Zappos Case Analysis Report

Posted: August 25th, 2021

Zappos Case Analysis Report

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Zappos Case Analysis Report

Abstract

Zappos, an online shoe retail shop, has thrived since its inception in 1999. Tony Hsieh, who is the company’s Chief Executive Officer, became a multimillionaire at the age of 24 having sold a start-up to Microsoft for $265million. He joined Zappos at a time when the firm could only realize annual gross sales of $1.6million, which prompted Hsieh to prioritize his ten-yearplan: to achieve a threshold of $1billion annual sales and to upgrade Zappos to one of the best companies to work for eventually. To meet his set objectives, Hsieh enforced corporate culture as a way of sustaining passion in the working environment and excitement to deliver as expected. According to Hsieh, other core pillars that would spark growth and success include clear communication with the staff and other stakeholders. Besides, he set a satisfactory customer service which guaranteed free shipping and returns, instant feedback based on 24/7 response, and a free-call number. By 2008, the organization attained its first $1 billion sales target and in the long run, became the twenty-third among the best companies to work for.

A. Connection between Mr. Hsieh’s Leadership and Zappos’ Corporate Culture

Zappos enjoys a type of leadership with a focus on company’scultural core values. On the one side, corporate culture fosters the playful approach,for example, enforcing passion during the recruitment process and throughout an individual’s stay at the company. On the other hand, it pushes performance by motivating its employees to “do more with less” (Nie & Lennox, 2011). Tony Hsieh, the organization’s CEO, is an ambitious and goal oriented person. He sets objectives and does all it takes to meet them. After joining Zappos, Hsieh had two significant challenges: to attain $1 billion gross sales in 10 years and also to raise the reputation of the company to be among the best employers (Nie & Lennox, 2011). For proper integration of his beliefs, Hsieh, with the support of the corporate culture, prioritized trainings as a mechanism through which he could deliver quality customer service (Nie & Lennox, 2011). This approach would only be possible through the realization of the philosophy of Zappos culture.

B. Zappos’ Corporate Culture and What it Does to Support it

Like its Chief Executive Officer, Zappos operates exclusively using guidelines dictated by its corporate culture. Firstly, it applies rules when formulating some of its values to make the goals not only attainable but also exciting and motivational (Nie & Lennox, 2011). The first rule is applicable during the recruitment process in which the interested candidates go through a two-stage interview, mainly to test whether they are suitable for the job or not. The other step is selecting potential recruits to understand if they fit intoZappos’ culture (Nie & Lennox, 2011). Successful personnel go through an intensive training exercise on learning customer-relationship approaches and the philosophy behind the corporate culture (Nie & Lennox, 2011). The other aspect of Zappos culture is the value of communication. Hsieh believes in transparency with customers, investors, employees, and even suppliers (Nie & Lennox, 2011). For him, everyone in this cycle deserves the best and thus, needs a proper consideration as an investment (Nie & Lennox, 2011). A clear structure used to enforce this culture includes a free-call number, a 365-day return policy, andavailabilityto customers all day long throughout the week. Lastly, the organization offers free shipping and return services (Nie & Lennox, 2011). These strategies have collectively resulted in the overwhelming growth witnessed at Zappos. 

Protecting organizational culture could be the major challenge; however, it is not the case with Zappos. Inthe company, clearly outlined values help in dictating the limits of operations and role boundaries to maintain passion and excitement either one is an employee or an investor. In 2013, Hsieh decided to change the structure from overreliance on manager roles to a self-management system. Such a move, though not taken as a positive step by a part of the staff prompting 14% of them to take buyouts, was the ideal decision that would help the organization succeed (Feloni, 2015). Practically, Zappos needs more flexible plans inscribed within its culture to keep performing even better.

C. Zappos’ Holacracy Model

Holacarcy is a relatively new management model. Its aim is to give more autonomy to individual employees, who must still strive to reach common organizational goals (“What is holacarcy”, n.d.). Until 2013, Zappos had been operating using a traditional management hierarchy, a strategy that enabled the firm to rely on leadership titles rather than be innovative. Aware of the dynamics in the market, Hsieh contemplated integrating a model that would ensure all employees embrace self-management (Feloni, 2015). Although 210 of its 1,503 workers did not take the move like a light one, adopting holacracy is a well-crafted decision. Through holacracy, Zappos is able to make its goals clear, thereby improving customer service because the workers can be acting as if they are the real owners of the firm. This transition is useful for an organization, which is currently on the verge to ensure client satisfaction and to increase the level of trust, as seen by its change from drop-ship to inventory model (Nie & Lennox, 2011). At present, Zappos is the largest organization using holacarcy style (“What is holacarcy”, n.d.). It is the most flexible mechanism to enable Zappos to expand beyond its current operational spheres.

D. Evaluation of Zappos’ Action as a Holacratic Move, not Transparency

Transparency has remained a major tenet among Zappos’ core values. It requires that the communication between the staff and customers is clear and honest. However, the process of switching to holacracy was far from its norms. 14% of company’sstaff took a buyout deal in response to the Chief Executive Officer’s ultimatum to embrace “self-management or leave” (Feloni, 2015). According to John Bunch, the leader of holacracy transition, the memo signed by Mr. Hsieh raised questions among workers who were concerned about the future of Zappos. In 2008, the sacking of the 8% of the employees did not come as a single entity; it was a plan for the retail locations in Kentucky and Nevada (Twitchell, 2008). If this move had been as transparent as the company claims, then its workforce would not suffer the consequences of losing their jobs.

References

Feloni, R. (2015, May 8). 210 Zappos employees – 14% of the staff – take buyouts after CEO ultimatum to embrace self-management or leave. Business Insider.Retrieved from https://www.businessinsider.com/zappos-employees-take-buyouts-new-self-management-structure-2015-5?IR=T

Nie, W., & Lennox, B. (2011, February 16). Case study: Zappos. Financial Times.Retrieved from https://www.ft.com/content/98240e90-39fc-11e0-a441-00144feabdc0

Twitchell, J. (2008, November 6). Zappos.com laying off 8 percent of workers. Las Vegas Sun. Retrieved from https://lasvegassun.com/news/2008/nov/06/zapposcom-laying-8-percent-workers/

“What is holacarcy”. (n.d.). Holocracy.org. Retrieved from: https://www.holacracy.org/