PDF Summary:Delivering Happiness, by Tony Hsieh

According to Tony Hsieh, the former CEO of online clothing retailer Zappos, happiness is good for business. Happy employees work harder and more efficiently, and happy customers spend more money. So how can you make your customers and employees happier and maximize profits? In Delivering Happiness, Hsieh says the answer lies in implementing three principles: Encourage a healthy business culture, provide great customer service, and invest in continuing education.

In this guide, we’ll explore each of these principles, how to implement them, and how they turned Zappos into a billion-dollar company in a decade. Along the way, we’ll compare Hsieh’s ideas with those of other business experts like Jim Collins (Good to Great) and psychologists like Jonathan Haidt (The Happiness Hypothesis). Finally, we’ll explore the psychology behind happiness and why Hsieh’s dedication to cultivating it led to his success.

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(Shortform note: Paul L. Marciano agrees with Hsieh’s emphasis on trust and empowerment in Carrots and Sticks Don’t Work. He outlines three main steps to empowering employees: First, share information with your employees about the company’s goals and procedures so they can work to fulfill those goals. Second, ensure your employees have all the resources needed to complete their tasks. Finally, step back and let your employees use the information and resources you've provided. Let them try new things and learn from their mistakes.)

Another thing employees need to be happy and productive is financial security. Zappos provides financial security for its employees by offering 100% medical, dental, and vision insurance coverage for all employees.

(Shortform note: Research suggests that offering employees such comprehensive insurance packages makes them healthier and less stressed. This decrease in stress and increase in health makes employees up to three times more productive than employees with less comprehensive insurance. Also, offering insurance can reduce operating costs: Employees will often take lower salaries in exchange for insurance, since buying insurance coverage directly often costs more than a salary increase would cover.)

A Culture of Innovation

The final principle of Zappos’s culture is innovation. Innovation is vital for any company, Hsieh maintains, because companies fail when they stop improving. The only way to maintain success is constant evolution.

(Shortform note: Many people stifle their company’s innovation because they won’t hire people who are smarter or more skilled than them and who may thus help them to improve. In The Art of Thinking Clearly, Rolf Dobelli calls this “social comparison bias.” Encourage innovation and maintain your company’s success by hiring the smartest and most talented people you can, even if they’re smarter or more talented than you.)

Innovation also contributes to employee happiness. Following the same patterns and processes at work becomes stifling over time and can lead to employee burnout, Hsieh explains. On the other hand, innovation brings a constant sense of excitement and growth to a company, making people more engaged and happier at work.

(Shortform note: Innovation’s relationship with happiness is a two-way street: Innovation inspires happiness and happiness inspires innovation. When employees have a good day, they’re more likely to come up with original and creative ideas. Thus, if you nurture them, innovation and happiness can work together in a cycle, continually improving your business and making your employees happier.)

How Zappos Encourages Innovation

Zappos encourages its employees to innovate by supporting their ideas, even unconventional ones, Hsieh says. For example, rather than conducting conventional job interviews, the Zappos hiring team created unconventional “speed interviewing.” Like speed dating, prospective employees only have a few minutes to convince the hiring team that they’re a good fit for the job. While the speed interviewing initially needed some trial-and-error to run smoothly, it lets the hiring team evaluate a lot of candidates quickly and determine who might be a good fit.

Zappos’s Continued Innovation

Zappos continued to innovate its recruitment process after Delivering Happiness was published. In 2014, Zappos replaced its traditional job postings with the Insider program. Instead of filling a single job position, the program focused on cultivating more general relationships with potential future employees: Its recruiters discussed general skills and interests, rather than specific job criteria. Once Zappos understood the potential employee’s personality and skills, it could determine where in the company that person fit and offer a job.

This program saw initial success, increasing engagement and interest in Zappos as well as the quality of applicants. However, it didn’t work well in the long term, and Zappos returned to offering traditional job postings on their website. This may be a sign to be bold with your innovation but pay close attention to the success of new projects and be willing to pivot to another plan if necessary.

Provide Great Customer Service

Providing great customer service is another vital component of a successful business. According to Hsieh, great customer service is being so supportive and adaptable in every customer interaction that you have a positive emotional impact on the customer. This positive emotional impact is the first step toward forming a healthy and profitable long-term relationship with that customer.

(Shortform note: Hsieh sees a positive emotional impact as the root of good customer service, but how do you generate this positive response? It doesn’t necessarily mean going beyond your customer’s expectations with free perks and bonuses: Studies show that most customers are happier with simple, quick solutions to their problems. Prioritize problem-solving before worrying about dazzling your customers.)

Why Is Great Customer Service Important?

Hsieh says providing good customer service is important because it increases the “lifetime value” of customers. This is the total revenue that a customer brings to the company throughout their life. If a customer only uses your service once, then their lifetime value is very low. However, if you create an emotional connection through your customer service, your customers are more likely to return to your business and increase their lifetime value.

(Shortform note: Hsieh notes that increasing the lifetime value of customers is important, but he doesn’t explain how important. Studies show that if companies increased the lifetime value of 5% of their customers, they’d increase profits by 100%. This profit increase occurs because you can charge long-term customers more money. By forming relationships with customers, you encourage them to trust you. If customers trust you, they’ll prefer your services over those of a competitor, even if you charge more.)

How Zappos Encourages Great Customer Service

Zappos encourages great customer service through its intensive training program, Hsieh explains. Every Zappos employee goes through four weeks of customer service training and two weeks working in the customer service call center. Most companies would view this as a waste of time and resources, but Zappos sees it as essential to the company’s success. If all employees are trained in customer service, they can all embody the principles of good customer service—such as attentiveness and politeness—in their interactions with customers, business partners, and the press.

