Opinion: Zappos: Core values or no values?

Recent book by Tony Hsieh makes Bruce Firestone wonder if the high-flying online retailer was simply a model of hypocrisy

For the first three quarters of my advance copy of the book Delivering Happiness by Zappos.com CEO Tony Hsieh (pronounced “Shay”), I felt like this was going to be the third book I have ever read that, if I could have, I would have authored (for the record, the other two are The Cryptonomicon by Neal Stephenson and Home from Nowhere, by James Howard Kunstler).

Alas, the last quarter of the book changed my mind.

It was as if the core values that Mr. Hsieh credits for the extraordinary growth of Zappos.com – an online shoe retailer with practically zero sales in 1999, $1.6 million in 2000, $8.6 million in 2001, $32 million in 2002 and more than $1 billion by 2008 – were just shibboleths, to be tossed aside at the first sign of recession.

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In November 2008, Zappos.com announced across the board HR cuts of eight per cent. Remember, this was a company that had just crossed the $1-billion threshold in sales, at a point when the recession had just been officially declared. Here you have a CEO and a company that initially set out 10 core values – providing WOW service; embracing change; being a fun place to work and a little bit weird; being creative, open-minded and having a sense of adventure; promoting growth and learning amongst employees and as an organization; having honest relationships not only between staff members but with customers and suppliers; creating a positive team environment and a family spirit; doing more with less; being passionate and, lastly, being a bit humble.

But then they used the recession as political cover for layoffs, as a lot of other large companies were also doing at the time.

If the book had stopped at page 190, I would have written about Zappos.com’s marvellous corporate culture and how that culture is intrinsically linked to its remarkable growth. All 10 of its core values are ones I believe could benefit most organizations, both for-profit and not-for-profit alike.

But on page 191, Zappos.com appears to start to behave like any other bottom-line driven corporation – trying to maximize short-term profits so it can get the highest price possible in a sale of the company that would, in fact, take place the following year.

Zappos.com was sold to Amazon for $1.2 billion in 2009. I see the hard-hearted hand of Sequoia Capital (a Menlo Park, Calif. venture capital firm) behind the sale.

Most of these bloodless VCs only want one thing – to maximize shareholder value. For other stakeholders like hard-working, passionate, laid-off former Zappos.com employees, it’s tough luck. (Just in case you think this is an American phenomenon, it isn’t. CEOs of major Canadian corporations like, say, a major telecommunications firm, have been known to under-invest in their networks as well as lay off many employees to goose short-term profits and their stock price to (try to) get the best price from a sale of the company. If, as CEO, the only strategy you can come up with is to sell the company; you need to resign and let someone else with more imagination and guts take over).

I found Jeff Bezos’s YouTube video about the Zappos.com acquisition much more authentic, and I would recommend you search it out if you have eight minutes and 10 seconds to spare. In it, Mr. Bezos modestly tells us that he only knows five things:

1. Obsess over customers;

2. Innovate;

3. Think long-term;

4. Develop a unique corporate culture;

5. It’s always day one of your future.

These are the values that Mr. Bezos brings to Amazon, plus the involvements he has elsewhere. They create both a value proposition and a business model equally hard to knock off.

In fact, I think the five points expounded by Mr. Bezos will have greater longevity than any of Zappos.com’s core values. Of course, my views may be shaped by my Canadian values that stress peace, order and good government over the American view that the pursuit of happiness is the sine qua non of life.

Nevertheless, Delivering Happiness will go into the bibliography for the course I teach. I just wish I didn’t feel let down by the creeping notion that somewhere in the brilliant story of Tony Hsieh and Zappos.com, there lies, at its heart, a hidden hypocrisy.

Professor Bruce M. Firestone is entrepreneur-in-residence at the Telfer School of Management at the University of Ottawa and executive director of Exploriem.org. 

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