Zappos CEO talks company culture at marketing conference

Tiffany Brown

Tony Hsieh, CEO of Zappos, takes a break with employees in the merchandising department for athletic performance footwear to enjoy a game of desk volleyball at the company’s call center in Henderson in this file photo.

By Amanda Finnegan (contact)

Wednesday, Nov. 11, 2009 | 2:05 a.m.

A day in the life of Zappos.com

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Make company culture a first priority and the rest — including marketing and customer service — will fall into place.

That was the message Zappos Chief Executive Officer Tony Hsieh hoped to drive home with entrepreneurs and marketing executives at Tuesday’s keynote address at PubCon 2009, an annual social media and search marketing conference.

Hsieh walked executives though Zappos’ humble beginning to the company’s $1.2 billion acquisition by Amazon last week and discussed the company’s corporate culture.

Hsieh’s ventures began with a pizza business in college, and he became a millionaire in 1998 at 24 when he sold an online advertising company to Microsoft.

After starting with Zappos as an investor, Hsieh joined the company as CEO in 2000. Since joining the company, Hsieh said, sales have grown from $1.6 million in 2000 to $1 billion in 2008.

The company’s set of core values, including the pursuit of growth and learning and creating “fun and a little weirdness,” garnered Zappos a spot on Fortune’s Best Companies to Work For List this year, a goal of Hsieh’s from the start.

For a glimpse into Zappos’ corporate culture, log onto the company’s aggregated Twitter site. Every Zappos employee is trained and encouraged to use the social media tool, Hsieh said.

Tuesday’s employee tweets included talk of a potluck, free flu shots and a “Zappos Idol” karaoke competition. The site also includes comments from customers about their experiences with the company.

Hsieh said the company publishes a Zappos Culture Book, a collection of short essays from employees and vendors about what makes the Zappos culture so unique. The book available for purchase on Zappos.com.

At the top of Zappos’ core values is one for which the company is most known — customer service.

“Rather than spending money on marketing, we put it into the customer experience with things like training our employees and free shipping, and then let our customers do the marketing for us,” Hsieh said.

All employees, from higher-ups to stock employees, go through a customer service training program.

Hsieh’s reasoning, aside from having extra call center representatives during the busy holidays, is to build lifelong relationships with customers, even if it means directing the customer to a competitor’s site.

“If we want to build the Zappos brand to be about customer service, then customer service is not just a department,” Hsieh said. “It’s the entire company.”

Discussion: 8 comments so far…

By short_fat_hairy

11/11/09 at 6:38 a.m.

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How's that communist Giovanni working out for you?
By MWCRob

11/11/09 at 12:19 p.m.

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It's great that we have world-class companies like Zappos that call Vegas home.

Vegas should do a local stimulus program where they give a Tony Hsieh $5m and have him start five non-gaming companies and see what happens. I'd bet more jobs and economic diversification would happen. He'd also probably pay the loan back, plus interest, in less than a year.

I don't know why the govt. doesn't do something like that with stimulus dollars, rather than pouring money into dying banks. Maybe because it makes sense?
By hahaha

11/11/09 at 12:45 p.m.

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Tony and Zappos.com have created an added-value customer service company that thrives on consumer happiness. Most companies fear the bottom line and don't think about the long run. Zappos makes customers for life. Pretty cool.
By vegasm

11/11/09 at 1:56 p.m.

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If the editors and readers want to get a REAL feel for Zappos' CULTure, they should ask Tony what the involuntary turnover (i.e. termination) rate is at Zappos, and why.

There are many topnotch employees who are happy at Zappos, and if Call Center work is all you know, Zappos CLT (call center) is one of -- but not the - best ones out there. If being micromanaged and having to be 'guided' in everything you do is how you function best, and you are willing to work at a company that does not provide raises, Zappos has a spot for you!

