Want smarter insights in your inbox? Sign up for our weekly newsletters to get only what matters to enterprise AI, data, and security leaders. Subscribe Now
(I’m live-blogging from Startup School, a daylong program from startup incubator YCombinator held at Berkeley today. This is paraphrased. Tony Hsieh is the CEO of online shoe company Zappos, which is in the process of being acquired by Amazon.)
Hsieh: Basically in college I was working at a pizza business. Then I started a company called LinkExchange and sold it to Microsoft for $265 million. The reason we sold it was because the company culture went totally downhill.
When I got involved, it was a great time at LinkExchange. We were working around the clock. We weren’t sleeping. But by the time we got to 100 people, the culture had changed. We had the people with the right skills but I wasn’t paying attention to whether they were a great fit for the culture.
Now I’m at Zappos. The deal hasn’t closed yet but we’ll be acquired by Amazon. We view it as switching our board of directors. We’ll still be operating pretty independently. (Gross sales reached roughy $1 billion in 2008, according to a chart he showed onstage.)
We’re totally focused on customer service. Thirty years from now, we wouldn’t necessarily rule out Zappos airlines. We admire Virgin Airlines.
We really think of our brand in terms of the three C’s. Clothing. Customer Service. Culture.
That’s all I really want to say about Zappos. I’d like to recommend a few books — one is Good to Great.
One of the key things I emphasize is Vision — whatever you’re thinking, think bigger. Does the vision have meaning? Chase the vision, not the money, the money will end up following you. If you’re an entrepreneur, I would encourage you think about what you’d be so happy doing that you’d do it for 10 years without making a dime. There’s a lot of books and consultants that talk about inspiration and how to motivate employees.
There’s a big difference between motivation and inspiration. We wanted to come up with core value — a culture. A lot of companies try to do this but it usually reads like a press release. They all kind of sound the same and it’s hard to commit to them. They need to be “committable” and that means you need to be able to hire and fire based on those values. If you have superstars doing everything really, really well, but they screwed up on one value. Would you be willing to fire them?
There are 10 core values to Zappos. We have a recruiting team that looks for a culture fit. (Here are examples: Deliver WOW through service. Embrace and drive change. Create fun and a little weirdness. Be adventurous, creative and open-minded. Pursue growth and learning. Build open and honest relationships with communication. Build a positive team and family spirit. Do more with less. Be passionate and determined. Be humble.)
The one we trip up on the most is the last one — “be humble.” There’s not a specific question we can ask like, “Are you egotistical today?” You can kinda tell by interacting with them. For example, we pick up potential hires in a Zappos shuttle and shuttle driver reports back to us.
It doesn’t matter what your core values are — as long as you commit to them. Don’t worry about whether your core values are the right ones. They should just fit your company and you should commit to them. There are a number of ways of motivating employees. You can do it through fear. You can do it through bonuses. But we really focus on inspiration.
(Hsieh then talks about the evolution of the Zappos brand.)
We didn’t know where we were going exactly in 1999. But in 2003, we asked ourselves what we wanted to be. We said we wanted to be about great customer service. In 2005, we decided to totally focus on the culture. In 2007, we decided we wanted to build a great emotional connection with our customers whether it’s through the phone. Now we want to make our employees happy and our customers happy.
Audience: How do you manage work-life balance. Zappos lets you take a vacation whenever you want. And that’s great, but we’re a five-person company.
Hsieh: We do have a vacation policy. Netflix might be the one that does that. A lot of other companies talk about figuring out work-life balance. For most companies, that implies that work must suck so you need a life on the outside. At Zappos, we’re more focused on creating a lifestyle. We don’t think about it as one or the other. Most Zappos employees leave work and hang out with other Zappos employees. We tell people when we hire them that they should be spending 10 to 20 percent of the time outside work with other employees.
Audience: What makes Zappos different?
Hsieh: It’s the relationship that customers have with us. If you ask them, they have a pretty emotional response. What we find is that customers are usually very enthusiastic about us. It’s not any one thing we do. It comes back to our culture. Employees come up with ideas all the time that I would never think about. It’s pretty cool that once you have the culture and everyone understands the vision, everything sort of takes care of itself.
Hsieh goes on to talk about happiness studies. In 1998, a new branch of psychology took root that focused more intensively on happiness. But people are very bad at predicting what brings them happiness.
One of the things we started doing at Zappos was giving people small promotions every six months instead of a large one every 18 months. There’s a lot of studies that show a correlation between employee engagement and employee productivity — do they have a best friend at work? Another great book is Peak which relates to Maslow’s hierarchy of needs. At the bottom are physiological needs like food, water and sleep. At the top is self-actualization.
I think differently from Mark Zuckerberg and his philosophy — we want our employees to stay, not leave. Constant growth is what will keep them in the company. There are three types of happiness — there’s a rock star type of happiness. It’s about chasing the next high. It’s great as long as you can sustain it.
The second type is called Passion or Flow, which is like the book of the same name. It’s about being so engaged that it seems like only 20 minutes have passed when hours or days might have. The last one is about meaning or higher purpose — that’s being part of something bigger than yourself.
Most people chase after the first type of happiness. But based on the research data, the best strategy is to pursue the third. Then the second one. Then the third is the icing on the cake.
The greatest companies deliver profits, passion, and purpose. If the research shows that vision, meaning and higher purpose leads to happiness. What is your company’s higher purpose? What is your own higher purpose?
