“Congratulations! You’ve created the happiest, most mediocre company in the world.”

That’s what an investor told Julia Hartz, Eventbrite cofounder and president. Well, sort of. No investor actually told her this. This was in a nightmare Hartz had during a period in which the online event-planning company was receiving accolades for its vibrant culture but was falling behind on its performance goals. She shared the experience at a conference hosted by the Next Web in May.

There’s plenty of evidence that employee happiness has a positive effect on productivity. But what if an already happy team isn’t performing as well as it needs to perform?

Boasting low attrition rates and national recognition for its vibrant culture, Hartz (@juliahartz) faced this question. She didn’t want to offset the good mojo happening at Eventbrite, but she knew that the company needed to see an upswing in performance. Even as a dream, the investor’s point hit her hard.

So, Eventbrite’s senior team began having tough conversations and setting clearer expectations with employees. “I wanted to elegantly and subtly introduce this notion of performance to a really, really happy culture,” Hartz says. “And it seems like a reverse problem -; most people have a high-performing company but a bad culture.”

In the short term, this did affect the company’s culture: The attrition rate went up. But as a result of the tough talks, Eventbrite also saw a sevenfold increase in new feature rollouts in 2012 (compared with 2011), Hartz says. The increased performance ultimately yielded a positive cultural effect on the team members who stuck around. “People actually did become more satisfied and happier,” Hartz says.

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