What a shoe shop can teach us about developing high performance cultures

Zappos.com is the online shoe and clothing shop based in Las Vegas that was founded by Nick Swinmurn in 1999 and sold to Amazon ten years later for a cool $1.2bn! The firm, run by Tony Hsieh, has become an icon of contemporary business success. When you look at how Zappos managed to grow so fast in what is a highly competitive and well established market, and with the biggest financial downturn in history punctuating its journey, there are some interesting new lessons about success today.

A paper by three professors from the University of Colorado, Don Warrick a Professor of Management and Organisation Change, John F. Milliman a professor of Management, and Jeffery M. Ferguson a Professor of Service Management and Marketing visited Zappos to unpick what led to such meteoric success. Sales went from $8million to over $1billion in less than 8 years.

The paper is due to be published later in the year in the journal Science Direct.

The researchers found that there were two overarching principles that drove Zappos’ success:

1. Culture and
2. High performing teams

From the outset employees are specifically trained for the culture in a manner reminiscent of Google’s practices. Their staff turnover is around 7% whilst the industry average is over 150%.

The saying (attributed to Peter Drucker) that culture eats strategy for breakfast may have some truth in it. However it is much better if the strategy and culture are aligned. As the authors point out: this isn’t about trying to replicate a culture of Zappos rather than aligning the style of the leaders, with the mission, strategy and what the employees actually do. It’s a whole package. You can’t just implant a culture. Having said that Zappos very deliberately and step-by- step built a culture that was and is hugely successful. They also focused on developing high performing teams. An approach I am very much in favour of. It is the lessons from these two developments that the paper addresses.

Culture culture culture

The researchers’ definition of culture should be tattooed on every leader’s eyelids. It is useful and critical.

“…organizational culture is basically a term used to describe the environment in which people work and the influence it has on how they think, act and experience work”

Dysfunctional cultures can develop stress, distrust, low morale, a lack of sense of ‘team’, a feeling that they aren’t supported or cared for, a lack of listening, minimise learning, or make the learning either a negative experience or dysfunctional itself and resist change. A productive culture on the other hand inspires, helps to develop openness, builds trust, enhances performance, fosters developmental feedback, gets people to push themselves to be better and do better, boosts self-esteem, inspires a willingness to learn, flex, innovate and be genuine.

Hsieh became Zappos’ CEO in 2001 and deliberately set about creating a culture that was focused on three principles:

1. Employee happiness
2. Exceptional customer service and
3. High performance

The researchers suggest that there are five ‘drivers’ that shaped Zappos’ culture:

1. Committed leaders
2. Practised core values
3. Customer focused strategy
4. HR practices aligned with the core values
5. Management practices aligned with the core values

Committed leaders

The leaders need to be zealot like about creating a culture that will energise the employees to fulfil the mission of the organisation and that the mission needs to be customer centric. These three things

1. Leadership passion and focus
2. Energised happy workers and
3. Genuine focus on exceeding the needs of the customer

create purpose. People need to be aligned behind a common purpose that they believe in before they will drive and strive to fulfil it. And for Zappos that common purpose was making the customer happy. Underlying this is highly personable and exceptional customer service, offering a wide selection of products, along with fast, accurate product delivery.

As the IBM CEO Lou Gerstner put it – “Culture is everything”. The underlying understanding Tony Hsieh had was that if you get the culture right the rest will follow.

The job of the leaders at Zappos is to think about the culture, to support it and maintain or improve it. Culture isn’t something that just happens at Zappos. They actively develop it. In fact it is the focus of the leadership. Get the culture right and it will create happy employees who strive and drive to deliver the exceptional customer service required.

Openness, honesty and feedback

Part of the culture is honesty in all directions. They spend a lot of effort on communication with (not to) the employees, their suppliers and their customers, so everyone knows exactly and truthfully what is going on at all times. Previous research and practice has shown that high performing teams are founded on feedback, continual ‘at the time’ and ‘in the moment’ feedback. Everyone is expected to provide this level of feedback on performance. There is no hiding from giving or receiving performance feedback for anyone in a high performance team. The focus is on performance, which in turn, in Zappos is focused on the service to the customer.

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

Culture inquiry

The leaders lead what is known as a continual culture inquiry. This means monitoring and nudging the culture and working practices in the right direction using insight from all the stakeholders, the employees, customers, suppliers and anyone else who has sight of the company. The primary question here is: ‘is this helping or hindering our mission?’

This means that the organisation is continually adapting, learning and getting better.

Core values

In 2010 Zappos codified its ten core values:

The two values the researchers pull out as the ones Zappos mainly focus on is Deliver WOW through service” and ”Create fun and a little weirdness”. These align perfectly with the two arms of their strategy: happy employees and happy customers.

The customer centric strategy

Zappos’ customer focused strategy is:

1. Customer service should be a priority for everyone
2. Enable Service Reps to solve customer issues without involving a supervisor

3. Don’t keep customers who are overly demanding or disrespectful to employees
4. Don’t restrict Service Reps regarding call time, scripts, or sales pitches
5. Connect directly with customers and make contact information available on every web page
6. See customer service as an investment, not a cost
7. Reinforce the culture by sharing great service stories

HR practices

Zappos spends a lot of time and effort recruiting and selecting the right people for the culture and training extensively to meet the requirements of the culture and of their job.
The key here is that new employees go through an extensive cultural orientation programme. The orientation programme lasts for 4 weeks following which all employees, regardless of role or seniority, will then complete two weeks in the call centre dealing with customers directly and learning how to deliver exceptional customer service. Interestingly during the orientation period every employee is offered $3000 to leave if they feel they don’t fit with the culture, which is a very clever tactic when you think about it.

The management

The manager’s role is to help create the conditions where the employees are happy and can deliver exceptional customer service. This involves the creation and maintenance of a fun working environment, high social engagement, lots of recognition, celebrations, rewards and personalising, for example having birthday celebrations and parties for events.
Additionally the management are there as custodians of the culture and to look after the employees. Personal life coaches are available to every employee and everyone has access to free or low cost healthy food on-site and health advice, for example.

Reference

Warrick, D. D., Milliman, J. F., & Ferguson, J. M. (2016). Lessons learned from Zappos on what it takes to build high performance cultures. Organizational Dynamics.