1.Identify the main research problem.

2.Analyze the main underlying causes of the existing problem.

3.Establish the cause-and-effect relations between the various aspects.

4.Formulate the best solutions to address the problem.

CASE 1: ZAPPOS FACES COMPETITIVE CHALLENGES

Zappos Faces Competitive Challenges

Zappos, based in Las Vegas, is an online retailer with the initial goal of trying to be the best website for buying shoes by offering a wide variety of brands, styles, colors, sizes, and widths. The Zappos.com brand has grown to offer shoes, handbags, eyewear, watches, and accessories for online purchase. The companys goal is to provide the best service online, not just in shoes but in any product category. Zappos believes that the speed with which a customer receives an online purchase plays a critical role in how that customer thinks about shopping online again in the future, so the company is focusing on making sure the items get delivered to its customers as quickly as possible.

Zappos CEO Tony Hsieh has shaped the companys customer-service-focused culture, brand, and business strategy around 10 core values:

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.

Deliver WOW through service means that call center employees need to provide excellent customer service. Call center employees encourage callers to order more than one size or color because shipping and return shipping is free. They are also encouraged to use their imaginations to meet customer needs.

Zappos has received many awards for its workplace culture and practices, including being frequently recognized in Fortune magazines annual rankings of the 100 Best Companies to Work For. The job of human resources at Zappos is more than just a rule enforcer. HRs job is to protect the culture and to educate employees. HR focuses on interactions with managers and employees to understand what they need from HR (HR is even invited to attend work teams happy hours). Zapposs employment practices help perpetuate its company culture. Only about 1 out of 100 applicants passes a hiring process that is equally weighted on job skills and on the potential to work in Zapposs culture. Some managers at Zappos believe that if you want to get a job the most important value to demonstrate is be humble including a focus on we instead of I. Job candidates are interviewed for cultural fit and a willingness to change and learn. For example, they observe whether job candidates talk at lunch with others or just the person they think is making the hiring decision. The HR team uses unusual interview questionssuch as, How weird are you? and Whats your theme song?to find employees who are creative and have strong individuality. Zappos provides free lunch in the cafeteria (cold cuts) and a full-time life coach (employees have to sit on a red velvet throne to complain), managers are encouraged to spend time with employees outside of the office, and any employee can reward another employee a $50 bonus for good performance. Call center employees can use an online scheduling tool that allows them to set their own hours, and they can earn more pay if they work during hours with greater customer demand. Most of the over 1,500 employees at Zappos are hourly. Every new hire undergoes four weeks of training, during which the company culture must be committed to memory, and spends two weeks dealing with customers by working the telephones. New recruits are offered $2,000 to leave the company during training to weed out individuals who will not be happy working at the company. Zappos provides free breakfast, lunch, snacks, coffee, tea, and vending machine snacks. Work is characterized by constant change; a loud, open office environment; and team interactions. Employees at Zappos move around. For example, call center employees can bid for different shifts every month.

To reinforce the importance of the 10 core values, Zapposs performance management system asks managers to evaluate how well employees behaviors demonstrate the core values such as being humble or expressing their personalities. To evaluate task performance, managers are asked to regularly provide employees with status reports on such things as how much time they spend on the telephone with customers. The status reports and evaluations of the core values are informational or used to identify training needs. Zappos also believes in helping others understand what inspired the company culture. The company created the Zappos.com library, which provides a collection of books about creating a passion for customer service, products, and local communities. These books can be found in the front lobby of Zappos offices and are widely read and discussed by company employees.

Corporate culture is more than a set of values, and it is maintained by a complex web of human interactions. At Zappos, the liberal use of social media including blogs and Twitter facilitates the network that links employees with one another and with the companys customers. Zappos takes the pulse of the organization monthly, measuring the health of the culture with a happiness survey. Employees respond to such unlikely questions as whether they believe that the company has a higher purpose than profits, whether their Page 63own role has meaning, whether they feel in control of their career path, whether they consider their coworkers to be like family and friends, and whether they are happy in their jobs. Results from the survey are broken down by department, and opportunities for development are identified and acted upon. For example, when it was clear from the survey that one department had veered off course and felt isolated from the rest of the organization, a program was instituted that enabled individuals in the group to learn more about how integral their work was. To keep the company vibrant, CEO Tony Hsieh spent $350 million to develop a neighborhood in downtown Las Vegas, which is the home of Zappos.coms new headquarters. Hsieh wants to provide employees with a great place to work as well as to live and socialize.

Recently, Zappos adopted a management philosophy, holocracy, which gives employees the freedom and responsibility to decide how to get their work done and eliminated people managers. Hsiehs intent was to allow employees to act more like entrepreneurs and help stimulate new ideas, bring their full selves to work, and have a purpose beyond making money, all of which he believes will benefit the business. Employees work in teams or circles rather than as individuals, and team membership can change. However, employees are finding the new management system confusing and requiring them to spend more time in meetings. Also, they wonder how they will earn raises and advance their careers without management jobs. In all, 210 employees found the new philosophy so dissatisfying that they took three months of severance pay and left the company. Zappos is changing its recruitment process to ensure that its new hires are comfortable with holocracys self-management style.

Despite this setback, other companies are trying to learn from Zapposs practices. Zappos Insights is a department within Zappos created to share the Zappos culture with other companies. Zappos Insights provides programs about building a culture (3-Day Culture Camp), its WOW service philosophy (School of WOW), the power of a coaching-based culture (Coaching Event), how the HR function protects the culture and how its programs support it (People Academy), and custom programs. The cost to attend these programs ranges from $2,000 to $6,000 for each attendee.

QUESTIONS

1. Zappos seems to be well-positioned to have a competitive advantage over other online retailers. What challenges discussed in Chapter 1 pose the biggest threat to Zapposs ability to maintain and enhance its competitive position? How can HRM practices help Zappos meet these challenges?

2. Do you think that employees of Zappos have high levels of engagement? Why?

3. Which of Zapposs 10 core values do you believe that HR practices can influence the most? The least? Why? For each of the core values, identify the HR practices that are related to it. Explain how the HR practices you identified are related to the core values.

4. How might the change to the holocracy management style undermine Zapposs core values and cause employees to have lower levels of engagement?