Tributes have poured in from business leaders and workplace experts to Zappos founder Tony Hsieh, who died on 27 November from injuries sustained in a house fire. He was just 46.
In 2009, Hsieh sold his online apparel warehouse to Amazon for $1.2 billion – but the thinking behind the sale was far more interesting than the sum. As Hsieh explained a decade ago in a column for Inc.com, he made the deal to preserve the company culture that had powered Zappos to that point – an emphasis that other members of the brand’s board considered less important than the profit margin.
“[W]hat distinguished us from our competitors was that we’d put our company culture above all else,” Hsieh wrote. “We’d bet that by being good to our employees – for instance, by paying for 100% of healthcare premiums, spending heavily on personal development and giving customer service reps more freedom than at a typical call centre – we would be able to offer better service than our competitors.
“Better service would translate into lots of repeat customers, which would mean low marketing expenses, long-term profits and fast growth. Amazingly, it all seemed to be working. By 2005, gross merchandise sales were $370 million, and we made the Inc 500.” (Inc.com, 1 June 2010)
Under the terms of the buyout, Amazon allowed Zappos to continue to march to the beat of its own cultural drum, fulfilling Hsieh’s hopes for the longevity of the brand’s values. Indeed, one Amazon distribution centre even began to experiment with Zappos’s policy of paying new recruits $2,000 to quit if they were unhappy with their jobs – a feat of reverse-psychology that has driven high retention rates at the firm Hsieh built.
As a New York Times obituary notes, Hsieh was soft spoken and introspective, and had been obsessed with customer service from Zappos’s inception – instructing call-centre staff to speak to customers like old friends and even setting up a 24-hour free-delivery and free-return system, enabling prospective patrons to try on multiple pairs of shoes and send back the pairs they didn’t want. (The New York Times, 28 November 2020)
In 2010, Hsieh illuminated his culture-driven outlook in his book Delivering Happiness: A Path to Profits, Passion and Purpose.
What should other leaders learn from how he did business?
The Institute of Leadership & Management’s head of research, policy and standards Kate Cooper says: “We have known for some time that if you put shareholder interests first, as the key stakeholder group, that does not deliver the sorts of results that organisations need. A great example of that was the PPI scandal, in which an emphasis on boosting profits through quick wins led banks to put customers’ interests a distant second to those of shareholders. The outcomes of that collective decision are well documented.”
She notes: “For decades, there has been an energetic debate about whether organisations should put employees or customers first. But what Hsieh demonstrated was that it’s not an either/or scenario. If you:
- value your employees and reward them fairly;
- sell a product or service that they are proud to be associated with, and
- ensure that they are equipped with tools that will help them resolve customers’ problems,
…then their enthusiasm for their jobs will manifest itself as great customer service.”
Cooper points out: “Staff who are engaged in this way will be eager to tell people about what they are selling. They will be proud of the organisation they work for – indeed, it’s clear there is no implicit embarrassment or apology attached to being a Zappos employee. And as well as translating into how workers deal with customers, that spirit will inform how they interact as colleagues, too.”
She explains: “By saying to staff, ‘We value you: we want you to stay here after your early training – to the extent that we’d even give you $2,000 if you want to quit,’ Zappos is sealing a powerful bond with its workforce. The brand’s approach chimes with research that the Institute published earlier this year, which found that being valued or not valued is a key determinant of employees’ desire to remain in their jobs. So, for Zappos staff, that sense of feeling important within the context of the firm’s service delivery model is clearly something they find contagious – and customers are evidently feeling the benefits.”
Cooper adds: “Of course, a company needs to get its business model and products right. But by looking after your employees, you are in effect making sure that they will look after your customers.”
For further insights on the themes raised in this blog, check out the Institute’s resources on managing customer relationships
Image of Tony Hsieh kindly provided by the Zappos Press Office