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Zappos Milestone: Q&A With Tony Hsieh

Zappos.com CEO Tony Hsieh's mission is to spread happiness to his customers and employees — and quite possibly change the tone of business as we know it.

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Tony Hsieh

Tony Hsieh

Photo By Jim Laurie

Zappos.com CEO Tony Hsieh’s mission is to spread happiness to his customers and employees — and quite possibly change the tone of business as we know it.

Tony Hsieh sums up the goal of Zappos.com quite simply: to deliver happiness in a box.

“Our customers call and e-mail us to say that’s how it feels when a Zappos box arrives,” he said. “And that’s how we view this company.”

Hsieh, who started out as an investor in Zappos in 1999 and soon after joined the company full time, said he’s learned that companies largely succeed and fail based on the strength of their culture and the passion of their employees. That’s a lesson he learned in the late 1990s, when his company, LinkExchange, underwent rapid growth and its culture became focused solely on increasing the value of the firm, which was later sold to Microsoft Corp. for $265 million.

“Businesses often forget about the culture, and ultimately, they suffer for it because you can’t deliver good service from unhappy employees,” Hsieh said. “LinkExchange grew so fast that it became impersonal and not as much fun. The priorities were different.”

That is part of what inspired Hsieh to use Zappos as his personal laboratory to test new ideas on how to build relationships and corporate culture, which he hopes will spread into the larger business community. “For me, part of it is about seeing what we can accomplish here at Zappos, but also seeing what we do here that can change other businesses and the world in general — whether it’s through inspiring other companies to deliver better customer service or to focus on their own company culture,” he said.

Footwear News sat down with Hsieh at the company’s Henderson, Nev., headquarters to talk about shaping a corporate culture, the importance of customer service and how the company is growing beyond its shoe niche.

FN: What does the 10-year milestone mean to you?
TH: It was in 2003 that we set the goal of hitting $1 billion in gross merchandise sales by 2010. That would have taken us 11 years, but we hit it last year, so we were pretty happy about that. For us, our goal for the first 10 years was to establish ourselves in the footwear market and build our brand around the best customer service and customer experience, and also build the company culture. One of our early goals was to make the Fortune list of the best companies to work for, and we just made that this past February. So we’re pretty happy.

FN: Is this how you imagined the company would look 10 years down the road?
TH: I didn’t really have any preconceived notions in terms of what exactly it would look like. Most of [the company’s evolution] is really driven by employees, not by me. I view my role more as trying to set up an environment where the personalities, creativity and individuality of all the different employees come out and can shine.

FN: How would you describe your management style?
TH: Our company culture is based on 10 core values that our employees came up with. My style is to make sure we’re always living by those core values and making decisions based on them. A lot of bigger companies might have what they call “core values” or “guiding principles,” but it’s usually something lofty sounding, like it comes out of a press release and the employees might learn about it on day one, but then it’s just a meaningless plaque on the wall. For us, we actually hire people based on these values, and we’ll fire people based on these values even if they’re doing their job perfectly fine. Part of my job is making sure that is implemented as a policy.

FN: Is the corporate culture an extension of your personality?
TH: The analogy I would use is that if you think of employees as, say, plants, I don’t see myself as the tallest plant that everyone aspires to be. I see my role as being the architect of the greenhouse, and they’ll figure out how to grow on their own. I’m generally pretty introverted and quieter and shy. I don’t think I’m representative of the energy you see out there.



FN: But this is something you’ve created.
TH: It’s more that I allowed it to be created. It’s making sure that employees not only feel comfortable being themselves, it’s them actually feeling like part of their job is to help make this culture grow stronger and stronger every day. For me, my role is about unleashing what people already have inside them that is maybe suppressed in most work environments.

FN: How has your role changed over the years?
TH: I joined the company about two months after it started. I come from a technical background, so I was doing a lot of the computer programming for the Website and our systems. When we needed to set up the warehouse, I moved to Kentucky for five months to set up operations there. Now we’re trying to train people to be less about doing it yourself and more about helping develop other people and training them. We didn’t have a training team five years ago, and now we do. Five years from now, the goal is to have almost all our hires be entry-level employees, but we’ll provide all of them with the training to become a senior leader within five to seven years, and that also helps to protect our corporate culture because we won’t need to bring in senior-level people from the outside.

