The Customer Is King

As mandated by their top executives, Zappos.com, Southwest Airlines and Disney aim to deliver superb experiences for everyone they serve
July 10, 2012

When their customers come first, companies can thrive even as consumer critiques explode on social media and as the economy stagnates. The proof lives at corporate culture pioneers Zappos.com, Southwest Airlines and The Walt Disney Co. These highly successful enterprises offer different philosophies, management strategies and lessons that can be adapted and applied to smaller businesses. But the underlying keys are happy customers and, just as important, happy employees.

Culture Is Job One at Zappos

The quietly charismatic Tony Hsieh knew little about the shoe industry when he helped start Zappos. But as his fascination with the online shoes-and-more store grew, he became zealous about creating and maintaining the proper company culture, one that fit with its large selection, free shipping (both ways) and 365-day return policy. Zappos also promises order delivery in four to five business days, but nearly all customers receive a surprise upgrade to overnight shipping.

The company’s customer-centric mission is emphasized during a four-week training program for all new hires—one that quickly immerses them in the Zappos mindset. If they decide it’s not for them after the first week, anyone in the class can quit and receive $2,000 plus the wages accrued during training time; it’s a standing offer through the end of the four weeks. Less than 1 percent take the offer, Hsieh says.

Later, employees undergo annual reviews that examine whether they are living up to core values that are intrinsic to Zappos’ belief system. Management ensures “that everyone understands our vision of having the Zappos brand be synonymous with the very best customer service as well as making sure that we hire people who are a fit for our company culture,” says Hsieh, 38.

Hsieh has always checked employees’ pulse closely. For instance, in 2004 he asked all employees to send an email describing “what the Zappos culture means to you.” The end result was a 10-point core-value statement and a Zappos Culture Book (distributed to employees and available to anyone who asks at ceo@zappos.com). The company later started producing an “Ask Anything” newsletter where employees can indeed ask anything. The questions are posted anonymously, answered and delivered to all employees via email.

The lively, quirky atmosphere suits Hsieh’s personal style; he says he has always gravitated to small groups of friends during his varied pursuits. Early in Zappos’ evolution, Hsieh realized the company had become his new tribe. “Being a part of Zappos is just a lifestyle,” he told SUCCESS in 2009. “And it’s not because people are being forced to work crazy hours [the warehouse operates 24/7]. It’s just because people want to hang out with each other, and people are passionate about their company.

“The thing we realized that sort of ties everything together is that customer service is about making customers happy, and the culture is about making employees happy. So really, we’re about trying to deliver happiness, whether it’s to customers or employees, and we apply that same philosophy to vendors as well.”

These tactics haven’t changed since Amazon.com purchased Zappos in a 2009 stock deal valued at $1.2 billion on the day of closing; a stipulation of the sale was that Zappos maintain its identity as a brand.

The culture is a huge part of that brand, and Hsieh realized its significance because of his experiences at his first startup, LinkExchange. “The culture was soured,” he told TechCocktail.com founder Frank Gruler in 2011. (In 1999, Hsieh and his initial partners sold the company to Microsoft for $265 million.) “By the time it grew to 100 people, I dreaded getting out of bed in the morning to go to the office of my own company.… From the beginning, company culture has always been important at Zappos, and in fact today it’s our No. 1 priority. Our whole belief is that if we get the culture right, the work and other stuff—like delivering great customer service and building a long-term, enduring brand or business—will just be a natural byproduct of that.

“If I hadn’t gone through the mistakes at LinkExchange, I don’t think we’d have paid as much attention as we do to company culture at Zappos. As a result, we’ve made Fortune’s Best Companies to Work For list three years in a row.”

Zappos’ fun-loving ambience transitioned nicely when the company recently moved from San Francisco to a more isolated location in Las Vegas. On a tour, one might encounter a coffee machine dressed as a robot, an aisle of cowbells, a makeshift bowling alley built by Zappos software developers, employees dressed as pirates, employee karaoke contests, a nap room, a petting zoo or a hot dog social. A parade might pass by because one department decided to celebrate Oktoberfest. A Zappos employee operates a technology library and meeting place in downtown Vegas so tech nerds, entrepreneurs and arty folks can read, interact and collaborate.

An avid reader himself, Hsieh found success as an author with Delivering Happiness: A Path to Profits, Passion, and Purpose (Business Plus, Hachette Book Group, 2010), which spent 27 weeks as a best-seller. A few months after the book launch, he and a Happiness team of Zappos employees drove a bus across the country, where they heard firsthand how people were making happiness a priority in their lives. Hsieh then launched a separate company with a cause, Delivering Happiness, which spreads the entrepreneur’s philosophy to other businesses, nonprofits and even households—“parents tell us that they have instituted it with their children,” he says.

Southwest Airlines Flies High

Crusading San Antonio lawyer Herb Kelleher broke the mold in the airline industry with his model of putting employees first, customers second and shareholders third at Southwest Airlines.

In 1971, Kelleher co-founded low-cost Southwest Airlines to serve Texas’ three business centers: Houston, Dallas and San Antonio. The upstart company relied on over-the-top customer interaction and zany stunts to compensate for a zero advertising budget. Kelleher showed up at events dressed as Elvis Presley, the Easter Bunny and a leprechaun. The company revolutionized the airline industry with a minuscule fleet—three Boeing 737s—and a huge dose of chutzpah.

