Martin Mucci first heard about Paychex through a casual conversation with its founder, Thomas Golisano. That talk led to Mucci joining the payroll processing business, where he now has spent two decades–the last dozen as CEO.
Mucci had met the Rochester entrepreneur a few times before, but did not know him well. However, during that conversation in Golisano’s office, Mucci was impressed with Golisano’s honest and straightforward discussion of values and the concept of service in business. Mucci, former CEO of Frontier Communications, joined Paychex as senior vice president of operations in 2002, at a time when it had more than 80 branches and 7,400 employees across the country, and annual revenues nearing $1 billion.
By 2010, when Mucci became CEO, Paychex had doubled its revenues but was emerging from the throes of the Great Recession. The economic slump began with the bursting of the U.S. housing market bubble from 2007 to 2008, eventually resulting in a global recession.
“We came out of the recession and we were kind of stuck at $2 billion, which is not a bad number for our revenue, but we were kind of not growing as a business,” Mucci says.
He decided to make technology a key focus for human resources, payroll, benefits, and insurance services.
“We could see that it was still about service, but (the) service definition had changed to be much more about ‘I want to be able to do things when I want, how I want, where I want,’” Mucci says. “And that’s the mantra.”
Today, Paychex serves over 730,000 clients with integrated human capital management software solutions; as a payroll processor, it pays one out of every 12 U.S. private-sector employees. Total Paychex employees have grown to 5,000 at its Rochester headquarters and nearly 16,000 worldwide. Revenue has topped $4 billion with market capitalization reaching nearly $50 billion.
While Mucci will remain chairman, he will step down as CEO tomorrow. John Gibson, who has served in leadership roles for Paychex since 2013, will succeed him. During his time at the company, Gibson has focused on expanding service for Paychex clients by developing 24/7 options with chat and social media support, which has resulted in record client retention, the company says.
The Rochester Beacon spoke with Mucci about his tenure as CEO, the importance of technology, the impact of the pandemic on the work environment, and the future of the business in Rochester. An edited version of the conversation follows.
ROCHESTER BEACON: You just marked a dozen years as chief executive of Paychex. On Friday, you hand the CEO reins to John Gibson. Looking back over your time as CEO, what stands out for you?
MARTIN MUCCI: Well, first of all, I think the people stand out the most to me. The employees have been just a tremendous asset to the company with their focus on service.
You know, when I came in (as CEO), we kind of restated what our values were as a company. … We aligned our company and our culture around our values and what we stood for, which was a lot of respect for each other. It was teamwork, it was customer service and integrity.
We were very proud of the fact that no matter what we did, we talked about clients, employees and owners of the business. Something I call “the C the E and the O” – CEO. What’s best for our employees and what’s best for our owners? We made a very big focus on ethics. You have to be a very ethical company when you’re payroll, you’re HR. And we’re a 14-time winner of the world’s most ethical companies, something we’re very proud of to win every year.
You know, small businesses make up 95 percent of all the businesses in the U.S. That was Tom’s original idea … they were not being served. That was 51 years ago. There was no place for them to go to really outsource payroll. So, we’ve continued to think about the impact that we have on the economy, frankly. How we can help businesses survive and thrive.
The big accomplishment for me as a CEO was, we weren’t really growing back in 2010. We came out of the recession and we were kind of stuck at $2 billion, which is not a bad number for our revenue, but we were kind of not growing as a business.
So we made some changes to the leadership team. We came in around a goal of: “Let’s grow this company from $2 billion to $3 billion in revenue in five years.” I actually gave the leadership team all a Christmas ornament that said “Paychex, 3B, 2016” in 2011 and said, “OK, we’re going to hit this number and we’re gonna grow to $3 billion in revenue in those five years.” It was something that we all rallied around. There were a lot of fun things we did with 3B.
And then the next step, it’s like, what did the company look like at that level? Meaning, you would have some thousands more employees, many more job opportunities for employees. Our clients would have a lot more products, and we’d be in different client businesses. And we did grow from really a small business payroll company to really today being known as, you could say, human capital management.
Paychex is a very tech business. It’s known as an innovative technology company, but we weren’t known for that even 12 years ago. We were a service company. We did everything for you by calling you and taking your payroll information.
We then had 12 years invested heavily in technology. Our IT team went from probably 600, 700 people to about 1,800 now, all over, frankly, the country and in India as well. We’re really worldwide.
We have a mobile app that’s 4.8 out of 5 stars. You can do a lot of things yourself now. For example, if you’re an employee of one of our clients, and you have our mobile app, you change your direct deposit, you update your address right there.
