Zappos - Clothing, Culture and Customer Experience

As a business leader, how far are you willing to go to ensure that your company's purpose and culture are in sync? 

Would you be willing to relocate your entire company multiple times until you found the optimal location? Could you tolerate a call centre with no formal supervisors, call volume displays or maximum call duration? Would you be willing to adopt a ground breaking organizational structure, issue a challenge to staff to get on board or quit AND to pay those that aren't committed to leave, even if it mean that 15% of your staff departing in short order? 

You probably wouldn't but online clothing retailer Zappos did and on a recent trip to Las Vegas I took a side tour of Zappos HQ which I was desperate to visit because about a year ago they were in the news for a very unusual reason and I wanted to know more.

Zappos has a visionary CEO called Tony Hsieh (pronounced shay), a Harvard computer science graduate who made a bundle selling his first tech company to Microsoft. Following this he founded a venture capital firm that invested in an online shoe sales company named Zappos which he subsequently went on to lead, culminating in the sale of Zappos to Amazon for approx. $1.2bn. 

The reason that Zappos was in the news was because of a very public switch to a non-traditional management system named 'holacracy' and the subsequent offer that they made to their staff; either commit to the change or leave with a generous settlement.  As a result of this ultimatum, Zappos lost approximately 15% of their staff who were unwilling to commit. Pretty significant.

So when I took the opportunity to visit Zappos it was with more than an ounce of curiosity about what kind of company would accept that kind of voluntary turnover event and how it's worked out for them.

Like many tech firms Zappos are not afraid to experiment and change - fail early, fail often is in their DNA. Having started in San Francisco they moved the company lock, stock and barrel to the mid-west in order to be close to their national distribution centre. Once things were running smoothly they headed back west and settled in a Vegas suburb. They recently ended up in downtown Las Vegas in the former City Hall which they have made their own at a cost of about $45m to house their 1,500 staff. This downtown location serves Zappos needs well because Vegas is a fast growing city that is still a relatively affordable place to live, given the sunshine and world class leisure opportunities that it affords. It also supports the 24/7 nature of Zappos operation superbly.

Mr Hsieh is serious about Las Vegas and has invested $350m of his own money into an initiative called the Downtown Project which aims to revitalize this formerly rundown and somewhat seedy part of town into a place where people would want to be. One of their projects is the Downtown Container Park which is a fun and child friendly area to hang-out and sample the wares from a variety of small start-up businesses located in the surrounding repurposed shipping containers. 

Mr Hsieh has also invested in the Gold Spike hotel & casino which has been transformed into an after work hang-out as well as providing co-working and super affordable co-living 'crash-pad' spaces for Zappos employees.  Mr Hsieh himself lives in a form of co-living in an upscale trailer park (Airstreams of course) just a few blocks from Zappos HQ. The whole initiative has been something of a limited success but one has to admire it's good intentions.

The plaza at Zappos HQ. 

The plaza at Zappos HQ. 

The Downtown Container Park retail start-up incubator and family friendly hang-out. 

The Downtown Container Park retail start-up incubator and family friendly hang-out. 

The enormous patio at the Gold Spike complete with AstroTurf covered seating, stages and the obligatory Airstream trailer.

The enormous patio at the Gold Spike complete with AstroTurf covered seating, stages and the obligatory Airstream trailer.

Our tour commenced with a video showing a potted history of Zappos and one unlucky visitor having his necktie cut in half - because ties make Zappos employees feel nervous. The alternative was to lose the tie or wear it around one's head for the duration of the tour. It's a bit of a gimmick but it made a point that they are non-corporate and they do donate money to charity for every tie that they destroy.  The tours are conducted by a member of the Zappos Insights team who act as ambassadors for their corporate culture. Zappos are so proud of their approach to culture that they set up the Insights team as a consultancy to offer their services to other companies.

