CASE STUDY: Positive Culture = Growth and Profitability

by Aug 9, 2018

There are a few companies in my locale that seem to consistently win the best place to work awards – one of them is Coastal Payroll. Coastal Payroll has also had exponential growth in the last five years. They’ve made the Inc 5000 list of fastest growing companies four years running, and San Diego Business Journal’s list five years running.

I sat down with its founder and CEO, Jonathan Gallagher, to learn a little more about the culture and whether he sees real benefits to focusing on it.

Why do you focus on culture?

We compete against large payroll companies (ADP is worth several billion dollars) and we needed to figure out how to do that. We can’t control what ADP does, so we decided to start obsessing about the things we can control, like who we want to be, and that has become our brand.

How did you create your core values?

We put a box with a slit in the top in the conference room for about 6 weeks, and we asked people to write their ideas on post-it notes and stick them in. Then we placed all the post-its on a wall and we could move them around and see themes emerge. We developed them from there, and we introduced them after a fun day in the park – it was the Coastal Olympics.

Can you give me a few examples of how you use your core values?

The core values are our rudder, and so we have to align ourselves with them. We choose a value of the month, and then we talk about it in staff meetings, and we flash it on our TV screens all month long.

Our managers send an email to their team members asking if they are truly integrating the value of the month into their lives and if so, how. If the employee is instead just hanging out around the value, the manager wants to know how he or she can help get the employee back on track. Managers also ask for nominations on others living the values so those nominees can be recognized.

What else are you doing that helps create a positive workplace?

We ask our employees to set personal and professional goals for the year, and the goals are in frames on each person’s desk. Managers hold their team members accountable to one personal and one professional goal in their monthly one-on-one’s. We are empowering people to be the best they can be, and that’s a great gift and I’m very proud of that.

We have a gratitude stone – it’s a just stone someone found and painted. People can give it to each other, and they get really creative in how they present it. One person made a video with his family about why they were grateful to a co-worker, another person made up a rap.

The department heads also pick an employee of the month, and the employee gets a stuffed animal and covered parking for the month. Of course that stuff doesn’t mean anything, it’s the acknowledgement and it seems to really mean a lot.

Who’s creating all of these ideas? 

We have a culture club. They also do a newsletter, they organize holidays and birthday parties, and it’s all the simple details that make it fun. They gave all the dads socks for Father’s Day, and this Friday is lazy day, so everyone is encouraged to wear their slippers and we’ll have movies playing in the conference room. We’ve got yoga day coming up, and we’ll be offering yoga in the conference room that day.

Do you see an ROI to all of this? You’re obviously spending time, money and resources on your culture.

We’re not so analytical that I can tell you we know it increases productivity by 4%. I don’t even know what that would mean for us.

I know we have high retention, and recruiting is much easier than it was before we started doing this. People want to be here. You can also feel the vibe in the office when you walk up and down the corridor, it’s pretty cool.

I also know that people are more willing to push themselves and own it when they believe in what they’re doing. If they have a negative conversation with a client, they are more able to take it and go with it because they own it.

(Note: They’ve also grown every year since focusing on culture – that’s not a coincidence. I have also personally heard several people say that Coastal wasn’t the cheapest option when they were shopping for payroll but they wanted to work with a company that cares about its employees. If rapid growth and customers willing to pay extra for your services isn’t ROI, I don’t know what is.)

How do you handle it if someone acts outside your core values? They engage in incivility or bullying, for example.

We try to get to the root of it. If someone is too direct, for example, they may not mean anything by it and maybe they’re just direct. We have to empower team members to have difficult conversations with each other, and we also try to help managers deal with it so that it gets resolved.

A person who feels bullied has to believe they have a safe place to go and be heard. So we ask in those conversations, “How would you like to address this? Do you want to talk about it directly with them, or do you want our help?” It’s just really critical that you have a dialogue.

And, as leaders we have to hold ourselves accountable to the values too. That means if we have to let someone go, we will.

Will there ever be a time when you can stop focusing on culture?

Culture is a living breathing thing and it must be nourished or it will wither away and die. And good culture doesn’t automatically make it all rainbows and unicorns. These are people, and so we have to maintain culture.

In fact, our first step in creating culture was to tour Zappos, and then we paid extra to meet with some people and get some one-on-one attention. We felt like the Zappos people in that meeting weren’t prepared and we weren’t happy. I was on the flight home feeling really disappointed when a lightbulb went off: They’re just people too, and they aren’t perfect all the time.

That’s when I realized this was possible for us. We’re people and we’re not going to be perfect either. All we can do is start focusing on culture, and the Zappos experience gave me confidence that we could create a great one.

Last question. What advice do you have for HR professionals trying to convince their CEO to put resources into culture?

Always talking about the benefits is important – so the reduced turnover, the cost of recruiting, and the fact that good culture shows more profitability. If talking about the benefits doesn’t work, hit them with fear. Discuss the cost of a settlement and lost customers, etc. Present the CEO with numbers and tangible information about the benefits and costs and you’ll get their attention.


And there you have it. Some great insight from a CEO who focuses on culture. If you want more information about building culture, check out my LinkedIn Learning course on Creating a Positive Culture. Don’t worry if you don’t have an account, you can get 30 days free at that link.


About Catherine Mattice

Catherine Mattice, MA, SPHR, SHRM-SCP is President of consulting and training firm, Civility Partners, and has been successfully providing programs in workplace bullying and building positive workplaces since 2007. Her clients include Fortune 500’s, the military, several universities and hospitals, government agencies, small businesses and nonprofits. She has published in a variety of trade magazines and has appeared several times on NPR, FOX, NBC, and ABC as an expert, as well as in USA Today, Inc Magazine, Huffington Post, Entrepreneur Magazine, and more. Catherine is Past-President of the Association for Talent Development (ATD), San Diego Chapter and teaches at National University. In his book foreword, Ken Blanchard called her book, BACK OFF! Your Kick-Ass Guide to Ending Bullying at Work, “the most comprehensive and valuable handbook on the topic.” She recently released a second book entitled, SEEKING CIVILITY: How Leaders, Managers and HR Can Create a Workplace Free of Bullying.

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