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A Key Ingredient
As Tony Hsieh states in “Delivering Happiness“,
A key ingredient in strong (business) relationships is to develop emotional connections. – Tony Hsieh
In my fantasy world, I find this extremely ironic because, in “business”, most corpricracies only anoint those who can cleverly camouflage their emotions to exalted and coveted leadership positions. And yet, here is Mr. Chez, the CEO of a profitable billion dollar company in the cutthroat shoe retail industry, “nicely” flipping the finger at mainstream American business and the esteemed B-school advice they rode in on.
It’s funny how “passion”, which can be defined as a “strong emotion“, is demanded of the DICforce, but Spock-like emotional control is required by SCOLs and BOOGLs for ascension to the throne.
Why Do You Guys Suck?
In this Gary Hamel post, Extreme Management Makeover, Mr. Hamel tells the story of HCL Technologies CEO Vineet Nayar’s passionate effort to turn his company’s culture upside down. Read the article to discover the slew of wildly unorthodox actions that Vineet executed to achieve his goal. As a sampling of Mr. Nayer’s courage and determination to buck the status quo, check this one out:
HCLT employees are able to rate the performance of any manager whose decisions impact their work lives, and to do so anonymously. These ratings are published online and can be viewed by anyone who has submitted a review. This visibility challenges managers to be more responsive and exercise their authority judiciously. The number and organizational scope of the reviews a manager receives are also a good indicator of an individual’s zone of influence—is he or she adding value across a wide swath of the company, or only within a narrow sphere? Importantly, this “feedforward” process isn’t connected to compensation and promotion decisions. It is purely developmental. Nevertheless, there aren’t many hiding places left at HCLT for mediocre managers.
Want another zinger?
Early on, Vineet and his leadership team set up an online forum and encouraged employees to ask tough questions and offer honest feedback. Nothing was censored on the “U&I” site; every post, however virulent, was displayed for the entire company to see. Vineet recalls that in the beginning, “virtually 100% of the questions were dirty questions. ‘Why do you guys suck?’ ‘Why does your strategy suck?’ ‘Why aren’t you living up to your values?’’ While some managers bemoaned the fact that all of the company’s soiled laundry was now online, employees lauded the forum as a symbol of HCLT’s commitment to transparency and as another way to hold top management accountable. The U&I portal had another value: it was also an early warning system for critical issues facing the company.
Does your company even have a DICforce-to-management U&I portal? If you’re lucky enough to have one, is it anonymous and uncensored so that the submitted questions are more than just cream puffs?
If Vineet was in any position other than the CEO, do you think his idea of “employees first, customers second” would have any chance at all of being heard, let alone being placed into execution? Do you think managers in general explore the landscape for innovative management practices and weird, heretical companies like HCLT, Zappos.com, SAS Institute, SEMCO, et al?
Much To Like
There’s much to like in Zappos.com CEO Tony Hsieh’s new book: “Delivering Happiness“. In addition to detailing the inspiring rags-to-riches Zappos.com story, Mr. “Chez” shares many nuggets of wisdom that he discovered along the way:
Don’t play games that you don’t understand, even if you see lots of other people making money from them.
It doesn’t matter how flawlessly a business is executed if it’s in the wrong business or if it’s in too small of a market.
Without conscious and deliberate effort, inertia always wins.
The presentation of the truth is as important as the truth.
Never outsource your core competency. If we were trying to be about customer service, we knew that we shouldn’t be outsourcing that (call center).
Without a separation of work and life, it’s remarkable how values can be exactly the same.
Don’t measure call times, don’t force employees to upsell, and don’t use scripts.
A key ingredient in strong relationships is to develop emotional connections.
It’s not what you say or do, but how you make people feel that matters the most.
For individuals, character is destiny. For organizations, culture is destiny.
As it turns out, many of the best ideas came about while having drinks at a local bar.
Layoffs
If you”re familiar with the Zappos.com business success story, you might think that it’s the perfect company. Unlimited growth, unlimited profits, enthusiastic employees, all good and no bad. But did you know that the company had to lay off some of their workforce not once, but twice? The first layoff, which came in the early startup years when they were struggling to survive month to month, was much more understandable than the second layoff, which occurred in 2008 while they were profitable.
