5. The “C” Word

Up to this point, I have made a few references to the “C” word, Culture, but I have not yet explained why it’s so important. During the more than 20 years that I have developed marketing and business strategies, I’ve noticed something quite interesting: A company could develop the best kick-butt strategy to win in the market—and still fail to realize the potential of what was possible. What kept a company from achieving what it was clearly capable of? Some people might say “execution,” but if you dig deeper, you have to ask, “What keeps a business from executing?”

The answer is culture. A company that has no soul, no sense of purpose, no passion for serving customers, and no desire to foster happiness and trust among employees can’t possibly win in the market. A company without culture will never achieve greatness or even a fraction of what it could achieve with a healthy, vibrant culture.

So what is a healthy, vibrant culture? I could tell you, but I think it’s better to show you. As I mentioned in the Introduction, culture is a theme woven throughout this process. You will learn from examples throughout the book and you will also have the opportunity to develop your own culture plan in the last chapter of the book. But for now, learn from a few of the masters. The examples in the rest of this section will show you how to create a truly amazing culture: a company where it’s not only more fun to work, but more profitable and satisfying to all stakeholders as well. Let’s start with a company that has recently become the poster child for culture and values-based leadership.

Las Vegas-based Zappos is anything but a typical online shoe retailer. Company culture and values do not simply differentiate the business, but seem to fuel the very idea of why the company exists. Founder and CEO Tony Hsieh attributes Zappos’s overwhelming success (and over $1 billion in sales) to a culture that thrives on unique values and delivers exceptional levels of personalized customer service. In less than ten years, Zappos has created a customer base that exceeds 10 million, and an impressive 75 percent of customers return to buy an average of 2.5 times a year.

Truly exceptional customer service is the norm at Zappos. They have a 24/7 service, a 365-day return policy, an 800 number on every web page, free shipping, and free return shipping. When was the last time you placed an order through a customer service agent and finished the call actually feeling better than you did before you made the call? That’s the goal at Zappos. Your experience with a customer service agent is anything but typical. In fact, the friendly, caring agents have been known for cheering up a customer who is having an exceptionally bad day by sending flowers, a note, or spending extra time trying to make a customer’s day a little happier.

What Do Pizza and Shoes Have in Common?

When Hsieh spoke at a recent conference, he shared a story that described just how service oriented his employees are. He was in Santa Monica with a group of people including a vendor from Sketchers who was hungry and craving a pizza at 3:00 a.m. When she became frustrated after making call after call to find a pizza place that would deliver at 3:00 a.m. with no success, Hsieh suggested that she call Zappos to see if the customer service agent who answered the phone could help. “You must be kidding,” she said. Hsieh gave her the number and when the agent answered the phone, she gave him her request (remember she is in Santa Monica looking for a pepperoni pizza delivery at 3:00 a.m. and the agent works for a shoe company in Las Vegas). After a brief hold, the agent comes back on the line and gives her five phone numbers for pizza places that were still delivering. Now that’s service. Great service is the core purpose at Zappos. The company is a service company that just happens to sell shoes and other items.

Since Zappos is “Powered by Customer Service,” one of the biggest challenges is finding people who love working with other people to deliver “Wow!” customer service.

New candidates are screened in two interviews. One interview is focused on skills and the other on core values and cultural fit. Questions like, “On a scale of one to ten, how weird are you?” help sort out the cultural fit.

Once hired, every employee goes through five weeks of training in culture and core values as well as customer service and warehouse training. Zappos wants people who are there for the culture, not for the paycheck. In fact, they are so adamant about this that they offer new hires $2,000 to quit after their initial five weeks of training. If you stop to think about this for a moment, you realize just how unusual Zappos is. Two-thousand dollars is a really good incentive for call center employees looking for a nice bonus to go find another job, but surprisingly few actually take them up on it. In 2007, three percent took the payout to leave, and in 2008, only one percent took the offer.

Committable Core Values

Hsieh says the secret sauce to a great culture is having “Committable Core Values.” This means that whatever a company’s core values are, people must commit to them, evangelize them, and be willing to hire and fire based on the core values. Hsieh says he wasn’t always enlightened about the importance of culture to business success. He learned this the hard way that most entrepreneurs do: through personal experience, trial and error, and mistakes. Although Hsieh’s first company, LinkExchange, was very successful (he sold it to Microsoft for $265 million when he was only 24 years old), he said he didn’t know any better to pay attention to company culture. By the time the company grew to 100 employees, he no longer wanted to work in the company because it had become too impersonal.

Hsieh has clearly put his “lessons learned” to work at Zappos where culture and core values are talked about every day, just as revenue and market share are talked about in most companies. Culture is so important that they have developed a more than 350 page manifesto called “Zappos Culture” that is updated yearly (it was more than 470 pages in 2008). The highly transparent company extends the same courtesy to suppliers, vendors, and customers by offering several views into the company:

• An extranet gives vendors access to the same database as Zappos employees. Hsieh says, “This means we have 1,500 vendors helping us co-manage the business.”

• An “Ask Anything” newsletter.

• Tours for customers, reporters, or anyone that just wants to visit their company headquarters and warehouse. Just make a request at [email protected]. During a visit, you can walk around and talk to anyone you want. Zappos will even pick you up at the airport!

• Communicate with Hsieh or other Zappos employees through Twitter (twitter.com/zappos) or through one of several blogs (blogs.zappos.com).

So what’s next for a company that has set a new benchmark for employee engagement and customer service? Hsieh says he wants the company to be known for “Three C’s,” which are clothing, customer service, and culture—three attributes that align with the customer value chain. Customers come to the company for the clothing (awareness); customer service helps retain them and bring them back; and culture is the platform that makes it all possible.

The July 2009 merger of Zappos and Amazon could be a match made in heaven. The merger combines two strong visionary leaders, a customer-driven online experience, and technology directed toward a 1:1 learning relationship with customers. If Hsieh can infuse the union with his personalized approach to customer experience, we may see a new business model—a perfect combination of technology and caring, personalized service.

“It’s all about delivering happiness,” says Hsieh.

Zappos Core Values

The Zappos core values are expressed next. The explanation of each value is actually in the words of an employee, Donavon Roberson, from the Zappos Culture Book. The book is published by Zappos every year and is largely a compilation of what the culture means to each Zappos employee. It’s really a brilliant idea to create a culture book that is written by employees. Although CEO Tony Hsieh developed the ten core values, it’s the employees who own them, live them, and make them real.

Roberson’s introduction to the ten values begins with “...I love what I do! I love this company! I love the culture, the people, the mission, and the passion to do whatever it takes to provide the greatest customer service possible. I was attracted to the culture and the fact that it is a living, breathing, active aspect of who we are. Many organizations that I have been involved with in the past have had mission and value statements, but they were simply put into publications and posted on walls. Many companies talk about culture, vision, or values but many times it ends there, a plaque on the wall. Not in the case with Zappos! Our culture is what sets us apart from would-be companies that try to mimic what we do here.”¹