Tony Hsieh (pronounced Shay) was born in 1973 in Illinois. His parents were immigrants from Taiwan who met at graduate school. Hsieh studied computer science at Harvard University where he was a member of a prize-winning programming contest team. While there, as a student job he managed a pizza grill. One of his customers was Alfred Lin, who became his friend and later became CFO and COO at Zappos. After graduating Hsieh worked for Oracle Corporation but quit in 1996 after just five months, to co-found the LinkExchange, an advertising network. It sold banner ads and grew quickly on the crest of the burgeoning wave of new websites. In 1998, LinkExchange was sold to Microsoft for $265 million.
Hsieh and his friend Alfred Lin now co-founded Venture Frogs, an incubator and investment firm. A friend had dared Hsieh to start a company with the name Venture Frogs so that is what he did. They invested in a variety of tech and Internet start-ups, including Ask Jeeves, OpenTable and Zappos, an online shoe retailer. A little later, Hsieh joined Zappos as the CEO.
He was concerned that customers would feel nervous about buying shoes unseen and untried, so he set out to make them feel comfortable and secure with shopping online. Zappos offered free shipping and free returns. The company gained a reputation for extraordinary customer service. Hsieh empowered and encouraged employees to go to great lengths to help clients. This proved successful. When Hsieh joined Zappos in 2000 it had a turnover of $1.6 million. By 2009, he had grown revenues to $1 billion. At that point, Amazon acquired Zappos.com for $1.2 billion. Hsieh made at least $200 million from the sale but stayed on as CEO to lead the company.
He upended the company structure. In 2013 it became a holacracy without job titles, where employees could self-organize. Zappos was listed in Fortune as one of the best companies to work for. Tony believed that having fun at work wasn’t a liability; it was an asset.
The remarkable culture which Hsieh developed at Zappos starts with the hiring process which is longer and more involved than traditional recruitment. The company hires only about 1% of all applicants. Before an employee is hired, he or she will meet several different employees and attend a company event. Zappos hires slowly with the emphasis on cultural fit.
New hires spend their first few weeks manning phones in the call centre learning how to respond to customer needs. This is useful training because in busy times all employees are expected to be available to man the phones. Part of the induction process is a scavenger hunt to meet people and to find things out about the company.
Upon completion of their training, new employees are offered $3,000 to leave the company. This is a test of commitment. Zappos does not want people who do not love the job. If they turn down the exit offer, new employees have a ‘graduation ceremony’ with all the department present and cheering.
Zappos has a culture book that is written and updated by employees. It expresses how staff feel about the Zappos culture and the actions they take to develop it. This book is given visitors and anyone who wants it.
The company has a wide range of social activities for employees and their families including cookouts, picnics and theatre trips. Managers make cultural assessments rather than performance evaluations and give raises based on skill tests.
Call centre staff are empowered to use their imagination to serve customers and make them happy. Evidence of the effectiveness of this approach is shown by the fact that over 75% of sales are from repeat customers. One of the company’s core values is to “be adventurous, creative and open minded.” The Zappos unique ethos has been carefully developed to enable employees to achieve that goal. The company is famous for encouraging people to express their creativity and for allowing them to fail.
Zappos shares its approach freely. Tony Hsieh wrote a book, Delivering Happiness, describing the history and culture at Zappos. It was featured in many eminent publications, including The Washington Post, CNBC, The Huffington Post and The Wall Street Journal. It reached No. 1 on the New York Times Best Seller List and stayed on the list for 27 weeks. Zappos has been so celebrated for its corporate values that the company has a consulting team that helps other businesses improve their cultures. It offers leadership training courses including the “School of Wow.”
Hsieh loved the game of poker and moved Zappos to downtown Las Vegas. He organized a major re-development and revitalization project for the dilapidated downtown area of Las Vegas. In 2013 he pledged $350m for the project. Initially this was a plan for a place where Zappos.com employees could live and work, but the vision grew to create an environment where hundreds of small business and entrepreneurs could flourish.
In August 2020, Hsieh retired as the CEO of Zappos after 21 years in charge. Tragically, in November 2020, he was injured in a house fire in New London, Connecticut. He was rescued by firefighters and taken to hospital but died later, just two weeks before his 47th birthday.
Insights for Innovators
Delight and surprise your customers. Hsieh said he was not passionate about selling shoes but he was passionate about customer service. He found that appetite led to innovation, growth and profit.
Culture is everything. The Zappos products and processes were good but what set it apart was its culture. Hsieh worked tirelessly to build the right culture and to hire and develop people who could build and enhance that vision.
Empower your people. If you have bright, committed and enthusiastic people then give them the freedom to make important decisions about how they do their work and achieve goals. Entrepreneurs want autonomy – and giving autonomy to employees creates more entrepreneurs within your business.
More stories of great innovators in Think like an Innovator by Paul Sloane published by Pearson.
