Category winner: Tony Hsieh at Zappos:
Structure, Culture and Radical Change

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This case won the Human Resource Management/Organisational Behaviour category at The Case Centre Awards and Competitions 2018.
 
The case
Tony Hsieh

Who – the protagonist

Tony Hsieh, Zappos CEO.

What?

Known as the “Amazon of shoes”, Zappos’ warehouse in Kentucky contained four million pairs from dozens of brands, guaranteeing free delivery to customers within four or five business days.

shoes

Unlike the majority of online retailers, Zappos encouraged its customers to communicate with them by telephone, as they believed a customer who called was worth five to six times as much over the course of their lifetime, compared to those who ordered online.

Why?

In favour of a relaxed working environment, and valuing employee satisfaction over profit, Hsieh decided to move towards Holacracy – a philosophy and form of organising based upon self-management.

Frustrated with the slow pace of the transition, Hsieh issued an email to his 1,443 employees stating that, if unhappy with the change, they could leave by a set date and be entitled to at least three months’ severance.

14% had taken up Hsieh’s offer. Worryingly, this figure included 20% of the tech department, who were in the middle of a complex migration of its website (known as the Supercloud Project), which powered a billion-a-year-business, to the Amazon platform.

Tony HsiehWhen?

A millionaire by time he was 24, Hsieh and his business partner, Alfred Lin, invested $500,000 in Zappos, founded by Nick Swinmurn in 1999, and later became sole CEO in 2003, at a time when they were reporting $70million in sales.

By November 2009, Amazon had acquired Zappos for $1.2billion, with Hsieh and Ling trading their stock for Amazon stock, giving Amazon legal ownership of Zappos. Crucially for Hsieh, Zappos would operate independently under his leadership.

It was 2013 when Hsieh started the process of moving to a Holacracy structure, with a three-year timeframe envisaged.

But not satisfied with the speed of change, Hsieh sent the aforementioned email to his employees on 24 March 2015. People wanting to leave had to give notice by 30 April 2015.

las vegasWhere?

After starting life in San Francisco, Zappos moved its headquarters to the outskirts of Las Vegas, where Hsieh hoped to find a larger pool of customer service-oriented talent for its growing 24-hour call centre.

In 2013, Zappos relocated its HQ again to the old City Hall building in downtown Las Vegas, an area Hsieh wanted to revitalise, after businesses and middle-class homeowners left for the Strip in the 60s.

Key quote

“Money meant that later on in life I would have the freedom to do whatever I wanted. The idea of one day running my own company also meant that I could be creative and eventually live life on my own terms.” – Tony Hsieh, on what he wanted from business.

What next?

Seemingly under pressure from the business press for ‘that’ email, the subsequent departure of 14% of his staff, and whether Holacracy was just a PR stunt, Hsieh remained calm and was already thinking “what next”?

 
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Tony Hsieh at Zappos: Structure, Culture and Radical Change
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The author
authors

Noah Askin, Gianpiero Petriglieri and Joanna Lockard

Noah and Gianpiero discuss how a divisive protagonist in Tony Hsieh sparked much debate in the classroom.

A strong protagonist

Tony Hsieh"Tony’s a fascinating character, above and beyond being a successful businessman, and as such he is a good exemplar of the reality that leadership is always personal – never just business. That is one of the reasons we included a fair amount of his personal story in the case.

“A great deal of what he’s done at Zappos feels like it was the result of, or a reaction to, his personal experiences and aspirations. His story and approach really make for a great case discussion. Tony’s blending of the personal and the professional in his leadership of Zappos brings out strong feelings among MBA students and executives alike.”

No end to the discussion

“In Europe, some students are shocked by Tony’s approach to business. In the US, Zappos and Tony’s story is relatively well known, and eccentric, cult-like business environments are a bit more mainstream than they are in the rest of the world. Because of this, Tony’s comments around “work-life balance” really being more about “work-life integration” – especially when paired with some of the video clips we show of life inside of Zappos – can definitely come as a shock to some students, while others love him for those.

“I think Tony’s decision to live in an airstream in what amounts to an upscale trailer park close to Zappos’ HQ, and to similarly revolve his life around all things Zappos, is often seen as pretty extreme as well. But it’s precisely what makes for a rich and interesting discussion about the changing nature of our work in relation to the rest of our lives: Tony is the embodiment of the movement that suggests we should “bring our whole selves to work.” You might call it shocking, or you might call it open, it still speaks to a larger trend worthy of scrutiny and discussion.

“The “get on with the changes or leave” memo, of course, makes the discussion more focused on the consequences of leaders’ authenticity. What happens when their vision does not include you?”

The need for argumentThe need for argument

“No cases are worth teaching that are not worth arguing about, and this is no exception. Good cases are meant to generate healthy, multi-sided debate amongst students, and this is certainly one of them.

“In the Zappos case discussion, we ask students whether Zappos is a cult and who would invest in the company but not work there. The question can strike a chord with students, many of whom desire to work in organisations with a strong culture but wrestle with the possible downsides associated with those cultures.

“Tony is a powerful reminder that you can’t have a passionate relationship with work and keep your distance and a cool mind. Passion burns.”

Commitment to HRM

“I think we do so well in the Human Resource Management and Organisational Behaviour category (2018 is the 19th time INSEAD has won this category award) due to the School’s dedication to humanising global business, a principle on which many of our activities rest.

“INSEAD’s particularly diverse student body and commitment to finding common ground among those diverse contacts really drives home the importance of practicing empathetic arguing, in class and beyond. In order to practice that attitude and skill, cases that illustrate the intricacies and contradiction of the human experience in, of, and at work are essential.

“It is something that the INSEAD OB faculty intuitively understands and tries to practice. It yields not only cases that resonate in the classroom, but an overall approach to teaching OB that leaves our students very well equipped with the hardest of skills as they re-enter the workforce: compassion.”

About the authors

Noah Askin is Assistant Professor of Organisational Behaviour at INSEAD.
e noah.askin@insead.edu
tw @naskin 

Gianpiero Petriglieri is Associate Professor of Organisational Behaviour at INSEAD.
e gianpiero.petriglieri@insead.edu
tw @gpetriglieri

Joanna Lockard was a research assistant at INSEAD when the case was written. She is now a Management Consultant at a consulting firm in the UK.
e joanna.lockard@gmail.com

 

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