When 2008 started, Zappos.com exceeded sales and profit expectations for 2007, so CEO Tony Hsieh and his leadership team decided to dole out a surprise, 10% bonus, to all Zapponians. Incredibly, eight months later he was hatching an e-mail stating that Zappos would be laying off 8% of the workforce. WTF, you ask?
2008 was a whirlwind year. The stock market crashed, the housing market crashed, hundreds of thousands of people were thrown out of work, and businesses everywhere, including Zappos, started reeling from lower sales. Since Zappos was growing like mad up to that point, they discovered that they were overhiring. Even though they weren’t losing money, the Zappos leadership team decided that they had to cut their workforce to better align their costs with decreasing revenues. In Tony’s words from his book “Delivering Happiness“;
Rather than trying to spin the story as a “strategic restructuring” as many other corporations were doing, we stuck by our core values and remained open and honest, not only with our employees, but with the press as well. – Tony Hsieh, CEO, Zappos.com
In November of 2008, Tony sent an e-mail announcing the cuts to all employees and the publicly visible Zappos.com blogs. After the bloodletting was over, he sent a followup e-mail. The full text of both e-mails is in the book, so buy it if you’re curious about what he said to the world.
Extended Business Model
In Zappos.com CEO Tony Hsieh’s new book: “Delivering Happiness“, Tony describes the original Zappos.com business model as “drop-ship”. As the UML sequence diagram below shows, a customer would place an order at the Zappos.com website, Zappos would relay the order directly to the shoe manufacturer’s warehouse, and the order would be fulfilled and shipped directly from ground zero. It was a low cost model for Zappos, but it limited sales growth since many shoe manufacturers didn’t have the information systems in place to execute their end of the model. In addition, sales were limited to the inventory that warehouses held in storage, not necessarily what Zappos’ customers wanted.
During the initial stage of growth, Zappos.com was often short on cash (surprise!) and often just a month or two away from goin’ kaput (surprise, again!). The Zapponians needed to increase sales in order to increase cash flow. During a brainstorming session in a local bar (not in a committee of BMs, CCRATS, BOOGLs, consultants, and other self-important dudes) they came up with the idea of extending their existing business model.
Man creates by projection, nature creates by extension – Unknown
The sequence diagram below shows the extended business model that Tony “chez” et al decided to move toward. In a nutshell, Zappos would purchase or lease a warehouse and stock its own inventory based on trend information extracted from its website. As simple as it looks, the devil is in the details. Buy and read the book to learn how they pulled it off – despite being cash poor and close to going tits-up.
If changing our business model is what’s going to save us, then we need to embrace and drive change. – Tony Hsieh
How many times have you heard or spoken the “embrace change” words above but never experienced or executed any follow through?
A Blessing And A Curse
The figure below depicts a UML class diagram model of the static structure of a typical Wiki system. A Wiki may be comprised of many personally controlled and/or global workspaces. Each logical workspace is composed of user created work pages and news items (a.k.a. blog posts). Lastly, a Wiki contains many user accounts that are either created by the users themselves or, in a more controlled environment, created by a gatekeeper system administrator. Without an account, a user cannot contribute content to the Wiki database.
Org Wikis are both a blessing and a curse. They’re a blessing for the DICforce in that they allow for close collaboration and rapid, real-time information exchange between and across teams. They also serve as an easily searchable and publicly visible record of org history.
In malevolent and stovepiped CCHs where SCOLs and BOOGLs rarely communicate horizontally and, even more rarely, downward to the DICforce, Wikis are a curse because….
Networks make organizational culture and politics explicit. – Michael Schrage
BOOGLs and SCOLs that preside over malevolent CCHs don’t like having their day-to-day operational behavior exposed to the light of day. If a malevolent CCH org is liberal enough to “approve” of Wiki usage, chances are that none of the BOOGLs or SCOLs will contribute to its content. In the worse case, a Wiki police force may be established to enforce posting rules designed to keep politics and positioning behavior secret. Hell, without censorship, the DICforce might form the opinion that they are being led by a gang of thugs who are out for themselves instead of the lasting well being of the org.
