Ragnar Sass, Pipedrive co-founder on building a startup culture.

Blu Mint Digital attended the first ever Digital Freedom Festival, bringing together entrepreneurs, startups, investors and policymakers to discuss the latest trends in digital technology. Among the attendees was Pipedrive cofounder Ragnar Sass who gave us a masterclass on how to build a kick-ass startup culture – and why this is so important for startups and entrepreneurs.

Pipedrive is a successful company with happy employees.

The company was founded in in Tallinn in 2010 to provide simple CRM software, but is now a global operation with over 30,000 paying customers in more than 150 countries.

Pipedrive is now the leader in CRM software globally thanks to a workforce that has now expanded to over 200 employees from 20 different countries. Incredibly, just 10 employees have left the company during those six years.

Are employees happy because Pipedrive is successful? No. It’s the other way around according to cofounder Ragnar Sass. Pipedrive is successful because employees are happy.

In addition to Pipedrive, Ragnar has also been using this approach as the cofounder of the startup foundation Garage48 and a new HR tool called Clanbeat.

As a result, he knows that building the right startup culture from day one is absolutely essential for its growth. This isn’t just based on anecdotal evidence. Here are some of the benefits that employee happiness has been proven to deliver:

Higher productivity

This has been repeatedly demonstrated in studies, most notably at the University of Warwick in 2014. They found that happiness can boost productivity by 12%, while unhappiness can cause it to drop by 10%.

That’s a difference of 22% productivity between your happy and unhappy employees. Imagine they are working a standard eight hour day from 9am to 5pm. If your employees are unhappy then that’s the equivalent of them packing up just after 3pm each afternoon and calling it a day.

Yes, I know an eight hour day probably sounds like a luxury if you work in a startup. That brings me to the next point.

Resilience against stress

Work life can be tough, particularly at a startup where employees are constantly having to run around and put out fires. Your employees never know what challenges are coming next, but we do know that they will be able to handle them better if they are happy.

A 1998 study gave participants a stressful and nerve-inducing task, but then interrupted their schedule with a movie that was either uplifting or downbeat. When they returned to their task, the participants shown an upbeat movie were better able to handle their emotions afterwards.

We can’t eliminate every stressful situation at work, but we can ensure employees are better able to handle them.

Greater creativity

Happy employees perform significantly better at tasks that require creativity. The theory is that being creative requires the peace of mind necessary to see connections between seemingly unconnected elements.

While creativity is often based on anecdotal evidence, research by Alice Isen in 1999 put this theory to the test by setting creative tasks for participants then dividing them into two groups. Isen then raised the mood of one group by providing them with gifts and asking them to watch funny videos immediately before the task began. This group then demonstrated a far higher level of creativity to complete the task.

Improved attendance

According to a Gallup study, unhappy employees take an extra 1.25 days off sick per month. That adds up to 15 days per year, which is an incredible three working weeks every year that an unhappy employee is absent from your company.

At least with time off for holidays, employees can plan their absence and leave handover notes. The disruption that sick leave causes to both clients and the rest of the team is more damaging, especially if resentment begins to build with their colleagues who do come in every day.

Greater loyalty

There’s a frequently used joke among the startup community. Investing in an employee who then leaves might be unfortunate, but it’s not nearly as bad as not investing in an employee who then stays.

Employee retention is incredibly important and their individual happiness and contentment with their work is usually the most important factor, according to a 2014 study by Deloitte.

The concern about investing in an employee who leaves is understandable though. A detailed study from the Society for Human Resource Management discovered that replacing an employee who decides to leave typically costs the company equivalent of six to nine months of their salary!

Need more proof about the importance of startup culture?

This comprehensive Gallup study also examined the effect of employee happiness on business performance by comparing the upper and lower quartile of companies on their level of employee engagement.

The results were staggering.

Employees who feel engaged by their company were more productive, more creative, more innovative, generated higher sales, had fewer accidents, generated fewer quality defects and took less days off.

This led to a 202 per cent improvement in company performance between the two groups of companies.

How to build the right startup culture for your company

Crafting your startup culture probably wasn’t top of your to-do list when you first started up. That’s understandable, especially when you have an actual product or service to build first.

During the early days of any company, the culture is intertwined with the personalities of the founders and early employees. As the company grows however, it becomes increasingly difficult to retain that earlier sense of cohesion without a set of values that everyone understands.

My own favourite example is about an organisation that successfully managed to unite employees towards their goal, which was quite literally a moonshot.

As the story goes, President John F. Kennedy was at the NASA Space Centre in the 1960s and began chatting to employees about the work they do there. During the Presidential visit he met a janitor sweeping the corridors who was more than happy to explain his purpose at the organisation.

“My job is to help put a man on the moon,” the janitor explained.

For Ragnar Sass, building the world’s most popular CRM software must have felt like a moonshot during those early days in Tallinn, but they managed to develop a startup culture - at the same time as their product - that remains strong today.

There’s plenty of fun, as well as perks, for employees at Pipedrive. They even have a Chief Happiness Officer – an adorable dog who can give you a tour of the company in this video.

Building a kick-ass company culture is more than this, however. It means understanding what employees want more than anything, which is respect, recognition and the opportunity to grow.

This is even more important for millennial employees who now form a large proportion of today’s workforces and are starting to define modern companies.

While every employee is unique, it is clear that millennials as a group are bringing new values into the business world. They want a clear purpose and the opportunity to grow, but they aren’t afraid to switch companies (or countries) when the opportunity arises.

