Betting on happiness of employees

Jet.com is making an huge bet to establish itself as a major force in the $350 billion US e-commerce market

You can’t accuse Jet.com of timidity. The startup is making an audacious bet to establish itself as a major force in the $350 billion US e-commerce market.

To succeed, Jet must offer good selection, low prices and fast delivery — all the things online buyers demand yet few retailers can provide. The graveyard of e-commerce hopefuls is crowded. If Jet stumbles, it will end up like the flash-sales site Fab, which burned through $325 million before being sold for less than a tenth of that early this year.

Jet has had some bumps and turns since last summer, when it began selling products as varied as cans of chilli, exercise bikes and WowWee personal robots. It changed its business model, dropping the membership fee. It is burning through cash as it continues to scale up, now with more than 900 employees. A week before Christmas, it told some customers they would not get their orders in time. Jet said only about 500 shipments out of 1 million were affected, but such admissions never look good.

Yet, Marc Lore, Jet’s founder and chief executive, says he is not worried. What will separate Jet from Fab and every other failed company, he says, is happiness. In particular, employee happiness. “I’m constantly asking people at Jet if they’re happy,” he said. “It’s really important for me to know that they love working here and think this is the best place they’ve ever worked.”

Jet supplies its employees with typical startup perks like free food, four months of paid parental leave, unlimited vacation and an ownership stake that could one day be worth a lot. But it also has some decidedly less common policies, like standardised, no-negotiation pay packages and worker-friendly employment agreements. Employees can see, every day, how the business is doing.

“Transparency” is a big word with Lore. So is “fairness.” Make people feel good, he says, and they will do their best. Trust them and they will reward you. Other executives have the same idea, even if they do not quite express it in those terms. As the startup scene moves from hot to lukewarm, there is a dawning sense that new companies need to think about the long term even as they are still struggling to establish themselves.

“Many Silicon Valley companies are built on a culture of momentum, which can mask a lot of troubles,” said Michael Fertik, founder of Reputation.com, a reputation management company that started in 2006. The solution championed by Fertik and others is creating “a durable culture.” That task often falls to someone called the chief people officer, usually working directly with the chief executive.

The tools of the chief people officer are not necessarily better benefits or even raises. “We don’t simply want to console people with money,” explained Deena Gianoncelli, Jet’s chief people officer.

Money still drives the culture, however. And there has never been more money at stake than now. The number of unicorns — startups that are worth more than $1 billion, a list that includes Jet — has more than tripled in the last two years, according to CB Insights, a research company.

“Leading a startup is a brutal pursuit,” Jason Calacanis, an entrepreneur and investor, wrote recently on his blog. “Most days are a death march in which you work horrific hours under massive duress waiting for your chance... to join the 80 per cent of startups that die off.”

As the holiday shopping season was beginning in late November, Lore convened his top executives in Jet’s Hoboken, New Jersey, headquarters for their regular weekly meeting. Here are some of the things that were not on the agenda: warehouse logistics, customer concerns, fine-tuning prices, potential shipping bottlenecks, supplier issues or any of a dozen other topics that could have bedeviled Jet’s first December.

Instead, the executives discussed the mood and well-being of Jet’s employees. The preliminary results of Jet’s first “Happiness Pulse” were in. More than 500 employees responded to the survey, which means basically everyone who had been at Jet for at least a month.

Two-thirds of them said they viewed Jet favourably. Only 4 per cent had a negative opinion. “So only 25 people are basically unhappy,” Lore said. “We have an opportunity to keep pushing these people into the ‘favourable’ bucket,” Gianoncelli said.

The executives chewed over the results in individual categories, which were presented by the survey company as scores: Jet got an 87 out of 100 as a company the employees would recommend as a great place to work, a 90 for letting people feel their work was important, and 87 for its managers.

The results included not just the engineers and executives in Hoboken, but also packers in Jet’s three warehouses and the customer service people in Salt Lake City. “These are not numbers you would expect out of an hourly workforce,” said Nate Faust, the chief operating officer.

Oswald, an economist at the University of Warwick in Britain who has studied workplace happiness for decades. “However, there is growing evidence that there is a causal link between happiness at work and greater productivity at work.”

Delayed holiday shipments

And then there is transparency. In an interview a few weeks after Jet’s official debut in July, Lore pulled out his phone and opened an app. It showed that Jet sold $667,200 in gross merchandise value in one day, up 89 per cent in a month. Jet had 6,100 first-time buyers the previous day, and 7,800 orders.

The company had $153 million in cash. Jet’s warning to customers about the delayed holiday shipments might be a case in point. While the company said it was an industrywide problem, the news quickly rocketed around the Internet.

The demands increase. Seventeen per cent of workers told Gallup this year that they worked 60 hours or more a week, nearly double the 9 per cent who said so in 2005. “The social norm at every company is to be available 24 by 7,” says Caralyn Cooley, Jet’s vice president for talent operations.

“My willingness to accept that made me very successful.” Cooley rose through the ranks at Honeywell, PepsiCo and then, as a mother of twins, Amazon, where she managed dozens of human Maybe, like most startups, Jet will fail, and the energy and money spent developing an employee-focused culture will have been pointless. The company has had doubters in the news media, but it says it is doing well, with 2 million customers and, in mid-December, its first $2.5 million revenue day. “We think they are going to be a winner in the cost-conscious consumables market,” said Gene Munster, senior research analyst at Piper Jaffray.

Whatever its fate, Jet is anticipating a different era. As Gianoncelli and Cooley try to create a durable culture for what may or may not be a durable company, sometimes the more important factor is not whether employees will stay, but whether they should be hired in the first place. Jet is hiring 50 people a week.

An analytics applicant came into Jet for an interview. In some ways he was a model candidate, smart and driven. But he did not score high in the “plays well with others” category. Asked to talk about a recent project in which he was a member of a team, he could not think of any. His prospects immediately diminished to zero. “He could have fit in somewhere else,” Cooley said. But he was not for Jet.