5 Minutes with…Tony Hsieh

Tony Hsieh has many reasons to smile. Since he became the CEO of Zappos.com, the online retailer, in 1999, sales have grown to $1 billion. In 2009, Amazon.com acquired the company for $880 million. And most recently, his new book Delivering Happiness: A Path to Profits, Passion and Purpose made it to the top of The New York Times bestseller list for business hardcovers. Hsieh spoke with Lindsay Tigar to discuss how a happy corporate culture pays off.

Lindsay Tigar: If a business owner has limited funds and few employees, what are some good strategies for building a culture of happiness?

Tony Hsieh: Most of the things we do at Zappos on the culture side don’t actually cost a lot of money. Some things are as simple as saying “Hi” when you pass each other in the hallway, even if you don’t know each other.

Other things, like letting employees decorate their desks and conference rooms, are very inexpensive as well. Making the time to spend outside the office for activities such as happy hour, bowling, or hiking also don’t require a lot of money—they just require setting aside the time to do it.

LT: Extra dough can make anyone happy. What about monetary incentives?

TH: While we do offer great benefits, we try to stay away from incentives where the mentality is ‘If you do X, then you’ll get Y.” We focus more on inspiring employees, not motivating employees [with money].

LT: How do you get your employees to buy in to the success of the company?

TH: It’s hard to do if success is defined as the company making more money or becoming a market leader. For Zappos, it’s about trying to deliver happiness to employees and customers, not just about being the number one retailer of shoes, or making money.

Companies that have a higher purpose have an easier time engaging employees because part of the definition of success includes working towards achieving that higher purpose.

LT: How can management get employees to understand the big picture facing the company?

TH: A big part of explaining it comes during the initial four weeks of training that employees go through. But for us, the big picture really isn’t that complicated: Deliver great customer service to make customers happy, and help build a great company culture to make employees happy.

LT: How does happiness relate to profits?

TH: Happy employees are engaged employees. Engaged employees are productive employees.

LT: You offer employees in your training program $2,000 if they choose to leave the company. How many have taken the money? Why did you decide to do this?

TH: In general, about two to three percent of people end up taking the offer. The original reason for offering this was because we didn’t want employees who were at the company just for a paycheck. We want employees who really believe in our long-term vision and feel our culture is something they want to be a part of and contribute to.

LT: Zappos customer service is known for its extreme attention to detail by “ensuring happiness with every purchase.” Does that mean the customer is always right?

TH: It means the customer who we want is always right. We think this actually enables us to generate more profits in the long-term. Occasionally, we have customers that abuse our return policies (for example, constantly returning worn shoes) or abuse our customer loyalty reps. In those cases, we shut off the customer’s account.