FreshBooks:It’s All about the Rock Stars—a.k.a. Customer Service
Mike McDerment: “The culture is way bigger than me. It’s not a cult of Mike here.”
Dan Sachs: “Well it started out that way, more or less.”
Mike McDerment: “I don’t think [of it] as a cult of Mike. I think [of it as] a cult of, ‘I want to be in a company that helps people and actually is dedicated to customers, a company that works really hard at building great products.’ Those things aren’t Mike per se.”
If you’re a sole proprietor or the owner of a small business, you know that one of the most challenging things is staying on top of the financials when all you want to do is deliver your service or manufacture your product. Mike McDerment, cofounder and CEO of FreshBooks, a cloud-based accounting software company in Toronto, Canada, knows exactly how you feel.
In 2003, Mike was the head of a four-person website design business that he had dropped out of business school to start. One day, he accidentally saved over an old invoice. Instead of cursing his own stupidity and then moving on like most people, he decided to do something about it. He spent the next two weeks coding a computer program that would be more user friendly than Microsoft Excel. By the end of that time, he had laid the foundation of what has evolved into FreshBooks, a three hundred-person company whose mission is to “reshape the world to suit the needs of self-employed professionals.”
Growth Canadian Style: Free Range and Sustainable
FreshBooks started out in Mike’s parents’ basement in Toronto less than fifteen years ago. In 2016 it was not only recognized as “The Best Workplace in Canada” (for a medium-sized company) by the Great Place to Work institute but also as a company “that keeps its millennials from quitting” by cnbc.com. To learn how Mike kept all of these millennials around (and other things), I caught up with Mike—and his dog—at the FreshBooks headquarters.
The office is located in a relatively quiet neighborhood, and it shares its building with a self-storage company. It took me a while to find the entrance, but then I was able to circle around to the back and take the elevator up, where I then walked into an innovative, open, and very “techy” looking office space. Mike’s office—maybe 8 x 8 ft.—is a glass-enclosed conference room off the main workspace, which is open. Mike himself is about 6'5'' and is wearing shorts and a T-shirt. When I arrive, I catch him running back and forth from one work group to another until we finally catch each other’s eye.
Before we start chatting, he gives me a quick tour that includes a stop at the company kitchen/cafeteria for a glass of water. It’s a very comfortable environment, and I feel at ease immediately as I observe various teams collaborating in the kitchen and at work stations. We settle into Mike’s office, which is purposefully located near the bathrooms to encourage employees to stop by and chat.
I was there to find out how FreshBooks developed such a strong culture of customer service along with a mission and workplace that appeals to millennials. One of the things that I found so interesting about FreshBooks was that, unlike some of the other companies that I’ve visited over the years, FreshBooks developed a culture of outstanding customer service organically without ever talking about it. This may have something to do with the fact that the last job Mike had before owning his own website design business was leading canoe trips at a camp. (Perhaps catering to an audience of tweens and teens provided good experience for his current line of work.) Regardless, Mike feels that the lack of a roadmap was ultimately a benefit despite the bumps along the way.
“People tell me, ‘Hey, other companies don’t do this. It’s not software culture,’” he says. “I didn’t know that. It’s made some things take longer than they needed to, but I think a lot of the things that make this place special and different are because when you go and learn something somewhere else, you start doing stuff and don’t necessarily think about why. There were parts of our growth story that could have been less painful or happened faster. But then I don’t think you get the magic.”
When Mike started FreshBooks, he was still trying to run the website design company he’d developed. Facing the fact that it was too tough to do both, he transitioned out of the latter to focus on the company that’s here today. Along the way, he had to learn everything from scratch, from building the company’s software and marketing it, to scaling his services, all the while fighting to retain clients and employees.
“We were really obsessed with customer service from the get-go. We were very concerned with our quality. We were very timely with our responses, always answered the phones. We put our phone number on our website from the earliest of days, even when we were trying to make our company look way bigger than we were. We staffed over the holidays. We were always on for customers.”
FreshBooks’s passion for focusing on and rewarding outstanding customer service is built into the DNA of the company and comes from Mike himself—a guy who readily concedes there are people who don’t find him empathetic upon first meeting him. However, he adds, “I’m unusually good at putting myself in other people’s shoes. I’m not perfect, nobody is. I don’t always get it right. But when I’m talking to a client, I transition into, ‘What problem are you trying to solve? How can I help you do that?’ I’m wide open at those times.”
