March 23, 2012

Amazon’s Culture: How to Shape an Enduring Organizational Culture

 

The growth and success of Amazon.com is remarkable. There’s a good chance you’ve ordered something (or many somethings) on Amazon. You might even be a loyal customer taking advantage of Prime Membership with free 2-day shipping. But what you might not know is how Amazon created their organizational culture.

Recently I’ve been reading Change or Die by Alan Deutschman. In his book, Deutschman shares the story of David Risher, a marketing executive with Microsoft who interviewed with Jeff Bezos, founder of Amazon, in 1996. At the time, Amazon was was only one year old and losing money. They were renting space in “an old brick building on Seattle’s skid row, a dismal block with a needle exchange, a defunct pawnshop, a grocery store with barren shelves, and an outreach service for troubled youths” (p. 46).

Bezos was very frugal, refusing to spend money on things that simply were not important. His desk was a wood door from Home Depot with two-by-fours for the legs. Despite the glamour-less looks of Amazon’s headquarters, Bezos had assembled a team of 30 employees. They were just like Bezos…incredibly smart, frugal, risk-takers, and information analyzers. Bezos told Risher, “I’d rather interview fifty people and not hire anyone than hire the wrong person.”

Deutschman observes, “Back when hardly anyone had ever heard of Amazon, a tiny start-up company that hadn’t yet sold a dollar’s worth of stuff, it was ridiculously difficult to get a job there, even if you had inside connections. Even when you applied for a job answering the phones in the customer service department, Bezos’s colleagues would compile a one-hundred-page dossier about you” (p. 47).

Risher accepted a position at Amazon, which stunned his Microsoft colleagues. The two top executives, Bill Gates and Steve Ballmer, tried to convince him to stay. And when he didn’t, they told Risher he was, “the stupidest guy they ever met” (p. 48). Amazon’s made revenues of $16 million in 1996, which ballooned to $1.6 billion three years later, and reached $8 billion by its 10th anniversary.

But as Amazon grew, here is the amazing part: the company culture stayed the same. Even ten years into its life, with 12,000 employees, you could still find people with desks made out of doors and employees with extraordinary analytical minds. Deutschman observes:

The first few dozen people create a culture that’s self-perpetuating. Their personalities make up a company’s cultural DNA, the genetic code that replicates again and again. Bezos hires a bunch of people, like Risher, who in turn hire many others. The newcomers arrive at a place that already has its own set of well-defined values, beliefs, practices, skills, quirks, and even delusions. Since they depend on Amazon for their livelihoods, they have a strong incentive to model their behavior on the people around them, especially the stars and the higher-ups. The newcomers try hard to fit in. If they can’t fit in, they quit. If they fit in particularly well, they rise and become role models for the newer hirers. The overall effects is that the culture created by Bezos and Barton-Davis and Risher is sticky. (p. 49)

Here’s an important insight to Bezos’s method: If you want to create a particular organizational culture, it is essential that you get your early hires right. And while it’s easy to make quick hires so that you can lighten your own load, doing so can be lethal to the organization. Bezos was brutal in his hiring discipline. But he had to be if he wanted to firmly establish the right culture.

There are a number of things that define your culture, but the people who hire are the most influential in creating culture. They bring to the table their beliefs, values, and behaviors which shape culture from the very beginning. Bezos said, “Cultures are these fantastic things. Cultures are not so much planned as they evolve from that early set of people. Once a corporate culture is formed, it tends to be extremely stable. It stays around. It ends up building on itself” (p. 49).

To create or protect a healthy organizational culture, you’ll need an effective hiring process. Furthermore, you need to know what types of questions to ask. I don’t believe you have to hire people exactly like you in terms of skills. In fact, doing so may keep the organization from gaining traction. But you must recruit people with the same DNA. Skills determine if a job gets done. But DNA determines if the organization stays true to its vision.

Question: What have you found to be a practical way to shape the culture of your organization?

 



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