zappos business analysis

To understand why Zappos would be a motivating place to work, one must dig deeper into the basics of the company. What are their philosophies? What are their goals? What is their mission? Zappos.com is a fairly new company created in 1999 by a consumer who wasn’t able to find his favorite pair of shoes at the mall. Adding this online shoe company to the other online retailers met the need for online shopping at a time where malls were a thing of the past. Interestingly enough, “this country hasn’t opened up a new one [mall] since 2006, so it’s no surprise that nearly a third of Internet users turn to the web for most of their shopping.” (Donovan, 2013) This new contender to the marketplace soon took off and in 2009 was acquired by Amazon. From start-up company to billion-dollar organization, Zappos has definitely proved that they have what it takes to succeed aligning their mission around, “provid[ing] the best customer service possible.” (Zappos IP, Inc., 2013) In addition, “regardless of our structure, our goal is to position Zappos as the online service leader.

If we can get customers to associate the Zappos brand with the absolute best service, then we can expand into other product categories beyond shoes.” (Zappos IP, Inc., 2013) And many customers agree. “Greetings Heather Wittnebel, Thank you for shopping with Zappos.com! We wanted to let you know that your return is back safe and sound in our warehouse. That trip over the river and through the woods to grandmother’s house went smoothly.” (Personal Email from Zappos.com, 2013) This email was a carefully planned motivational tactic which left the customer happy, “I could tell right away that Zappos was interested in working with the customer, not against.” (Wittnebel, 2013) Zappos is not only delivering a high quality service but the customers are echoing that accomplishment. That being said, while customer service is their pride, at the heart of Zappos there is a core company philosophy on developing their employees and focusing on employee happiness and motivation just as much as their customer service efforts.

The CEO, Tony Hshieh implements programs and incentives that create a caring environment for all employees. Zappos’ concern for their internal team can been seen in their core company values. These values are, “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”. (Zappos IP, Inc., 2013) In addition, many of the employee benefits of this company come from the fact that there is no set “style” of the business. By that, it means there are no offices, no scripts in Customer Service, and rather than restricting the employees there is an emphasis on encouraging individuality. All employees have free access to cafes, drink areas, recognition ceremonies, the ability to provide gifts to the customers and manage the customers as they see fit. It is almost as if the employees are able to manage themselves as they see fit to serve the customers.

If those benefits aren’t enough the medical, dental and vision health coverage are nearly free out of pocket for staff members. There are fitness programs, nutrition ideas, lifestyle programs and work/life balance employee assistance programs available. Other benefits include: “40% employee discount on the Zappos.com web site, 401k match, paid volunteer time off, monthly team outings to build a positive team and family spirit, vacation, sick time, pet insurance, car pool program, nursing room, bereavement leave, several discounts with local businesses and more” (Zappos.com, 2013) This definitely would do wonders in creating and promoting the overall morale of the company. Individuals may look forward to coming to work because of the extra benefits the company gives to help their staff be comfortable and in turn hopefully you have a happy efficient worker. Hsieh is a man who studies the use of happiness and motivation to find quality employees. He takes what he learns from the two and incorporates that with the very principles that make Zappos the kind of company it is today.

This company’s values and philosophy are unique in today’s corporate world and may not be used very often in other organizations because it moves the employees away from organizational goals and concentrates more on individual goals. In comparison, a company like Verizon offers some of the same well-paid customer service positions with very attractive benefits, but employees are not geared towards their own happiness and growth. More commonly organizations core values include increasing revenue and almost never include anything relating to the employees. Zappos primary focus is their culture, which has outweighed the commitment to their consumers. (Hollender, 2013) In addition to the benefits, Zappos employees are loyal and ready to work for the company. Why? The culture of Zappos is mirrored in their hiring tactics. The interview process is one unlike most. They focus majority of the interview getting to know the candidate as a person including their personal goals, restrictions, and beliefs, assessing how the individual will fit in to the company. During the interview they will ask questions about a person’s lifestyle and feelings. They then enroll candidates in a 5-week training course. During this time “the offer” is made to the candidates enrolled. This offer comes with a $2,000 “buh-bye bounty” as writer Adam Lashinsky calls it, which allows new hires to leave if the company isn’t a good fit.

