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Be Humble
Zappos.com’s core value number 10 is: “Be Humble“. According to CEO Tony Hsieh via his book Delivering Happiness (DH), the “Be Humble” core value has probably had the most impact on hiring decisions at Zappos.com.
There are a lot of experienced, smart, and talented people we interview that we know can make an immediate impact on our top or bottom line. But a lot of them are also egotistical, so we end up not hiring them. At most companies, the hiring manager would probably argue that we should hire such a candidate because he or she will add a lot of value to the company, which is probably why most large corporations don’t have great cultures.
So, how can you weed out the BOOGLs, CGHs, CBMs, SCOLs, and determine whether a candidate fits well with your culture? Zappos.com requires each candidate-for-hire to go through two sets of interviews: one with the hiring group to evaluate skills fit, and the other with the Human Resources (HR) group to determine cultural fit. It’s the latter that sets Zappos.com apart from the herd (moooo!). They ask questions specifically derived from their set of 10 core values.
So much for being humble myself. If I was, this blog wouldn’t be soaked with acronyms like BOOGLs, CGHs, CBMs, SCOLs, and other childish terms from the readme.txt page 🙂
Note: Tony et al will be starting a book tour in August and they will be traveling around in a souped up DH bus. You can follow the happiness on Twitter at dhbus and dhbook and ceo@zappos.
Google, Zappos, And Me
Check it out:
I was preparing to write a blog post about Zappos.com’s core value “Be Humble“, but I forgot what number it was. So, I decided to Google it, and the above picture is what appeared in my browser. WTF? Holy Shite!
If this doesn’t get me a free pass to Zappos Insights, I don’t know what will!!!!!
Note: I swear that the pic wasn’t photo-shopped. I ain’t no Bernie Madoff.
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?
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
A $1.6M Mistake – And No One Was Fired
The other day, I discovered that a human mistake made on Zappos.com’s sister web site, 6pm.com, emptied the company’s coffers of $1.6 million dollars. Being the class act that he is, here’s what CEO Tony Hsieh had to say regarding the FUBAR:
To those of you asking if anybody was fired, the answer is no, nobody was fired – this was a learning experience for all of us. Even though our terms and conditions state that we do not need to fulfill orders that are placed due to pricing mistakes, and even though this mistake cost us over $1.6 million, we felt that the right thing to do for our customers was to eat the loss and fulfill all the orders that had been placed before we discovered the problem. – Tony Hsieh, CEO, Zappos.com
If this happened at your company, what would your management do? Do ya think they’d look at it as a learning experience?
Besides Zappos.com, here are the other companies that I love. What are yours, and is the company you work for one of them?
Viable, Vulnerable, Doomed
Unless an org is subsidized without regard to its performance (e.g. a government agency, a pure corpocracy overhead unit like HR), it must both explore and exploit to retain its existence. Leaders explore the unknown and managers exploit the known, so competence in both these areas is required for sustained viability.
Exploitation is characterized by linear thinking (projecting future trajectory solely based on past trajectory) and exploration is characterized by loop thinking. Since these two types of thinking are radically different and prestigious schools teach linear thinking exclusively, all unenlightened orgs have a dearth of loop thinkers. Sadly, the number of linear thinkers (knowers) increases and the number of loop thinkers (unknowers) decreases as the management chain is traversed upward. This is the case because linear thinkers and loop thinkers aren’t fond of one another and the linear thinkers usually run the show.
The figure below hypothesizes three types of org systems: vulnerable, doomed, and viable. The vulnerable org has a loop thinking exploration group but most new product/service ideas are “rejected” by the linear thinkers in charge because of the lack of ironclad business cases. Those new product/service ideas that do run the gauntlet and are successful in the marketplace inch the org forward and keep it from imploding. The doomed org has an exploration group, but it’s just for show. These orgs parade around their credentialed rocket scientists for the world to see and hear but nothing of exploitable substance ever comes out of the money sucking rathole. The viable org not only has a productive explorer group, but the top leadership group is comprised of loop thinkers too – D’oh! These extraordinary orgs (e.g. Apple, Netflix, Zappos, SAS) are perpetually ahead of their linear thinking peers and they continually (and unsurprisingly) kick ass in the marketplace.
What type of org are you a member of?
Spreading Happiness
Just like last year, as soon as I heard that Zappos.com’s 2009 culture book was available, I e-mailed the company to get one. Just like last year, I received my free, postage paid copy in the mail three days later. What a great way to spread happiness, no?
Right on page number 1, Zappos CEO Tony Hsieh states:
People may not remember exactly what you did or what you said, but they will always remember how you made them feel.
Who says there is no room in business for emotions? Ninety-nine percent of business schools and business executives do, that’s who: “It’s not personal, it’s business.” Over the years I’ve learned to question the assumptions that institutional bozeltines, oops, leaders operate under. Sadly, I’ve discovered that most of those taken-for-granted, 100 year old assumptions like “the separation of feeling from work” don’t hold true anymore. How about you?
Ya Can’t Put The Cat Back In The Bag
Check out this snippet from “Can Larger Companies Still be Passionate and Quirky?“:
Writing for The New York Times, Adam Bryant conducted an interview with Tony Hsieh, the chief executive of Zappos.com. Part of the interview that intrigued me was Hsieh’s explanation of why he and his roommate sold their company LinkExchange to Microsoft in 1998.
Part of it was the money, he admits. But, mostly, it was because the passion and excitement that permeated the company in the beginning was gone, and he’d grown to dislike its culture:
“When it was starting out, when it was just 5 or 10 of us, it was like your typical dot-com. We were all really excited, working around the clock, sleeping under our desks, had no idea what day of the week it was. But we didn’t know any better and didn’t pay attention to company culture. By the time we got to 100 people, even though we hired people with the right skill sets and experiences, I just dreaded getting out of bed in the morning and was hitting that snooze button over and over again.”
To avoid this happening with Zappos, Hsieh says he formalized the definition of the Zappos culture into 10 core values; core values that they would be willing to hire and fire people based on. Read the interview with Hsieh for details on how they went about this.
With LinkExchange, Tony was wise enough to know that it was fruitless to try and restore the company’s original esprit de corps culture. Once the cat gets out of the bag, it’s pretty much a done deal that you won’t get it back in.
What’s mind boggling to me is that leaders of startups that grow and “mature” over time don’t even have a clue that the vibrant culture of community/comraderie that they originally created has petered out. They get disconnected and buffered from the day to day culture by adding layer upon layer of pyramidal stratification and they delude themselves into thinking the culture has been maintained “for free” over the duration. Those dudes deserve what they get; a transformation from a communal meritocracy into a corpo mediocracy just like the rest of the moo-herd.
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WTF?
Meh!
D'oh!
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