In the old days, that was all paper. You fill out something, give it to an employer, they’d give it to us. We change it, we’d send something back. Today, everything for the client, and their employees can be self-service.
I’ll tell you about three products that (are) probably the latest innovations. One is called real time payments and we’re one of the only companies in the industry to do that. That means if a client wants to make a change in their payroll, we can change that in a matter of seconds; we can pay you through the banking system.
We also introduced something called Paychex Pre-Check. So now, when before, you’ve always run a payroll, typically, as a small business or mid-sized business, and there may be a mistake that you made in it. Now, we send the information to your employees ahead of time. They get an alert that says: “Look at your payroll. Here’s your hours. Here’s your pay. Here’s your taxes. Does this look right? If it doesn’t, please alert your business owner.” Then they’ll make changes before payrolls are processed. So, we’ve really involved the employees of our clients to be able to help them to be more efficient.
And the last one, we just introduced last month, actually, (at) what’s called HR Tech, the largest technology conference for HR outsourcing in Las Vegas, (is) Paychex Voice Assist, which is hands-free, so you can talk to your Google Assistant and say: “I want to run a payroll today. Here’s all the information. Here’s all the hours.” And then you say, “Run the payroll.” You could do it from any Google Assistant anywhere and not touch a thing.
Technology and service
ROCHESTER BEACON: You called Paychex a technology company when it comes to these things and that’s not necessarily what people always think of with human resources. So then why do you think technology has been so important for Paychex? When did you first start seeing that shift or taking that shift seriously?
MUCCI: We found businesses want to do more things themselves at a time when they want to do it. So, you know, Paychex for 35 years was, “Hey, we’ll call you on Monday morning with your payroll specialist, get all the hours, take it all over the phone, and load it into the system. We’ll get everything done for you.”
And that changed pretty dramatically. We could see that 15, 20 years ago that it was starting to change. Employers wanted to say, “Hey, I want to go online at midnight and do my payroll myself. I want to be able to do that. I want my employees to have more control in their mobile app and be able to go on their phone and change their 401(k), or update their address or direct deposit bank information or check, get their pay stub or get their W-2.”
So, we could see that it was still about service, but (the) service definition had changed to be much more about “I want to be able to do things when I want, how I want, where I want.” And that’s the mantra.
By the way, I think we’re still the only ones that offer 7 by 24 by 365, a live person if you want them. You know, software and apps–they’re great until you have a problem. If, when you say, “Jeez, I’ve never calculated an overtime bonus like this before; I’m really not sure exactly what I’m doing,” you can still reach a live person with us anytime of the day, Thanksgiving, any holiday.
And believe it or not, we get plenty of calls, in the middle of the night from people saying, “Hey, I’m running a payroll tomorrow, and I really got to understand how to use it.”
We could see from our data that it was changing what the definition of service was.
ROCHESTER BEACON: It sounds like it’s a blending of both keeping a live person still there, but expanding out and relying on the technology?
MUCCI: So, it’s the technology first, but there’s a backup, if you need it. It really is about driving efficiency for our clients.These are small businesses who really need help with driving with more efficiency, making things simpler for them. Yet, allowing them to control it if they want to control it.
And, boy, technology helped tremendously during COVID, as many small businesses ended up with remote employees, for things like time and attendance. You know, we started with clocks kind of thing, punching a clock. Then we went to scanning cards and so forth.
Of course, today, you could check in and out on your app. You can punch in and out on your watch if you’re a Paychex client. (The watch) records all your time remotely and even has geofencing, which will say where you are, if the client wants to have that feature. We’ve gone to iris scan as well. So, you’re at the location, nobody touches anything, you just go in and scan your eyes and that punches you in and out. If you’re remote, you can punch it on your phone, your watch, whatever you need.
So, it was, what does the client need? What gives them flexibility to be as efficient as possible, and make things as simple as possible?
After the pandemic
ROCHESTER BEACON: Speaking of the COVID pandemic, you told us in a previous story, that pre-pandemic, 95 percent of people in Paychex were in the office. Then during the pandemic, that number basically flipped so 95 percent were then telecommuting. Has that remote mentality stuck around with the company and you think that will hold true with Paychex and the business world in general?
MUCCI: Now, I would say today, probably two-thirds of our employees are hybrid or remote, so they have some sort of flexible, hybrid schedule, or they’re fully remote. Maybe 70 percent are back in the office for the most part.
A lot of that was we sat down with the employees by team, by division, by group, and said, “OK, what schedule is going to work best?” That was probably a year ago now.
