Zappos: The Culture and the Organization

Since its founding in 1999, Zappos was destined to become the most selling online shoe company in the world (Reingold, 2016). The key reason behind this success is vested in the way the organization manages its employees and the focus on who it is selling the products to instead of what it is selling. The mission statement of Zappos is “to provide the best possible customer service”. In executing this goal, the company strives to realize happiness for both the employees and customers. Zappos employees typically call the company’s mission statement as the wow statement and has helped in the retention of employees who truly fit the profile of the company. In this light, the goal of Zappos can be summarized as realizing customer happiness along with employee happiness (Reingold, 2016). With regard to the company’s CEO, when people feel comfortable, they become more creative, in turn benefiting the entire organization. Employees at Zappos are guided by ten core values which have been integrated into their routine work. These values include: I) Embrace and drive change, II) Deliver wow via service, III) Be open-minded, creative, and adventurous, IV) Create fun and some weirdness, V) Be open and foster honest relationship with communication, VI) Pursue learning and growth, VII) Do more with less, VIII) Build a family spirit and a positive team, IX) Be humble, and finally X) Be determined and passionate (Askin, Petriglieri, & Lockard, 2016).

The Culture of the Organization

The culture at Zappos is legendary. The online retailer was among the very first big companies to implement no corner offices and an open floor plan. Five years ago, the company CEO - Tony Hsieh – decided to take Zappos to a bold and novel direction. Concerned that corporate growth within the organization was undermining the very culture that made the company great, Hsieh instituted holacracy which is a model of self-management in which teams are substituted with concentric circles while managers become lead links who notably have limited formal authority over other employees in the company, and everyone in the organization is empowered to make decisions (Askin et al., 2016). The company culture at Zappos intends to help employees collaborate effectively, make the maximum use of their potentials, and improve the company through the elimination of bottlenecks and bureaucracy. The main unit at Zappos is the circle, which is a fluid yet a distinctive team of employees. Through a rather strict process of governance, the different circles/ teams at Zappos are designed to meet specific goals including customer-care (wow customers), marketing (brand aura), infrastructure, and corporate media and public relations (Bernstein, Bunch, Canner, & Lee, 2016). Employees are allowed to step in and out of roles based on what they would prefer to accomplish and what seems to be causing unnecessary burden. However, employees can hold roles in different circles, largely acting as links between circles.

The Effectiveness of the Culture and the Organization Structure

Whether the culture and organizational structure at Zappos has been effective in meeting the goals of the organization and living in the values cannot be directly concluded. Some employees have been shown to celebrate the flat and boss-less environment that fosters flexibility and engagement (Bernstein et al., 2016). With expertise and experience less emphasized, junior employees have been the highest beneficiaries as they now take part in the making of decisions that do affect their responsibilities in the company. However, other employees, especially those who used to occupy high-ranking positions, have denounced the organizational structure as a naive social experiment that ignores how things are done in the corporate environment. Even though some employees quit the organization in 2015, others remained but are not happy in line with the goals of the organization. For instance, Reingold (2016) cites a case of an employee at Zappos who was previously a career manager and whose powers were eventually reduced with holacracy. She is unable to realize her long-term career goals while working at Zappos though she has to contend with the new work structure.

However, Zappos continues to make a number of changes to its employee management, customer targeting, and in product mix. Under holacracy, the organization realized 75 percent YoY increase in the operating profit in 2015 (Bernstein et al., 2016). In this light, holacracy has shown early signs of helping Zappos live within its values and realize customer happiness along with overall employee happiness. Negotiating with one another, employees assume duties that they are able to handle and combined with less bureaucracy and ability to participate in decision making, the culture and the organizational structure will enable Zappos to realize its goals.

Whether the Organizational Structure Fosters Engagement and Innovation

The organizational structure at Zappos does foster engagement and innovation. Since the employees of Zappos are driving all the processes themselves, they have a greater sense of making actual progress in meaningful work. Having such daily sense of progress, along with colleagues who provide advice and resources, and help each other is a factor that differentiates Zappos from other organizations (Askin et al., 2016). These factors, which are integrated into the organizational structure of Zappos are strongly associated with increased employee motivation, enhanced innovation, and engagement. Simply put, an increased focus on establishing an organizational culture that embraces the differences of each individual is what makes Zappos special. Even employees who were previously introverts have benefited from the requirement that each person should speak in meetings. For example, one employee of Zappos – Danielle Kelly – said that team meetings have improved his socialization and communication skills (Reingold, 2016). Besides, considering that decision-making is not pushed from the top management, people are encouraged to take decisions that they deem appropriate for the company, which fosters innovation (Askin et al., 2016). Most importantly, the wiliness to fail is what encourages Zappos employees to be innovative. Zappos wants fun and crazy ideas and hence, the company provides a safe space for the employees to explore and share their creativity (Askin et al., 2016).

Role of Tony Hsieh in Driving the Culture and Organizational Effectiveness

Hsieh continues to play an important role in driving the culture and the organizational effectiveness of Zappos. He has cultivated the company’s fun and a little weird culture. Since he became CEO, Hsieh has kept things casual – wearing sneakers, jeans, and a Zappos hoodie or T-shirt each day (Askin et al., 2016). He also communicates in a rather casual manner, ignoring bureaucratic procedures, with the hope of being a role model to the employees. As the CEO, Tony emphasizes developing a personal and emotional connection with both customers and colleagues at work. Besides, Tony has put increasing emphasis on rewarding and hiring people who were motivated to work at Zappos. His most significant decision is when he directed the employees who were not contented with the organizational culture to voluntarily resign (Askin et al., 2016). Even though the company lost about 18 percent of its staff, Tony has been at the forefront of the organization’s success, largely reminding employees to articulate the ten core values. Hsieh’s tendency to favor work-life integration as opposed to work-life balance will continue to be instrumental in the success of Zappos’ culture and effectiveness well into the future (Askin et al., 2016).

Whether Hsieh Should Take on a More Formal Leadership Role

The three goals of holacracy – making decisions closer to the work, designing roles that merge employee capabilities, and responding to emerging needs in the market – have made the role of Tony Hsieh as Zappos CEO less formal (Bernstein et al., 2016). Even though holacracy has its advantages as it improves employee innovation, motivation, and engagement, there is a need for some formal leadership within an organization. As Reingold (2016) elucidates, markets are full of volatility and when a crisis does strike, there is a need for faster decision making to prevenient excessive losses. However, with the 300 leads links and 500 circles, Zappos could be ineffective in making organization-wide decisions (Reingold, 2016). Besides, Zappos culture does not guarantee that employees will always work towards the realization of company objectives. Humans are naturally lazy, and when given the opportunity for self-management, they can make decisions that favor themselves as opposed to the organization. Therefore, Zappos should make some changes in its organizational culture, including the CEO taking on a more formal role. The CEO should validate major decisions made by employee teams. Similarly, employees should not be allowed to set their own salaries in comparison with the market rate as employee remuneration is an important area that if managed poorly can lead to excessive costs.

References

Askin, N., Petriglieri, G., & Lockard, J. (2016). Tony Hsieh at Zappos: Structure, culture and change. INSEAD. Retrieved from https://www.thecasecentre.org/educators/products/view?id=137577

Bernstein, E., Bunch, J., Canner, N., & Lee, M. (2016). Beyond the holacracy hype. Harvard Business Review, 94(7). Retrieved from http://hetprogrammahuis.nl/wp-content/uploads/2016/08/Beyond-the-Holacracy-Hype.pdf

Reingold, J. (2016). The Zappos experiment. Fortune, 173(4), 206-219.