June, 2010

Over beach vacation last week, I hijacked my dad’s copy of Delivering Happiness: A Path to Profits, Passion, and Purpose by Tony Hsieh, CEO of Zappos.com. You may have heard about it on NPR. Hsieh built and sold a company right out of college and, with the proceeds, as well as a venture fund he raised called Venture Frogs, did some early stage investing. Hsieh ended up investing in, and later helping to build, Zappos.com as CEO.

The company was recently acquired by Amazon for $1.2 billion (employees netted about $40 million in the sale) — and will continue to grow with its existing team because the company’s culture is working so well.

The Zappos.com story is an amazing one and it validates a lot of the lessons we’re writing about in our forthcoming report, Employees Matter (an update of our 2004 Beyond Paycheck-to-Paycheck report).  In the book, Hsieh uses his e-commerce firm to demonstrate the importance of hiring carefully in order to build a great culture of engaged employees, how to use training effectively, when and why to promote from within, and the many benefits of treating employees well.  Zappos.com is a company well known for delivering fantastic customer service; part of Amazon’s attraction to the deal was the Internet based shoe and apparel company’s strength in customer relationships – a strong match for Amazon’s savvy in the technology department.

A few quotable lessons from Delivering Happiness:

• “A company’s culture and a company’s brand are just two sides of the same coin.”
• “It’s really important to come up with core values that you can commit to.”
• “If you just focus on making sure that your product or service continually wows people, eventually the press will find out about it.”

Zappos.com understands the value in letting employees have a little room to do great work on their own terms.  The purpose of supervisors, Hsieh argues, is to help employees do well, remove obstacles in their way, and empower them to make decisions. In other words, decentralize decision making.

Hsieh says that employees should know the core values of the company inside and out – and be able and allowed to make decisions based on them even without top management always weighing in.  Again, decision decentralization!

Finally, if your company is good enough at creating a great culture, employees will enjoy seeing one another outside of work.  Sometimes the best inspiration comes out over a glass of beer.

–Anne Claire Broughton

A new book, Profit at the Bottom of the Ladder, just published by Harvard University Press (and recently reviewed in this post in the New York Times’ Economix blog) makes the case for why workforce best practices should include engaging employees at the bottom of the ladder (in other words, entry level workers).  In a six year study of a handful of medium sized firms from several countries around the globe, researchers from McGill University led by Jody Heymann sought to understand how employees – especially those with the least education or professional experience – and their companies could succeed together financially.

The research involved selecting companies that had thoughtfully chosen to improve the working conditions for their least educated employees in an intentional and strategic way – and documenting the bottom line results.  Engagement practices included benefits often only available to higher-level employees, such as increased wages, profit sharing and other forms of asset building, leave and flexibility programs (even at manufacturing firms!), provision of health care, extensive on-the-job training, and opportunities for advancement. Using primarily a qualitative methodology, the researchers conducted hundreds of top to bottom interviews with employees and their managers.

The findings are at once remarkable and common sense. Broad based engagement is, in fact, a key driver for positive financial and performance outcomes including: reduced absenteeism, lower turnover, easier recruitment, a more highly motivated workforce, savings to the firm, and improved competitive advantage across sectors.   Acting on the recommendations of employees on the line resulted in significant time and money savings at American Apparel and Dancing Deer Bakery, for example.  (Dancing Deer Bakery is also profiled in SJF’s upcoming  report on employee engagement and its bottom line impacts to be released this fall.)

Finding the argument that there is no casual relationship between engaging lower level employees and increasing company profitability to be erroneous – but recognizing that this is viewpoint to which most mainstream business subscribes – this book uses exhaustive 360 degree analysis of a cross section of firms to dispel it.  The authors do point out that most of the firms profiled are privately held, which may enable them to take a long view of growth.  But they are doing well in the present, too, despite the recession. A compelling quote from the book succinctly captures this point:  “While we cannot say that all of the companies will remain financially successful, the working conditions at the firms we studied either during economic downturns or when entire sectors were threatened, had provided them with crucial tools that markedly increased their chances of survival.”

-     Christa Wagner and Anne Claire Broughton contributed to this post