People often think there’s a magic touch when it comes to creating company culture, but Sal Giambanco, PayPal’s VP of HR during its startup days, sees it differently. In reality, Sal says, it’s about recruiting people who are authentic in their own sense of thinking.

As someone who worked at PayPal alongside Elon Musk, Peter Thiel and Reid Hoffman, among others, Sal knows what he’s talking about. “These are folks who are deep thinkers,” he says. “That gets into the importance of understanding the philosophical and the theological implications of culture, which when you’re reading business texts are often lost.” That helped PayPal’s founders build a revolutionary fintech company and create a culture that spawned the “PayPal Mafia”–early employees at PayPal that have gone on to found some of the largest tech companies in the world.

To understand how PayPal’s culture was shaped in the early days and how entrepreneurs can lay the foundation for world-class company culture, Sal recently joined 500 Global for a fireside chat to discuss his experiences. He shared his insights from nearly a decade at PayPal as it scaled globally, from leading human capital and operations functions as a Partner at Omidyar Network, one of the world’s largest philanthropic investment firms, working with entrepreneurs through Endeavour, and his extensive startup advisory and social impact work.

PayPal: The Early Days

Sal says that at the beginning PayPal didn’t identify as a financial services firm, but as a tech company engaged in financial services. There was a deep sense of cooperation and team spirit; it didn’t matter which department someone came from—everyone was responsible for solving problems. “The original PayPal was all about an attitude that we were all responsible for everything,” says Sal.

And there were plenty of problems to solve. When Sal joined in late 1999, PayPal was losing up to $10 million per month and would soon be on the verge of running out of money. He was responsible for recruiting under those circumstances, which included asking new hires to take a 70% pay cut for jobs they might soon lose—no easy task.

“Would you join that company? Because that’s the reason why we had all those entrepreneurs who went off to start all those companies [as] part of the PayPal mafia,” says Sal. “Because they accepted that employee value proposition.”

It helped that Sal brought a unique vision to his role. He’s a trained Jesuit who once served as a chaplain at San Quentin prison and for terminally ill hospital patients. His work as a Jesuit included recruiting young people to take permanent vows of poverty, chastity and obedience. “There’s no comparison between the level of difficulty in trying to recruit people for the Jesuits and anything else I’ve seen in my entire career,” says Sal.

Philosophy of Culture

When approaching company culture, Sal points to a philosophical definition of culture: it’s the product and process of a cumulative conversation of a people about what is good, true and beautiful and what is bad, false and ugly and how to coordinate actions to pursue the former and avoid the latter. He believes it’s helpful to consider the philosophical underpinnings of culture overall, which includes looking back to fundamental concepts Aristotle and the ancient Greeks developed thousands of years ago around paying attention to how we behave together and developing methods of holding ourselves accountable.

Alongside that, Sal offers a practical business definition of culture: the beliefs, values, attitudes, traditions, practices and assumptions shared by people at all levels, which shapes the way people think, behave and evaluate. That culture is represented in organizational artifacts like language, decision-making, symbols, stories and legends, and it’s usually built around a values statement that defines and codifies deeply-held beliefs and principles, and establishes a standard against which other actions can easily be assessed.

That’s a lot to digest, but what it ultimately boils down to is understanding that we’re all human beings and we value some things over others and interpret behaviors based on those values. “That’s what we’re talking about when we’re creating a culture,” says Sal. “What are the things we want to value within our company over other things?”

Building World-Class Culture at Startups

Every organization has values, whether they’re implicit or called out publicly; identifying them simply means paying attention to what a team prioritizes and how it spends time. PayPal’s original team understood the importance of being mindful of these things and how the organization behaved and held people accountable. For example, in the early days they limited the number of meetings they held to avoid analysis paralysis and banned using PowerPoint because it was a linear progression of thinking.

A successful culture, says Sal, creates rituals around everything from on-boarding employees to decision-making and celebrating success. These rituals help teams adjust to what Sal calls the “signal-to-noise ratio.” In this chaotic era of social media there’s more noise than ever, and companies need to pay attention to the right signals. For example, says Sal, a CFO shouldn’t just be a bean counter; their priorities will dictate their business decisions. “The CFO needs to be someone who pays attention to that signal-noise-ratio within the financial architecture of your business.”

Similar to rituals, Sal believes it’s important to develop company stories and legends. “I used to call it myth creation,” he says. “Remember myth is a form of truth.” He points to stories that helped burnish PayPal’s reputation: how they worked seven days a week and slept at the office and cleaned it themselves because they couldn’t afford janitors.

Sal also believes a key part of a strong culture is getting creative and avoiding stiffness when it comes to formal documentation, like employee handbooks. “I hate employee handbooks, I hate rules. I like guidelines.” He likes guidelines because they test people’s judgement and help them prioritize and solve real problems. If everyone on a team understands organizational standards and values, it speeds up decision-making and allows companies to grow talent internally and promote leaders who embody those values. That’s important, says Sal, because outside hires at the senior leadership level don’t have a great track record of success once companies reach a certain size. Strong, internally-grown talent helps prevent inconsistencies from developing across geographies and teams during expansion.

So how do you know when you’re getting culture right? This is where feedback loops become important at every level of an organization, says Sal, because they affect every aspect of a company, from marketing to human capital and innovation itself. He recommends training focusing on feedback loops and helping employees learn how to give feedback (the reason being that people generally aren’t trained to talk to each other). In particular, he highlights the SBI Feedback Model, which helps people communicate and process what they’re truly feeling and express deeply important things in a safe manner.

Ultimately, an important way to gauge whether company culture is successful is to understand your employees. The number one reason employees stay at an organization is because they feel managers care about them as people, says Sal. “That develops the primacy of loyalty, which means that those employees will then engage in the holy grail of human capital,” he says. “The holy grail of human capital is discretionary effort.”

Discretionary effort is when employees go above and beyond the call of duty because they care deeply about their work. Sal is a good example. “I worked for some amazing CEOs and the one thing that I never wanted to hear ever was ‘Sal you’ve disappointed me,’” he says. “That was worse than death to me.” Imagine then what a small team of employees engaging in discretionary effort can do together—or just look at what PayPal achieved.

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company culture

Lessons from PayPal on Building a World-Class Startup Culture