In addition, since the Amazon acquisition this is now up to $3,000. (Taylor, 2008) (Lashinsky, 2010) With this technique, Zappos is paying the interviewee for the amount of time they spent training as well as a bonus. This is a really great strategy for eliminating perspective employees who aren’t truly serious about the job or share the same core values of the company. Out of all candidates that go through the training only 1% actually take the money (Ref) and again after the acquisition that number has remained low at 2-3%. (Lashinsky, 2010) These statistics along with the undeniable growth and profitability of Zappos tells us that not only are people taking the job but also, the company is working and working well. “Zappos managed to move from number 23 in 2009 on Fortune magazine’s “100 Best Companies to Work For” list to 15 in 2010.” (Bauer & Erdogan, 2009) So is this “buh-bye bounty” the answer to increased employee retention rates? Statistics have not quite proven that because some call centers have as low as a 51% retention rate, whereas the facility in Henderson has a rate of 91% (Zappos.com, 2009). Based on Zappos’ performance everything seems to be pointing upward, so why hasn’t this work model been adopted in other companies?

In contrast to Hsieh’s, individual before company, business model, many feel this isn’t a solid foundation that will continue to work. Why? Well for, many companies the Zappos hiring theory isn’t realistic because their core values don’t match those of Zappos. In addition to the “buh-bye bounty” Zappos also encourages “Create Fun and A Little Weirdness” in their core values which you won’t see mirrored in lets say a bank or medical institution. These values, which are unique to Zappos, are, or can be, difficult for other companies to use. For example the application of the core value of “Create Fun and A Little Weirdness” might not be appreciated at a Merrill Lynch or Mass General Hospital. Each organization has to find the values that fit the company appropriately. Encouraging an adventurous and open-minded individual may not be what you want in your investment banker or neurosurgeon. However, “Build Open and Honest Relationships With Communication” is something you would want from my neurosurgeon. This core value is one of the ones that all companies can use. It is important to also recognize that each company has its own challenges and benefits. Zappos is no different. While employee happiness and retention may be doing well Zappos also has some challenges.

The main challenge that Zappos is having is staying true to the culture of the business. Zappos was initially designed to allow online purchasing and distribute the items to the customer in a timely matter. However, with the increases of benefits and the encouragement of individuality, the company has faced some difficulty in staying connected with the culture and core values of the company. The company has to determine at what point the employee is not allowed to have complete freedom, what restrictions or guidelines need to be put in place to ensure that all actions adhere to the policy of the company. Furthermore if the policies, guidelines and values are not followed, then what are the disciplinary actions that must be taken? These are challenges that have to be addressed in order to ensure the company is able to continue to grow in profitability. Another one of Zappos’ challenges has been the acquisition with Amazon in 2009. Communication is defined by Merriam-Webster as, “an act of transmitting or an exchange of information” (Merriman-Webster, 2004) and is an extremely important concept for both companies and individuals in the workforce.

Communication is vital and this is especially true during times of change or in the case of Zappos, during the time of an acquisition. During any acquisition there are many questions employees, customers, investors, and stockholders have as to the life of the acquired company and whether their mission, standards, and brand will continue to exist. During this particular acquisition in which Amazon acquired Zappos, Hsieh used an email to his staff as a way to be completely transparent with the situation and the changes that might occur but also uses the email to answer many of the questions he knew his staff would have.

In his email Hsieh shares his excitement for the opportunities and support Zappos will receive from Amazon, in addition to the continuation of their own vision and brand identity. During any merger one of the largest changes is typically that the acquired company takes on the acquiring companies organizational processes, regulations, mission, and company goals. However for this acquisition Hsieh was very careful to explain that, “We plan to continue to run Zappos the way we have always run Zappos — continuing to do what we believe is best for our brand, our culture, and our business.” (Hsieh, 2009) He then goes one step further by reviewing the top 3 burning questions he expects all his employees will have with regards to organizational changes and what they can expect. He covers whether or not there will be lay-offs, and whether or not the culture of Zappos will change. As he stated earlier in the email and in this particular case Hsieh explains that Zappos senior management will not only continue to work at Zappos but will now receive Amazon recourses and support. “The Zappos brand will continue to be separate from the Amazon brand. Although we’ll have access to many of Amazon’s resources, we need to continue to build our brand and our culture just as we always have. Our mission remains the same: delivering happiness to all of our stakeholders, including our employees, our customers, and our vendors.” (Hsieh, 2009) In addition, to explaining these organizational changes, or non-changes, he ends his communication with a Q&A interview and short video from the CEO of Amazon who expresses his admiration for Zappos and his vision for moving the company forward in the future. In this video he explains the importance of “think long term” (Bezos, 2009) mindset that he shares with the Zappos CEO and that he doesn’t expect to have any kind of radical changes to Zappos in the future. This kind of information from not only the CEO of the company being acquired but also the CEO of the acquiring company is vital in communicating the areas where change will occur and where it won’t occur to the staff. As stated by Kim Harrison of Cutting Edge PR, “Effective employee communication is the first or second most important issue emerging in all studies of mergers. Internal communication and culture changes are identified as the hardest to achieve, but the most important in merger success.” (Harrison, 2013) That being said during any acquisition changes will be made.

