FreshBooks had a problem: The Toronto company was taking on so many employees so quickly that it felt as if there were strangers in its new office. Mike McDerment, the chief executive of the cloud accounting software service, noticed the change just after the 160th hire.
“People were walking past me in the hallway, staring at their shoes,” he said.
His company had made huge gains with a product in an entrenched market, and he worried that a divided office culture—between new and tenured employees — would diminish its start-up advantage.
The company’s response to that threat has encompassed many of the most popular strategies for corporate collaboration and a few fresh ideas. FreshBooks employees say hello in the hallways again. They mingle in common spaces that dominate an open office layout. And they go on “blind dates” with one another through an unusual voluntary programme meant to encourage communication.
“We believe culture is strategy, and the difference between companies ultimately is culture,” McDerment explained. “We spend a lot of time doing things to build strong bonds between people. … I want FreshBooks to be like the world’s greatest cocktail party. You may not know everybody, but they’re all friends of friends.”
Innovation is one of the potential powers that organisations gain when employees work together. And while innovation is consistently among the top strategic priorities cited by executives, it can also be a major weakness if not managed correctly. To be innovative, organisations must leverage the talents of all employees. That requires a supportive environment, management ingenuity, and a keen eye on talent management. To wit: A 2012 CGMA report indicated that 40% of executives believe that inadequacies in talent management hinder their ability to be innovative.
Corporate cross-pollination is one way to create and foster a culture of innovation. It occurs when employees from all disciplines and levels mix with one another to transfer ideas, perspectives, and knowledge. The practice can produce novel insights and solutions.
And it’s precisely what FreshBooks is trying to do.
Business depends upon relationships. So corporate leadership should take a genuine interest in employees and their growth, converse with employees on a variety of topics, be highly accessible, emphasise what is good and going well, promote a sense of connectedness amongst employees, and encourage a healthy mix between work and personal living.
Emotions are contagious. And a positive, optimistic workplace can send employees home at the end of the day stress-free. This results in a motivating climate where employees will do their best and most productive work while freely associating with other teams.
FreshBooks lists its values in an acronym, PORCHFEST, emphasizing passion, ownership, results, change, honesty, fun, empathy, striving, and trust. Living those values requires employees to develop a broader sense of the roles their colleagues play in each part of the business. “You’re not living our value of empathy if you’re not prepared to hear and internalize what’s going on around you,” McDerment said.
Remember the hallway awkwardness? McDerment took a direct approach to solving it. At his next all-hands meeting, he introduced the idea of “Heads Up, Hello.”
“You don’t pass somebody in the hallway without having your head up and saying ‘Hello,’ ” he told his employees. The rule quickly took hold. “Since then, no problem.”
Today FreshBooks has about 250 employees — about three times as many as it did three years ago. The growth has prompted other ways to encourage employee relationships and maintain a positive workplace.
The most attention-grabbing of its concepts is the voluntary blind date programme, which sends groups of two to four colleagues to local restaurants. The programme aims to connect people from across functions to improve communication and understanding of different roles within the company.
“It was an activation of these company values — putting yourself outside the comfort zone, learning about someone who has passion for their own role,” said Shannon Murphy, a FreshBooks copywriter who was paired with a finance team member. “Now we make a point of saying hello and having a conversation. We don’t work in the same area, but there’s so many chances for us to interact.”
Don't send new hires straight to their jobs
Rewards and incentives tend to narrow employees’ focus onto the action or outcome that is rewarded. Intrinsic rewards, where the activity itself is the reward — delighting customers, challenging oneself in new ways, deepened learning — can enhance creativity and motivation, especially for tasks that require even the slightest bit of high-level cognitive function. Extrinsic rewards have their place, but be wary of offering them to encourage innovation. Focus instead on providing meaningful work so that intrinsic rewards are more prevalent.
FreshBooks builds its culture and reinforces its values by putting each employee close to the customer.
Every new hire at FreshBooks spends a month in the company’s customer service department. Each leaves with better product familiarity and with 60 familiar faces beyond his or her own permanent teams. Moreover, acting as a public face for FreshBooks helps the new hire learn how the company thinks of itself.
“Having the experience … opens you up to the people we have running that team, but also to a different kind of worldview around what service can be for customers,” McDerment said.
The customer service group additionally acts as a first line of defence against hires who don’t fit the company, and has in a couple of cases vetoed a new employee, he said.
Separately, McDerment suggested that a high-level executive make contact with each employee during the interview or onboarding process. “When you meet somebody in the halls, maybe you didn’t work on a project with them, but you had 45 minutes together,” he said. “I always carry around my understanding of what makes a person tick.”
Make time for critical innovation and discussion
Innovation often happens in the gaps between actual work. Encouraging employees to set aside a percentage of time to explore, discover, and experiment can reap big rewards. For example, Google formerly allowed employees to spend 10% of their time toiling on something of personal interest. Google’s “10% time” resulted in Gmail and other innovations.
