photo credit: Lars Plougmann

It’s a common understanding of how to run a company that you must be market-driven, and be responsive to customer feedback. And as a customer advocate, I would certainly never be one to deny that customer input and market validation are important. But the other side of that coin is that you’re in business not only to make money, but to develop yourself, enjoy the rewards of a job well done, and hopefully leave this world having enjoyed yourself and given enjoyment to others.

To fully live that ideal might mean turning some work down. It might mean making tough decisions about when to leave your current job and start your own company. It might mean passing on certain investors who don’t share your views on how business should be conducted.

But in order to make those tough decisions, you have to really know yourself and your values. Not just personally, although that of course is important too, but as a company. What does your company stand for?

I recently ran across an article at Both Sides of the Table that dealt with this very idea on the way to becoming a more customer-centric organization:

So I started thinking about the ‘Inside Out’ organization. This is the company that lets outsiders have a glimpse of what is going on in the sausage factory. Being transparent about our workload, our struggles, our fund raising, whatever. Letting our customers and the market know that we were a real organization with real people rather than a pre-packaged, pre-processed marketing machine.

It may be scary, but there’s a lot to be said for letting your insides show. You may end up attracting more appropriate customers in the long run.

photo credit: paulswansen

Gossip. Some of us take part more than others, but we all contribute a little from time to time.

In the workplace, gossip can get really mean. A former coworker was recently telling me about attempts to undermine her that came from others in the office who saw that she was away from her desk while her boss was out of town. (The truth was that she’d had a doctor appointment, and had emailed her boss about it in advance.)

But it doesn’t stop there. Office gossip can trump up single instances of a behavior into a gossip-worthy pattern: maybe someone who’s having a tough morning is observed stepping out for a 5-minute fresh air break and suddenly that person is suspected of having a pattern of idling. Or maybe someone is observed taking the last cup of coffee without starting a new pot because he or she is in a hurry to a meeting, and suddenly that person is the culprit whenever the pot is empty.

Whatever the behavior, gossip has a way of turning trivial events into something sinister in the retelling over time. There is also, according to an article in this morning’s New York Times, a tendency for gossip to grow due to the pressure to contribute to it:

The earlier studies found that once someone made a negative comment about a person who wasn’t there, the conversation would get meaner unless someone immediately defended the target. Otherwise, among both adults and teenagers, the insults would keep coming because there was so much social pressure to agree with the others.

You know what our suggestion is: be the one to shut it down. We’ve talked before about how important it is to empathize with others around you; great accomplishments are rarely made without true collaboration, and for true collaboration, you need at least reasonable compassion and empathy for those you’re working with. But nothing breaks down trust and creates barriers to collaboration like gossip. Shut it down. Move on. Foster a culture of empathy and understanding. If something needs to be communicated to someone, talk to the person directly or communicate with his or her manager if need be. But no good will come from spreading gossip around the office.

Besides, you’ll only be making it more likely that one day, office gossip will be spreading about you.

In the interest of fairness, Fog Creek’s compensation policy is open, public, simple, and accountable. Many companies try to obfuscate the rules they use for determining compensation in hopes that they won’t get caught paying some people too much and others too little. Some companies actually consider it a firing offense to reveal your salary!

We feel that in the long run, this can only hurt us through negative morale, high turnover, and destructive office politics. Therefore, the policy in this document is publicly available. People have a right to know what the levels are and what they mean. Everybody has a right to know what their colleagues’ levels are.

It made me wonder what the Corporate Idealist crowd has to say about that approach. Your thoughts? Please share in the comments.

What’s not to love?

So I was delighted to have the opportunity to interview Tony Hsieh, CEO of Zappos.com, for Corporate Idealist. The following responses provide insights into what it’s like to lead a truly innovative and customer-centric company… that just happens to do over $1 billion in gross sales.