Although I’m in my fifties now, I still can totally relate to his missteps. It’s hard starting a business when you’re in your twenties because it’s more expensive, time-consuming, and challenging than you can ever imagine. That’s one of the main reasons why so many new businesses fail even if they start out with a great idea. Mike isn’t afraid to talk about the times he almost failed, and he’s justifiably proud of making it through to the other side.
He says the company hit a wall at eighty people; there was so much to do and so much to organize that no one even knew what the mission of the company was. That’s when he decided the entire organization needed a day to come up with a mission statement. It began with teams each going to four consecutive “stations” that would help them brainstorm. One, for example, featured a video of the author and motivational speaker Simon Sinek giving a TED Talk titled “How Great Leaders Inspire Action” (one of my personal favorites). It’s based on Sinek’s 2009 best-seller, Start with Why: How Great Leaders Inspire Everyone to Take Action.
It all seemed like such a good idea at the time, but good intentions don’t always lead to good outcomes. “The day did not go like I’d hoped it would,” says Mike. “Very well-intentioned, but a failure. We did not get a mission statement out of that thing. I left that day, and I thought the sky was falling for six or eight weeks.”
But the sky didn’t fall. Instead, Mike hired a COO who had experience operating a large company. The next series of company-wide meetings included specific steps to help employees take action to solve all the day-to-day issues. But, in the end, FreshBooks still lacked a mission statement. This missing piece was always in the back of Mike’s mind until a few years later, when he thought more about his own experiences as a small business owner and the people he knew who were also self-employed, either by choice or necessity.
“Our insight is the world is not built for self-employed professionals or their teams, which is not surprising because we grew up in the age of corporations. Then you start to look at how the world [is] set up for [self-employed] people and the short answer is not well at all. That’s where we come in.”
Thus, the company’s mission was born: “To reshape the world to suit the needs of self-employed professionals and their teams.” And it has had a profound influence on the company’s culture.
FreshBooks is at the right place at the right time. According to the US Bureau of Labor Statistics, 10.1 percent of the US population was self-employed in 2016, and that number is expected to grow significantly over the next decade.
Culture: FreshBooks’s Special Sauce
Now that the company has more than one hundred employees, Mike is delighted to have a strong leadership team that he can rely on to focus on some of the areas he isn’t as interested in. As he says, business is a “team sport.” And like other leaders profiled in this book, Mike is emphatic that company culture all comes down to the people that you hire and how you treat them.
“When I started, we called the people in customer service ‘Rock Stars.’ You’d be doing support three days a week and had two days to do other stuff, which was generally around serving customers in one way or another anyway. So the folks we hired were the kinds of people on a mission to serve people and customers.”
Like so many of the leaders I spoke with, FreshBooks intentionally hires people who find meaning in serving others. I’m convinced this helps build a cohesive culture.
“That’s at the heart of what we want to understand when we interview you. Do you derive satisfaction from serving others? Are you intrinsically motivated to help people? Do we believe you could be good at it because you’re motivated? It’s hard to teach that. Then it becomes this flywheel where everybody is like that.”
He continues by describing an example of how empathy was put into action—the definition of hospitality. One day, a visually impaired customer tried to get in touch with the company over the internet. As a solution, FreshBooks sent him a “crazy contraption” that he could use to direct his mouse. To Mike, “solving that kind of problem is the result of a carefully crafted culture that recognizes and rewards that type of behavior [even though] we’re a tech company, not a restaurant or hotel.”
Of course, he also admits that there have been times his team has taken the internal message of doing anything to help a customer a bit far.
“We’ve had instances where people would say, ‘I’m sorry that happened to you—I’m going to refund the last three years of your account.’ My thing there would be, ‘Okay, that is probably not in line with what was necessary to do here. That’s probably too far. Let’s try and learn from that. The person was trying to do the right thing for the customer, and that’s great, but we can’t give away three years of somebody’s account every time something goes wrong.”
