Performance Reviews and Feedback at Zappos: Pursuing Growth and Learning

Ms. Augustus Scott started her career at Zappos as a customer support representative. 

By the time she quit, she was a life goals coach at Zappos! 

Her positive attitude and desire to learn propelled her from being a call center agent to a coach.

However, many employees with the same desire to learn and a positive attitude often don't grow because organizations tend to box employees and hardly focus on individual growth and development.

Zappos is not one of them.

Zappos's culture intentionally encourages employees to upskill and evolve.

Tony Hsieh, the CEO at Zappos, firmly believed that if you get the culture right, everything else falls into place.

Zappos recruits and trains for culture. They also encourage their people to have fun and work in an uber-relaxed environment with scrumptious food, ice cream parlors, and the freedom to be zany and creative both in their working style and in any professional endeavor.

While this kind of autonomy and laxness might be a red flag for some companies, it works wonders for Zappos.

Employees are empowered to go the extra mile to "wow" each customer.

It is little wonder that Zappos has grown from $ 8 million to over $1 billion in just eight years. And an equally impressive stat is that their employee turnover is as low as 13% in an industry rife with attrition averages of over 150%. 

Customers love the Zappos experience and 75% return as repeat customers.

Building a solid company on the backbone of a strong people culture means more than handing out coffee mugs and wall quotes. 

For Zappos, the culture intimately links back to the founder's vision and specific drivers that make up the DNA of Zappos.

All of the above coalesce together to create a culture where employees receive rewards for having a hunger for growth and development.

"In most corporations, you have to go through certain protocols and processes. We do have processes here, but it's something I was passionate to find a way to go ahead and take that journey and achieve (my goals).

So I took a journey of growth and learning, which is one of our core values, core value number five." Augusta Scott, former Life/Goals Coach at Zappos, in an interview with John Greathouse, entrepreneur and investor.

So, let's dive into how Zappos takes on the herculean challenge of getting employee reviews right.

👠 How does Zappos approach performance management?

Their original approach was carrying annual culture and performance reviews.

"Zappos has always placed 'living the core values' at the center of conversations between employees and managers." Joseph A Michelli, The Zappos Experience. 

Performance reviews 1.0: Annual appraisals

Like most companies, Zappos initially engaged in the process of annual performance reviews.

While most companies review their employees only around performance metrics, Zappos has introduced culture and performance reviews, encouraging people to adopt the company's core values.

In true Zappos fashion, the ten core cultural values were instrumental in the annual review process.

"At Zappos, our 10 Core Values are more than just words, they're a way of life. We know that companies with a strong culture and a higher purpose perform better in the long run. As we continue to grow, we strive to ensure that our culture remains alive and well." Zappos, Oath of Employment.

1. Deliver WOW Through Service.
2. Embrace and Drive Change.
3. Create Fun and A Little Weirdness.
4. Be Adventurous, Creative, and Open-Minded.
5. Pursue Growth and Learning.
6. Build Open and Honest Relationships With Communication.
7. Build a Positive Team and Family Spirit.
8. Do More With Less.
9. Be Passionate and Determined.
10. Be Humble.

Owned by managers, 50% of the evaluation focused on how much an employee contributed to each of the key drivers of the Zappos culture. For the remainder, the discussion focused on the topics of employee strengths and opportunities for growth.  

• With cultural reviews, leaders assign one of the following scores: Outstanding (O) = exceeds expectations; 
• Satisfactory (S) = meets expectations consistently; 
• Needs Improvement (N) = did not meet expectations 

On the following dimensions:

• Core values-how the employee aligns with the key drivers of the company culture.
• Performance-how competitive the employee is in their job skills and knowledge.
• Leadership-does the employee have the required work ethic to be a future leader?
• Growth potential-whether the employee is seeking opportunities to learn and upgrade their skill sets.

Below you can see what part of a performance report looked like:

"Over my tenure as an organizational consultant, I have seen very few organizations weigh 'culture contribution' or 'embodiment of values' as heavily in the overall assessment of employee performance. Nor have I seen many businesses orient employees to the notion that participation in the culture would be a key metric of employment success." Joseph A. Michelli in The Zappos Experience: 5 Principles to Inspire, Engage, and WOW.

But, like in Adobe's case, they moved away from the traditional annual cycles to continuous feedback and culture reviews. This move also reflects their adoption of holocracy.

Holocracy (aka self-governance, aka no managers)

Zappos follows a culture of Holacracy, which advocates self-governance and autonomy, aka no managers in the traditional sense of the word. 

At the core of it, holacracy is the belief that employees know exactly what is expected of them from a business standpoint and enjoy the trust and freedom to operate fast and with ease to meet those expectations.