FN: Why did you decide to make customer service the central mission of the company?
TH: We always, even from the beginning, thought customer service was important, but that actually wasn’t the original plan for the business when we first started. Originally, we just wanted to be the largest online footwear retailer. We did that for two or three years. Then, we sat around and asked ourselves, “Do we want to be about footwear, or about something bigger and more meaningful?” We decided it was going to be about customer service, and that’s what we wanted to build our brand around.

FN: What keeps you motivated?
TH: A lot of people talk about work-life balance, and the implication is that work isn’t as much fun. What we’re trying to create is something where Zappos is a lifestyle and people look forward to coming to the office. And when they leave the office, they go and hang out with other Zappos employees. There’s no real separation between work and life. If you’re passionate about what you’re doing and you believe in the long-term vision of the company, then it doesn’t feel like work.

FN: What’s been more fun, the startup phase or now growing the company?
TH: For me, the most fun is change or growth. There are definitely elements of both that I like. Launching a business is kind of like a motorboat: You can go very quickly and turn fast. A bigger business is like a cruise ship: There are lots of amenities and you can go a lot further, but it’s harder to turn quickly. There are advantages and disadvantages to both. There’s always going to be a new set of challenges. I’d get bored if business was just steady and there weren’t new things happening all the time.

FN: What projects are you working on right now?
TH: For this year, we’re making a big push into clothing. For people who just know us for shoes, it’s about getting the message out there that we have a pretty good selection of clothing, and that’s going to be growing over time. It’s four times the size of the footwear market, so there’s a lot of opportunity there. Our customers might intellectually know that we sell clothing, but when they want to buy a new pair of jeans, the first thing that comes to their minds might not be Zappos. Part of it is a merchandising issue, too. While we have a pretty decent selection of clothing now, there are lots of brands that we would like to have that we don’t currently have.

FN: What other categories would you like to be in?
TH: Any product category that isn’t a commodity is something we might consider selling online, but it doesn’t have to be limited to online. Our brand is about service. We’ve had companies ask if we would want to start an airline. Now, that’s probably not something we’d do 10 years from now, but maybe 20 or 30 years. Think of Virgin and all the different things it does. The difference is that they’re about being hip and cool, and we’re about customer service.

FN: What’s the best advice anyone has ever given you?
TH: Robert Greenberg from Skechers USA Inc. told me two years ago that the most important thing in life is the quality of life. That’s the philosophy he used to build up Skechers, and that’s similar to what we’re trying to do here at Zappos.

FN: What advice do you give people just starting out or struggling in business?
TH: It depends on what stage they’re in. First, figure out the larger vision and greater purpose for the company, beyond just making money or being No. 1 in your market. Along with that, figure out what core values you want for your company, specifically values that you’ll commit to and make hiring and firing decisions based on. It actually doesn’t matter what your values are. It’s about whether you’re consistent with them and are willing to do performance reviews based on them. If you are, you can build an organization that’s aligned and where everyone is moving in the same direction. Then it takes a lot less thinking because you’re just living your brand.

FN: What would you be doing if you weren’t running Zappos?
TH: I’ve always been interested in building a consumer brand, just what that is doesn’t really matter. I think of it as a way of having the best parts of fame without the worst parts of fame.



FN: What is a typical day like for you?
TH: There is no typical day or week. There was one week a few weeks ago where I was speaking at four different conferences in different cities, so it was nonstop travel all week. Sometimes I’m involved in the technology side and the Website feature side, other times on the training side. It’s all over the board, wherever my help is needed.

FN: What are some of your favorite memories from the last 10 years?
TH: We were pretty excited when we signed Nike one or two years ago, also when we made Fortune’s “Best Companies to Work For” list. When we have a record day, which is usually during the fourth quarter, we celebrate at a bar and people wait for the countdown from the live sales report. It’s not so much about the milestone itself, it’s more about the fact that sometimes there are 100 or 200 or 300 people all at this bar, [and it] wasn’t planned out. Seeing people so excited and passionate about the company — that’s what’s exciting, more so than the milestones.


Zappos’ 10 Core Values

1. Deliver “wow” through service.
2. Embrace and drive change.
3. Create fun and a little weirdness.
4. Be adventurous, creative and open-minded.
5. Pursue growth and learning.
6. Build open and honest relationships with communication.
7. Build a positive team and family spirit.
8. Do more with less.
9. Be passionate and determined.
10. Be humble.

 

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