I can relate. I remember many years ago wanting to take care of a very good customer in my restaurant, Spruce. The guest arrived entertaining a party of seven other executives for a special dinner with a full tasting menu and expensive wine—the works. As the entrees were served, one of the orders was incorrectly prepared and sent back to the kitchen, where the issue was quickly resolved. It wasn’t a terrible mistake but a mistake nonetheless. It was a busy night, and I checked in with the server who told me about the problem, and I said “Let’s buy them dessert” as a way to compensate for our error. It was a pretty standard response, but the server, who was equally busy, heard “Let’s buy them dinner.” Well, at the end of the evening, the host walked up to me and thanked me profusely for my generosity—which seemed a bit disproportionate to me at the time. Of course, eventually, I figured it all out and realized that we needed to have more specific systems in place to ensure that our responses to errors were proportionate. Good intentions only go so far!
Mike nods in agreement after I tell him my story. But he sees a silver lining: “I’d rather have them go that way once, I’d rather have everybody on the support team do that once, because it’s a pretty low cost, and I know they’ll make it up in the other stuff, if that makes sense.”
From day one, FreshBooks has required every hire—from members of the executive team to the software engineers—to work in customer service for one month so that they can learn firsthand about customers and their needs. If you’re someone who feels that’s beneath you, you’re not going to fit into their culture.
“In that first week, you learn about our values, you learn about our product, you learn about our customers, and you start answering the phones. In week two you start taking calls. By the time you leave that period, you understand the product, customer, and culture. A big part of that is you are taught by rock stars. You know them, they’re around. You can’t look down on them after you leave [training] because they were there for you when you didn’t know anything.”
How many companies do you know where members of the executive team answer phones for a month and the founder calls the customer service team “rock stars”? I ponder this as I realize I’ve known few corporate leaders with the patience or emotional intelligence to answer customer complaints on a daily basis. It’s one thing to get into the weeds for a few days or a week, but, in my own experience, I find it challenging to dig in consistently every day, especially when there are so many other distractions while you’re trying to run a business. Passion for customer service is almost like muscle memory—it needs to be practiced regularly to maintain it.
Taking Care of the Team
While it’s debatable whether empathy can be taught, what I’ve heard over and over from the people I interviewed for this book is that empathy is certainly less likely to come from workers who are treated poorly. If you want outstanding customer service, you’ve got to offer outstanding employee service. Whether that’s expressed in official policies such as servant leadership or simply practiced from the top down, it’s imperative to treat all employees with respect.
As Mike says, “You can’t treat people like shit and expect them to treat others well. My philosophy is take care of the team, the team takes care of the customers, and customers take care of you. I think that is fundamental to a lot of the things that follow. I can’t say I necessarily knew that’s how I thought about it when I started, but pretty soon I wrote that down, and I’m doing my best to live by it.”
I realize that he’s just described what people in my industry call the circle of hospitality, which includes the employees, the guests, and the shareholders, so I explain it to him. Unsurprisingly, he doesn’t believe it’s just a concept in the hospitality industry.
“I think every business has to balance these things. The thing that took root for me was when somebody said unless a decision balances all three, it’s not a durable decision and will ultimately become undone.”
Nuts and Bolts the FreshBooks Way
The FreshBooks workspace is designed for “the three Cs:” collaboration, connectedness, and collisions. As Mike gave me a tour of his company, I gradually understood what this meant. There are no individual offices, except for Mike’s (which, as previously mentioned, is entirely made of glass and purposefully located near the restrooms so that people can easily stop by for a chat).
The design helps connect employees to one another, he says. He wants employees to be visible and not to “feel like they’re working for some mystery individual off in some ivory tower somewhere.”
This connectedness is also fostered by the outer meeting rooms, also made of glass, so you can always easily find the people you need. Mike says he got the idea when he heard about the way Michael Bloomberg held open, public meetings when he was the mayor of New York City and decided he wanted to have open meetings as well.
Collaboration is cultivated by having lots of desks together in some areas without any kind of barrier between people. That way, he says, employees can spin around and chat when it’s important.
Collisions happen in the kitchen, where every employee goes for coffee, lunch, and weekly meetings where Mike talks about the values of the company and shares stories about employees who have “made the values real.” In addition to that public recognition, employees can be recognized for their work with a $25 gift card, which can be awarded anytime by any employee. Mike says it’s not the amount of money that’s important—it’s the recognition.
“You can call that a ‘program,’ but for me it’s wanting to reward and recognize the behaviors you want perpetuated. Create the conditions and reward and recognize the behaviors you want perpetuated. If you want great service, reward and recognize great service. If you want great cost cutting, reward and recognize great cost cutting.”
As Mike says, “I didn’t realize it, but we’ve been building a culture that’s egalitarian. I think it’s really important in service culture. If the service team feels like they’re less important than other departments, I don’t think you get the best from them.”