But that does not mean that there is no leadership figure at Zappos. The key difference relates to decision-making capacities:

"We still have leaders and a lot of people associate leadership with management. We still need people to hold others accountable and terminate people when necessary. In traditional structures only managers/execs have the authority to make changes/decisions. In our organization everyone has the authority to make changes to the company and decisions in their work." Zappos, Holacracy and Self-Organization.

The role of leaders at Zappos (the "lead links") is to provide the resources to help and engage employees but not to dictate courses of action.

Performance reviews 2.0: Real-time feedback and reflection

Three reasons why Zappos eliminated the annual performance review system:

1. Moving from a singular yearly event to real-time feedback would encourage more frequent conversations between the employees, peers, and leaders, resonating with Zappos' growth and learning culture.
2. The employees should perform consistently and sync with the team's expectations.
3. Employees should consistently align with the company's core values.

"We got rid of HR-driven performance reviews [...]. I looked at it through the employee's perspective, asking if this performance review actually helped me as an employee. 

Do I like going through this process as an employee? When my boss sits down with me and goes through this process, does this do anything for me as a person? 

And my answer was no. It wasn't helping. 

It was just bureaucratic, only put there to help with staff rank and to pigeonhole people within a certain area.

It didn't make sense with our values, and it didn't make sense with what we were doing." Former Chief People Strategist at Zappos, Hollie Delaney, in an interview with The Gartner Talent Angle podcast. 

So, Zappos has completely done away with the traditional performance ratings and even performance feedback.

"For us, the 'once a year, sit down and tell you how you're doing review' became a crutch for managers who did not have to make sure that they consistently knew if and how their people were living our values and otherwise performing." Rebecca Henry Ratner, former HR Director. 

Instead, they have opted for more frequent feedback and collecting insights from peers.

Managers are out. Peers are in

In a traditional performance management system, managers use performance reviews to make compensation decisions or devise an action plan to improve performance.  

But this approach did not make sense for a holocracy-based organization. 

Zappos' performance management took on a different mission: 

• Raise performance awareness for each employee.
• Enable all employees to improve constantly. 
• Empower peers with some essential facts: they can quickly see each other's trustworthiness.

So, as managers are no longer the owners of the employee performance process, Zappos decided to distribute the responsibility to those who feel the more significant impact of an individual's work, their peers.

"To do this, we provide [employees] with an easy way to get feedback from their peers regarding their impact, trustworthiness, strengths, and weaknesses." Darshan Bhatt, a developer at Zappos, focused on developing tools for enabling a positive culture.

Peers share insights on what the reviewee did well and how they can improve. The feedback collected on trustworthiness and strengths is publicly available, but the improvement elements are kept private.

Darshan revealed that the founding belief behind this decision was "'coach in private' while 'praising in public'."

Peer feedback with no boss to report encourages accountability and develops a high-performance work culture.

Performance is a constant work-in-progress

Zappos does not shy away from building their people's competencies from the ground up. 

This strategy is an excellent way to: 

• Ensure that all workers receive the same level of growth opportunities.
• Build workforce loyalty and retention, as opportunities for growth ensure longer employee tenures. 

"Zappos doesn't hire very experienced workers. They bring almost everyone in at an entry-level and grow their talent from within. All employees can access 30 different courses created by Zappos exclusively for their staff. The courses range from how to answer the phone to tribal leadership, public speaking, stress management, and introduction to finance." Jeffrey Hollender, author and activist for corporate responsibility.

Goal setting & coaching

The organizational structure allows all the people at Zappos to have access to the Goals Department to set goals.

One of the core values at Zappos is "Pursue growth and learning," and the goal-setting exercise directly aligns with this tenet. 

The goals are typically short-term 30-day challenges. A Goals Coach guides people. The coach helps the employees set personal and professional goals, as Zappos believes in the holistic growth of all its people.

"[Zappos] designed the program so that they [employees] are able to walk away with tools that they can take and not only achieve their goal with me but go on to set other goals and achieve them without me.

And that's the other thing about this program: it's sustainable so it can sustain them well past the 30 days and they achieve progression within the company." Augusta Scott, former Life/Goals Coach at Zappos, in an interview with John Greathouse.

Further reflecting on the sustainability of the program, Augusta Scott further highlights the role of the goals coach:

"I'm not here to tell them what to do. I'm really here to take that journey with them, ask those powerful questions and (help them realize that) they already have the answers.

It's a matter of tapping into themselves and finding out what obstacles are in the way and how can we remove those obstacles, instead of going around the obstacles or pushing the obstacles to the side."

The goals can be related to work, but often they are personal, like getting their finances in order or losing weight. Then, after their success, they can write on a Goals Club wall to share their story.

The belief is that when employees accomplish personal goals, it also helps them professionally, as they learn accountability and gain more confidence.

This accelerated growth curve incentivizes everyone to be on top of their game and makes them feel genuinely cared for.

Let's take two examples of how reaching personal goals can enable career development. 

