Tony Hsieh, the wildly successful, highly eccentric Vegas entrepreneur, died prematurely in November, shortly after retiring as the CEO at Zappos. While the cause of death was smoke inhalation from a house fire, reports suggest he was battling addiction problems. But that’s not what this article is about; it’s my second about Hsieh’s business lessons.

In December, I read Delivering Happiness, Hsieh’s anime-memoir describing how he built Zappos. Here I cover what I learned from the second half of the book – Hsieh’s meta-lessons about business culture.

Hsieh wasn’t just trying to deliver happiness to the customer. He believed the key to that was hiring the right kind of people, training them the right way – everyone would have a customer service focus – and making them happy at work.

Long before Zappos, Hsieh’s first successful startup was LinkExchange – Internet ad pioneers. But he grew unhappy, so disliking the job that he walked away from a lot of money rather than stick it out for a few more months.

“I don’t claim to be an expert in the field of the science of happiness,” Hsieh admitted in Delivering Happiness. “I’ve been reading books and articles about it because I find the topic interesting.”

Hsieh read and cited psychologist Abraham Maslow, who posited a five-tier human “hierarchy of needs” ranging from basic survival like oxygen, water, and food to increasingly higher needs like safety, social belonging, esteem, and self-actualization. Taking our lessons from Hsieh’s fate, we can perhaps take these lessons not as a key to personal fulfillment, but business fulfillment.

What is your goal in life? Why? Many of us find these two deceptively simple questions devilishly difficult to answer. Hsieh believed defining and understanding the goal and the why behind it would reveal our values and also begin to chart a path through life. Again, easier said than done.

Hsieh believed happiness came down to four things: perceived control, perceived progress, connectedness, and vision/meaning. Hsieh shaped Zappos’ incentives structure around these ideas.

Perceived control. For example, Zappos call center employees used to get an annual raise. Hsieh changed that. Instead Hsieh implemented a “skills set system,” giving out small raises as each employee learned and mastered each of 20 skill sets laid out by the company. Having control over their raises, Hsieh believed, made employees happier.

Perceived progress. In other Zappos departments, Hsieh changed the related practice of one large promotion into smaller promotions given on merit every six months. “We’ve found that employees are much happier because there’s an ongoing sense of perceived progress.”

Connectedness. Hsieh believed happier employees made more productive employees, so Zappos tried to foster socializing and friendships at work – with things like discounted food and relaxation areas. And that improved Zappos’ bottom line. “When staff is happy, the turnover rate is lower, decreasing overhead cost,” according to Zappos. “A recent CAP study showed that the median cost of replacing an employee was between 10 and 30 percent of that employee’s annual salary.”

Vision/Meaning. Hsieh studied Chip Conley’s book Peak: How Great Companies Get Their Mojo from Maslow. Conley, founder and CEO of hotelier Joie de Vivre Hospitality, turned to Maslow’s hierarchy of needs after finding himself in trouble during the post-9/11 travel recession.  

Conley posits three forms of happiness relating to “relationship truths” between employees, companies, and investors: pleasure, passion, and higher purpose. Pleasure is deep but brief. Passion creates the flow feeling, “in the zone,” where work is highly productive. Higher purpose is the most long-term. It’s goal-oriented and provides the foundation for dedication over the long term, despite obstacles, shortcomings, and failures.

When it came to customer satisfaction at Zappos, Hsieh built customer loyalty by exceeding expectations. A key strategy: having friendly, helpful customer reps talk over the phone, providing upgraded shipping, and more.

“We put our phone number at the top of every page of our site,” Hsieh said in Delivering Happiness, “because we want to talk to our customers.” Why? Isn’t it cheaper to interact through email, texts, apps and bots like virtually every other company? “The telephone is one of the best branding devices out there,” Hsieh said. “You have the customer’s undivided attention for 5-10 minutes, and if you get the interaction right, the customer remembers the experience for a long time and tells his or her friends about it.”

That was core to Zappos culture and a big reason for their high employee retention.

Hsieh’s controversial experiment in holocracy – decentralized decision-making – began long after he wrote Delivering Happiness, so it’s not covered.

“The biggest (and hardest) lesson I’ve learned in life,” Hsieh said presciently/ironically, “is that the external world is just a reflection of the world within.”

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