Reference no: EM132790539

CASE STUDY FOR REFLECTIONTITLE: ZAPPOS 

At the turn of the millennium, Zappos, a Las Vegas - based Internet retailer, was a start-up struggling to survive. The company wanted to be the online destination for buying shoes, but customers hesitated to pick out shoes online. The company hired a 27-year old business consultant named Tony Hsieh to figure out what would save Zappos.

Hsieh, a first-generation Taiwanese American with a degree in computer science, already had a couple of successful business start-ups under his belt. Undeterred by Zappo's weak performance, he set an ambitious goal. Zappos would become the largest shoe retailer on the Internet. How? Not by focusing on mainly price or even selection, but by enhancing a company culture designed to make employees happy. Happy employees, Hsieh believed, would deliver superior service. When customers take a chance on picking out shoes from a website, they want to trust the seller will ensure they are satisfied with everything about the purchase, from shoe style and fit to fast delivery and an easy returns policy.

The approach quickly began to stimulate sales, and just a year after he started advising Zappos, Hsieh was named chief executive. He works for the startingly small salary of $36,000. That arrangement does not other Hsieh because he is more motivated by creating a great organization than by earning money. Afterall, his previous business, LinkExchange, brought him $265 million when he sold it to Microsoft. 

The Zappos culture is built on 10 core values:

1. Deliver WOW (an emotional impact and powerful story to tell) through service.

2. Embrace and drive change.

3. Create fun and a little weirdness.

4. Be adventurous, creative, and open-minded.

5. Pursue growth and learning.

6. Build open and honest relationships with communication.

7. Build a positive team and a family spirit. ("Family" refers to Zappos co-workers).

8. Do more with less.

9. Be passionate and determined.

10. Be humble.

These somewhat unconventional values are essential hiring criteria, and the company's career website directs potential applicants to read the values --- which are described in whimsical terms ---- and apply for a job only if they want to be part of this "best thing about the Zappos family." In fact, at the end of the orientation process, employees are offered $3,000 to quit if they feel they aren't a good fit with the company values, and displaying a lack of the values is grounds for being discharged. According to Hsieh, hiring people who share the core values makes it easy to form real friendships, and those relationships, in turn, create an environment in which people think creatively. 

The Zappos Human Resources Department, under the leadership of Hollie Delaney, a Salt Lake City Native, ensures that job candidates start to experience and participate in this unconventional, fun culture during the application and selection process. An online application invites them to submit video cover letters with their applications, and interviews are conducted in a room that looks like the set of a TV talk show, where candidates might answer a question such as "What is your theme song?". Employees evaluating candidates consider not only work history but also the way candidates interact during lunch. They even take into account the observations of the shuttle drivers who take visiting job candidates back to their hotel.  Once on board employees might discover that fun and a little weirdness at the company includes an opportunity to dye. Hsieh's or another manager's hair blue or shave his or her head at the annual Bald and Blue Day, and the commitment to wowing customers spills over into work relationships. Given a chance to reward colleagues' good behavior with a $50 monthly bonus, many employees held off, waiting to see exceptional behavior. 

Recently performance appraisals also were brought into line with the focus on values. Employees are rated not just on task accomplishment but also on how they represent the core values. Managers are expected to describe specific instances of employees demonstrating the values at work, and employees who score low on a measure have the chance to receive training in that value. Outside the formal appraisal process, employees also continue to receive regular feedback on task-related measures such as percentage of hours spent talking to customers. 

Delaney's acknowledges that the company's values results in a work environment that is loud, hardworking, and full of change --- conditions that aren't for everyone. Pay also isn't necessarily high, especially for call centre workers. But for those who share the values, this kind of workplace is exhilarating. There also plenty of rewards and perks, including profit sharing, a nap room, and access to a life coach who counsels employees as they sit on a velvet throne. 

With this approach to human resources management, Hsieh heled Zappos grow into a billion-dollar company which was eventually acquired by Amazon for $1.2 billion. Hsieh negotiated a deal in which Amazon promised to let Zappos continue operating independently, in accordance with its distinctive culture.

Unfortunately, although the 2008 financial crisis didn't keep sales at Zappos from rising, the ongoing economic slowdown eventually hurt, and Zappos laid off some of the workers, letting them down as gently as it could with generous severance packages. Even so, Zappos, unlike many businesses, hasn't outsourced its call centre, located in Kentucky, because those employees need to be a part of the company culture. After all, they are the ones who talked directly with customers, and they are trained to wow customers --- for example, encouraging them to try multiple sizes because shipping is fee in both directions. What's next for this innovative e-retailer? Several reports are emerging that Zappos is moving away from using a hierarchical, traditional management approach with titles and detailed employee job descriptions. Instead, a holacracy approach will likely be implemented which will organize employees into "functional self-organizing circles." Zappos hopes this innovative approach to empowering its diverse employees will keep it at the forefront of employees' minds as a great place to work

QUESTION 1:

Evaluate whether you think Zappos is a responsive organization. How do you expect its recent downsizing to affect its responsiveness?

QUESTION 2:

How does human resources management reinforce Zappos core values?      

QUESTION 3:

How well do you think Zappos' human resource strategy supports the valuing of employees' diversity? What diversity issues does Zappos need to address?