Business 10th Edition by Ferrell,Geoffrey Hirt,Linda Ferrell

Exercise 22

Zappos Creates Organizational Structure and Culture with Teams
Zappos began in 1999 as an online shoe retailer but has expanded into many product categories since then. The company has always taken pride in its focus on employees and customers and, as a result, has adopted a team structure to reinforce the kind of organizational culture for which it aims. Jeanne Markel, the director of the Downtown Team, states that the managerial goal "is to drive the culture within Zappos." As Zappos began incorporating more product categories, the teams grew both in size and number. This helped to reduce the complexity of company growth and establish a basis for success. Many companies utilize functional departmentalization as a structure to organize their activities. Zappos' many teams serve this same purpose but are described as teams rather than departments. This means that there is a team for each function under each product category, and if the product category is large enough, there will be teams for product subcategories.
While the company is run by teams in every department, one of the most important teams is the merchandising team, because team members are responsible for purchasing all inventory on the Zappos website. This team has approximately 200 people and is led by the Vice President of Merchandising. Under the VP is a Senior Director of Clothing and a General Manager of Footwear, who lead the directors responsible for each purchasing category, including clothing, fashion, and couture and accessories, as well as private-label, performance, and casual lifestyle categories. A team that encompasses such a large and integral responsibility to Zappos' business model will likely change structure to accommodate growth. For example, over the course of seven years, Jeanne Markel saw her team grow from 4 people to 27.
Each purchasing category is composed of its own team as well. The casual lifestyle category, for instance, is led by the Director of Merchandising, who manages four directors responsible for separate subcategories, including kids, comfort, size and width, and home and luggage. There is also a Lead Buyer for each subcategory. From here, the subcategories are divided into further categories. The kids category has a kids footwear merchandising team. The structure of this team begins with entry level Merchandising Assistants, who work closely with the next level of Assistant Buyers to learn the industry and the trade. Assistant Buyers are responsible for mentoring Merchandising Assistants as well as handling up to 15 brands and making decisions on purchases. The next level consists of Buyers, who manage the Assistant Buyers and govern a group of brands. As an employee reaches higher levels in the team, his or her responsibility shifts more from buying activities to mentoring, training, and building the team. This is a core characteristic of Zappos' structure. The company strives to empower employees from the bottom up so that when they are hired as an entry-level employee, within five to seven years they have the opportunity to move up to leadership positions. The top-level positions on this team are the Lead Buyers, who manage the largest one or two brands on the team or on the company's website, and the Director, who rarely ever buys and only mentors and manages.
Because Zappos is an online company, most of the communication that occurs is via e-mail. However in order to ensure that teams function properly and work to reinforce their strong organizational culture, the company encourages face-to-face meetings. Formal meetings between the directors and the various levels on their teams will occur once per month. CEO Tony Hsieh also calls for directors to spend 20 percent of their time with their teams outside of work and gives them an allowance of $50 per month in order to do this. These kinds of activities strengthen the teams by making them more invested in collaboration and instilling trust among team members, as well as with other teams outside of their specific functional area. This serves as a valuable relationship building activity that allows entry-level employees to engage with all levels of the company in a casual manner, promotes brainstorming that results in creative solutions to challenges the team might be facing, and offers all employees a different perspective of their team members and the company they work for.
The most recent development the company has made in terms of organizational structure and teamwork is the adoption of Holacracy. This is a management structure that focuses on the type and amount of work that needs to be accomplished rather than on titles and hierarchy. This seems to be a natural transition for a company whose structure is highlighted by the use of teams and was instituted to avoid rigid structure that leads to inflexibility. The effects of this emerging management style are not fully known; however, it leaves Zappos with an opportunity to show others how it can be successful. 37
How does the use of teams contribute to the organizational culture?