Zappos’ Stakeholder-Centricity and Business Success

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Zappos, a successful online retailer, developed its business model by simultaneously pursuing its primary objective and focusing on stakeholders’ happiness. Following a frustrating shopping outing in San Francisco, Nick Swinmurn resolved to quit his job and invest in a shoe website which primarily concentrated on offering the best selection and outstanding customer service. Originally known as ShoeSite.com, the entity began its operations as a middleman, facilitating the execution and transfer of orders between suppliers and customers without holding any inventory. After years of challenging and unprofitable business, the company executives decided to redesign its operational strategy to focus on delivering the best customer service across the whole value chain. This implied that the organization had to control the entire process from order fulfillment to the eventual delivery as an approach to guarantee stakeholder satisfaction, entrench its core values, and increase its customer centricity. Although Zappos’ business model is unconventional, it enabled the leadership to foster a culture of ethicality, which can be simulated by other entities.

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Fostering an Ethical Culture at Zappos

Zappos leadership created and nurtured various core values which ultimately saw the domination of an ethical culture across the organization. The company has developed its business model on such principles as transparency, family spirit, open-mindedness, and honesty, which form the guiding framework of all the entity’s actions. According to Grigoropoulos (2019), firms which communicate their values, policies, and procedures create a robust foundation for ethical performance. Zappos CEO Tony Hsieh and the leadership team illustrated the culture the company required to thrive and itemized the ten core fundamental guidelines on which all operations and procedures would be conducted. Grigoropoulos (2019) argues that the defined standards should be boldly conveyed as the formal code which outlines expectations and directs behavior. Thus, Zappos’ action of amplifying and emphasizing its ten core values has been instrumental in creating an ethical culture in the organization.

Additionally, Zappos leadership has demonstrated its commitment to nurturing an ethical culture, thereby leading by example. Chadegani and Jari (2016) contend that the management of an organization plays an influential role in setting the appropriate ethical tone at the highest level of the company, which cascades to the lower echelons. Hsieh and his team established profound awareness that a company’s culture was the most valuable asset and emphasized that service was a by-product of culture (Hsieh, 2010). This indicates that Zappos’ leadership ability to set an ethical lifestyle at the top ultimately assisted in fostering and embedding a value-based culture in the organization.

Actions Other Companies Can Take to Simulate Zappos Culture

Zappos corporate culture and customer-centric business approach have made it a successful entity and a model for building and running a business. Although diverse businesses are inherently different, some critical concepts which contributed to Zappos’ success are universally acceptable. For instance, the creation of an ethical policy framework to be communicated across the entire organization is an influential step in embedding and entrenching the desired culture. Zappos developed and itemized ten core values that have defined the business and facilitated the continuous growth recorded since its creation. Additionally, the leadership should be at the forefront of observing the culture as a strategy of setting the appropriate tone for onward adoption by other employees.

Additionally, companies should enhance their commitment to employees’ and customer’s satisfaction and wellbeing as an indispensable business principle. Successful entities recognize that a happier and engaged workforce leads to increased productivity and profitability (Sabir, 2017). Zappos management contends that satisfied employees develop robust long-term relations with customers, which creates a unique shopping experience and best service. For instance, a fun-oriented, relaxed, and wacky work environment which integrates critical facilities, such as nap rooms and wellness centers, increases staffs’ wellbeing, resulting in higher productivity. This is closely associated with hiring, training, and retaining the right people by utilizing nonconventional assessments, such as checking how the potential employees relate to shuttle drivers (Hsieh, 2013). Organizations should also initiate regular training programs to escalate and rejuvenate their professionalism.

Impact of Zappos Leadership and Ethical Practices on Stakeholders

Zappos’ leadership and ethical philosophies are built on the foundation of happier and satisfied customers and employees. This implies that the organization invests considerably in winning the loyalty of its clients and workforce. Although stakeholders were initially skeptical about the emphasis on ethics and constancy, the approach ultimately proved effective and translated into remarkable productivity. Notably, the partners wanted the business model to devote more resources to sales generation instead of customer satisfaction and employee engagement. The impact of the leadership’s strategies is that it created and nurtured positive attitudes and loyalty among the staff and clients towards the company.

