Chapter 11 Case Study:

ZapposThey Do It with Humor

Zappos is consistently ranked highly as one of Fortune's Best Companies to Work For. Amazon's Jeff Bezos liked Zappos so much he bought the company. Can this last?

Customers First

Zappos's relentless pursuit of the ultimate customer experience is the stuff of legend. The company offers fast shipping at no cost and covers return shipping if you are dissatisfied for any reason at any time. The Zappos brand is less about a particular type of product and more about customer service. Zappos CEO Tony Hsieh has said, We could be in any industry that we can differentiate ourselves through better customer service and better customer experience.

Culture To Thrive In

Success at Zappos begins with the company's culture and the unusual amount of openness Hsieh encourages among employees, vendors, and other businesses. If we get the culture right, he says, most of the other stuff, like the brand and the customer service will just happen. We want the culture to grow stronger and stronger as we grow.

Hsieh shares the Zappos culture with anyone who will listen. In a program called Zappos Insights, Company Evangelists lead tour groups of 20 around the Las Vegas headquarters. Office cubicles often overflow with kitschy action figures and brightly colored balloons, giving participants a glimpse of a workplace that prizes individuality and fun as much as satisfied customers. Staffers blow horns and ring cowbells to greet participants in the 16 weekly tours, and each department tries to offer a more outlandish welcome than the last. The original idea was to add a little fun, Hsieh says, but it grew into a friendly competition as the next aisle said, We can do it better.

Those who want to learn Zappos's secrets without venturing to Las Vegas can subscribe to a members-only community that grants access to video interviews and chats with Zappos management. Ask nicely and the company will send you a free copy of their Zappos Family Culture Book, a compilation of employee's ideas about Zappos's mission and core values. Hsieh has his own book, tooDelivering Happiness. Zappos has even gone one step farther in sharing its delivering happiness message. Throughout 2017, Zappos is taking happiness on the road in what is being dubbed the Friends with Benefits Road Show to bring the brand closer to customers. Zappos will be hauling a branded shipping container around the country, making stops at various cities, giving out free tacos and beer, sponsoring music from local bands, and handing out puppies! In a recent stop on the tour in Austin, TX, Zappos was able to connect with almost 5,000 consumers during a three-day event.

Enter Holacracy

Hsieh's vision is a fashion-forward concept called Holacracy. Trademarked HolacracyOne, it is described as an approach that replaces today's top-down predict-and-control paradigm with a new way of achieving control by distributing power.

In Zappos's holacracy, employees are partners and managers don't exist. Partners hold power distributed by the Holacracy Constitution, where they agree to undertake tasks such as creating and acting on projects to fulfill roles, tracking progress, helping one another, and spotting tensions indicating things could be better.

When Zappos adopted Holacracy, Hsieh justified the shift this way: There's the org chart on paper, and then the one that is exactly how the company operates for real, and then there's the org chart that it would like to have in order to operate more efficiently. [With Holacracy] the idea is to process tensions so that the three org charts are pretty close together.

Wait a Minute

When the switch to Holacracy kicked in, Hsieh faced an unanticipated resistance by some employees, including ex managers. About 14% of Zappos partners decided that Holacracy wasn't for them and chose to leave the company. One said, There's a lot of things that haven't been figured out yet people don't know what is going to be in the books for them a year down the line.

Rocky waters? It isn't clear whether the Holacracy experiment is a long-term winner for the forward-focused Hsieh. For the first time in 8 years, Zappos dropped off the overall list of Fortune's Best Companies to Work For. The vision that seemed on the brink of creating a whole new way to organize has recently become murky. Zappos has tried a lot of different things, including Holacracy, some of which have left former employees feeling confused. Said one former Zapponian, Holacracy is a social experiment [that] created chaos and uncertainty. This sentiment has had an impact. Over the past year, 29% of the Zappos staff has turned over.

Next Laugh?

So, what does the future hold? As Zappos lives under the Amazon umbrella and as Hsieh devotes more time to community service, can the Zappos culture survive growth and a possible leadership transition? Will Zappos continue to be the home of fashion-forward practices such as Holacracy? Is Hsieh's unique brand of leadership so built into the firm's practices that Zappos will stay the same even under a new CEO? Will this company continue to remain prosperous? Will it be able to regain its reputation as being a great company to work for?

Case Analysis Questions

1. DISCUSSION

What leadership traits and style does Tony Hsieh demonstrate at Zappos? What aspects of his leadership can you criticize, if any? Is his leadership approach transferable to other leaders and other organizations, or is it person and situation specific? (10 Points)

2. PROBLEM SOLVING

Tony Hsieh is a big thinker, and Zappos is clearly his baby. But he's also into philanthropy and community development activities that are taking up more of his time. Perhaps he'll come up with other new business ideas as well. As a leadership coach, what steps would you recommend that he take now to ensure his leadership style and vision live on at Zappos after his departure? What can a strong and secure leader such as Hsieh do to secure a positive leadership legacy? (10 Points)

3. FURTHER RESEARCH

Check the latest on Zappos and Tony Hsieh. How and what are each doing today? Do some research to compare and contrast the leadership style and characteristics of Tony Hsieh with those of his boss at Amazon, Jeff Bezos. How are the leadership styles of the two CEOs alike? In what ways do they differ? For whom would you rather work? Is one style better than the other in its situational context? (10 Points)