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The Rough Notes Company Inc.



February 28
08:50 2017


Tour of Las Vegas’s Zappos office helps inspire agency culture focus

Leadership is multifaceted. But at its core is responsibility foorganizational culture—designing, developing, and nurturing the shared values that drive how organizations operate. Author and former MIT Sloan School of Management Professor Edgar Schein put it this way: “[T]he unique function of leadership that distinguishes it from management and administration is … concern for culture. Leadership begins the culture creation process and … must also manage and sometimes change culture.”

Today’s business leaders recognize this. And many are doing something about it. Among these is Lew Kachulis, CPCU, CIC, CWCA, president of Gilbert’s Risk Solutions, a Sharon, Pennsylvania-based agency that was named Rough Notes December 2002 Agency of the Month. “Focusing on culture has allowed us to bring on and develop star performers who are passionate about serving customers,” Kachulis says.

But it wasn’t always this way. “We found several years ago that, although we were hiring people who were very qualified from a technical standpoint, a few didn’t work out,” he says. “The reason was there wasn’t a good culture fit. Their values were not in alignment with Gilbert’s’ values, and, consequently, we had to part company.”

At about that time—probably five or six years ago—Kachulis, an avid reader, learned about, an online retailer created in 1999 to sell shoes. “Even today, we think of Zappos as an online shoe store,” he explains. “But the CEO of the company, Tony Hsieh, defines his company very differently—much like how we in the insurance business would, or should, define ours: It’s all about customer service and it’s all about the customer experience.”

Hsieh (pronounced Shay) has a rather remarkable business track record. In 1996, a year after graduating from Harvard, he launched an online advertising network that he sold to Microsoft less than three years later for $265 million. Next, he formed a venture capital firm and then, in early 2000, he joined Zappos as CEO. In less than a decade, Zappos revenues reached a billion dollars and, in July 2009, announced it bought the firm in a deal valued at $1.2 billion or so.

Zappos, based in downtown Las Vegas, is widely recognized for its culture, which it selflessly discusses with just about anyone who is interested. The company actually conducts on-site tours, including what it calls the “Zappos Tour Experience,” a 90-minute glimpse into the Zappos culture. The site says the tour gives “an inside look into our everyday work life on campus … offer[ing] a glimpse into the Zappos culture and a walk in a Zapponian’s shoes. Say hello to some of our amazing culture-filled departments, such as HR and our Customer Loyalty Team (customer service).”

A look at culture

Kachulis and another Gilbert’s manager took that tour on the tail end of a business trip to Southern California. “We drove from Los Angeles to Las Vegas specifically to tour Zappos,” he recalls. “It was interesting to go through and see some of the workstations and how some of the people dressed; they’re looking for a very eclectic group, and they tend to be a little bit weird.”

“People thought,‘I can’t believe this company and how customer friendly and how wonderful they are,’and they started posting online about their great experience with Zappos. That actually helped them grow their business.”

—Lew Kachulis
Gilbert’s Risk Solutions

His use of the term “weird” actually proves that Kachulis paid attention to what company leaders shared during the tour. One of Zappos’ 10 core values is “Create Fun and a Little Weirdness.” That plays out in a number of ways, including on its website. For example, to learn more about Hsieh and his senior staff, you won’t get very far looking for a link titled, “Corporate Officers” or “About our Team.” Nope, corporate exec bios are found under the “Meet Our Monkeys” tab.

One of Kachulis’s early tour observations was the fact that the Zappos office set-up reinforces the firm’s core values—in particular, those focused on relationships, communication and positive team spirit. “Tony Hsieh doesn’t occupy some big corner office,” Kachulis explains. “His workstation is right there in a big open room filled with all kinds of people working.

And by cubicles, Kachulis doesn’t mean ones with six-foot walls. “No, these are very low—maybe a foot or two above desk height,” he notes. “And his management team is around him; the CFO is, maybe, a couple of stations over. This set-up really fosters communication with the management team, and they want management to be very accessible.”

Customer service focus also was apparent in the tour. “They encourage their customer service staff to spend as much time on a conversation as the customer wants,” Kachulis explains. “They monitor it, and even brag about a call that was hours long. You can test their customer focus by calling in and asking for recommendations on where to get a good pizza. The rep will ask where you live, then search online for the best pizza shops, and even offer to call your order in, if you want. They’re a little quirky, and it works for them.”

Service focus also is apparent in how the company addressed possible threats. “At a brainstorming session, management looked at what could cause Zappos to fail. They concluded that sending people the wrong shoes would generate bad online reviews that could ruin the company.” To address that, the company did something that, not surprisingly, was a little weird: they purposely sent people the wrong pair of shoes.

“The reason they did that—and their customer service reps were prepared and anxiously waiting for that call from customers who got them—was to turn the experience into a positive,” Kachulis explains. “They would apologize and then tell the customer they’d send out four pairs of shoes in different sizes and styles for the customer to try on. Then, the customer could keep two, and they wouldn’t be charged for the extra pair.”

