Tony Hsieh, CEO, Zappos. com Zappos is an online shoe and merchandise retailer that grew from a startup company in a San Francisco apartment to become a billion dollar company within a decade, while also being consistently ranked as one of the top companies to work for the past five (5) years. Zappos has 1,243 employees and had revenue of $2. 2 billion in 2011. While the company cut 1,670 jobs in 2011, there was no voluntary turnover and more than 46,000 job applicants. (Vellota, 2013) This was accomplished by making good business decisions and adhering to a set of core values that everyone is expected to commit to.
Amazon acquired Zappos in 2009 for $920 million, yet, it continues to operate independently to maintain their unique culture under the leadership of Chief Executive Officer (CEO), Tony Hsieh. The evolution of the Zappos brand promise over the years has been follows: 1999 – Largest selection of shoes; 2003 – Customer Service; 2005 – Culture and Core Values as the Platform; 2007 – Personal Emotional Connections; 2009 – Delivering Happiness. (Hsieh, 2010) Zappos is currently located in Henderson, Las Vegas and in the fall of 2013, they will be relocating to the downtown Las Vegas area.
This downtown area is undergoing an urban revitalization movement and is being transformed into “the most community-focused large city in the world. ” (Kaydo, 2013) Visitors can arrange online for a free tour of Zappos’ headquarters that include transportation at no cost. Zappos has a library with an impressive list of titles that everyone is encouraged to check out free of charge to “Pursue Growth & Learning”. Zappos Insights was created to mentor companies and individuals and give them the chance to immerse themselves in the Zappos Family culture. Hsieh, 2010) Tony Hsieh was born in Illinois, the oldest of three boys. His parents emigrated from Taiwan as college students. Later, the Hsieh family relocated to the San Francisco Bay area in California. Growing up, his parents placed emphasis on mastering musical instruments and academic and career accomplishments. At a young age, Tony fantasized about making money. In elementary school, he held garage sales; invested his time and money in an earthworm farm; sold advertising space in a self-composed newsletter; and in middle school started a mail order photo button enterprise that earned him $200 a month. Hsieh, 2010) He got the idea for the photo button by reading the classified section of Boys Life magazine. He handed off his lucrative button business to his younger brother when he went off to college at Harvard University where he studied computer science. In college, Tony won a bid to run the college grille, which he invested in an oven and sold pizzas to student residents. It was at Harvard; Tony met Alfred Lin, who unbeknownst to Hsieh was making a greater profit from Tony’s pizzas by selling them by the slice.
Tony’s goal after graduating college was to land a high paying job “that did not seem like too much work”. (Hsieh, 2010) Before graduating from college in 1995, Oracle offered Tony a job as a software engineer, which he accepted because it paid the most money, and for his moving and housing expenses during their three-week training program. Tony soon became bored and approached his former college roommate and Oracle colleague, Sanjay Madan, with the idea of creating websites for businesses in their spare time. Soon after, they both quit their jobs at Oracle and devoted their full time to this endeavor.
In 1998, Tony Hsieh, at the age of twenty-four (24) years, sold the company he co-founded, with Sanjay Madan, called Link Exchange, two years and eight months earlier, to Microsoft for the sum of $265,000,000. (Reiss, 2010) Link Exchange was an internet advertising company that displayed banner advertisements on their website. With the profits from the sale of Link Exchange, Hsieh co-founded, with another college alumnus, Alfred Lin, an investment company called Venture Frogs. Venture Frogs invested in a variety of tech and internet startup companies. Hsieh, 2010) In 1999, Nick Swinmurn was walking around a mall in San Francisco looking to purchase a pair of shoes. He went home empty-handed after walking from store to store. He tried looking for shoes online and was unsuccessful. He found a number of small stores selling shoes online; however, there was no major online retailer than specialized in shoes. Nick decided to quit his job and start an online shoe retail business. His idea was to create a website that offered a large selection of shoe brands, styles, sizes and widths. He called it shoerite. om. Swinmurn arranged a meeting with Tony Hsieh and Alfred Lin, investors who owned Venture Frogs, and pitched his idea. Hsieh was intrigued by Swinmurn’s statistic of “footwear in the United States is a $40 billion market, and 5% of that market was already being sold by paper mail order catalogs. ” (Hsieh, 2010) Since, Nick knew little about buying shoes, except for his own personal use, and not a thing about selling them, Hsieh sent him away in search of two things; someone who know about buying and selling shoes and a better name.
