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Why Workday Will Cut Loose a Top Performer

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The consulting firm Great Place to Work is holding its annual conference this week in San Francisco. GPTW is the brains and the brawn behind Fortune’s annual list that celebrates self-nominated companies whose employees like their employers. No. 7 on the list this year is Workday, the online HR- and finance-software company. In a ballroom in the bowels of the ticky-tacky Marriott Marquis hotel, I interviewed Workday’s co-founder and CEO, Aneel Bhusri. He said a few things that stuck with me.

First, it’s no coincidence that Workday would have an inordinate interest in the subject matter of this conference. The word “work,” after all, appears in both its name and the host organization’s. Bhusri said Workday set out since its founding in 2005 to create an employee-centered, fun environment. (If employees didn’t care about fun, they should work for rival Oracle, he quipped; Oracle (ORCL) successfully launched a hostile takeover of Bhusri’s previous company, PeopleSoft.)

Workday largely succeeded at pleasing its workers, on the assumption that happy employees equal happy customers. Then, a few years back, Bhusri noted Workday’s ratings slipping on the workplace review site Glassdoor. It turns out that as the company grew not all its new employees, especially managers, were living its culture and values. The response was to dramatically add processes and training the growing company needed.

Workday (WDAY) has impressive gender balance in its upper ranks but not, says Bhusri, because of mandates. He think it’s important to ensure diversity of the applicant pool and entry-level ranks—and then to choose the best person for senior positions. The results speak for themselves. He’s also more than willing to cut loose a top performer who otherwise doesn’t meet the standard for collegiality.

I wondered if Bhusri could prove that such actions were best for shareholders, beyond the perfectly reasonable assumption that a happier workplace leads to financial success. His response was sagacious: Financial results are probably a lagging indicator of a bad culture. By the time its ramifications are felt, it’s probably too late.