The Importance of a Company's "Culture"

Tony Hsieh is the CEO of Zappos.com, an online shoe and clothing shop. Hseih joined Zappos as an advisor and investor after he sold LinkExchange, the company he co-founded, to Microsoft for $265 million in 1999. He ultimately took on the role of CEO, where he helped grow the Zappos to over $1 billion in gross merchandise sales annually, while simultaneously making Fortune magazine's annual "Best Companies to Work For" list. In November 2009, Zappos.com, Inc. was acquired by Amazon.com in a deal valued at $1.2 billion on the day of closing. Hsieh is also the author of "Delivering Happiness."
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TRANSCRIPT

Question: Why did you consider your first business, LinkExchange, such a failure? 

Tony Hsieh: From the outside, the first company, LinkExchange, that I co-founded seemed like a success. It was actually a pretty sad thing selling the company. Most people don’t actually know the reason why we ended up selling the company. It’s because the company culture just went completely downhill. I remember when it was just five or 10 of us; it was kind of like your typical dot-com back in the day. This was 1996, and we were working around the clock, sleeping under a desk, had no idea what day of the week it was, but it was a lot of fun. But we didn’t know any better to pay attention to company culture. 

So, by the time we got to 100 people, we hired all the people with the right skill sets and experiences, but not all of them were culture fits. And when we got to 100 people, I remember I myself dreaded getting out of bed in the morning to go to the office. And that was kind of a weird feeling because this was a company that I co-founded and if I felt that way, then I wondered how all the other employees must have felt. So, we ended up selling the company. And with Zappos I wanted to make sure that I didn’t make the same mistake again. So from the beginning culture has always been really important and to this day, culture is actually the number one priority in the company. And our whole belief is that if we get the culture right, then most of the other stuff, like delivering great service, or building a long-term enduring brand will just happen naturally on its own. 

Question: Why was the culture at LinkExchange lacking? 

Tony Hsieh: So, I guess my definition of whether a culture would be a right fit for me personally, would just be; would I want to hang out with these people if we weren’t forced to work together? And at LinkExchange the answer was, no. And at Zappos the answer is yes. In fact, most employees when they leave the office we go hang out with other Zappos employees and we spend our weekends together. And so that’s probably the criteria I use for whether a culture is right for me. 

Question: Why is culture so important in building a company? 

Tony Hsieh: Our whole belief is that, if you get the culture right then most of the other stuff will happen naturally out of it. But it really depends on, you know, what the culture is. So, it’s a big "if." For us we’ve really kind of formalized the definition of our culture into our 10 core values. So if you do a Google search for Zappos' core values, you’ll see what those 10 are. And I think it’s inherent in those 10 needs to be stuff that is relevant to business. 

For example, one of our core values is to embrace and drive change. I think that’s really important for business. Another one is about being adventurous, creative, and open-minded. And another one is to do more with less. And so I definitely think that the core values need to incorporate business concepts, but they don’t necessarily need to sound business-y. For example, other companies might say, “Increase company efficiencies,” which is exactly what "do more with less" means. We are just less formal about it in terms of the actual wording.

Recorded on May 27, 2010
Interviewed by Victoria Brown

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