Guide to Building Data-Driven Organizations in the Public Sector

Amazon vs Zappos

Team 3: Marcela Morales and Joseph Lynch

A Tale of Two Data-Driven Management Systems: Amazon and Zappos

Topic Overview

The articles below examine the use of data and their effects on management. From the tightly controlled business at Amazon to the more freely run Zappos, these articles attempt to show the use of data on measuring employee effectiveness, employee retention, and morale. Both Amazon and Zappos are highly successful, but each has a very different philosophy. These different environments are even more strange since Amazon owns Zappos!

Chapter Summaries

Sutherland, J., & Sutherland, J. J. (2014). Scrum: the art of doing twice the work in half the time. Currency. CH7 happiness

In the chapter “Happiness” the author explores the impact of attitude and happiness on business. Sutherland and Sutherland assert that happiness happens when pushing yourself. Happiness of the team is crucial to business. Further examined, the authors states that “happiness leads to success in nearly every domain of your life.” Happiness is not the outcome of being successful, it “precedes” it. In the SCRUM process, the goal of the team is not to assign blame when things don’t work as intended but rather to review the process and find the solutions, as a team. The authors instituted a concept called the happiness metric, plainly put, it identifies how the employee feels and identifies what one thing would make them happier. As noted, autonomy, mastery, and purpose are a core component of employee happiness. Sutherland and Sutherland then examined Zappos and the core concepts of happiness that made the company successful. To achieve Wow! Moments for the customers and make them happy, Zappos felt the employees had to be happy as well. Connection to others is a major component of the strategy. Zappos has a 12% turnover rate, and this is due to letting employees go who lack happiness as measure by customer interactions and complacency. To ensure new employees understand the culture, they are put through a 4 week “boot camp” to ensure they understand the company’s philosophies and culture. Sutherland and Sutherland used Zappos to show that happiness is a truly effective approach to business. The chapter is summarized in 8 key points. It’s the Journey and not the Destination. Happiness is the New Black. Quantify Happiness. Get better everyday and measure it. Secrecy is poison. Make work visible. Happiness is autonomy, mastery, and purpose. Pop the Happy Bubble. Zappos made these ideas work and grew from a $1.6 million dollar company in 2000 to a billion dollar company in 2008.

O’Neil, C. (2016). Weapons of math destruction: How big data increases inequality and threatens democracy. Broadway Books. CH7 sweating bullets

The article in Weapons of math destruction is broken into 3 distinct subchapters. The first section deals with how data is used to impact the workforce. In the article, workers in the food service and retail industry were examined. The article asserts that 2/3 of food service and ½ of retail workers receive their schedule less than one week before it starts. This is done with the help of scheduling technology using Operations Research (OR). The technology matches employees to the busiest times, hours available, and other business needs. As a result, employees have a challenge maintaining a routine which inhibits activities like attending college, spending time with children, or managing child care. The effect on their children is quite similar, a lack of routines. The varied schedule was linked to sleep deprivation and heightened anxiety. Some employees have to close a business and open it the next morning, termed “clopening.” This technology also works to limit employees less than 30 hours, so they often do not receive benefits. The inability for these workers to advance themselves enhances the inequalities in the system while maximizing profits for the business. The Second section is focused on employee metrics. A company called Cataphora designed algorithms that could scour emails and other data to identify the best idea generators in the workforce. These algorithms would rank employees for management, so they could determine, through technology, the best workers. During the recession of 2008, this data was used to identify who to lay off. This technology used assumptions and often without other types of manager input. The technology had a low correlation to employee performance. The potential outcome of this technology could have been the culling of very effective employees from the businesses. Cataphora went out of business. In the third section, a review of the testing of students and monitoring of teachers in response to the 1983 report “A Nation at Risk” by the Regan administration. The report warned of a “rising tide of mediocrity” in our nation’s schools. Tests were used to determine teacher effectiveness with one major flaw. The tests were not measured on an absolute scale. Scores were inaccurately tied to school type, social inequality, and a failed try at fairness. Teachers scores varied wildly from year to year although the learning plans and lessons taught remained the same. One teacher examined in the article scored a 6 out of 100 one year and 96 out of 100 the next year. Nothing about his style had changed. In addition, the reporting of lower SAT scores was examined. The total overall score had changed, however the assumptions were incorrect. Over time, the number of students taking the test expanded greatly. When each subgroup of test taker was examined, each area had shown improvement which is called Simpson’s Paradox. The total was lower, but each subgroup improved.

“Zappos: A Workplace Where No One And Everyone Is The Boss.” NPR, July 21, 2015. PODCAST

This article discusses the idea of “holacracy” and how it was successfully implemented at the Zappos company. The idea behind it was to create more autonomy in the employees while maintaining the small-firm culture in a big-firm environment. Holacratic governance is compared to cell biology. Each of your cells works on its own without asking other cells for permissions to do anything. He seeks adaptability and nimbleness in his companies that focuses on the groups interests and not individual interests. This workplace is more employee centered with the idea that happy employees have a “trickle down” effect when it comes with handling customer requests.

Richard Feloni (Feb 19, 2016). “A former Zappos manager explains how her job changed after the company got rid of bosses.” Business Insider. LINK

This worked well for Zappos because without the structure of a hierarchy employees are empowered and understand the meaning of their work and have purpose instead of menial goals. Holocracy is a style or work that relies on autonomy and self-governance. When Zappos decided to make the change to a holocratic environment, bosses were no longer needed. Zappos gave each employee the ability to opt out of this culture shift by offering a buyout of those who didn’t want to “participate.” 14% of the workforce took this offer. Each member joins teams to solve issues or create programs. Every employee has an equal say and the decisions are made where the information is rather than through a hierarchal structure.

Key Take-Aways (for Yellowdig)

Two companies, Amazon and Zappos have entirely different cultures, but both have success.

At Amazon, the corporate culture uses statistical and employee-initiated data to improve performance. Employees can a report other employees anonymously when they think they are not working hard enough. Turnover is high, the stress is high, and the ability for employees to sabotage one another is high. The culture brings in highly ambitious employees who work as rivals to achieve results. The articles paint Amazon as a very tough culture in which to succeed and quite unforgiving. Even with this tough work environment, Amazon has become the largest retailer in the world.

Zappos is a company that believes that happiness of the employees leads to happiness of the customer. Zappos does not use a hierarchal approach, rather, they use “holacracy” which gives employees autonomy to make decisions that create Wow moments for their customers. Zappos has no managers, they use teams to make decisions and most closely resemble the SCRUM approach. Zappos has grown significantly and is also quite successful. Zappos invests in employee culture and dedicates 4 weeks of “boot-camp” for every new employee. Zappos, in terms of culture, is the exact opposite of Amazon. Surprisingly, Amazon owns Zappos.

Discussion Questions

Discussion Question 1: Do the risks of bad data or assumptions outweigh the benefits of using data to identify workplace effeciencies or employee performance?

Discussion Question 2: Would holacracy, where there is no management, and a design that emphasizes autonomy and self-governance work in your agency? How would this benefit your Agency and what risks would it bring?

References