The Mistake That Cost One Founder $100 Million Dollars

It was 3pm Monday and the surf was pumping. I had to close my laptop and get out there because hey… life is short. And I when I surf, I work better.

On the way to the beach I helped an American guy with directions. He was a surfer too. Turns out he was also the CEO of a successful tech company in Georgia, Atlanta.

I asked about his team. He was in charge of 50 staff. Impressive. He spoke about the work environment and how much he enjoyed it. How good his team was. And how much he enjoyed working there.

“What’s the secret to building a great team?” I asked.

“Hire for culture,” he answered.

I smiled and nodded because I know about the Zappos story.

The $100 Million Mistake

Zappos today has one of the best company cultures in the world. But achieving this hasn’t been easy. In an interview with Inc. magazine, CEO and founder Tony Hsieh admits that hiring mistakes have cost his company $100 million. Ouch!

When Tony Hsieh talks about hiring, it’s worth listening. If Zappos have learned anything about building a team, it’s to get culture fit right.

We’ve actually passed on a lot of really smart and talented people that we know could make an immediate impact on our top or bottom line, if they’re not good for culture, we won’t hire them for that reason alone. – Tony Hsieh

Zappos’ culture is built on providing amazing customer service. If you’re not good with people, you don’t get hired.

Tony Hsieh s Brilliant Strategy For Hiring Kind People   Business Insider

What Makes A Great Culture?

There are three elements that decide a culture:

  • The people – personality, attitude, social skills and personal values.
  • The environment – location, working hours, office design, perks provided, social activities.
  • The structure – company policies, organizational structure, processes and systems.

The best culture really depends on your type of business. But the goal is to get everyone working as a team, a happy team. Environment and structure are easy to get right. The challenge is often hiring the right people.

You want to hire people that share your company’s values and your style of working. Often these people also share similar personal values and/or personality traits. Remember values are different to interests. Eg. You might like running and I like surfing but we share the same value of keeping fit. That’s a value.

The team at Buffer share their core values in the slides below. These are not rules but a way of living. If they don’t come naturally, you’re not a good culture fit.

Why Culture Matters

I’ve only ever had two corporate jobs. One lasted 8 years. The other 18 months. The reason? Different cultures.

When I reflect on my own experience, it’s not hard to understand why I was happy in one work environment and miserable in the other.

At one company ideas were easy to execute, we enjoyed a Friday beer together and everyone wanted to work there, it was a positive place. The other company was averse to change, no one stayed for a drink on Friday’s and the internal chatter was negative. I struggled to adapt.

One of my motivations for starting a company was to create a fun culture that would attract like minded people. I wanted to enjoy going to work again. And for good reason. According to a study, the average person spends 90,000 hours at work over their lifetime.

I truly believe that enjoyment in the workplace comes when you work as a team. Every business wants to hire superstars. Yet having a superstar is never the sole reason a team achieves greatness.

I’d rather have five guys with less talent who are willing to come together as a team than five guys who consider themselves stars and aren’t willing to sacrifice. Talent wins games, but teamwork and intelligence win championships.
– Michael Jordan

Like any good team everyone needs to be on the same page. “It only takes one bad hire to destroy a good culture,” said the American guy I was talking to.

“She was ex-Microsoft,” he said, referring to a bad hire he made.

“She had all the credentials too, switched on and brilliant at her job,” he explained.

“But her communication style aggravated others. She played politics and gossiped about others.”

Such a personality style likely contributed to this girl’s success at Microsoft but not at her new job. She was fired.

Most companies persist with a bad culture hire who is good at their job. Big mistake. In Zappos’ case, a $100 million dollar mistake.

Culture determines success.

What’s Your Culture?

If you’re a founder it’s worth thinking about the kind of culture you want to create BEFORE you need to make your first hire. This will help you identify the right people and start building those relationships for when the time is right. Tony Hsieh recommends noting down your personal values and making those your company values. You are the business!

If you’re early stage, you don’t need to spend too much time on this but it’s worth thinking about the kind of company you want to build and what you will stand for.

You can also look to Zappos 10 core values for inspiration.

Of course documenting your values on paper is one thing. Executing them is another. If you want to dive deeper into the how, I suggest watching the video below. *Fast forward the video to 19:55min for the culture discussion.


You can teach someone new skills but you can’t change who they are. That’s why getting culture fit right is so important. All the skills and experience in the world mean little when teamwork is not there. Considering how much time we spend with our co-workers it seems crazy to overlook this fact.

After their $100 million dollar lesson, Zappos culture is stronger than ever.

 This article originally appeared on JasonAllan.co

Title Photo Credit: flickr