Zappos and Kronos: Powered by Service 1 ZAPPOS AND KRONOS: The Details POWERED BY SERVICE Author: Christa Degnan Manning, Senior Vice President, HfS Research December 2014 During the recent KronosWorks user conference, I had the opportunity to visit the headquarters of Zappos, the online shoe marketplace that has expanded into many apparel categories since it was founded in 1999. Leading with the tagline Powered by Service, Zappos grew to more than $1 billion in revenue in seven years by delighting its customers (disclosure: I am a Zappos VIP and indeed delighted with the service.) It is now on track to surpass record revenues this holiday season. Through the renovated Las Vegas city government complex culture tour, Zappos reinforced my belief that every business differentiates itself by service today and empowering the people who deliver that service. This includes the workforce management solution developer that brought me there, Kronos. Zappos recently deployed Kronos time and attendance for its more than 5,000 workers, selecting Kronos because it was responsive and accommodating during the selection process, said senior payroll manager Mara Bellini, who thought Kronos flexible approach would work best with Zappos unique culture. Of note, Zappos initially chose to deploy Kronos software on- premise, but then opted for a cloud deployment as its IT resources got pulled into a significant commercial site operational project with Amazon, which bought Zappos in 2009. Kronos prefers its customers choose its software in the as a service (SaaS) model today, and reports 12,000 of its 20,000 customers are now in the cloud. As it seeks to lead in the crowded human capital management (HCM) SaaS market, however, Kronos should take Zappo s tagline to heart and increase its focus on services to extend the run of success it has had in the marketplace. Competition in HCM SaaS is fierce as many companies offer broader functional and global capabilities, and the depth and breadth of support services needed to make initial implementations as well as on- going innovation consumption and integrations in HCM are going to be the keys to success for all participants. All in the Family My official culture guide on the tour, known as the Culture Maestro, underscored how Zappos has a stated focus of creating a company culture of employee empowerment and engagement: call center reps have no scripts or
Zappos and Kronos: Powered by Service 2 time limits on calls and the discretion to help customers to the point of making restaurant reservations and sending flowers. Indeed, Zappos eschews traditional HR practices in favor of cultivating a funky family atmosphere and talent community where new job opportunities are shared with brand fans and it pays people to leave if the hires themselves do not feel they are a good fit for the firm after weeks of extensive on- boarding training. Zappos CEO and co- founder Tony Hsieh wrote a book, Delivering Happiness, explaining the company culture philosophy and how Zappos generates and maintains good profit margin while incurring higher costs. He said the strategy is to take most of the money we would have otherwise spent on paid advertising or paid marketing and invest it into customer service and the customer experience instead, and let our customers do the marketing for us through word of mouth. 1 These words are wisdom for the HCM software industry, which like retail is being disrupted by Internet delivery models. As companies like Kronos seek to move their customers to the cloud, this means the bar is raised on their customer service and the customer experience as well. Successful enterprise software delivery today means helping customers map the tools to workforce strategy, link implementations to desired business outcomes, and help them consume and measure the benefits that on- going innovation and capability expansion in the cloud can bring. What to Watch As Zappos grew, it explicitly defined the core values that drive its culture, brand, and business strategies. Many of these core values can be used to guide and govern HCM SaaS platforms supporting the workforce today:» Deliver WOW Through Service.» Embrace and Drive Change.» Create Fun and A Little Weirdness.» Be Adventurous, Creative, and Open- Minded.» Pursue Growth and Learning.» Build Open and Honest Relationships with Communication.» Build a Positive Team and Family Spirit.» Do More With Less.» Be Passionate and Determined.» Be Humble. 1 http://deliveringhappiness.com/book/faqs/
Zappos and Kronos: Powered by Service 3 Kronos is very similar to Zappos in that it demonstrates many of these values as well as has a strong compassionate people leader at the helm, Aron Ain. He seeks to create an extended enterprise family atmosphere amongst Kronites and company customers, which was palpable at KronosWorks. As Kronos seeks to expand further beyond its core time and attendance and English- speaking markets through more organic development and acquisitions, its own people and services strategy including internal consulting talent and a broader partner ecosystem will increasingly be the factors that make it win in the marketplace. While Ain insists Kronos is a software company, and its private equity investors appreciate the 30% margins it has been able to hit in the last few years, as Kronos moves more customers to the cloud, it will be pulled into a more service- orientation, as have competitors Workday 2 and Ultimate. 