Tony Hsieh, CEO of Zappos.com

Corporate Idealist: Thank you for agreeing to this interview. In previous interviews, you’ve mentioned that you got into the shoe business because it looked like such a great opportunity — a $40 billion market. Did you have any concept at the time that you might differentiate the company through customer service, or did that evolve with time?

Tony: Back in 1999, there really weren’t any great destinations online for buying shoes. After learning that it was a $40 billion market in the US, and 5% of it ($2 billion) was being done through paper mail order catalogs, it seemed like a good investment opportunity. I got involved with Zappos about 2 months after it started.

From the beginning, we’ve always thought that customer service was important. But it wasn’t until 2003 that we decided we wanted the Zappos brand to not just be about shoes. Instead, we decided that we wanted the Zappos brand to actually be about the very best customer service and customer experience. Once we made that decision, we started making a lot of changes to our business to be even more customer-service focused.

Corporate Idealist: You’ve also stated that roughly 75% of your business on any given day is from repeat customers. Was the realization that repeat business was going to be your sweet spot something that came about by accident when reviewing business intelligence data, or were you actively trying to cultivate a loyalty- oriented business?

Tony: We stumbled into it accidentally. In the early days of the company (we were founded in 1999), we were unable to raise funding so we weren’t able to spend a lot of money on expensive marketing campaigns. As a result, we were forced to focus more on our existing customers. What we found was that the more we invested into customer service and the customer experience, the more loyal they were, and the more we grew from word of mouth. Today, we take most of the money we would have spent on paid marketing or advertising and invest it into the customer experience instead.

Corporate Idealist: What challenges did you have to overcome to make the company truly able to focus on customer service and customer experience?

Tony: During the first few years, there were many times when we we didn’t have enough money to pay our own employees, but we had such a passionate and dedicated group of employees, that many of them decided to forgo or reduce their salaries because they all believed in the long term potential of the company. If it weren’t for the passion of our early employees, Zappos wouldn’t be around today.

Corporate Idealist: Have you ever had to debate with other executives or with your board of directors about the costs associated with providing an excellent customer experience? If so, how has that been resolved?

Tony: Like any other business, we still have financial goals we need to meet in order to keep our shareholders and board of directors happy. Our approach has been to maximize the amount we invest in the customer experience and our company culture while still meeting our financial goals. There are always things we can do to make our customers happier… for example, in theory we could offer same day delivery for every customer. But it wouldn’t make sense from a financial perspective, so we don’t do that.

Corporate Idealist: Turning our attention to the employee experience, your hiring practices are famously steeped in Zappos culture and oriented towards retaining the right people through the on-boarding process. There’s a clear customer benefit in all this, but it seems that there is an employee benefit, too, in working around people who share a vision and a positive attitude. What indicators can you describe (such as retention, etc.) that this approach is working as intended?

Tony: Our turnover rate for employees varies by department (for example, turnover in the warehouse is higher), but when you compare each department with the same department in other companies, we’ve found that it’s generally lower, which saves the company money in the long run.

Corporate Idealist: You’ve said that when you decided to move operations to Las Vegas in 2004, it was due to difficulties finding customer service people in San Francisco. Yet it seems as if Las Vegas has come to be part of the company identity, as well — visiting conventioneers are often welcomed by Zappos by a party in a trendy nightclub. [Editor's note: I've been fortunate enough to attend one myself.] How did the employees who relocated from San Francisco adapt to Las Vegas culture, and how long did it take for Las Vegas to be part of the company identity?

Tony: When we first moved from San Francisco to Las Vegas, we had about 90 employees in San Francisco and about 70 ended up moving with the company.  Today, we have about 700 employees in Las Vegas, so the vast majority of our current employees joined Zappos after they had already lived in Las Vegas.

For the employees that moved from San Francisco, some of them decided that living in Las Vegas wasn’t quite right for them, so we offered to pay for their relocation back to San Francisco. Overall, I think most employees are pretty happy with the move.

Most customers don’t actually know that we are located in Las Vegas, so I’m not sure if it’s really a part of the company identity.