An individual may have a personal goal to overcome their fear of public speaking and become a more effective presenter. 

They can improve their communication and presentation abilities by joining a public speaking club or attending workshops. 

This personal growth can increase confidence and visibility in the workplace, making them a stronger candidate for leadership positions or roles requiring frequent client interactions.

Another employee may set a personal goal to adopt a healthier lifestyle, including regular exercise, a balanced diet, and stress management techniques. 

Achieving this goal can increase energy levels, focus, and emotional well-being. 

As a result, the employee may experience enhanced productivity and a greater ability to handle workplace challenges, contributing to their overall career development and growth.

"We believe that inside every employee is more potential than even the employee himself/herself realizes. Our goal is to help employees unlock that potential. But it has to be a joint effort: You have to want to challenge and stretch yourself in order for it to happen." Zappos Insights.

They also list sample behaviors for each cultural value.

For example, an employee living by the "Pursue Growth and learning" value:

• Is curious about how things work.
• Has an insatiable appetite for improvement.
• Is their own teacher (self-evaluative).
• Inspires and mentors each other.

Zuddles

Zappos also encourages real-time feedback through weekly team huddle meetings, or "Zuddles." The goal is to help employees reflect on their wins and losses in the last week.

In addition to these meetings, the client-facing employees perform a quality check by listening to their recent calls with customers to identify areas of improvement for the next call. 

Within the Zuddles, team members also reflect on the core values, often testing each other for knowledge of the ten values.

Zuddles occur every week.

Peer recognition 

Peer recognition boosts employee morale, so Zappos has a fun way to do this: Each month, employees have a budget of 50 USD to allocate to a peer. 

The Coworker Bonus Program is a tool that employees use once a month to recognize one of their peers. All they have to do is type in their name, a reason why they selected them, and how that reason relates to Zappos' ten core values. 

The Zappos HERO Award works in conjunction with the Coworker Bonus Program. 

"A Zappos HERO is an employee who embraces our core values to the fullest and lives to deliver WOW to their fellow Zapponians. The most outstanding example of a core value leader will not only receive the $50 bonus from their nominating coworker but will also get their very own Zappos HERO cape (because, really, a cape is a necessity for all heroes) and a $150 Zappos gift card!" Four Peer-To-Peer Ways Zappos Employees Reward Each Other.

Smart capture and share

Zappos has internal wikis and blogs to help employees work together and solve problems.

After the Amazon acquisition of Zappos, the fulfillment center got intermingled with Amazon.

To list typical issues and solutions, employees used a knowledge base in the form of a simple wiki.

Similarly, quarterly all-hands meetings are recorded for future reference so that all employees use them as references.

Teams come together to discuss their learnings and frequent problems that they have encountered.

Compensation

Under Holocracy, reviewing compensation can be difficult as no one and everyone is the boss. 

At Zappos, instead of job titles, employees collect skill badges. Compensation decisions consider the badges or skills they collect and how that directly impacts business metrics. 

"At this time, compensation is tied to roles, and the badges encompass the work or skills being done in those roles. However, we are currently building a more robust badging system that will allow people to build their salary based on the avenues they would like to pursue," says Lisa Jewett, former Badge Librarian at Zappos. 

Collecting more badges is equivalent to leveling up and getting a higher paycheck.

While this system may seem too zany for other companies, it works wonders for Zappos. 

In line with the holocracy culture at Zappos, upgrading an employee's base salary is self-deterministic and not under the control of a manager. It is entirely up to an employee to decide on a customized path where they can contribute in different verticals and pick up multiple skills. 

"We believe this [badge system] will help build transparency within compensation and allow people to see what skills they need to get to the point they want to be at. If somebody says, 'I want to do what Hollie is doing,' for example, you'll be able to see my badges and what I've done in my career both at and before Zappos. You can see what that leads to in the course of badging and the subsequent pay that comes from those badges.

Instead of a traditional progression plan, it's based on what we're calling a 'Choose Your Own Adventure.' Because you have the transparency to see all of the badges, you can choose the adventure you want to take to build the career you want, not one that's defined for you by a manager." Former Chief People Strategist at Zappos, Hollie Delaney, in an interview with The Gartner Talent Angle Podcast.

So this badge system means that employees earn badges based on the roles and skills they acquire. The badges offer an opportunity to simultaneously explore new functions, pursue their passions, and increase their earnings. And Coupled with the principle of holocracy, employees are in the driving seat of their career development. 

🗝️ The key to Zappos' performance review success

Zappos is among the companies that have redefined the performance review process. 

They have replaced annual feedback with more frequent real-time performance feedback.

They have created an internal 360 feedback tool so that people can evaluate themselves and their peers.

Performance and culture are closely related

They encourage the employees to evaluate themselves and the managers to assess the employees more often. 

The emphasis is always on alignment with the company culture by adopting the core values.