Are you here to build a career or to build an organization? – Peter Block
Death By A Thousand Cuts
Zappos.com CEO Tony Hsieh has a new book out titled “Delivering Happiness“. Early in this heartwarming and wonderful little tome, he tells the story of the first real company he co-founded – LinkExchange. As LinkExchange grew and became more successful, he turned down offers of $1M (from BigFoot) and then $20M (from Yahoo!) to sell the company. He ended up selling out later for $265M to Microsoft. Tony’s personal take from the sale was a whopping $40M, of which $8M would be forfeited if he didn’t stay on for 1 year after the sale.
Before the sale of LinkExchange, he woke up one day wondering what happened to the company culture. Tony pondered how the day-to-day culture transformed from a joyous “one for all, and all for one” working environment into one that was dominated by “politics, positioning, and rumors“. He couldn’t put a finger on any one specific event or person(s) as the cause of the deterioration in culture, it was more like “death by a thousand cuts“; an insidious and undetectable rise in malady sustained by some unknown force.
After the sale of LinkExchange, Tony walked away from the company before his contracted year was up, leaving $8M on the table. His reasoning was that he already had plenty of money and his happiness was worth more than the extra $8M. The end of LinkExchange was the start of Zappos.com…..
I had decided to stop chasing the money, and start chasing the passion – Tony Hsieh
My Leadership Cut
This is the way it is……
Is it the way it should be? Are there any alternatives that could “work”? Are there even any slight variations on this same-old, same-old, scheme that can make it work better compared to the rest of the herd? Nah. No way, right?
A Change In Funding Source
The figure below shows a dorkily simplistic UML sequence diagram example of the provision of service from a support group (e.g. purchasing, quality assurance, configuration management) to a product development group within a CCH patriarchy. During product development, the team aperiodically requires and requests help from one or more corpo groups who’s raison d’etre is to provide timely support to those who need it. 
Depending on who’s leading the support group, the service it provides can be highly responsive and of high quality. However, since the standard “system” setup in all CCH corpocracies is as shown in the sequence diagram below, the likelihood of that being true is low. That’s because in centralized patriarchies, all budgets, salaries, and token rewards are doled out by the sugar daddys perched at the top of the pyramid. On the way down, the middlemen in the path take a cut out of the booty for, uh, the added-value “leadership” they provide to those on the next lower rung in the ladder.
In exchange for their yearly/quarterly investments in the lower layers of the caste system, the dudes in the penthouse require periodic status reports (which they can’t understand and which are usually cleverly disguised camouflage) that show progress toward wealth creation from the DICs below.
Since their bread is buttered from the top and not their direct customers, the natural tendency of support groups is to blow off their customers’ needs and concentrate on maximizing their compensation from the top. They do this, either consciously or unconsciously, by adding complexity to the system in the form of Byzantinian procedural labyrinths for customers to follow to show how indispensable they are to the b’ness. As a result, their responsiveness decreases and their customers experience an increase in frustration from shoddily late service.
So how does one fix the standard, dysfunctional, centralized, CCH setup? Check out and ponder the sequence diagram below for a possible attempt at undoing the dysfunctional mess. Can it work? Why, or why not?
By definition, if everyone is doing industry best practice, it’s not best practice. It’s average practice.
Bureaucracy Reinforcement
In the “Bureaucracy Formation” post, I hypothesized about how orgs can undetectably transform from vibrant and flexible citizens into rigid and slovenly slow, bullies. As a refresher, the figure below carries over the pre- and post-transformation “system” states from that post. Sadly, after the t=Bureaucracy time threshold is passed, the situation gets worse than the picture implies.
In order to survive, thrive, and indisputably “show” their importance to the well being of the whole, each support group continuously adds more and more time sucking and money hogging work of questionable added-value to the system. However, the work they add is not for them to do. Incredulously, it’s red tape work they impose on their clients (a.k.a. customers), which are the product group and “other” support groups that are forced to use their service.
Early on in the stages of org development, it’s relatively easy to get support. You ask a person for help and you get it in a timely fashion. If you have to supply input along with your request, like a piece of software, or hardware, or a document, you don’t have to meet any arcane content, formatting, or packaging requirements. Over time, however, everything changes. First, a simple form is required. Then, a more detailed form. Then, more than one form. Then multiple forms and multiple signatures are required. Then you are required to follow a detailed step by step procedure that is so arcane and unmemorable that you have to look it up every time you need service. Then, if you do something wrong, you’re scolded for not knowing the process. On and on it goes. You get the picture, no?
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WTF?
Meh!
D'oh!
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