Event Recap: Zappos CEO Tony Hsieh on Delivering Happiness

Welcome to Digital Capital Week (#dcweek for those of you on Twitter). DCWeek is a 10-day festival (full schedule here) focusing on technology, innovation and all things digital in our nation’s capital. As part of DC Week, about 30 participants gathered in a GW lecture hall to hear Zappos.com CEO Tony Hsieh. Hsieh’s book, Delivering Happiness debuted at number one on Amazon.com and BarnesandNoble.com’s best seller lists.

Hsieh got his start in business back in college with, what else but, a pizza business. He bought a couple pizza ovens and started selling pizza to kids in the dorms. One customer, Alfred, would come in a buy a full pie. A few hours later, he would return for another one. Hsieh later figured out that Alfred was buying the pies and reselling the individual slices to other kids in the dorm. Alfred is now CFO of Zappos.com

From his pizza business, Hsieh went on to co-found LinkExchange. He hired his friends to work for him until the company got so big ran out of friends. Hsieh realized he had lost control of the business and it was no longer fun. He sold it to Microsoft.com.

Through his venture capital firm, Venture Frogs, Hsieh became involved in Zappos.com. Hsieh asked, “do we want to just sell shoes or, do we want to do something more meaningful?”

Customer service became the #1 priority for the company. When this shift occurred, Hsieh discovered that all levels of the company embraced customer service — the employees, the delivery people, the customers — it became a fundamental part of the corporate culture. Hsieh developed ten commit-able core values. Core values include “create fun and a little weirdness” which is intended to celebrate unique characteristics of each individual. These values are not only apart of the day-to-day work of the company, but also help drive the hiring process. Hsieh gave an example of how one core value — be humble — is “tested” during the interview process: All interview candidates are picked up on the Zappos.com shuttle bus. They are taken to the offices, where they are given a tour and then spend the day interviewing. They are then taken back via the shuttle. At the conclusion of the day, the shuttle bus driver is asked how the candidate treated them — poor treatment, no hire. Zapposinsights.com details all of these core values.

Zappos.com has found its success through developing a PEC or personal emotional connection: get the interaction right and they remember that for a very long time. For example, if Zappos.com doesn’t carry a product you are looking for, they will recommend another website that does. Do they lose that business? Sure. Do they build an emotional connection by searching the Web for the product you need? You bet. This attitude toward customer service naturally helped Zappos.com expand from shoes to other product lines.

In 2009, Zappos.com further expanded its brand to “delivering happiness,” the topic of Hsieh’s book. As a company, Zappos.com made the conscience decision to move towards a culture which no longer had to choose between making profits and customer service.

A number of articles exist as to how Hsieh empowers his employees to make customers happy whether it is including a personal note with a purchase, or just chatting with a lonely customer. Hsieh asks “what’s the ROI of a hug?”

Managers are also empowered to help build a corporate culture and are encouraged to spend 20-30% of their time outside of the office with their team. “Party with a purpose,” says Hsieh. Allowing his 500+ employees to do this has helped teams build levels of trust, improve communication and encourage a “lend a hand” attitude. Hsieh defines a good manager as someone who can fire an employee and then go have a beer together afterward.

For Hsieh, it’s not about paying huge salaries or having a checklist of benefits; it’s about hiring people who want to grow personally and professionally and within 5-7 years become senior leaders. That’s not to say he’s never made a bad hire. Hsieh says as businesses grow, there is the temptation to just put a warm body in the seat as quickly as possible rather than taking time to find the right person to fill the role. Hsieh estimates that bad hires have cost Zappos.com over $100 million.

In November of 2009, Amazon.com formally acquired Zappos.com in an all stock transaction valued at $1.2B. After the acquisition rather than top level executives taking the retention bonus, Zappos.com split it amongst all employees — equating to a 40% bonus to each employee. Hsieh certainly delivered happiness that day.

Hsieh asks, what if airlines followed this idea of “delivering happiness”? If one followed it, other airlines could probably survive. But, if a handful, or better yet, half, followed embraced a corporate culture of delivering happiness? The other half would not survive. Let’s hope Hsieh starts his airline soon!