Flight attendants wore hot pants, hid in the overhead luggage bins to surprise loading passengers and sang the flight safety briefing; they still spice up flights today. To build more good will, Southwest employees participate in community service in cities the airline serves.

And Kelleher, chairman emeritus at age 81, proudly notes that many have tried to copy Southwest’s business plan but none has achieved the same level of success. Its creative culture has served about 1.5 billion customers, and it operates more than 550 Boeing 737 aircraft among 73 cities as the largest U.S. domestic passenger carrier.

“The Southwest goal was to provide affordable, reliable service [and] a spiritual infusion—an infusion of fun, warmth, hospitality and diligent [service] for both employees and passengers,” Kelleher said in 2008.

Even though Kelleher’s employees-first philosophy was business-school heresy, he reasoned that “if you treated the employees well, if you cared for them, if you value them as people, if you gave them psychic satisfaction in their jobs, that they would really do a great job for the customers and the customers would come back, which would be good for the shareholders.… We think everybody is a leader no matter what their job is.” Southwest celebrated every personal joy, such as the birth of a baby, and genuinely cared about every employee’s personal mishap and grief.

Personal contact gets complicated as a company grows, however. Once Southwest had many more employees and more turf, Kelleher had former President Colleen Barrett establish culture committees to act “as missionaries to spread the word and keep the fire of culture burning.… [You have to] constantly celebrate employees who exhibit golden-rule behavior because they’re role models for all of your people.… ” Every new hire is told he or she is the keeper of this special Southwest value set.

Underscoring that responsibility, Southwest instituted the airline industry’s first employee profit-sharing plan in 1973 to give employees buy-in (eventually making a few millionaires among its original hires). Kelleher emphasized that having employees as part of the ownership base and encouraging them to think entrepreneurially was productive, but pointed out that managers controlling the company kept the bigger picture in view.

Many industry observers doubted Southwest’s culture could survive without Kelleher at the helm, but it has fared well under the lower-key leadership of CEO Gary Kelly. “Our people are our single greatest strength and most enduring long-term competitive advantage,” Kelly says. “All of our people do know what is right, and they feel empowered to act on it. That hasn’t changed.”

Disney Sells Happiness

The Walt Disney Co. is famous for excellence in customer service. Two examples: Giving special badges to first-time park visitors and birthday guests so employees can call them by their first names, and locating trash receptacles 27 paces apart because company studies show that’s the average distance a guest will carry a candy wrapper before discarding it.

The Orlando-based Disney Institute has been training employees and outside clients for 25 years. About four years ago, reacting to interest in the company’s strength in grooming employees and paying attention to guests’ needs, Disney decided to expand its best-practices global training and consulting service and take it off campus.

The most frequent initial request from companies hiring the institute is, “ ‘Just make my people happy’ or ‘just make my people smile,’ ” says Vice President Jeff James. “They say, ‘We know that you do it very well at Disney, and we want our front line to be as happy and smiley as Disney.’ ”

And business is good. This Disney sideline business has doubled its revenue in the past three years, with clients ranging from the National Football League to public school systems. In serving those clients, the institute looks “for strong business results and an intent to return,” James says. “That’s true for any business.” He adds that the way you get that is great customer service: They’re happy and they want to come back.

What separates the Disney Institute from other management consulting companies is that its parks are living laboratories offering real-life examples. “We can talk about how we do it, how it may not always work perfectly and how to fix it when challenges arise,” James says. “The key is getting senior leadership to embrace the business case for a strong customer experience, to show how it translates at the bottom line.

“They have to understand that this is a journey. They can’t think that we are going to bring in the Disney Institute for six months and it’s fixed. They have to be willing to stick with the journey for however long it takes to make it work. Much depends on how aggressively they embrace change, how big a company they are trying to change and how much involvement they choose to engage at the outset.”

The Disney program helps clients create quality standards and measurements. “We always focus back to a common purpose, which everyone can grab a hold of, understand and be focused on all the time,” James says. “That’s why anyone exists within an organization. You may have a task you are assigned to do as part of an overall group but at the end of the day you are there for a purpose.

“In Disney’s case, we provide happiness by delivering the finest in entertainment for people of all ages everywhere. Your task may be doing public relations for the company or sweeping the streets in the park, but you are part of that purpose. People need to know why they come in to work every day. When you see everyone focused on that purpose, that’s when you see change really start to happen.”

The customer-driven movement is getting stronger and stronger, James says, and it’s about more than service—it’s about the experience you provide. “That’s not just about your front line smiling. It’s about everybody getting smarter and better at what they do. I can see it in companies that are coming to us now that have had a long history of not focusing on the customer at all. When they talk about their mission or vision, it has nothing to do with the customer. It’s about their hardware or what they manufacture. Their initial thoughts are, ‘We want to build the best light bulbs in the world,’ not ‘provide people with the best lighting.’ ”

Zappos, Southwest Airlines and Disney find that remaining true to themselves, their employees and their mission keeps customers happily referring—and returning.

 

The Zappos Way

Zappos defines its culture through its 10 core values:

1. Deliver WOW through service.

2. Embrace and drive change.

3. Create fun and a little weirdness.

4. Be adventurous, creative and open-minded.

5. Pursue growth and learning.

6. Build open and honest relationships with communication.

7. Build a positive team and family spirit.

8. Do more with less.

9. Be passionate and determined.

10. Be humble.

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