3 It will also come up against strong traditional service players such as Ceridian 4 and ADP, the latter a long- term profitable partner of Kronos, but one making significant investments in its own SaaS capabilities. Of note, Zappos uses Workday for its core human resource information system and ADP for payroll. HfS research with buyers shows that most companies want to get more HCM- related solutions from fewer providers, so supplier rationalization and consolidation in this space is inevitable. HfS bets that the companies that are willing to extend themselves and connect the dots between consulting, SaaS, and managed services with outcome- focused solutions and accountability will be the ones that win with enterprises because HCM SaaS will never be an island of its own. IT maintenance tasks alleviation aside, the key benefit of HCM SaaS is the on- going innovation, but workforce- facing changes and self- service enhancements require more thoughtful planning and change management than simply pushing new code out to a cloud. As Kronos touches many mission- critical workers from nurses to fire fighters, delivery people to plant floor machinists, it must raise its game in terms of support services before, during, and after initial deployments of its solutions. It must also consider more industry- specific consulting capabilities as it forays into the more complex areas of task management and workforce analytics. A clear sign that Kronos is investing in staff is that the Boston Globe named Kronos the top place to work in the largest company category in its 2014 Top Places to Work ranking of the most admired workplaces in Massachusetts, where 1,200 of Kronos more than 4,000 workers are based. The Globe's survey measured employee responses to statements regarding employee happiness, including company direction, execution, employee connection, workload and responsibility, management, and pay and benefits. As Kronos takes on more responsibility for SaaS delivery and multifaceted workforce management support, it will need to expand its employee commitments as well as cultivation of service provider partners. Yet company and workforce transformation is nothing new to Kronos, having started out manufacturing time clocks before evolving into software development. Powered by service is simply the next transition. 2 The Workday Services Value Chain. HfS Research, November 2014. 3 Putting the Services in SaaS. HfS Research, July 2014. 4 Ceridian Focuses on Total Workforce Support. HfS Research, July 2014.
Zappos and Kronos: Powered by Service 4 About the Author Christa Degnan Manning Christa Degnan Manning leads global workforce and talent strategies and solution provider research for HfS. In this industry- unique practice, she investigates workforce optimization: how companies best get work done today with hybrid networks of traditional employees, contractors, and third party service providers. In addition, she supports firms in selecting the software and service providers that help find, manage, and motivate all types of workers across the extended enterprise of today. Based on two decades of experience in market research and Fortune 100 company team leadership with successful profit and loss responsibility, Christa also helps companies understand and document value particularly beyond cost savings for sourcing and governance decision support and return on investment calculations in workforce management and employee experience enhancement initiatives. Prior to HfS, Christa served as a director in the Advisory Services consulting unit of American Express Global Business Travel, leading the EXPERT INSIGHTS research and Applied Business Intelligence consulting practices which sought to analyze travel program optimization opportunities, identify best practices, and quantify improvement outcomes through primary research and travel spend data analysis worldwide. Before American Express, Christa spent a decade as a business process and technology analyst and practice leader with the Aberdeen Group (establishing indirect procurement and category management coverage) and AMR Research/Gartner Group (covering employee self- service, human capital management, and integrated talent management software and service providers), following five years as a business journalist and media professional. Frequently quoted by leading business and trade publications and speaking at industry events throughout her career, Christa has also served on many advisory boards, most recently the Association of Corporate Travel Executive (ACTE) Global Education Conference planning committees, the Global Business Travel Association (GBTA) Foundation s Industry Advisory Council, and Executive Travel Magazine s Corporate Travel Advisor & Professional (CTAP) Board. She was the founding co- chair of the Measurement and Evaluation Committee of Women in Travel (WINiT), a Clinton Global Initiative (CGI) participating organization. Christa has a Bachelor of Arts from Barnard College, Columbia University, including studies at University College, University of London, and a Master of Arts from the University of Massachusetts. She has also completed on- going professional development course work in business metrics at The Wharton School, University of Pennsylvania. She works virtually from Scituate, Massachusetts, USA, a seaside town between Boston and Cape Cod, where she lives with her two children and rescue Lab- Aussie Cattle mix dog. Christa can be reached at christa@hfsresearch.com. Follow her on Twitter @ChristaDegnan and through www.horsesforsources.com.
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