Nick returned with Fred Mossler, who worked in the shoe department at Nordstrom’s, and a name, Zappos. com. Zappos was derived from the Spanish word, zapato, which means “shoe”. Hsieh was taken by Nick and Fred’s passion, took a “leap” of fate, and decided to invest in them. Two months later, in 2000, Tony Hsieh joined Zappos as their Chief Executive Officer (CEO). (Harnish, 2012) Alfred Lin joined as Chief Operating Office and Chief Financial Officer (COO/CFO) in 2005. Zappos. com profits went from $0 in 1999 to more than $920 million in 2009 when the company was sold to Amazon. om. (Hsieh, 2010) Zappos’ success is largely attributable to its unique focus on customer service; however, Tony Hsieh’s primary focus and top priority is company culture. (King, 2011) It is Hsieh’s philosophy that if they “got the culture right, then building our brand to be about the best customer service would happen naturally on its own. ” (Hsieh, 2010) On the topic of customer service, Hsieh believes that “customer service shouldn’t be just a department. It should be the entire company. (King, 2011) Zappos defines the core values from which they develop their culture, their brand, and their business strategies. The ten core values that Zappos live by are: (Hsieh, 2010) 1. Deliver WOW through service – doing something that is beyond what is expected and that has an emotional impact on the receiver. 2. Embrace and Drive Change – embracing change enthusiastically and perhaps even more importantly, to encourage and drive it. 3. Create Fun and A Little Weirdness – encouraging weirdness is to encourage people to think outside the box and be more innovative.
When you combine a little weirdness with making sure everyone is also having fun at work, it ends up being a win-win for everyone. Zappos employees are more engaged in the work that they do and the company as a whole becomes more innovative. 4. Be Adventurous, Creative, and Open-Minded – wanting people to develop and improve their decision-making skills. Zappos encourages people to make mistakes as long as they learn from them. 5. Pursue Growth and Learning – inside every employee is more potential than even the employee himself/herself realizes.
Zappos’ goal is to help employees unlock that potential. However, it has to be a joint effort: you have to want to challenge and stretch yourself in order for it to happen. 6. Build Open and Honest Relationships with Communication – strong, positive relationships that are open and honest are a big part of what differentiates Zappos from most other companies. Strong relationships allow them to accomplish much more than they would be able to otherwise. 7. Build a Positive Team and Family Spirit – Zappos employees are more than just a team; they are a family.
They watch out for each other, care for each other, and go above and beyond for each other because they believe in each other and they trust each other. They work together, but they also play together. Their bonds go far beyond the typical “co-worker” relationships found at most other companies. 8. Do More With Less – Zappos employees are focused and serious about the operations of the business. They believe in working hard and putting in the extra effort to get things done. 9. Be Passionate and Determined – Passion and determination are contagious.
At Zappos, they believe in having a positive and optimistic (but realistic) attitude about everything they do because they realize that this inspires others to have the same attitude. 10. Be Humble – Zappos believes that no matter what happens they should always be respectful of everyone. (Hsieh, 2010) Tony Hsieh believes that these are “committable” core values independent of actual job performance and “that you are willing to hire and fire based on them. ” (Heath, 2010) He believes in hiring people with personality traits in line with these core values for a good “cultural fit”. Robin, 2011) Hsieh believes a very different form of corporate culture is a model for achieving success and how concentrating on happiness of those around you, you can dramatically increase your own. Influence requires listening and relationship building with a win-win outcome. According to Hsieh, “If your business style is still focused on the ‘old school’ hard-selling, push-marketing approach, it’s time to take a close look at how well it is servicing you these days. The new culture driven by social media is all about forging real connections and building relationships. (Zwilling, 2012) When it comes to the topic of leadership, Hsieh “cringes at the word ‘leader’. It is more about getting people to do what they are passionate about and putting them in the right context or setting. They’re the ones doing the hard work. ” (Groth, 2012) Zappos corporate structure is flat where decision-making is decentralized and the employs are more empowered to make decisions. Entrepreneurs, leaders and managers in any field can learn a lot about hiring, leadership, employee engagement and business communication by studying Tony Hsieh business approach.
Employee or job satisfaction is related to positive customer outcomes and affects your bottom line. Satisfied employees increase customer satisfaction and loyalty. Zappos first core value of “Deliver WOW through service” is more about the way in which Zappos does it. Employees are encouraged to “create a little weirdness” and are given unusual discretion in making customers satisfied. Employees are encouraged to use their imaginations, including sending flowers to disgruntled customers and they even offer a $2,000 bribe to new employees to quit the company after training to weed out the half-hearted. Robbins, 2013) In summation, Tony Hsieh understands how organizational behavior affects a company’s performance. Employees are empowered to make decisions that increase customer satisfaction. At Zappos, employee loyalty, job satisfaction and productivity are high, contributing to the company’s growth. (Robbins, 2013) The Zappos environment gives employees the sense that they are part of something bigger. Hsieh feels inspiration is a more effective motivator than fear. Zappos is structured a lot less hierarchical than most companies and the decision making process in decentralized.
In selecting employees, his decision is significantly influenced by how well the candidates will fit into the organization and whose values are in line with the organization’s values. Tony Hsieh is very interested in making people happy as the title of his book “Delivering Happiness” suggests. Inspired leaders do not sell the obvious. Not only is Zappos more than just shoes (they increased their line to include jewelry, house wares, fragrances, skin care products, clothing and much more) so is Zappos’ CEO, Tony Hsieh. He is a good example for all entrepreneurs, leaders and managers to follow.
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