Changing Your Company’s Culture Can Boost Your Bottom Line

A weak economy can have long-lasting effects on companies financially, but it can also impact employee morale. The most recent recession was no exception, and employees couldnt help but worry whether or not their jobs were safe. Last year, as our Seattle-based company, Verdiem, pulled itself out of the recession, I knew we needed to make some changes.

Through the downturn, our business model was working well and demand for our products was strong. But despite that, our employees needed a cathartic reset to feel reassured and reinvigorated. We held an offsite meeting and I asked employees for honest, no-holds-barred feedback on what was working and the direction they wanted Verdiem to take. We used an analogy of a ship we considered the practices that would guide us, and which we would leave on the metaphorical dock.

After the ship was ready, we set sail and began making changes. We instituted agile business practices across the company. Our development team had been using agile methods for years, but we decided the increased collaboration, cohesiveness and emphasis on results would benefit teams beyond our software developers. Today the agile methods allow our teams to be more courageous and innovative, and help us zero in on the activities which are most likely to drive meaningful business results.

Next we eliminated our annual employee performance review process. Like many other companies, we used to have a traditional review process that included the following steps.

• Employee performs self assessment

• Manager solicits employee feedback from peers

• Manager writes review

• Manager scores employee on several key behaviors

• Manager fits employee to curve and determines pay increase

Not only was this process time consuming and laborious, but it was also ineffective and did not incent behaviors consistent with our culture. At its core, a pay-for-performance review process pits employees against one another, creating unhealthy competition. Additionally, given the transparency, continuous communication and goal alignment that is inherent in agile practices, much of what our review process provided was obsolete.

We still do annual check-ins, but rather than focus on performance, we focus on value alignment. Born of all this is what we call our annual retroview. Unlike traditional reviews, retroviews focus on how well aligned employees are with company values. The retroview process culminates in an all-company retrospective. This open dialogue encourages honest feedback and an examination of our processes to ensure we are keeping up with industry trends, meeting customer needs, and eliminating bad habits.

We also threw our vacation policy overboard. It was another unnecessary distraction for managers and employees that delivered zero business value. So, we simply stopped tracking time off. We value and encourage vacations and time with our friends and families. But, we also realize that the professional/personal time boundaries are blurred. By eliminating a formal tracking policy, we embrace this notion and further focus people on achieving meaningful results.

Not all of our changes were so drastic. For example, we eliminated offices and opted for an open workspace to foster increased collaboration. We also implemented beer:30, a bi-weekly happy hour to increase morale and bonding among employees.

While these changes to our company culture sound exciting, what have these shifts actually done for us as a business? The answer is: a lot. Our employee morale is at an all-time high, and each employee feels a greater sense of accountability. Our sales have increased; we are able to develop and improve products at a faster rate; our customers are happier; and we are on track to increase revenues by 30 percent over 2011.

So, can company culture impact your bottom line? You bet it can. We are living the benefits, and we encourage companies to take a close look at their cultures to see where they can make employees happier, thereby improving results.

John drives Verdiem’s strategy for enterprise energy management and efficiency, and is responsible for scaling the company to meet growing market demand. He also co-created Scrum, the world’s leading agile software development methodology.