Zappos and Lululemon

11-10aLayingOffEmployees.pdf

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Chapter 11: Zappos: Taking Steps toward Maximizing Stakeholder Satisfaction: 11-10a Laying Off Employees Book Title: Business Ethics: Ethical Decision Making and Cases Printed By: Toure Williams ([email protected]) © 2019 Cengage Learning, Cengage Learning

11-10a Laying Off Employees

Zappos is known for its commitment to its employees, but the company faced hard economic times that demanded tough decisions. In October 2008, Sequoia Capital, a venture capital firm that was a controlling investor in Zappos, met to discuss the problems presented by the economic downturn and its effect on their portfolio companies. Sequoia Capital instructed Zappos to cut expenses and make the cash flow positive. As a result, Hsieh made the difficult decision to lay off 8 percent of employees. This was not a desired event but was required by Sequoia Capital.

Zappos strived to handle the layoffs in a respectful and kind manner. Hsieh sent an email notifying employees of the layoff and was honest and upfront about the reasons behind the decisions, even discussing the move on Twitter. Employees who were laid off received generous severance packages, including six months of paid COBRA health insurance coverage. Because of the company’s honesty and transparency, employees and customers were more understanding of the tough decision Hsieh and Zappos had to make.

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