The Value of Millennials
Retaining employees is good for a company’s bottom line, but millennials won’t stay if they feel their values are not respected in the corporate culture. In fact, a 2016 Gallup report on the millennial generation reveals that 21 percent of millennials say they’ve changed jobs within the past year, which is more than three times the number of non-millennials who report the same. Gallup estimates that millennial turnover costs the US economy $30.5 billion annually.
This means that at most companies training goes on nonstop and institutional knowledge keeps disappearing. Mike says that to keep this generation engaged and loyal, your organization must be mission-driven or the problems of retention will continue.
This intuitive understanding of how to get the best out of younger employees is exactly what Crystal Kadakia and so many others have written about. In Kadakia’s book, The Millennial Myth: Transforming Misunderstanding into Workplace Breakthroughs, she explains how important meaning, collaboration, and transparency are to her generation, and the benefits that companies can accrue by adapting to the new generational reality.
“The potential upside of letting go of our stereotypes, reestablishing understanding, and acting purposefully is immense,” she writes. “Boomers, gen Xers, and millennials can form relationships where knowledge is transferred, productivity increases, and supportive community is built. . . . We can feel more empowered ourselves, knowing that we are not just doing what we have always done, but are doing the right things.”
Mike may not have consciously realized what he was doing, but FreshBooks’s emphasis on collaboration, connectedness, meaning, recognition, and reward is exactly what appeals to millennials, who make up 74 percent of his total employees and most of the customer service team. The company’s workspace seems particularly attuned to millennial desires and working styles. Regardless of whether Mike designed the company (and its office) this way on purpose, company cultures that reflect the values of millennials pay off, as Kadakia notes in her book. Unlike the majority of companies with a high percentage of millennials, Mike claims FreshBooks has a 93 percent retention rate.
Given that millennials will be affecting and changing the culture of an increasing number of companies as more and more baby boomers retire, I wanted to hear more of Mike’s thoughts about appealing to this cohort. Like so many people—from researchers and career experts to others profiled in this book—Mike says refocusing on values and meaning in the workplace is essential to doing so.
“Human beings want meaning. I think the difference with more recent generations is they’re not going to settle for a job that pays well as a reason to get in and do a good job every day. They need more. Maybe they don’t practice religion anymore so what they choose to apply themselves to needs to matter. They’ve got to find meaning in this world.”
Warming up to the subject, he continues. “When you’re gen X, you’re just glad to be employed because it [the economy] was shitty for a while. Before that you were the company person. Nowadays people think, ‘I have lots of choices, I applied myself. Why the hell should I work for you?’ In a world where your workforce can go wherever the hell it wants whenever the hell it wants, what they’re seeking is meaning.”
As we continue to talk about millennials’ search for meaning in their work, Mike tells me he’s found it’s not just millennials—everyone, regardless of age, wants meaning in their work. He then relays a story about visiting a good friend of his, who was a very successful insurance salesman at the time. Mike was disturbed when he heard how cynical and jaded his friend was about work, so he asked him if he’d ever felt like he had a mission. The friend rolled his eyes and shook his head no. Disappointed in his friend, Mike told him he was being shallow and urged him to start his own business, which he did.
“He’s working on it now. I connected him with another guy. They’re almost getting into their third year, but I see him working and I see him motivated. If I asked him about work now, he would be genuinely excited. He’d never experienced that before. My point is, it’s not just age. It’s about the conditions. I think there are so many people who haven’t had the benefit of seeing how much better it can be if you create the right conditions. It’s in all of us [to do so].”
In fact, he’s dismayed when he sees how many of his peers consider work a virtual prison: “I realize I’m living in another world. Toronto is a big city, but I hate hanging out with my best friends [and talking about work] because none of them cares about their jobs the way I do. Some of them are very successful, but I don’t know how they get up in the morning. There’s a lot of that attitude still going around, but generationally, expectations are changing.”
The Future of Customer Service
As a tech company, FreshBooks understands the power of social media as well as its challenges and opportunities. An early adopter of Twitter, using it as a service tool to get and give instant feedback, Mike is well aware how social media influences a company’s reputation—either positively or negatively.
“A lot of businesses think of social media as a risk. I think that’s insane in the world where social media is today. You don’t have a choice anymore. It’s all wide open all the time. So you better be good. I think this is what’s forcing businesses to take customer service seriously, what’s forcing them to say, ‘We have to solve this service thing because we’re getting hammered on social media and everyone is hearing about it.’”
