The Zappos Way of Managing

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Such rapid growth was exciting. But it also led Hsieh to wonder how he could preserve Zappos's radical dedication to customer service and its fun, loose work environment. "We always hired for culture fit," he says. "But we were growing so quickly that managers who hadn't been around for very long might not know what our culture was." He wrote an e-mail to the entire company asking for help, and he distilled the responses into a list of 10 core values, including "Be humble," "Create fun and a little weirdness," and "Deliver WOW through service." Then he assigned and collected short essays from every employee on the subject of the company's culture and published them, unedited, in a book that he distributed to the staff.

Every year, all employees, both new and old, contribute a fresh essay to the book, which has grown to 480 pages. Hsieh uses it as a way not only to get employees thinking about the meaning of their work but also to show the outside world what he has built. Talk to Hsieh for five minutes, and he will inevitably try to get your address so he can mail you a copy. The book is painfully earnest and yet affecting nonetheless. There are all the clichés one might expect -- acronyms, ridiculous overstatement (one call center rep compared Zappos to China's Ming Dynasty), and a fondness for the word Zapponians. It often goes way over the top. "Could you imagine if Zappos was more than an online retailer, or the job that pays the bills, but actually became a way of life?" wrote Donavon Roberson, a pastor who left the ministry before joining Zappos.

Most Zappos employees are familiar with all this history. In fact, despite all the research I did before heading to Las Vegas, I didn't know that Nike had spurned Zappos until I sat in on a two-hour Zappos history class -- part of a four-week course on the subject -- and watched as employees called out various milestones: 2002, $32 million in gross sales! 2006, the year the company recorded its first $3 million day! 2007, the year Nike joined Zappos!

This mastery isn't accidental. It's required. All new Zappos employees receive two weeks of classroom training. Then they spend two weeks learning how to answer customer calls. At the conclusion of the program, trainees are famously offered $2,000, plus time worked, to quit. The practice, Hsieh's idea, began in 2005, with a $100 offer. "Our training team had gotten good at figuring out who wasn't going to make it, and we were thinking, How do you get rid of those people?" says Hsieh. Paying them to quit saves the company money by weeding out people who would jump ship anyway and allows those who remain to make a public statement of commitment to their new employer.

More recently, Hsieh has overseen the development of an even more comprehensive curriculum. The first course, intended for employees who have worked at Zappos for two years or less, involves more than 200 hours of class time (during work hours) and mandates that students read nine business books. Topics include Sarbanes-Oxley compliance and Twitter use. Advanced students can take classes in public speaking and financial planning. "The vision is that three years from now, almost all our hires will be entry-level people," Hsieh says. "We'll provide them with training and mentorship, so that within five to seven years, they can become senior leaders within the company."

The Zappos headquarters takes up three modest buildings in a nondescript office park about a 20-minute drive from the Las Vegas Strip. Walk in, and it becomes immediately clear why for some entrepreneurs, visiting Zappos is of a piece with the buffet at the Bellagio or a trip to the top of the (replica) Eiffel Tower. In fact, Zappos hosts a tour of its headquarters every couple of hours, an operation that is staffed by 12 people and includes two SUVs and a bus with custom Zappos paint jobs. Call the company from your hotel, and someone will pick you up and ferry you to Henderson.

My tour is led by Roberson, the former pastor, who wears jeans and a maroon polo shirt and carries a giant Zappos flag. We are joined by four consultants from Deloitte. In the lobby, Roberson points out the Reply to All Hat -- a sort of dunce cap for employees who commit that venial office sin of the inadvertent mass e-mail -- and takes us past the nap room, where three employees are stretched out on couches. At the office of the company's staff life coach, who also happens to be Hsieh's former chiropractor, we are each photographed while sitting on a throne.

But the most striking thing about the tour is the extent to which the company's long-term plan is on display. A sales chart in the lobby informs everyone in the building that the day before -- March 4, 2009 -- Zappos sold $2.5 million worth of merchandise. A computer printout in the hallway notes that there are currently 4.1 million items, mostly shoes, in stock in the warehouse in Kentucky. At the conclusion of the tour, we are invited to peruse the company library, which is filled with multiple copies of two dozen business and self-help books. We are urged to take whatever grabs our fancy, a policy that applies to employees as well. Roberson explains that one of Zappos's core values is personal growth and that books are given out to help employees grow with the company.

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Max Chafkin

Senior writer Max Chafkin has profiled companies such as Yelp, Zappos, Twitter, Threadless, and Tesla for the magazine. He lives in Brooklyn, New York.

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