Health care is free (no deductible, no co pay, ends the minute you are terminated), as are cold cuts in the lunchroom, 2 weeks vacation and 1 week sick time are given (but don't use that sick time! Sick = points; points = termination). Other than that, Zappos offers zero benefits not mandated by law.

CLT employees are treated like children, never as adults (training classes are call 'incubation', the new hires 'incubabies' and once they graduate they become 'big kids'; employees go to 'lunchie-pooh' to eat"it goes on).

Tony never walks upstairs just to say 'hi' or give words of encouragement to the very team he touts as the heart of Zappos culture and customer service. For CLT, Tony is a mythical being, a Hero of The People to be worshiped, but not seen.

What people don't realize is the 'happiness' observed in person or on the phone is staged (as are the photos). Emails are sent out daily advising CLT when tours are scheduled for that day, noisemakers are handed out and right on que the 'happiness' act goes into play, complete with cheering -- no matter how many customers are on hold, no matter how long they have been on hold. Once the tour is gone, it's back to reality.

Time off requests, including doctor appointments, have been frozen since June. If you just have to have that root canal or other medical or family emergency time off, it will cost you points, and at 70 points Tony fires you -- no excuses, no compassion. Ask Tony how living with an abscessed tooth, flu, sick family members etc., without being able to take time off, correlates to his current 'happiness' fad?

QA ("Team Happiness') monitors customer phone calls for tone of voice. When a customer says "Zappos must be great -- everyone is always so upbeat" - it's because the QA team is listening and scoring. In fairness to Team Happiness, they normally do not subtract points from your score when a customer hangs up in the middle of a speech, tells you to shut up or says 'F!@# you! But, if your QA gets scored too low, you are terminated, no matter how good an employee you are or how much positive feedback ('props') you receive from customers. It's all about the stats/scores, not the customer's experience.

Which is the strangest 'customer service' philosophy I've ever seen" but then, well run successful companies buy -- not get bought.
By CynicalObserver

11/11/09 at 9:26 p.m.

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Part 1 0f 2

Tony Hsieh's "culture of workplace happiness" and "Zappos Core Values" are attention-getting marketing hype, nothing more.

In reality, Tony is a hypocrite, who as Chief Exeuctive Officer of Zappos fails to supervise Zappos' management employees, to insure they are following those Core Values in their relationships with employees.

Zappos "team leaders" and mid-level managers create little fiefdoms, and completely ignore the Core Values. Tony is oblivious to that fact, despite traveling the countryside promoting the Core Values and the corporate culture which he thinks he created. The reality in Nevada is that corporate culture exists only in Tony's mind.

Tony's much publicized "Core Values" for Zappos employees and management are chimera, nothing more. Employees rely on them, and then are terminated for the very conduct which the Core Values encourage, such as being candid in critiquing or making suggestions about how Zappos is operated.

In the Fall of 2008, Zappos had a large, well publicized lay-off which was expensive for the company. Throughout the beginning of 2009, Zappos slowly eliminated management employees, which Zappos hid from the financial press, because it would hurt both Tony's image and the value of Amazon stock.
By CynicalObserver

11/11/09 at 9:28 p.m.

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Part 2 of 2

Amazon.com's purchase of Zappos.com actually closed on November 2, 2009. Leading up to that closing, fearing that Amazon will ultimately scale back employee headcount, dumber, less articulate Zappos supervisors began a feeding frezy of terminating intelligent employees, who could be a threat in competition to keep jobs.

Despite the alleged existence of Core Values centered on the concept of honor and honesty, in an effort to minimize staffing costs, after Zappos huge Fall 2008 layoff, Zappos personnel department, with Tony's assent, instituted a common personnel management practice where despite the content of the "Core Values", Zappos employees (including employees with children) who insist they are following the Core Values are set up to be later terminated "for cause", thereby denying the terminated employees unemployment compensation and saving Zappos on state unemployment insurance premiums.

Despite Zappos' self-proclaimed excellent customer service, jobs communicating with customers by email were outsourced to China. Amazon's management has influenced policy setting for customer service operations, creating tremendous pressure on call center employees to increase their work product, creating a work environment approaching that of sweat-shop Nevada call centers.

