MAGGIE HSU: Hi, everyone. So you're probably wondering what Zappos, an e-commerce retailer, is doing at a symposium for hospitality and health design. I've gotten that question quite a few times.
So at Zappos, we're actually really interested in design. And today, I'll talk a bit about that. But I want to give two caveats before I start.
And the first one is that, you actually might disagree with parts of my presentation. And you might think that some of it's not applicable to you. We're obviously in different industries, and we have different table stakes. But I'll be speaking broadly about our innovation problem solving process.
And I think you'll find it interesting. I'll tape the conversation presentation as a conversation starter. And I encourage you to challenge and disagree with me.
And the second caveat is that it's dinner, you guys are tired. You've been learning all day. I know you want to get back to talking and drinking. So I will keep it short and punchy.
So quick background about Zappos. We're an online shoe and clothing retailer founded in 1999. Our CEO, Tony Hsieh, helped lead the company through its acquisition by Amazon in 2009 for $1.2 billion. We're headquartered in Las Vegas, not a bad place to be. We have about 1,500 employees. And about half of them are call center reps.
So we have an in-house-- a fully in-house call center. And we're very well known for a company culture and our core values. And we actually hire and fire based on those values alone. So we do look for talent, but if someone doesn't fit our culture and core values, we will not hire them. And so we're known
And so we're known for our shuttle test, where we used to pick up candidates from the airport, and we didn't tell them but, they'd start talking to the shuttle driver. And we would actually asked the shuttle driver for his feedback on the candidates. And we've had a couple of high-level candidates who we didn't hire because they weren't nice to the shuttle drive.r
And in recent years, we've gone to a self-manage organization. And I'm sure many of you have heard about holacracy. So we actually don't have any bosses or managers.
So contrary to what it said in the program, I'm not the CEO, unless I got a promotion I didn't know about. But I am an adviser. And we use that title because, again, people don't have titles. And we actually have a hierarchy of work rather than a hierarchy of people. And I'll talk a bit about this later.
So I wanted to share two customer service stories with you. The first one is that a mom called our customer service center and was frantic because her 4-year-old daughter had just ordered about 100 items. She had taken her iPad, opened up the Zappos app and ordered 100 paid items to ship to their house. We have next-day shipping. It was already on its way.
The rep quietly listened to the mother, immediately refunded her credit card for the total amount, sent a UPS truck to come pick up all the items, of course let the family keep a few of items because her daughter obviously loved pink. And now have a joke that the Zappos app is so easy to use that a 4-year-old could use it. Although I don't know what 4-year-old this was, because I'm clearly not at that point. So a pretty precocious one.
A second story, a mom actually called, and she wanted to order 10 Converse red shoes for an occasion. And she started talking to the rep, and it turned out that her daughter had cancer. And she had been staying at St. Jude's Hospital. And when she was there, she met a gentleman, a guy, and they started dating. And he also had cancer. And they had been dating for the past three years.
And he ended up passing away at the age of 20. And his one wish was that everyone at the funeral would wear red Converse sneakers. That was his favorite sneaker.
So Terry the rep heard this. She immediately sent them all the sneakers, didn't charge them, sent flowers to the funeral. Felt it wasn't enough, so actually ended up flying out the girlfriend's family to Vegas. They hosted a three-hour celebration of his life with his family out, all his friends, and really just celebrated that relationship. And I think the [? CMO ?] at St. Jude's ended up coming as well.
So I tell you these two stories, not because these were special call-center folks. They weren't folks where you could escalate a problem and they have the authorization to do something. We don't have a set process. We simply did what was right. This could have been any one of you. Call Zappos customer service right now, and we're open 24/7. You can order a pizza. We've done that before. Our CEO actually called and ordered a pizza.
You can just talk. There is a blogger who ended up calling the customer service line every day for a week. And his questions got more and more outlandish. And he basically was waiting for it to-- at some point, someone would say, we're not even talking about shoes, why are you calling? Nobody ever did.
So if you think about other experiences when you call call centers, like calling the airline or calling a cable company, you have all these metrics on the left. You know that they're judged on the length of call and all these other things.
At Zappos, we simply have two metrics. The first one is the time to answer. How quickly did we pick up? And the second one is was the customer wowed? So at the end of the conversation, did they physically say the word, wow?
Our longest reported call-- someone actually broke this record-- is over 11 hours. So [INAUDIBLE] pretty [INAUDIBLE] because it was so crazy. But Steven was a call center rep. A female had called in. A woman was calling him, just wanted to talk. I think he went to the bathroom once. Someone brought him lunch.
But one of our rules is we cannot hang up on someone who calls. They have to be the person to hang up. So if they want to keep talking, we'll keep talking. So what we end up seeing, we end up seeing greater customer loyalty, higher shared wallet, lower turnover, and higher employee happiness engagement.