If allocating a percentage of all employees’ time is untenable, consider a day or two per year. For example, ShipIt Days at software group Atlassian is a quarterly corporate event during which all employees work on anything they want. They have 24 hours to assemble a team, develop a prototype or fix a problem, and prepare to showcase it to the entire company the following day. The best idea wins, with resources support from executive leadership to finish and ship it.
Collective reflection and discussion is also encouraged. McDerment suggested scheduling a specific, frequent time for teams to talk to large groups of colleagues about their work.
“They largely happen on Friday, when teams are regrouping,” he said. “People get up and say, ‘Here’s what I’m working on, here’s why it matters, here’s what it accomplished, here’s what it did.’ ”
It’s not just a feel-good showcase. Attendees are encouraged to ask critical questions and challenge presenters’ assumptions, he said. This kind of dialogue plays to one of the company’s core themes.
“We listen, we care, we’re supportive,” McDerment said. “We’re a team that solves problems together. It doesn’t mean we always agree — but you’re going to know you’ve been heard if you express a different point of view.”
FreshBooks is a “learning culture,” he explained, “so our ability to learn, unlearn, and relearn is actually what will distinguish our performance along the long run.”
Make space for collaboration
The culture and physical spaces in which people work have a profound impact on their productivity, creativity, and wellbeing.
A 2013 study by design firm Gensler found that employers that provide a spectrum of choices for when and where to work are seen as more innovative and have higher-performing employees. In addition to providing work-from-home options, employers should ensure the physical space of an office environment evokes creativity and provides adequate space for focused work, formal and informal collaboration, chance encounters, and play.
“We don’t have offices in FreshBooks,” McDerment said. “We have meeting rooms for people who like to go into them. They’re well set up for teams to work as a group.”
The company’s offices cover large floor plans, currently encompassing one 90,000-square-foot expanse. Eating facilities are consolidated in one area, encouraging employees to share meals. The meeting rooms are walled with glass. The overall layout is based on “collaboration, collisions, and connectedness,” McDerment said.
“You can see a long way down our office,” he said. “You’re more likely to bump into people and spread some ideas.” McDerment follows the philosophy so closely that he fought against new bathrooms for the back half of the building, fearing that by spreading toilets throughout the layout the company would reduce employee interaction.
Open offices do draw criticism from some quarters, often for increasing distractions for employees, but McDerment maintains that the design has been crucial for FreshBooks.
“These collisions — it never ceases to amaze me how people, just with little interactions like that, where they wouldn’t necessarily bump into somebody, can unlock stuff,” he said.
Mark S. Brooks is a senior manager of innovation at the AICPA. Andrew Kenney is a CGMA Magazine contributing editor.
The behaviours and actions of managers send signals throughout any organisation about what is acceptable and expected. Here are more ways managers can influence and reinforce a culture of innovation.
Fail forward. Failure is often seen as a negative event, something to be avoided and often taboo to talk about. While it is important to celebrate successes, it is also important to celebrate learning from failure. Managers should provide a reasonable safety net for employees to experiment and fail, for the sake of learning about the customer, the market, and the competition.
Ask questions. Great results begin with great questions. Questions encourage learning, which facilitates new perspectives and insights. Managers should neither strive to have all the answers nor be too quick to criticise. Instead, seek to ask and encourage many questions. Questions that result in more questions will spur dynamic, agile, and creative thinking. Question-driven companies can respond quickly to change, are proactive in finding and leveraging opportunities, and place a high value on learning.
Encourage constructive conflict. Employees with the same education, same background, and same career path will likely develop homogeneous ideas and solutions. Conversely, employees with diverse backgrounds and perspectives will lead to greater insights and ultimately better ideas. Healthy and constructive conflict is an outstanding channel for learning and thinking differently. For example, one of the core values at McKinsey & Co. is to uphold dissent because it is a way to get to better answers when solving complex issues. Of course, managers must ensure that such conflict and dissension is framed in a constructive manner and remains with the project at hand rather than becoming personal.
Hire for innovation. The role of recruiting and retaining innovative talent does not fall solely with the human resources department. Managers and individual contributors have an important role to play with recruitment and retention. The two most important factors in hiring for innovation are to recruit people with diverse backgrounds and areas of expertise, and to challenge their creativity and critical-thinking skills throughout the interview process. Ask candidates to work through a real business challenge. This may include giving the candidate a case to analyse and asking him or her to present recommendations. This type of exercise will help hiring managers assess a candidate’s creativity, understanding of the business, attention to detail, comfort with ambiguity, and critical-thinking skills.
Retrain existing talent. Innovation training focuses on creativity, opportunity identification, analytics, and strategic thinking. The intent of innovation training is to reset expectations on the need for and the ability of employees to be innovative. Training should help employees tap into their existing creativity skills and teach a variety of tools, techniques, and frameworks. The Center for Creative Leadership’s 70:20:10 Model for Learning and Development should be employed — that is, 70% of the training is focused on doing, 20% on learning from each other, and 10% on the academic lectures and reading. Actual problems for the business should be addressed as hands-on projects for training participants.