Want to Build a Great Business? Be Happy!

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LAS VEGAS—Tony Hsieh, chief executive officer of online shoe and clothing retailer Zappos.com, preached the gospel of happiness to the audience June 28, 2011, in the general session at the Society for Human Resource Management’s (SHRM) 63rd Annual Conference & Exposition. The Harvard University graduate, who led the Las Vegas-based company from almost no sales to more than $1 billion in annual gross merchandise sales, shared stories of his path to success—and the mistakes he made along the way.

Hsieh, author of the best-selling book Delivering Happiness: A Path to Profits, Passion and Purpose (Business Plus, 2010), began his career selling pizzas to fellow students while he was in college. When he started his first business in 1996, online advertising company LinkExchange, he hired his college buddies, including a guy who bought his pizzas and resold them by the slice. But as the company grew, Hsieh became increasingly disillusioned.

“By the time we got to 100 employees, I dreaded getting out of bed to go to my own company,” he said. So, in 1998, he sold LinkExchange to Microsoft for $265 million. A year later he founded an investment fund. Zappos.com was one of the companies the fund invested in; within a year Hsieh joined the Internet retailer as an adviser. 

Determined not to repeat the disappointment he experienced in the past, Hsieh gave a lot of thought to the fledgling company’s culture, believing that it would be the key to its eventual success—and to his personal fulfillment.

“At Zappos, we see ourselves as a service company that just happens to sell shoes. We wanted to make the Zappos brand be about providing the very best customer service and customer experience.”

Instead of spending money on product advertising, Zappos directed its resources to providing great customer service. It embedded culture into every aspect of its operations. To serve customers better, its warehouse runs 24/7.

New hires go through two rounds of interviews, the second round conducted by HR to assess candidates’ cultural fit. Half of the questions in employees’ performance reviews center on demonstrating the company’s culture.

Every employee, regardless of job title, undergoes five weeks of new-hire training, including two weeks in the company’s call center “taking real calls from real customers,” Hsieh said. At the end of the first week of training, new hires are offered up to $4,000 to quit. Call center reps don’t use scripts, and calls aren’t timed.

“Customer service shouldn’t just be a department. It should be the whole company,” Hsieh said.

It took the company a year to write 10 “commitable” core values, which are embedded in everything from its approach to employee development to structured interview questions designed to measure a candidate’s alignment with what the company stands for.

Several years ago, Hsieh decided to create a Zappos “culture book” by asking employees to write reviews of the company and what the company’s culture means to them. In addition, the company promotes the use of social media; it has about 500 employees who are active on Twitter.

“At Zappos, we don’t have a social media policy,” Hsieh said. “We tell employees to ‘be real and use your best judgment.’ ”

Now, Zappos.com holds workshops called Zappos Insights to teach other businesses about its innovative approach to business and to help them define their brand.

“What we do might not work at other companies,” he said, “but every company should have values it can actually commit to. In the end, it’s all about delivering happiness, whether it’s customers or employees.”

Desda Moss is managing editor of HR Magazine.