Giving feedback is a skill like any other that needs training

Zappos' performance awareness system highly depends on the quality of peer input and employee self-evaluations.

To enable peers to share meaningful feedback, Zappos provides specialized training to develop the competency of giving feedback. 

"Providing truly meaningful feedback is not a skill that many of us are taught. Some people are born with tact and grace, but for the rest of us, the uncomfortable conversations are, well…uncomfortable.

To help with that, we are creating (or leveraging existing) training programs relating to emotional quotient, conflict resolution, and mentorship." Darshan Bhatt, a developer at Zappos, focused on developing tools for enabling a positive workplace culture.

To sum up, the areas where the Zappos reviews stand out:

• More frequent feedback from peers and leaders, rather than just one annual review, helps teams bond and keep track of their strengths and weaknesses.
• Defining performance through the cultural spectrum encourages employees to fit into the company culture by adopting core values.
• The lack of managers in the traditional sense encourages employees to be accountable, take ownership of their work, and learn from their mistakes.
• Giving support to personal goals will trickle down to career growth and performance. 

➡️ How can you run performance management like Zappos? 

Zavvy lets you run a performance management process like Zappos. The process is simple. 

Here is a step-by-step breakdown.

🎯 Coaching check-ins to replicate Zappos' personal goal exercises

You can use Zavvy's one-on-one check-ins software to run the goal-setting and coaching exercise. 

Zappos encourages employees to set 30-day goals aligning with their professional skills and personal development.

You can document the specific goal and action items and even take notes on goal progress.

💎 Use the Career solution to document your cultural values

You can create a framework with all your values and assign all employees to them. These will further integrate with your performance and feedback reviews.

As a result, leaders and peers can easily reflect on whether a specific employee behaves in the spirit of those values.

🧭 Use Career frameworks to define roles & competencies

Let your leaders and team members have equal weight when defining the competencies.

With Zavvy's career frameworks feature, you can document the key roles and expectations for each role and level. This alignment and transparency that will benefit your entire organization. 

🔁 Run peer evaluations with Zavvy's flexible 360 tool

Setting a peer review on Zavvy only takes a few clicks:

1) Name your cycle.

2) Select what types of feedback you want to collect: from managers, peers, direct reports, and self-evaluations. Again, the choice is all yours.

3) Customize your feedback surveys with appropriate questions. 

Inspired by Zappos' cultural values, you can include these items in your peer reviews:

• Your peer understands that excellent communication also includes good listening, as displayed in your interactions.
• Your peer works well with your coworkers and fosters teamwork within your department or area.
• Your peer encourages a positive team spirit and does not display negativity in the workplace.
• Your peer works to improve efficiency at the office.
• Your peer can get the job done and work with the resources at hand or devise a workaround if resources are missing.
• Your peer has passion, drive, and perseverance. You show respect to others, no matter what position you hold within the company.
• Your peer understands that every opinion is valuable and that great ideas can come from anyone.

4) Select the participants for your review cycle.

5) Define the timeline. Consider specific deadlines for nominating and approving peers, submitting peer feedback, and sharing and discussing the results.

6) Launch your new performance development cycle. 🎉

📜 Create a learning ritual similar to Zappos' Smart Capture and Share

At Zappos, teams come together to discuss their learnings and frequent problems that they have encountered.

You can replicate the Smart Capture and Share "knowledge" base at Zappos with Zavvy's training rituals. 

For example, you can assign microlessons with solutions for typical daily issues your employees may encounter. 

With Zavvy's self-paced training journeys, employees can review them at their convenience.

You can also create leader-specific training with the workflow and journey builder.

For example, Zavvy helped Freeletics create a leadership training program that saw a great return on investment, with 100% of all managers feeling supported in their growth.

Their People Manager Roundtable brings together leaders from different departments every six weeks. 

For every group, two facilitators are chosen to pick a topic and prepare the session. 

To do so, they follow a step-by-step process on Zavvy.

🌟 Bonus features of Zavvy's enablement suite

Some more features that make Zavvy stand out in conducting industry-standard performance reviews: 

• Ready-to-use survey templates designed by qualified learning scientists. They created our survey questions and feedback cycle templates in line with the best HR practices at companies like Microsoft and Google.
• The 360° feedback builder is highly customizable, allowing you to build feedback and performance review processes as per function and use case.
• The advanced anonymity settings allow you to decide what needs to be anonymous and what needs to be transparent.
• Plus, your employees can automatically create a new focus area to work on, derived directly from the feedback cycle.
• Best part? Iterative feedback correlates with other use cases, like career frameworks, growth plans,and the extensive learning library with over 10.000 learning resources.

Combining technology with research rooted in the best people management practices, Zavvy can improve performance outcomes across leading organizations worldwide. 

Book a free 30-minute demo to see how to craft the best performance review system that enhances your organization's productivity.