Culture and Money—Tony Hsieh’s Take on the Challenges of Growth

If you haven’t read Tony Hsieh’s book on building Zappos, Delivering Happiness, click on the title to order it immediately! Tony’s book provides an entertaining, yet deadly serious, description of how to establish a not only a profitable company, but one that can maintain its passion and purpose. As an entrepreneur who wants to grow your company to the second stage or beyond, you need to understand the pitfalls to growth—the surprises along the way that can change the journey from the one you dream of to one where you just want to jump off the cliff instead of continuing the climb! There is so much in the book that makes sense that I could devote a number of blogs to it.

Tony’s comments on building and maintaining culture impressed me most. He described his feelings about his first wildly successful company, LinkExchange, as it grew into an organization he didn’t recognize and couldn’t relate to. At Zappos, he and his management team took steps to maintain the culture that made it successful as it grew into a $1Billion+ company. The book describes the hiring philosophy, the Culture Book, and the firm decision to hire only people who fit with and bought into the Zappos culture. Culture was more important to Zappos than the short term benefit of hiring someone with great qualifications, but a different philosophy of life and work. I admire that kind of clear sight and determination.

Culture relates to more than employees, however. At Zappos, he also learned that alignment among investors and board members was also important. Money invested in your company is not really “free”. As Tony and his team dreamed a bigger dream for what Zappos was and could become, he found that the board had a different set of goals, and he had to develop a creative solution to make sure that the Zappos he envisioned could stay on track. Tony was kind enough to give me permission to reprint his table of things to think about when looking for investors and board members:

 Top 10 Questions to Ask When Looking for Investors and Board Members

 cio1.  Do you really need investors? Can you avoid funding by growing more slowly?

2.  How actively involved will your investors be? How actively involved do you want your investors to be?

3.  What value beyond money can your investors add (connections, advice, experience)?

4.  What is the time horizon for a financial exit that your investors are expecting?

5.  What, if anything, are your investors hoping to get out of their involvement beyond just financial return? How would they prioritize those things?

6.  Do your investors and board of directors buy into the vision and mission of the company?

7.  Would they accept less profits if it meant that the vision could be fulfilled faster?

8.  How flexible are your investors and board members in their thinking?

9.  Who controls the investors? Who controls the board?

10. Do the core values of your investors and board members match the core values of the company?

© Tony Hsieh, Delivering Happiness

In Tony’s words, “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.”

Other People’s Money (or OPM) is often an important ingredient in a company’s climb to second stage growth and beyond, however, a failure to ensure that the investors are aligned with your goals (other than an expectation of profitability) can be the downfall of your dreams.

I’m hoping that Tony will accept my invitation to be my guest on Kline Online radio to share more of his wisdom. In the meantime, take his advice on interviewing investors and board members to heart.