Zappos Ethical Challenges and Actions to Address Them

Zappos currently faces various ethical challenges as the leadership tries to create an extensively transparent environment. The company has resolved to adopt a super-flat organizational structure, known as holacracy to encode autonomy, purpose-alignment, and agility in its operations (Kumar & Mukherjee, 2018). This will eliminate the hierarchical structure as the company implements a system which focuses on what to be done instead of the people to do it. To address the resultant ethical challenge of power distribution, the company will retain some hierarchy at the top level, such as keeping the positions of the people who set the remuneration quotas.

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Additionally, Zappos implements its plans with good intentions, which is challenging considering the enormous workforce. Managers and employees on a level-playing field may impede the friendly competition, which has been integrated into operations to motivate employees and encourage progress. This ethical issue can be addressed by recruiting the right staff which will ensure the company avoids candidates who are incompatible with its operational model. Moreover, the rapidly growing globalization poses another ethical challenge, particularly regarding the retention of free shipping policy and competitive pricing strategies in the international markets. However, the company can successfully overcome this challenge by innovatively developing new approaches to promote its core value in a sustainable and ethical manner.

Effectiveness of the Core Values in Developing an Ethical Culture

Zappos’ core values are effective in supporting the stakeholders’ perspective of a profitable business model. This implies that the company’s success and outstanding performance can be attributed to the elaborate ten-point principles, which emphasize the satisfaction and wellbeing of the stakeholders. For instance, the approach has earned the commitment of the workforce, customers’ loyalty, and the support of other parties, leading to higher productivity and profitability.

Ethical Challenges Faced by Zappos

Zappos, as any other business, faces various ethical issues and challenges. Among the prominent ethical issues was the 2008 employee layoff plan, in which the organization retrenched 8% of its workforce, and published the reasons for their workforce downsizing on the company’s website and social media platforms. The moral difficulty in this scenario was to strike a balance between the interests of the stakeholders, particularly Sequoia Capital, and the plight of the laid-off staff. However, the company’s CEO effectively addressed the challenge through honesty and straightforward communication regarding the reasons for decision and advancing a generous severance package to the affected employees.

Additionally, the merger with Amazon was a major ethical challenge for Zappos since it resulted in tension and dissatisfaction with the board. This is because Amazon’s corporate culture was distinctly different from that of Zappos, and, as a result, the latter would have to adapt to the acquiring entity’s values. However, this challenge was addressed by ensuring that Zappos remained an independent organization, thereby preserving its culture.

Conclusion

Zappos success illustrates that an organization can accomplish outstanding results by adopting non-conventional approaches which emphasize employees’ and customers’ happiness. Although different businesses face diverse challenges, formulating and implementing a comprehensive ethical framework can enhance the organizations’ ability to report improved productivity and profitability. Such frameworks also assist a firm in overcoming any ethical challenges, keeping the employees engaged, and earning the loyalty of its customers.

References

Chadegani, A. A., & Jari, A. (2016). Corporate ethical culture: Review of literature and introducing PP model. Procedia Economics and Finance, 36, 51−61. Web.

Grigoropoulos, J. E. (2019). The role of ethics in 21st century organization. International Journal of Progressive Education, 15(2), 167−175. Web.

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Hsieh, T. (2010). Delivering happiness: A path to profits, passion, and purpose. Hachette UK.

Kumar, V., & Mukherjee, S. (2018). Holacracy – the future of organizing? The case of Zappos. Human Resource Management International Digest, 26(7), 12–15. Web.

Sabir, A. (2017). Motivation: Outstanding way to promote productivity in employees. American Journal of Management Science and Engineering, 2(3), 35−40. Web.

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BusinessEssay. "Zappos' Stakeholder-Centricity and Business Success." February 10, 2022. https://business-essay.com/zappos-stakeholder-centricity-and-business-success/.