Positive online reviews spiked. “People thought, ‘I can’t believe this company and how customer friendly and how wonderful they are,’ and they started posting online about their great experience with Zappos,” he notes. “That actually helped them grow their business—taking a negative and making it a positive.”

As part of its orientation process, every employee is required to spend time working the phones. “Every single person, even legal counsel, is required to sit on the customer service desk and answer questions,” Kachulis says. “It sounds simple, but it’s brilliant. It reinforces the culture and customer focus to everyone, regardless of title.”

The company also publishes a culture book. “Every employee is encouraged to write something about the company, and then these employee contributions are compiled and published,” Kachulis says. “And they publish everything—good, bad, or indifferent. That’s part of their culture, too: open dialogue.”

When they went to Zappos, Kachulis and his tour mate upgraded their experience and paid for some one-on-one time with a team member. “One of the things that came up in that conversation was the cultural interview that Zappos does when hiring new employees,” he explains. “Given the fact that Hsieh believes the company’s success is built on culture, the interview is, perhaps, the most important part of the hiring and onboarding process.”

The Zappos manager who took part in the one-on-one session shared with the Gilbert’s leaders a copy of the form the company uses to drive its cultural interviews. “The cultural interview discussion and material was my greatest takeaway from the visit,” Kachulis notes. “That’s because it was a pain point. We were experiencing the challenge of trying to hire really quality people who were technically proficient and who also were a good cultural fit for the organization.”

Agency changes

As a result of the trip, Gilbert’s incorporated a cultural interview into its hiring process. “We took our values and established a set of questions for each,” he explains. “The cultural interview typically comes towards the end of the hiring process, when we’re nearing a final decision. At that point, we can say, ‘Okay, we believe this individual has the right skill sets, good communication skills, and the right technical ability. We’re willing to train them, but before we hire, we have to make the determination, is this individual a good cultural fit?’ ”

The Gilbert’s cultural interview addresses the agency’s five core values: honest communication, teamwork,
education and self-improvement, service beyond insurance, and respect. Questions under each category offer a deeper dive into the topic, and candidates are scored in each area. “We look at everything from someone’s passions, ethics, initiative, and creativity to their interpersonal engagement styles, flexibility, humility, and trustworthiness,” Kachulis notes.

“One of our core values is ‘education and self-improvement’; questions we ask around that are, ‘What’s the last book you read? Would you recommend it to me? And why?’ If they don’t read or if they say, ‘Well, I don’t read very much besides the newspaper,’ that doesn’t necessarily mean that they won’t get the job.

“But if they answer, ‘I’m in the middle of reading Cryptocurrency, a book about bitcoin, and I can tell you what I like about it and why you should read it,’ we’d view that person as curious—someone who likes to learn—and score higher on that question. Our hiring call wouldn’t rest on that question alone, but it’s part of a series that helps us determine who’s a good fit for our organization.”

The cultural interview is part of a 12-step hiring process spearheaded by Laura Miklos, who heads the agency’s human resource functions. “It begins with a predictive index, which is similar to a Myers-Briggs assessment, but it’s specific to each position,” Kachulis explains. “Next comes a phone interview, and then something called topgrading. That’s an outsourced tool that creates a useful one-page summary of a candidate based on education and career information they key into the online topgrading system.”

There are more activities, including two more sets of job-focused interviews, and then the cultural interview. “We recently needed to fill two claims adjuster positions,” Kachulis recalls. “We started off with more than 700 candidates, and the 12-step process, which took Laura two years or so to create, really helped make the hiring process efficient.”

More than efficient, it makes the hiring process effective. “As a result of the cultural interview and other things we do, I can say we’ve been hiring absolute stars,” he notes. “Of course, nothing is foolproof, but after implementing this, I look around the room and see a lot of ‘A’ players, and I attribute a lot of that to the hiring process.”

Training helps ensure that A-player status. “Each position has what we call a training track, which addresses the various things people need to know in order to be competent in their job,” Kachulis explains. “But the first thing we address is culture. I meet with all new employees, one-on-one or as a group, and go over our values. That’s part of our orientation and onboarding.”

To ensure consistency moving forward—in job proficiency and in cultural alignment—the agency uses what it calls goal review forms. The form drives monthly discussion on essential job functions and Gilbert’s’ five core values and a quarterly look at S.M.A.R.T. (specific, measurable, attainable, relevant and time-stated) goals. “The process was based on a series of books, including Helping People Win at Work,” he says. “And it replaces the annual review found in many agencies—a task that I used to loathe.”

The agency also reinforces core values and culture in staff meetings. “As often as possible, we try to highlight and then discuss one of our values,” Kachulis explains. “It’s not a long discussion—maybe an anecdote or story—but it lets us stress the importance of the value, the behaviors that exemplify it, and the alignment and consistency we seek.”

Kachulis encourages other agency leaders to consider taking a Zappos tour. “If anyone is in Las Vegas and has an extra half day, schedule a trip,” he says. “There’s so much to learn about leadership and culture—things that can make a difference in any agency.”

By Dave Willis, CPIA

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