Delivering Happiness

Alignment

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We did not invent the idea that having a vision that had a higher purpose
was important. We did not invent the idea that having a strong culture and
core values was important. Both of those ideas were highlighted in Good to
Great and Tribal Leadership, and have been around long before those books
were published.
But through tours, the culture book, public speaking, Zappos Insights,
Zappos Insights Live, Twitter, and our blogs, we found ourselves in a
unique position: We had scaled our business from nothing to over $1 billion
in gross merchandise sales in less than ten years, we had a strong set of
integrated core values, and our culture of being open and honest and
pursuing growth and learning was leading us to share, rather than hoard all
the corporate knowledge and learning we had accumulated over the years.
We had a tough time convincing our board of directors (who were also
investors) to embrace many of our activities that we believed would
ultimately help build the Zappos brand and make the world a better place.
The directors on our board came from primarily technology and
manufacturing backgrounds, not retail or branding. Some of them didn’t
fully understand why we were doing Zappos Insights or why we wanted to
embrace Twitter (see the Appendix for the link to my blog post on “How
Twitter Can Make You a Better and Happier Person”), and they weren’t
really convinced of the value of the Brand/Culture/Pipeline platform we
were building. Many of our efforts were dismissed by some members of our
board of directors as “Tony’s social experiments.”
For the most part, members of our board of directors wanted us to just
focus on the financial performance that was being driven by our e-
commerce business.
Which made perfect sense.
When Sequoia first invested in 2005, they had signed up to help build a
service-focused e-commerce company. They probably expected some sort
of financial exit (in the form of an acquisition or IPO) within five years,
which was the time line they saw from many of their other investments.
They hadn’t signed up for the additional things that we now wanted to do
that were longer-term strategies and not directly related to e-commerce, and
they certainly didn’t sign up for us to help other businesses create their own
visions or stronger cultures.

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But I saw the potential in what we were doing to make a much bigger
impact beyond just Zappos. I’m pretty sure that my refusal to give up on
that got me pretty close to being fired by the board. The five-year mark
from the time of their initial investment was fast approaching. Alfred, Fred,
and I didn’t want to sell the company, and due to a complicated capital
structure involving liquidation preferences, attempting to go public during
an economically turbulent time wasn’t really an option either.
In early 2009, we made Fortune magazine’s “100 Best Companies to
Work For” list. We were the highest-ranking debut in 2009. At our offices,
we were thrilled because that was an internal goal we had set in the early
days of the company, and it came just a month after we hit our $1 billion in
gross merchandise sales goal, well ahead of schedule.
But at the board level, we were at a stalemate. The board wanted a
financial exit, but internally at Zappos we didn’t want to exit. We wanted to
continue to build, and we were in this for the long haul. Luckily, I
controlled enough voting rights so that the board couldn’t force us to sell
the company, but they controlled enough board seats so that in theory they
could fire me and hire a new CEO who didn’t care about company culture
and was only concerned about maximizing profits from our e-commerce
business.
I realized I was relearning another version of the same lesson from
LinkExchange, when our company culture went downhill: the importance
of alignment. A strong culture and committable core values are important
because they create alignment among employees. I was now learning that
alignment with shareholders and the board of directors was just as
important.