Corporate Idealist: Another big piece of the Zappos identity that was later to the game is Twitter. You yourself are clearly one of the most popular accounts on Twitter, and many Zappos employees use it as well. How did Zappos come to embrace Twitter, and how has it become a part of the culture?

Tony: We have over 400 employees on Twitter, and you can view their tweets at:

http://twitter.zappos.com/employee_tweets

As you can see, most of the tweets are not about business or marketing, but it’s a great way for us to connect on a more personal level with both employees and customers. It gives people a glimpse into our company culture, which is ultimately what our brand is all about.

Corporate Idealist: Corporate Idealism, as we espouse it on this blog, is all about creative business, meaningful and satisfying work, and an unrelenting focus on the customer, none of which do we believe contradict the ability to make money. The Zappos story epitomizes that. Do you have anything to add for our readers about being a real- world Corporate Idealist?

Tony: I would say rather than focus on what will make you the most money or be best for your career, figure out what you would be passionate for 10 years and go pursue that. A lot of people work hard at building a career so that one day down the road they think it will bring them happiness. And most of the time, when they finally accomplish their goal, they realize that it doesn’t really end up bringing happiness or fulfillment for the long term. One of the things that the research has shown is that people are very bad at predicting what will make them happy. If the ultimate goal is to achieve enduring happiness, it seems like it’s worth spending some time learning about the science of happiness so you don’t wind up in the same situation.

photo credit: AMagill

Many years ago I worked for an institution with some very bad habits about a tiny group of people making all the decisions. It felt bad when the decisions were handed down, and even worse when I was asked to participate in the method. Needless to say I’m not there anymore….and not surprisingly, neither is the management team that drove the whole operation into the ground.

Perhaps it was leftover from childhood, when Spy vs. Spy ruled our play time. We found out we could write in lemon juice as invisible ink, and require our friends to use passwords to get into the clubhouse. It was absolutely glorious fun, but kids’ stuff in a grown-up world doesn’t usually translate well.

Knowledge and Status

There are times to keep situations low-key and to keep preliminary planning groups small. Throwing open all processes to a large group from the beginning usually results in chaos and frustration. Problems arise when management fails to plan for appropriate transparency in the overall strategic effort. Your team should be defined as those upon whom you depend to help carry out change, as well as those significantly affected by the results of your decisions. This may mean administrative and executive staff, as well as clients. Rumors and misunderstandings quickly will destabilize your operational foundation once the word is out planning is happening behind closed doors.

The best thing to do is to let people know in regular staff or even client updates that management will be looking at some current issues, and then provide a general timeline for when others will be brought into the dialogue. It is important that people know up-front that their input and perspectives are valued, and will be taken into consideration if any new approach develops. Beware the intoxicating “knowledge is status” dynamic. When people are in-the- know for too long, and fully aware that others are not, they tend to want to protect that status by losing interest in transparency. Your governance team must understand from the outset that your process is an open one long-term.

Truth or Consequences

There is a familiar saying, “Better to beg forgiveness than ask permission.” Simply put, this approach doesn’t work. Transparent management is not about asking permission so much as being candid, respectful, and trustworthy; and about extending the same expectations to your team. If we are honest with ourselves as we evaluate our own experience, we must admit that it is rare for colleagues to forgive fully being kept in the dark about the direction of the team they assume they are on. Without full investment in the direction, even the best ideas will falter in implementation. And without that investment, there will not be much incentive or accountability for driving to the goal. In the worst case scenario, your team may have a stake in sabotaging the plan to prove management doesn’t know what it is doing.

Your Cred is Everything

Management’s personal credibility is everything to the success of your organization. Decoder rings and secret knocks are child’s play, not grown-up management techniques. Staying above board early with your team, and as often as possible, puts you at a strong competitive advantage over today’s average approach to planning and engagement with organizational teams.

The added bonus for you? It feels really good, too.