And then, taking the words out of my mouth, he continues:
“You’re one recorded phone call away from being an internet nightmare, or one flight away from having your people drag somebody off a plane. Folks, this is all service, it’s all hospitality. You can’t get away from it anymore, and the leaders can’t ignore it. How do you deal with this? The answer is culture. The answer is service.”
FreshBooks, Mike says, came “baked”—by which I think he means prepared—for this new era because of its unwavering commitment to customer service and its employees. But if companies haven’t yet made outstanding service a priority, they’re going to have to “reculture” that part of their business quickly or they’re not going to be around much longer.
Another tech company that he sees continuing to excel in the future is the elephant in everyone’s room, Amazon. I can hear respect and also a bit of fear in his voice as he talks about Jeff Bezos.
“Look at Jeff Bezos. It’s very interesting what he does. It’s going to be on time and it’s going to be fast. Amazon is a terrifying company. They’re going to suck the life out of so many other categories and products, to the point of having no choice. But they’re doing such a good job. It’s a scary future in a world where it’s basically impossible to imagine how you compete because monopolies start to emerge. They’ve set an expectation that they’re fulfilling. People are growing up thinking, ‘I push a button, I get a thing in no time.’ Then you call up [another] company and get shitty service and you think, ‘Why ever deal with them?’ This century, they’re stone ages. You are from the fucking stone ages if you offer terrible service.”
FreshBooks’s Recipe for Success
Of all the companies profiled in this book, FreshBooks has probably given the most thought to matching its vision and values with those of the millennial generation. It’s no surprise that FreshBooks is in the top five favorite places to work in various polls year after year, receiving recognitions such as being named in 2017 as one of the “Best Workplaces in Technology” by Great Place to Work Canada. That said, their recipe for success really isn’t contrived, based on following a protocol or list of “ingredients”: it shows itself in its everyday operations. There is very little about FreshBooks that is designed or determined in a traditional corporate manner. Mike has developed a set of values rather than a rulebook to guide the company, and his employees accept his vision.
You might say, “Well, I know myself, and I am not that kind of leader so what can I take away from FreshBooks’s lessons?” I think there is actually a lot of useful information you can take from FreshBooks, as long as you believe that Mike’s approach to employees and the workplace is valuable:
1. Physical space matters. Think about the nature of the floor plan—open spaces and collaborative glass meeting rooms—all of which are becoming more standard in the modern workplace. However, just making collaborative spaces isn’t enough. If you fail to integrate the other essential pieces of the FreshBooks puzzle, it’s the same death by a thousand pricks.
2. Everyone likes to be positively recognized for what they do. People at the bottom of the pecking order work very hard. Those usually unsung “Rock Stars” are often what can make or break a company. It’s no coincidence that there’s excellent customer service at FreshBooks, where everyone starts out as a rock star. Another way employees are recognized, a $25 gift card, doesn’t seem like much, but it can go a long way toward making someone feel good about themselves and their job.
3. People want to be allowed to solve problems without a manager looking over their shoulder. Do some employees go overboard and make mistakes? Yep. But Mike would rather employees be too generous than not generous enough.
Great leaders such as Mike recognize that filtering for empathetic employees requires additional effort but pays off in the long run. Just as important is a company’s environment, which must be supportive and accountable to its employees. But perhaps most importantly, the culture has to be genuine. As Mike explains, genuine corporate culture gives a company purpose, which inspires its employees, which translates directly to extraordinary customer service. And great profits to boot.
11 Catherine Clifford, “How One Company Keeps Millennial Employees from Quitting,” https://www.cnbc.com/2016/09/19/how-one-company-keeps-millennial-employees-from-quitting.html.
12 Adkins, Amy. “Millennials: The Job-Hopping Generation.” Gallup.com. May 12, 2016. https://www.gallup.com/businessjournal/191459/millennials-job-hopping-generation.aspx.
13 Crystal Kadakia, The Millennial Myth. (Oakland, CA: Berrett-Koehler Publishers, Inc., 2017), 8.
14 Clifford, Catherine. “How One Company Keeps Millennial Employees from Quitting.” CNBC.com. September 19, 2016. https://www.cnbc.com/2016/09/19/how-one-company-keeps-millennial-employees-from-quitting.html.