CASE 1.
1 (HR IN SMALL BUSINESS)
ZAPPOS: HOW TO CREATE AN EMPLOYEE FRIENDLY CULTURE AND USE IT AS
A SOURCE OF COMPETITIVE ADVANTAGE
October 26, 2020
RATIONALE
Nick Swinmurn’s online retail store called Zappos has a different workplace
approach. It serves as an example on how organizations can create an employee friendly
culture and use it as a source of competitive advantage.
BACKGROUND
[Link] is an online shoe and clothing retailer based in Las Vegas, Nevada,
United States. Zappos, a short form of the Spanish word “zapatos” meaning “shoes,” is a
company founded in 1999 by Nick Swinmurn when he realized that there was not an
existing major online retailer who specialized in shoes.
Maintaining an effective culture in a workplace is an important strategy. It is
important to hire people who share your company value. A company culture that
facilitates employee happiness means better turnover and better company performance
(Neil Patel, 2012). Zappos’ CEO Tony Hsieh, one of the strongest advocates of culture,
notes that his entire business revolves around happiness. In 2010, Zappos was declared as
“the most employee friendly business out there” by Inc. Magazine.
Despite the few benefits and the low salary that Zappos offer to their employees,
over 1,300 of them still chooses to stay and give their priceless loyalty to the company.
Zappos places a high importance on recruitment so they require all their potential
employees to undergo a four-week customer loyalty training course, which includes at
least two weeks of talking on the phone with customers in the call center at full salary.
After a week of training, the new employees are offered $3,000 as buyout. Knowing all
the small benefits and low salary in the company, over 97% still chooses to turn down
and opted to stay in the company. This entails that people stay for the love of the job and
not for the money. “Employee benefits are perhaps more valuable than a high salary,”
states one of Zappos’ own blog posts.
EVALUATION OF THE CASE
Commitment and passion are the necessary qualities that an individual need in
order to be successful in Zappos. The company ensures that they hire the right people
with their unique four-week customer loyalty training course. “Power generally gets in
the way of learning,” says Mike Lee from Harvard Business School. Zappos adopted a
decentralized system with no job titles, no managers, no hierarchy called “holacracy.”
This type of work environment can really motivate an individual to explore, tend,
and improve their skills and abilities which is vital for the organization’s success. This
helps them become self-managed and self-organized and at the same time, actually feel
like they are part of the company’s decision making process since they are given the
power to innovate, make changes, and have a voice. They have the freedom to personally
connect with their customers since there is no time limit and they are even encouraged to
do so. This is also an advantage to earn the customer’s trust and loyalty since they are
treated as a family rather than just a plain business transaction.
Having no hierarchy may jumpstart to a negative practice and may result to
additional problems within the workforce but Zappos’ employees are different. They
share the same value with their CEO and understand the company values altogether
producing the best organizational performance. The CEO viewed this environment as a
city – he said, “Every time a city doubles in size, productivity per resident goes up to
15%.”
PROPOSED SOLUTION/CHANGES
Human Resource plays a big role in ensuring a company’s success from hiring to
training to maintaining the workforce. Zappos’ holacratic approach empowers employees
which helps drive the business. Creating this type of culture where employees have the
liberty to share their opinions opens a lot of doors and windows of vast resources in
which hierarchal companies often struggle with.
Changing this type of work environment is very tricky. An employee on
Glassdoor suggests that “Zappos might need more rules,” but others would most likely
say otherwise. Evaluation is key with this issue. The company must first assess the
organizational changes that they plan to impose to ensure that the new set of approach
will suit the employees. And they should also consider if the approach that they have
been doing for years is still applicable in today’s state.
RECOMMENDATION
Although Zappos’ workplace approach is empowering, we can never tell what
will happen in the years to come. Diversity is always present and we can never ensure
that the holacratic approach is applicable in the next generation. The company should
assess whether having a structural organization is necessary and if so, they should plan on
how to deliberately implement a careful strategic plan and at the same time how to slowly
make small changes with their culture and practices that will perfectly suit their
organization.
CONCLUSION
Zappos has developed different approach on how it manages, which is they
adopted a decentralized system called “holacracy”. This holacratic model empowers
employees and helps drive business, Zappos places a high level of trust on its team they
create an informal culture where employees will able to speak up and share. However
with Zappos style of management they are still able to focused towards development
which is to deliver satisfaction to the customers.
