On July 22, 2009, Amazon bought Zappos for $1.2 billion. A majority of the purchase price came in the form of 10 million shares of Amazon stock which were trading around $80 per share at the time. Today Amazon is trading at $1,460 per share. Amazon was willing to pay cash, but Zappos CEO Tony Hsieh wanted stock. Good decision Tony.
Prior to the acquisition Amazon and Zappos were in a vicious battle for the shoe market, and the only likely win-win scenario would be to work together instead of against each other. It was paramount that the Zappos company culture would stay intact. After Tony had an hour long discussion with Jeff Bezos, they agreed Zappos would be run as a separate subsidiary, so Tony could run the company as he saw fit. Bezos and Amazon would leave Zappos alone as long as certain financial metrics were hit. You can read the letter Tony wrote to employees announcing the deal [HERE].
Zappos was founded in 1999 by Nick Swinmurn when he couldn’t find a specific pair of Airwalk shoes at his local mall. The prior year, Tony Hsieh sold his company LinkExchange to Microsoft for $265 million, and set up an investment firm with his business partner Alfred Lin called Venture Frogs. Nick Swinmurn approached Tony about his ShoeSite idea and Tony was reluctant to invest until he heard that 5% of the $40 billion US footwear market was controlled by mail order catalogs. Venture Frogs invested $2 million. A few months later they changed the name of the company to Zappos and Tony joined Zappos as the CEO.
Tony sold LinkExchange to Microsoft because he felt the culture was gone. He didn’t enjoy going into work anymore. So from the very beginning, Tony has made company culture his #1 priority at Zappos. If the culture is right everything else takes care of itself.
Here is a great video of Tony Hsieh talking about Hiring for Culture. We have also transcribed this video for members [HERE].
Hsieh explains, “It wasn’t just a few executives that spent a long weekend on an offsite somewhere and came up with the core values. But instead, I just emailed the entire company and asked our employees, ‘What should our values be?’ We got a whole bunch of different responses back and went back and forth for about a year. And then eventually came up with our list of 10 core values.”
These core values weren’t just meant for a meaningless plaque in the lobby. The company lives and breathes them and hires and fires employees based on them.
For every new person that Zappos hires they do two separate interviews. The hiring manager will hire for relevant experience, technical skills, ie can they do the job? Then the HR department does a separate interview to see if they are a culture fit. They have to pass both to be hired. They decline many candidates that are super smart but fail the culture interview.
The interview team designs questions and/or “experiences” for the candidate so that they can test each one of the ten core values.
“The hardest one to test is core value #10, humility. You can’t just say, ‘How humble are you?’ And they say, ‘I’m the most humble person in the whole wide world.’ One of the ways that we test for this … a lot of our candidates are actually from out of town, and so we’ll pick them up from the airport in a Zappos shuttle, give them a tour, and then they’ll spend the entire day interviewing. Well at the end of the day of interviews, the recruiter will circle back with the shuttle driver and ask how they were treated. And it doesn’t matter how well the day of interviews went, if they didn’t treat the shuttle driver well, then we won’t hire them. It’s not even a question.”
This is an innovative way for testing for Core value #4, Be Adventurous, Creative, and Open-Minded:
“So one of our interview questions here, is on a scale of 1 to 10, how lucky are you in life. 1 is, ‘I don’t know why bad things always seem to happen to me,’ and 10 is, ‘I don’t know why good things always seem to happen to me.’ Well we don’t want to hire the ones because they’re bad luck and we don’t want bad luck to come to Zappos, that wouldn’t be good. No, but this was actually inspired by a research study that I read about several years earlier that actually asked that exact same question to a random group of people. And they got some ones, some 10s, a bunch of answers in between. And then afterwards, they had them do a task. And the task was to go through a newspaper and count the number of photos that were in that newspaper. But what the participants didn’t know was that it was actually a fake newspaper. And sprinkled throughout the newspapers were things that would say things like, ‘If you’re reading this now, you can stop, the answer is 37. Plus collect an extra $100.’ And what they found was that the people who considered themselves unlucky in life, generally never noticed the headlines.”
“They went through the task and eventually came up with the right answer, whereas the people that considered themselves lucky in life generally stopped early and made the extra $100. The takeaway is that, it’s not so much that people are inherently lucky or unlucky in life, but luck is really more about being open to opportunity, beyond just how the task or situation presents itself.”
Members can access the full transcript of his presentation [HERE].
While studying Intelligent Fanatics we found that culture is the key component to building a dominant and sustainable business. Here are a few more posts on [CULTURE].
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