So we talked a lot today about designing for health. So I just want to quickly cover a few things that we do here. One of are core priorities is to prioritize our employee health-- we consider that both mental and physical-- over bottom-line cost.
So we actually have a full-time [INAUDIBLE] instructor. We have a full-time charity CSR director. We have a full-time sustainability director. And we have three full-time life coaches. And they're there for anyone in the company to go to for personal or professional issues. And they help them reach their goals.
So we have six full-time positions that don't directly impact our bottom line. And that's really important for us. We also have a suite of wellness offerings and benefits that you'd expect to see at a company of our size.
But I want to spend of today talking about designing connection and designing for innovation. So in 2012, Zappos was outgrowing our campus. And we're located in Henderson, which is a suburb of Las Vegas.
And it just so happened that the old city hall was available. And we thought it would be really great to headquarter Zappos right in the heart of downtown Vegas and let the employees become part of the community.
But there was a slight problem. Due to the floor plan, we couldn't actually stuff all the employees in there. So our campus team had to be pretty creative about how they thought about the move. And they ended up doing a lot of research around collision ability.
And the thought is, if you could replicate what happens at the water cooler or on a smoke break, and what is that? You have people from different departments coming together, different levels, spontaneously sharing ideas, communication flow. You could actually increase camaraderie and trust across the company.
So we added a few things like ping-pong tables. And I know you find that at many companies. Especially in Silicon Valley, you'll find the ping-pong table. It's actually a great low-cost way for people to come together, play a game. Other folks can watch them.
We took that one step further. So we brainstormed all the situations in which you're physically near someone, but you aren't compelled to speak to them. And it's actually quite awkward. Can anyone guess?
SPEAKER 1: The elevator.
MAGGIE HSU: The elevator. Now, we wouldn't quite go to the bathroom. We have music in our bathrooms, but-- so we added televisions, and we actually put in very short interactive games that people could play, almost like Angry Birds, when they're riding up and down our elevator. And our elevators are actually quite slow, and so this helps kill the time, instead of making them faster. It was, again, a low-cost solution.
We also decided to spice up our conference rooms. So we literally have a ball pit room that's near our executive-- where our executives sit. And that inspired an activation called the ball pit activation. So for about a month we set up a ball pit in our open atrium. And every ball had a question on it.
And as folks came to work, they would step in the ball pit with a random employee just for a couple minutes and just pick up balls and start asking the questions. And this might have seemed like a contrived exercise. I don't even know you. You're in accounting. Why are we asking each other questions. I just want to start my shift.
But what we found was it actually started to increase connection across the company. And how did we measure that? There's no great way, but we thought that one interesting way would be to measure trust relationships across the company. So our internal data team put together a thing called face game.
And so about once a week you'd get sent a picture of someone's face. You probably, if you know them, they can track email traffic. And you get asked about four questions. So first question, second question, third question. Very, very quick.
And we ended up mapping the trust relationships among all of our employees within the organization, and we can see who the trust notes are. And we can see when we do interventions like this, how the trust relationships changed.
So finally, design innovation. So researchers at the University of Michigan, I think in 2013, did a study with scientists who had overlapping work spaces. And they had overlapping spaces between their labs, their offices, elevators, restrooms, et cetera.
And they found that for every 100 feet of zonal overlap, collaborations increased by up to 20%, and they actually tracked this, because they're scientists and write papers together. And we thought that was fascinating. So this zonal overlap, what was that? So we decided to implement a few things of our own to get to that zonal overlap.
So we took the office snack selection, and we took the in-demand snacks and started putting them on every other floor so people would have to walk up and down to get to them. Pixar actually famously did this with their restrooms, where in one of their headquarters they had restrooms that were in the center atrium. It ended up being a little too inconvenient. So we learned that you have to still be a little bit convenient. So they ended adding restrooms around but you get the idea.
There is additional research that shows that we sit twice as far away from someone in an office environment, you don't see them half as often, you actually see them half as often squared. You see them a quarter often.
So what we did is we allocated a mere 100 square feet per person versus our old office we had 150. I know in many offices, it's 200, 250 to allow for these collisions and sight lines and also have the added benefit of us being able to put more people into the same physical space.
We also like beta testing physical space, the way you might beta test an app. And so someone was like, this is a great idea. Let's have rolling desks for everyone. And every month we're just going to roll it around and really all collide. That did not work. There are phone lines. There are like fire safety things. Our HR department flipped out.
We didn't do that. But what we did was we created basically a fish-bowl conference room in the [? similar ?] [? concept ?] where everyone can see in. We have rolling chairs. And for like about a month, we had different teams just hold their meetings and conferences, and just-- yeah, meetings-- in that space. And then other folks could go out, walk around, and actually just see them. And again, that just increased physical sight lines.