While Zappos' employees are fraudulently induced into believing and relying on the "Core Values", in the "definitive merger agreement" signed by Zappos and filed with the Securities and Exchange Commission in connection with the Amazon purchase, Zappos management denied that the Core Values have any force or effect as binding employment contracts, and instead affirmatively represented that all Zappos employees are at-will employees, i.e. dischargeable at the whim of each employee's supervisor.

Now, it appears that Amazon has even re-written a few of the Core Values, creating a circularity in logic effectively negating them.

Zappos' Core Values and its "concern" for its "employees as family" are a marketing gimic, nothing more. Tony Hsieh is a charlatan, selling a corporate culture which does not really exist at Zappos.
By Spacekat

11/16/09 at 10:10 a.m.

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CynicalObserver and vegasm have said it all mostly. Zappos looks like the best company on the outside but is dying on the inside. Everyday desks are cleared away of employees things with no ideas from anyone around. God forbid you get really sick or hurt and can't come to work for weeks. They fire people for standards but only if you are not friends with someone that can save you. i hope amazon won't destroy what was once a great company to be proud of. Honestly, I think they already have before the ink hit the paper with Amazon. Be careful or they take your bonus and anything else... Good Luck!
By vegasm

11/17/09 at 4:31 p.m.

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Zappos and the Core Values

Rumor has it the Core Values were written after a particularly brutal employee survey from CLT (ask Tony Hsieh what percentage of employees responded they would NOT recommend Zappos as an employer to friends on the last non-'happiness' survey).

Whatever the actual case, employee surveys are now conducted from your PC, from your login page. Management has access to responders responses to all surveys, and scheduling makes sure all employees are given time off to complete the surveys"which I'm sure promotes Core Value # 6 (Build open and honest relationships").

Tony Hsieh enforces strict observance of the Core Values as intended to be used by management, not as presented to employees and the public -- Tony himself admits not being a 'CULTure fit' is grounds termination, so following Core Values is crucial to job security.

Core Values as intended, and real meaning:

#1 Deliver WOW Through Service: even when said 'service' cost the company profits. Customers have ordered $60,000 worth of goods (200+ orders), all shipped next day air and returned, for free, only keeping maybe $250. Zappos will not cut off these 'customers' in the name of 'service'. Worn shoes? No problem!

#2 Drive and Embrace Change. Real meaning: Zappos will change your work schedules, hours and days off at whim.To complain is a violation of a Core Value, and we all know what that means"

#4 Be Adventurous, Creative and Open Minded -- being 'Adventurous' means shaving your head or dying your hair blue on'shave your head or dye your hair blue day'; be Creative, as long as your creativity follows Zappos guidelines -- remember NO non-Zappos approved reading material or other items are allowed in your possession on the Zappos campus; be Open Minded to micro and mismanagement; otherwise"

#8 Do More With Less -- more work, less salary, personal computers dating back to the dark ages, losing free catered lunches for cold cuts, charging for candy once provided free (and 'donating' the proceeds, thus Tony and Zappos receive credit -- both Tax and media -- at employees' expense); don't complain or"

#9 Be Passionate"don't even THINK negative waves, let alone mention them in earshot of one of the 'listeners'. Be Passionate in your noise making and cheering as tours go by"or else. Be Passionate in you faking it to make it.

#10 Be Humble -- I never was able to figure this one out, what with Tony appearing on Oprah twice, Donald Trumps' show, Nightline, various other programs and charging $5,000 a head to attend one of his 'customer service how to' seminars (Insights).

#11 -- Undocumented Core Value: Run your company like a spoiled, impetuous, insecure and needy child, refuse guidance by more experienced outsiders, 'discover' new business concepts (actually decades old) and claim them as your own, then send dedicated knowledgeable employees packing for any perceived slight or ego bruising, and your company

GETS SOLD.

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