They also value more democracy in the workplace. In fact, many would rather not have a boss ordering them around at all. That might sound impractical, but they do value leadership and continuous feedback meaning bosses can transform into coaches instead to help them develop.

The question is, how do you use all this knowledge to actually build a kick-ass company culture? Here’s what Ragnar did.

1. Foster strong values

Almost every company was created to solve a problem. Whether that involves saving the world or just making slight improvements to a few people’s lives, every company is making this planet a better a place from its own perspective. Or other planets, if your company happens to be SpaceX.

For Pipedrive, its simple CRM software is helping thousands of businesses around the world grow by being more efficient, having greater visibility across its sales process and make more valuable connections that convert leads into customers.

This purpose should support a wider set of values about what the company believes in and how it acts, both internally with employees and externally when it presents itself to others. Always reaching for greatness, acting as a team and never making excuses are at the heart of Pipedrive’s success. Although ‘don’t f*ck up anyone’s day’ was there too.

These values are so integral to the company that Pipedrive will always send existing employees first to set up a new office in another country so that they can ensure the values remain consistent globally.

2. Hire super carefully

Recruiting the right employees is among the most important things any company - and especially a startup – can do. As we’ll come back to later, if you need to fire an employee after you’ve recruited them then that is entirely the fault of the employer.

At Pipedrive, over 70% of employees were found by other employees with €1,000 bonuses paid out for referrals that led to employment.

It’s definitely not an easy process for anyone though, even if you were recommended by another employee. It’s so important to hire people who fit in with the company that their recruitment process involves four to five interviews, including with at least two founders of the company.

A crucial part of the interview process is to discuss the company culture and values to see how potential employees understand and would be ready to accept them. Another key area to discuss is the future development of the employee within the company. It helps if they already have clear aspirations that align with the company’s goals.

3. Value every employee

Once hired, every single employee is super important. It’s not enough for you to know this as an employer. The employee should actually feel it too.

One option that Ragnar is particularly keen on is providing stock options to employees. At Pipedrive, this takes place after four months so that employees understand how important they are to the company and feel a sense of ownership for everything they and their colleagues do.

This may not be possible at every company, but there are wide variety of ways to show employees how important they are. At Pipedrive, this also means sending all employees to Estonia after they are hired – no matter where in the world they are - so they can understand the company better and meet colleagues face-to-face. There’s even a budget for socialising after work.

4. Let people grow

According to Ragnar, this is the most fundamental objective when building a kick-ass startup culture for your company. By now, you should have a company with a strong purpose and fantastic employees who are highly driven and feel valued.

These people should want to develop to their fullest potential within your company so you need to give them the support and space they need to do it.

A big part of how they achieve a kick-ass startup culture at Pipedrive is ensuring they have the right team leaders in place who can act as mentors and coaches. That doesn’t just mean passing down instructions. Instead, great leaders are great listeners.

They need to be an active listener too. That means understanding what employees are feeding back and possibly even reading between the lines when needed. They also need a positive attitude, the ability to motivate others and solve problems. Team leaders don’t have to work out all the details, but they should be able to help employees reach the end solution.

As your company develops, team leaders have an enormous responsibility. If they can help each employee within their team grow then the company grows too.

5. Build a ‘1-on-1’ culture

When everyone is working flat out, it can be difficult for employees to find the time to even look up from their computer, let alone hold one-on-one catch up meetings. Some companies offer their employees little more than an annual review.

Ragnar believes regular one-on-one meetings between employees and managers away from desks are incredibly important. These aren’t rushed tick-box exercises either. They can be up to 90 minutes long and should always end by scheduling the time for the next one.

Regular 1-on-1 meetings ensure that great ideas from employees are implemented and any problems throughout the company can be quickly found and remedied. Without this in place, employees can feel undervalued and demoralised.

Ragnar advises structuring these sessions around open-ended questions and then discussing how to solve any issues that arise. This is a two-way exchange so the manager should also be using this opportunity to gain feedback and understand how they can develop, as well as build greater trust.

In fact, Ragnar is so passionate about this that he built Clanbeat as a new HR tool to help teams have meaningful 1-on-1s. You can try it for free for the first 30 days so it’s well worth checking out to help your company get started.

6. Fire quickly, but humanely

There may be occasions when you need to ask an employee to leave if their presence at the company is not working out. Ragnar has some unconventional advice to always remember here. Firing someone is always your fault and not the employees.

It’s your company and you made the decision to hire them so you must take responsibility for ending their employment if they do not fit into your startup culture.

In practise that means treating the employee with complete respect throughout the entire process. You should act swiftly once you recognise this point has been reached, but also understand that this is a potentially difficult situation for anyone to be in.

Remember that any delay is only likely to lead to a deterioration in the situation, which could potentially impact other employees.

Conclusion

It’s easy to establish a personality and a startup culture for your company when it is so small that everyone knows each other well.

When your startup grows however, a clear and constructive culture across the entire company is essential. Every employee has an important role to play in this, but especially team leaders who need to listen, as well as continuously provide feedback to employees.

Employees are complex human beings. When they join a company, it’s because they have a particular set of desires to fulfil. Listening to your employees and understanding those desires and discovering how they align to your company is incredibly important.

If they grow then your company grows. That’s the most important lesson Ragnar learnt while building Pipedrive, Garage48 and Clanbeat.

Instead, too many companies see their employees as little more than their job titles. As a result, some companies fail to develop that startup culture they need.

The evidence from scientific research is conclusive however. Happier employees create more successful companies.

Find out more about Clanbeat.