And so our thought with all these is, instead of just focusing on short-term ROI, if we can systematize collisions-- we call that return on collisions-- we can actually accelerate what we're calling return on luck. And that's an interesting term. But we created it, but it's also known as accelerated serendipity or engineered serendipity.
And we're extremely inspired by the work of Greg Lindsay. He writes a lot about engineered serendipity in the workplace and other environments. As well as Steven Johnson. And Steven Johnson wrote this book, where good ideas come from, and talks about how the best innovation comes when you're looking outside your own industry.
And I think that's extremely relevant for some of the solutions that we've been talking about today. I loved the panel this morning when we were talking about all the potential things, having to have two beds in the room or one of the other times we talked about the experience of patient gowns and how it's uncomfortable to know which way to put them on. Thinking through, a lot of these great innovations are going to come from industries outside of [INAUDIBLE] here.
So this top is of great personal interest to me as well. I was a biology major in college, and I actually wanted to become a hospital administrator. I don't know what happened to that idea, but I remember saying that's what I wanted to do. I have been a romantic match-maker for many years.
And so I spent an inordinate amount of time thinking about how people authentically connect and are vulnerable, have shared parts of themselves in a meaningful way. We'll talk about that offline if anyone wants to. And I worked for Hilton Hotels in the Corporate Strategy Team so, again, I spent a lot of time thinking about how things like body spaces can affect how you feel.
So throughout all of these, we've decided that instead of focusing on output-- so a lot of companies have a very rigid planning process with set budget, set KPI, set targets. If we can have more like a greenhouse, so we have the right nutrients, the right soil, the right ingredients for good things to happen, then good things will happen. And so with us, it started with hiring the right people and having a strong culture. And we know that good things will happen. And this doesn't necessarily have to be prescribed top-down.
I highly recommend this book, Reinventing Organizations, by Frederic Laloux. It talks about self-organized companies, Zappos among them. And the one that I thought was really relevant for this group was Buurtzorg, which is an organization in the Netherlands that's nursing care.
These nurses are actually self-managed in small teams. They have no bureaucracy. They have no hierarchy No one is telling them what to do. And when they made this transition, they saw some incredible results. Half the amount of care, fewer ER visits, shorter average stays.
And so I think when people think about a self-managed organization, they say that's all well and good for you guys, but how would that be possible in a bar or in a hospital or in a call center, right, where you have people who are minimum wage, and they're on set shifts. And you have exempt employees and non-exempt employees and what does that even-- how can you be self-managed? They've made it work. So I'd highly encourage you to research more.
So we have the three ingredients. We have the strong company culture. We have a self-managed organization. And we systematize these collisions. Why are we doing all this?
Well, we actually want Zappos to be around for quite some time. And so we think that this will actually allow for us to be a more innovative organization and eventually a more resilient organization. So when I say the word virgin, do you think music? Do you think airlines? Do you think hotels? What do you think? You think all those.
Virgin started in one business, but it's around today because it was able to adapt all these other industries. So the Corporate Strategy Team, which I'm a part of, we've actually started brainstorming, what is our competitive edge? Shoes and clothing, we're, like, monetized. Other people have good customer service. They can do next day shipping returns. What are we known for? We're known for great customer service.
And so we thought about all the bad customer services experiences you might have in your day-to-day life-- going to the DMV, again calling the cable company. And someone threw out a joke, and they said, yeah, going to the bathroom at a festival kind of sucks. It's not a great experience.
And we thought, yeah, the porta-potty. It's a horrible experience. Who's ever enjoyed going to a porta-potty? So we kind of joked about that, but we said what if we could revolutionize something that's so on this one extreme that no one would ever drag a friend back or take a picture or do anything like that.
So we decided instead of creating a porta-potty, we would create a porta-party. So I actually have a quick video, which I'll show at the very end, of the Zappos porta-party experience.
And I think it's just-- it's kind of funny, but we've been touring it around the nation, and we've gotten some amazing results. But we'll have other porta-potties set up right next to it with no lines. There's a 10-person deep line and people are waiting to use this porta-potty.
We're also very much interested in going into the hospitality space, and so we have a group that's working on a Zappos hotel. And [INAUDIBLE] I forgot. So I've really enjoyed listening to all this great conversation, and that can be targeting the existing hotel. It could be doing it ourselves. It could be working with one of the hospitals to revolutionize one of the wings.
And so we're really excited to do something in the hospitality space. We think we have a lot to contribute on the customer service side. We'd love to talk to any of you who might be interested. And so that's it. This is my email address if you want a copy of the slides, feel free to email me. And I will leave you with this video of a porta-party, because I think it's a great way to transition into dessert. Thank you.
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Maggie Hsu, chief of staff to the CEO of Zappos.com, discusses the company's commitment to health and wellness programs at its new headquarters in Las Vegas during her keynote presentation October 10th at the Cornell Symposium for Hospitality, Health, & Design.