Our tour was confined to the front of house area which like most tech startups contained foosball tables, ball pools, Lego walls and other fun elements designed to announce that we are a relaxed place to work. As we toured the Insights team's work area the fun and informality was dialled up to 11. The aesthetic was industrial with open ceilings, data cables hanging from J-hooks and power fed from surface mounted junction boxes on the ceiling providing maximum flexibility. Everyone has a height adjustable desk (1:1 ratio) and they are all heavily personalized. It looked like a bit of a Facility Manager's nightmare and as it turns out their Facilities team were previously in other unrelated roles within the organization so they completely understood the culture and that a clean desk policy was never going to happen at Zappos.

The location of a CEO's work area says a lot about an organization's culture. In Mr Hsieh's case it's right by one of the staff entrances to the building. Again, this reinforces the openness & informality of the Zappos culture.

Lego wall, piano and hat for impromptu performances. 

Lego wall, piano and hat for impromptu performances. 

The tie cutting ceremony. 

The tie cutting ceremony. 

CEO's workstation displaying multiple personalized license plates for long service.

CEO's workstation displaying multiple personalized license plates for long service.

Zappos Insights team member workstation with mini ball pool and portrait of the Dali Llama. 

Zappos Insights team member workstation with mini ball pool and portrait of the Dali Llama. 

Employee heaven or facilities management hell? 

Employee heaven or facilities management hell? 

Sadly we didn't get to see any of the back office call centre areas because the 90min tour as designed does not allow it.  I really wanted to get a feel for how people work here with no formal supervisors or digital displays showing call volumes and wait times - there are no imposed limits on customer calls with the recently broken record being in excess of 10 hours for a single customer call. The Insights team have a ton of this type of anecdote that really hammers home just how customer service focused they are. Too many anecdotes to list in this blog post but they were all deeply impressive to someone in the business of workplace strategy.

Like most successful large businesses, Zappos have their own guiding principles that describe how they aspire to live in their workplace:

  • 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 are obsessed with their culture. They believe that other companies could copy their business model but not their unique customer focused culture. They take a lot of time to ensure that every  customer is wowed by their service and to do that they aim to keep their staff energized and ensure that every team member is a good fit for this wow culture. It's not unusual for prospective employees to have 6-8 return interviews before Zappos offer them a position. Even then during the employees probation period they are confronted with three game show type roadblocks to give them the opportunity to leave if they don't feel that Zappos is right for them. One of these incentives is a fairly significant amount of cash which is no doubt tempting for anyone that is less than 100% committed.

Once you're hired then the efforts that they have gone to seem to work as the turnover in their call centre is around 20%. This sounds like a lot but many call centres experience staff turnover from 40-60% annually. The call centre accounts for about half of their 1,500 employees so clearly it's worth the effort.

So what about the holacracy? In a nutshell holacracy is a form of flatter organizational structure in which teams are split into small, agile, self-organizing 'circles' where the overriding aim is to complete an assigned task or support a wider company initiative. The circles are democratic and everyone has a say in how they are run with the role of manager being replaced by 'lead-links' with responsibility for connecting the circle's goals to the larger organizational mission. An example of this in practice could be a call-centre team reorganizing their work schedules in order to cover a staff absence or period of peak call volume.

There wasn't a lot of time on our tour to cover holacracy and I feel that it's the type of thing that you would need to actually experience via workshops or similar in order to understand how it would work in practice but my research leads me to understand that it is advantageous for call-centres that really don't need a top down hierarchy in order to be able to function.

In conclusion, I found myself deeply impressed by Zappos. Their office looks like a tech startup with lots of the 'me too' type fun elements that we've come to expect in the post Google workplace. However, what is most impressive is the length that they have gone to in order to create and maintain a WOW! experience for both their staff and their customers. From the outside they would appear to be delivering on their cultural guiding principles and I would recommend that anyone with an interest in creating a compelling corporate culture takes the Zappos Insights tour before undertaking their next workplace change initiative. 

Space at Work specialize in designing workplaces. We take the time to understand our client's requirements and by asking the right questions and listening to the responses we provide solutions that incorporate best practices as well as current and emerging trends to create spaces that are agile, adaptive and ready to accept whatever change is around the corner. Please contact us if you'd like to know more.