Square Root’s Team, courtesy photo.

Publisher and reporter with Silicon Hills News

Creating a great company culture isn’t just about having perks like free lunches, Ping Pong tables, and nap rooms.

“They are important in a sense,” said Courtney Branson, head of culture at Square Root in Austin. “Having a Ping Pong table does bring people together and helps build relationships, but it’s not all a company culture is. Having those things won’t make your company a great place to work.”

Having a great company culture can differentiate a startup in the marketplace, said Michele Herlein, Ph.D., workplace expert and Chief Human Resource Officer at Barge, Waggoner, Sumner and Cannon in Nashville.

“It’s the secret sauce,” Herlein said.

Companies that focus on culture outperform others by three times, Herlein said.

“It’s not the perks,” she said. “The culture is really defined by how things are done. The way people feel, how they are treated and if people are able to make a difference and use their own talent to add value to the company…What creates a great culture is a company where an employee feels valued.”

Austin has several startups with great company cultures. Fortune Magazine and Great Place to Work named Square Root, AgileCraft, AcademicWorks, BP3 Global to its 2016 list of the nation’s best small to medium sized businesses.

Square Root sees company culture as essential to success, said Chris Taylor, its founder and CEO. The bootstrapped, private company, founded in 2006, makes store relationship management software and has 55 employees and $12 million in annual revenue.

Square Root learned about the importance of company culture after it hit 18 employees and two talented workers left the company, Taylor said. It was because the company hadn’t articulated its values and its mission, he said.

From that point forward, Square Root did just that, he said.

“We made company culture a huge priority,” he said.

Its mission statement is to “transform the relationship between brands and their stores.” Its values, which are framed and hang on the walls of the conference room, are to “think big, do bigger, be customer inspired, partner and thrive.”

Having someone in charge of human resources and company culture is extremely important, Taylor said.

A lot of tech companies skip adding a human resources executive in the beginning but as they become bigger that position can become essential in preventing a toxic workplace.

“When you are first starting out you put everything before the people because you are just in it and you’re racing to develop the next big thing,” Branson said. “I came on board and I really tried to make our values come to life.”

Square Root set up a system to hire employees based on its values, Branson said. Every job candidate meets with several executives and each one ranks them. Branson interviews candidates for cultural fit.

Recently a job candidate scored well with everyone but Branson. He was dismissive of her and her questions. She ranked him lower than everyone else so they didn’t offer him a job and started the process over again.

Having a toxic company culture can be detrimental to a startup, Taylor said.

The importance of a healthy company culture came to light recently in Silicon Valley with online ride-hailing company, Uber. Earlier this month, Travis Kalanick, its founder, took a leave of absence following a “series of scandals stemming from its bad boy culture,” according to the New York Times.

Uber’s problems stem, in part, from a blog post by one of its former software engineers, Susan Fowler, who wrote about being hit on by her boss and reporting it to human resources and being told to either endure it or find another assignment.

That kind of behavior can lead to a toxic workplace if companies try to keep Rockstar engineers happy by bending the rules and making allowances for their behavior, Taylor said.

The key is to create an environment where everyone can thrive, Branson said. And having a diverse culture helps, she said.

Square Root does provide perks to employees and they do help keep employees engaged and happy, but company communication is key, Branson said. The company executives meet with employees on a regular basis.

Among Square Root’s most popular perks is an annual $3,000 tuition reimbursement that employees can use on anything to learn a new skill like scuba diving.

And recently Square Root’s COO Elizabeth Schwartz took a sabbatical to complete a five-month hike on the Pacific Crest Trail.

The company also has a monthly event called “knitting” in which employees gather on the lawn to share something they are passionate about outside of work. Topics have included whiskey, fostering dogs, and writing stories for children.

Last fall during Fortune Magazine’s Great Place to Work conference for small to medium sized businesses in Austin, Herlein toured Square Root.

“They really were putting intention on culture from the ground up,” Herlein said. “They were putting processes in place to make sure the people they hired were congruent with the company’s values.“

Square Root’s campus consists of five 1920s craftsman style bungalows in Clarksville, less than a mile from downtown. Its campus has a unique neighborhood feel that was very inviting, she said.

A healthy company culture ensures that employees take good care of customers, she said.

“Everyone should always be continually learning, growing and progressing,” Herlein said.

Leadership needs to demonstrate trust and integrity, she said.

Sometimes problems arise in a company culture when someone is promoted into management. They might be a great engineer, but they might not make a great manager, she said.

“It’s got to be the decision of leadership that you don’t tolerate those behaviors,” Herlein said. “The traits you condone are what you’re going to get.”

Maintaining Square Root’s great company culture as it gets larger is extremely important, Taylor said.

“Every person you hire is going to move your company culture,” he said.

Taylor wants to make sure those employees move the culture in the right direction.

Editor’s note: As part of the day-long NewCo Austin conference, Square Root’s COO Elizabeth Schwartz and its CEO Chris Taylor are giving a talk at 4 p.m. on Wednesday at its offices to talk about “Take a Hike: How Our Culture Supported My 5-Month Sabbatical.”

One of Square Root’s offices, courtesy photo.