(Originally published June 8, 2010)
Tony Hsieh, CEO of online shoe retailer Zappos, has drawn a lot of attention this week. His first book, Delivering Happiness, came out yesterday and has been drawing tons of news coverage. He and Zappos drew an eight-minute segment on CBS Sunday Morning. And in this week’s Inc., he offered a candid assessment of why he sold the company.
It appears that the 35-year-old Hsieh has never tasted failure. Shortly after graduating from Harvard, he co-founded a company called Link Exchange. At the age of 24, he sold the company to Microsoft for $265 million. He then took on his next challenge by joining Zappos as an advisor and investor.
Zappos gave Hsieh the opportunity to test his belief that if you get the company’s culture right, by being good to employees, you can establish a strong customer service ethic that will differentiate you from competitors and create loyalty and repeat business. To this day, Zappos pays all health-insurance premiums for employees. It lets employees take all the time they need with customers who call in for help, and it spends heavily on personal development. Watch this video if you want to get an idea of how the culture works.
By 2005, Zappos was succeeding so well that Amazon CEO Jeff Bezos made a buyout offer. Hsieh turned him down, believing that Bezos underestimated the necessity of the culture Hsieh was building.
Four years later, however, Amazon made a new offer, and Hsieh accepted after extracting a promise that the Zappos culture would remain intact. To an outsider, there was no apparent reason to sell. The company was growing, and it was profitable, so why not continue to grow it independently?
Hsieh financed Zappos himself during its early years but eventually took in other investors. He controlled a majority of the stock, so the company couldn’t be sold without his consent. By taking in investors, however, he had to create a five-person board. He and the like-minded Alfred Lin served on the board, but three other board members weren’t in agreement with Hsieh’s emphasis on the importance of culture. They could have fired Hsieh and taken the company in a new direction.
Instead of letting this happen, Hsieh sold out to Amazon. By doing so, he was able to keep the company he loves alive and stand by the employees who helped take Zappos to the success it enjoys today. By doing so, he’s continued a culture and a service ethic that seems to be working out just as he envisioned.
Grammar tip: Hordes of people can run amok. Miserly people hoard their wealth.