(Shortform note: Hsieh says training all employees in customer service is important. However, others go further, arguing that training internal departments that don’t usually interact with outsiders is most beneficial. Backend departments often complicate the customer service department’s job. However, if every employee is trained to prioritize customer service, they’ll focus on helping the customer service department succeed and thus help to maximize customer lifetime value. For example, an IT department that hasn’t trained in customer service may delay upgrading customer service’s hardware because they value the marketing department more. After customer service training, the IT department would prioritize upgrading customer service’s hardware so they can contact customers faster.)

Maintain Communication With Customers

Another vital element of customer service is maintaining communication with the customer. Zappos achieves this through its call center. While call centers are almost ubiquitous in large and medium-sized companies, Zappos sets itself apart from its competitors through its innovative, customer-oriented call center policies.

(Shortform note: Research supports Hsieh’s commitment to making his call centers as effective as possible. Studies show that 80% of customer interactions happen over the phone. In addition, 92% of customers base their opinion of a company on their experiences with that company’s call center. Thus, optimizing your call center can be vital to securing long-term customers.)

Hsieh says Zappos has three unusual call center policies that encourage the kind of communication necessary for great customer service:

1. Zappos doesn’t time calls. Most call centers measure employee success through the number of calls they take in a period of time, which pressures employees to rush calls. Untimed calls mean employees can instead focus on providing great customer service.

(Shortform note: Research supports Zappos’s abandonment of timed calls. Studies show that customers care less about call speed than they do about having their problems solved with a single call. Thus, call centers should judge employee success on whether they can handle customer needs without having to transfer the customer, rather than on how quickly they make calls.)

2. Zappos doesn’t use scripts. This allows employees to use their own judgment when handling customer requests and form genuine relationships with customers.

(Shortform note: Employees can form genuine relationships when they don’t have to rely on scripts because they have the freedom to learn about their customers and integrate that knowledge into their service. For example, a customer may mention that they enjoy hiking. The employee can use this information to connect with the customer and direct them to the company’s hiking boots. The customer will be impressed that the employee paid attention to their interests and is more likely to shop there again.)

3. Zappos doesn’t upsell. Many companies use their call centers to promote upgrades or additional products to customers. However, upselling prioritizes revenue over the customer experience. Instead of trying to sell a customer more products during their call, Zappos indirectly encourages customers to make further purchases by providing great service.

(Shortform note: Zappos’s call center doesn’t upsell, but its website does by tracking items you’ve previously viewed or purchased and recommending items you might like based on that data. This isn’t hypocritical: Customers’ needs change depending on the situation. When customers call Zappos, they just want to solve their problem quickly. However, when shopping online, upselling can help customers find the best products to meet their needs. For example, Zappos’ website might register that you’re shopping for Nike sneakers and display several different style and price options so you can quickly find one you like that fits your budget.)

Invest in Continuing Education

According to Hsieh, the third and final important element of a successful business is continuing employee education: in other words, constantly giving your employees training and learning opportunities. This training shouldn’t only apply to the skills the employee was hired for, Hsieh adds. Rather, employees should learn about a variety of different skills and areas of knowledge so they can more easily innovate and adapt to new situations. According to Hsieh, employees are happier and more willing to work when they’re learning and improving themselves.

(Shortform note: How does learning make you happy? Raph Koster explains in A Theory of Fun For Game Design that “fun” is a burst of dopamine you receive when learning something new or mastering a skill. Dopamine generates pleasure and motivation, so learning something new, as Zappos encourages, directly contributes to happiness.)

In addition, companies are only as good as their employees, Hsieh explains. Your company can’t grow and improve unless your employees do as well because they’re the ones operating the business. Thus, to keep innovating and maintain your company’s success, support your employees’ innovation and success.

(Shortform note: Hsieh says companies are only as good as their employees and uses this as justification for continual employee education. Others take this idea a step further, saying your company is only as good as your worst employees. Thus, improve the quality of your company by evaluating and training your weakest employees specifically. You’ll improve your profits and the newly-trained employees will likely feel happier and more fulfilled.)

Finally, continuing education is important for business succession planning. Many companies train their employees for a single, specific job, Hsieh says. Then, when those employees have to adapt to another role—whether because of a planned promotion or an emergency situation—they aren’t prepared to do so. However, if your company prioritizes continuing education in a variety of skills and areas of knowledge, you’ll create a system where any time a role opens, there’s an employee ready to fill it. Not only does this alleviate stress, but it also provides a clear path of career progression for your employees, giving them a constant stream of goals to aim for.

(Shortform note: In Principles, Ray Dalio agrees that succession training is important. He suggests three steps you can take to ensure your employees are ready to fill new roles. First, select a replacement for each key person on your staff: Just like you’d have backups for important parts of a machine, make sure someone’s ready to fill the gap if any of your essential personnel are unavailable. Second, give these future successors opportunities to see how their predecessors think and solve problems. Finally, let successors handle some of their predecessors’ responsibilities so you can analyze how prepared they are for the role.)

How Zappos Encourages Continuing Education

Zappos encourages continuing education through its “educational pipeline” system of training. Hsieh says Zappos’s pipeline operates on a merit badge system: People who fulfill certain training requirements earn promotions and pay raises. The first, basic elements of training are mandatory, but after those elements are completed, people can select which merit badges they want to earn and which skills to specialize in.

(Shortform note: This merit badge system works because it offers employees a choice in what to train in. Even minor choices engage intrinsic motivation, where you do something because it’s personally rewarding for you. This kind of motivation lasts longer and is both stronger and mentally healthier than motivation caused by external rewards. Its power is visible in studies of traditional education: College students who select their own courses and assignments turn in better work more consistently. By applying proven theories of educational motivation to its programs of continuing education, Zappos thus encourages its employees to find fulfillment and happiness in their training.)