He had already sold a company—Internet advertiser LinkExchange—to Microsoft for $265 million because it was not a fun place to work anymore.
Since he didn’t want to repeat that mistake and always wanted Zappos.com to remain a fun place to work, he made his No. 1 priority at Zappos.com getting the culture right from the start.
His rationale isn’t just touchy-feely.
In a panel about growth strategies at the Ernst & Young Strategic Growth Forum, Hsieh referenced a key finding of Jim Collins’s leadership book Good to Great: What separates great companies from mediocre ones in terms of long-term financial performance, Hsieh recalled from the book, is the great ones have strong cultures—as well as a higher purpose beyond profits that ultimately also enables them to generate significantly more profits.
How do you do the same? Here are seven recommendations from Hsieh:
1. Build a company—not necessarily a product—you’re passionate about.
“I’ve never been interested in shoes,” said Hsieh. “My passion has always been customer service, company culture, and community.”
Don’t sway from that passion, even if an opportunity arises that seems like it presents an immediate financial return.
2. Want to motivate? Inspire first.
“While there are lots of ways to motivate employees—fear, recognition, incentives (“If you do ‘x,’ I’ll give you ‘y’), what we stumbled into and figured out over the years is there’s a huge difference between motivation and inspiration,” said Hsieh.
In essence, Hsieh said there’s a much bigger financial payoff if you inspire employees with your mission—in Zappos.com’s case: customer service, company culture, and community—than using other techniques.
“If you can inspire employees through a higher purpose beyond profits, that you’re doing something that can help change the world,” said Hsieh, “you can accomplish so much more.”
3. Be the architect of the greenhouse.
If you think of your company as a greenhouse with a lot of plants, many think the CEO is the tallest, strongest plant all others aspire to be, said Hsieh.
“I view my role as the architect of the greenhouse,” and try to foster “what’s already natural among the empoyees so they flourish.”
4. Encourage “collisions.”
Hsieh is moving Zappos.com headquarters from suburban Henderson, Nevada, to downtown Las Vegas, and—through his Downtown Project—helping make it possible for employees to live downtown, too, by buying and constructing residential buildings.
Hsieh wants to increase employee productivity as Zappos.com continues to grow. When cities double in size, Hsieh said, productivity increases 15 percent. But when companies double in size, productivity declines. So to avoid that fate, his theory is that a hybrid operation between a company, community, and city will help different forces come together and “accelerate serendipitous innovation.”
“Most innovation comes from outside your industry applied to your own,” said Hsieh.
He is also setting up his new offices to encourage interaction. The reality is, he pointed out, if employees sit twice as far away from each other, they see each other “half as often squared, not half as often—because of the inverse-square law.”
He’s shutting down a sky bridge connecting buildings to force employees out on the street.
5. Make your company values flexible enough to adapt in China—or Kentucky.
Zappos.com has an office in China and ran a warehouse in Kentucky that until recently had several thousand employes. It also, of course, has departments that run the spectrum from accounting to a call center. To get people behaving in all these places with the same attitudes, he set out to create a list of 10 core values that are flexible enough they can be effective regardless of an employee’s job function or geography—and evolve over time.
6. Make sure your employees are learning—all the time.
Hsieh teaches his employees classes on Good to Great as well as the book Tribal Leadership, by David Logan.
This week, he’s hosting a speakers’ series in downtown Vegas.
7. Offer a clear career path.
If employees join at entry level, make it possible to get to a senior level within a certain number of years. “Set expectations on both sides,” Hsieh said.