This is even the case for Zappos. Even though Hsieh still remains steadfast in their culture and mission changes have occurred. In June of 2012 Hsieh shocked his employees when he explained that the company would be folding its existing warehouse operation into Amazon. Much like the initial acquisition, Hsieh distributed a blog post to employees to explain what was changing. Previously Zappos operated out of two warehouses in Kentucky but they were at total capacity. Ultimately the decision was made to hand warehousing over to Amazon. All Zappos employees who were affected with the change were offered a job with Amazon but this is a clear separation from the Zappos culture and a large change for many Zappos employees. In addition to the warehousing handover Hsieh also decided to move the Zappos headquarters to downtown Las Vegas in a brand new campus.

This new headquarters comes with many employee perks such as a food court, gym, and a hairdresser, making sure employees have everything they need in walking distance. However, as Sarah Lacy reported “Employees who are worried this may be a slippery slope of everyone getting folding in to the Amazon borg, Hsieh says it’s just the opposite. The move allows him to put all his energy and resources into making this new Downtown campus the best it can possibly be.” (Lacy, 2012) While only time can tell if Zappos can continue to thrive under their established culture separate from Amazon, even through these changes, for the most part, employees have remained at Zappos. Why are they still with Zappos? You could argue it’s because the employees share the same core values as the company, which we know can have an effect on motivation and employee retention, or it’s possible that through carefully crafted communications and corporate structure the employees feel connected to the entire company. “Although Zappos has over 1,300 employees, the company has been able to maintain a relatively flat organizational structure and prides itself on its extreme transparency.” (Chafkin, 2009) In the case of Zappos, it is clear that Zappos has implemented several practices and ideas that not only continue to motivate their employees but has also worked wonders in keeping them ranked amongst the top companies to work for. Unlike many companies, Zappos prides itself with a genuine focus and philosophy around the importance of employee individuality and professional top-notch customer service.

References

Laura Donovan. (2013). Here’s The Percentage Of Internet Users That Shop Online [INFOGRAPHIC]. [WWW document] URL http://www.thejanedough.com/online-shopping/

Zappos.com. (2013). Customer Service Isn’t Just a Department. [WWW document] URL http://about.zappos.com/

Zappos.com (2013). [Email Subject Line] [Email]

Heather Wittnebel. (2013).

Hollender, J. (2013). Lessons we can all learn from Zappos CEO Tony Hseih. Retrieved from The Guardian: http://www.theguardian.com/sustainable-business/zappos-ceo-tony-hsieh

Bill Taylor. (2008). Why Zappos Pays New Employees to Quit–And You Should Too. Harvard Business Review. [Online magazine] URL http://blogs.hbr.org/2008/05/why-zappos-pays-new-employees/

Adam Lashinsky. (2010). Zappos: Life after acquisition. CNN Money [Online magazine] URL http://tech.fortune.cnn.com/2010/11/24/zappos-life-after-acquisition/

(Ref).

Bauer T & Erdogan B. (2009). Organizational Behavior version 1.1. Flatworld Knowledge.

Zappos.com (2009. Zappos milestone: Customer Service [WWW Document] URL http://about.zappos.com/

Merriam-Webster, Incorporated. (2004). The Merriam-Webster Dictionary.

Tony Hsieh. (2009). CEO Letter. [WWW document] URL http://blogs.zappos.com/ceoletter

Jeff Bezos. (2009). Video from Jeff Bezos about Amazon and Zappos.com. [WWW video] URL http://www.youtube.com/watch?v=Q617xm9eCeQ

Kim Harrison. (2013). Good communication is essential for successful mergers and acquisitions. [WWW document] URL http://www.cuttingedgepr.com/articles/changecomm_good_comm.asp

Sarah Lacy. (2012). Zappos Hands Over Warehousing to Amazon, Focusing All Attention on the Great Downtown Vegas Experiment. PandoDaily. [Online magazine] URL http://pandodaily.com/2012/06/06/zappos-hands-over-warehousing-to-amazon-focusing-all-attention-on-the-great-downtown-vegas-experiment/

Max Chafkin. (2009). The Zappos Way of Managing. Inc.com. [Online magazine] URL http://www.inc.com/magazine/20090501/the-zappos-way-of-managing.html

"Looking for a Similar Assignment? Order now and Get a Discount!