So, we have some people fully remote. A lot of the IT folks are fully remote and work from home all the time. Many jobs are a hybrid, so they’ll come in roughly three days at minimum during the week.
I think we learned that the flexibility has been very good for employees and it’s worked for the company, too. People found that, given the technology that, luckily, we had invested in, you could do the job from home.
We also want you to still come together for the best learning, mentoring, innovation, you know, training things like that.
So, it’s more flexible. It’s not that, “Hey, you have to be in the office 8 to 5 now every day.” It’s, “Hey, look, we like you in here around three days a week.”
You may want to do more if you’re newer. More people who are new tend to come in a little bit more, because they’re trying to build relationships and get mentored and trained. Others who have relationships built, who have been here eight years, 10 years, it was easier for them to be remote a little bit more.
But I don’t think most companies are ever going to go back to five days a week, 8-to-5 schedules. It’s gonna be working our way through this and asking, “What does flexibility mean?”
I think most employees would like to be able to say, “Hey, if I could take this Monday and work from home, it’d be great. But next week, it might be Wednesday because of something or it might be Friday, or it might be a half a day.”
I think that’s where it’s going to settle out at some point so that they have the flexibility they need, and it’s not prescribed, like, “OK, Tuesday, Wednesday, Thursday you’re in and you come in once in a while on Friday or Monday.” I think it’s really going to end up kind of working itself out. We’ve already seen it work out pretty effectively.
And, you know, we had the best fiscal year (ever) last year so we’re still doing well in sales service. You know, it’s a lot usually about people with young children too. How difficult COVID daycare was. And I still think it’s difficult. So, giving people that flexibility yet knowing that they’re clear on what their responsibilities are and then counting on them to deliver has worked very well.
We’ve run for 51 years and constantly break records on how big we are. Last year we ended the year with $4.6 billion in revenue. So, you know, we did get that $3 billion, then we said in four years, let’s be $4 billion. Right now we’ve said, “Another few years, let’s get to $5 billion.” It’s a focus on constant growth.
We’ve grown in market value too. We went from $10 billion 12 years ago to now around $40 billion as I leave. We’re very proud of that as a team, of how we’ve grown. We’re now over 16,000 employees and around 5,000 are in Rochester. So, Rochester still has just under a third of our full employment across the country and around the world.
ROCHESTER BEACON: In a recent interview with Jim Cramer on CNBC, you said you felt the future of Paychex and the economic situation in general was strong. With interest rates rising and stocks falling, other people aren’t so optimistic. What gives you that sense of optimism?
MUCCI: You know, I think it’s part of its tenure. With Paychex, we’ve really gone through a few recessionary periods, in early 2008, 2009 particularly, some other scares here and there. As a company with a great team, and employees that stay focused, you find a way to maneuver through that.
Paychex is an interesting company with the fact that we’re very profitable and we pay a great dividend. In times of low interest rates and looking for higher growth, we grow the top line, but also pay a great dividend. People invest in Paychex stock because we do well in those situations.
As interest rates go up, and, you know, inflation goes up and regulations tend to go up, we do very well in that kind of period of time because with HR, the harder it gets for companies to do payroll. And, for example, right now, in the last two years, it (all has) been about “How do I hire and retain people? There’s not enough people in the workforce.” We have over 700 HR specialists who can be your HR person.
If I’m a small business with 20 employees, I don’t need a full-time HR person, but boy, all of a sudden during COVID, I can’t hire anybody. What do I do? Well, we’ll work with you to show you how you can better hire, how you can recruit, and how you engage and retain people. In both tough times or in better economies, we fit all those different situations and environments.
For example, another product we came out with (for) Indeed, one of the largest job posting sites. In the last year we helped Indeed, who would post links directly to the Paychex payroll system in our HR system. If you’re a client of ours, you can post on Indeed and everything’s paperless. We’ve placed a million employees in the last year. It’s incredible.
In those times Paychex always finds a way.
Another example, during COVID, Paycheck Protection (Program) loans started, right? So, this was a government subsidy that said, we’ll give you a loan. Most of them, we’ll forgive you if you can prove you’ve been hurt because of COVID.
We knew ahead of time by working with the federal officials what that was going to look like, so the day that rule came out, you could get money. We were there to say to the clients, “Hey, we have all your payroll information. We’ll put this all together, we’ll pre-package it, give it to you online, you sign it and we’ll fire it in for you,” and they got their loans very quickly.
About 97 percent of them now have gotten their loans, and we did about $65 billion total in loans that we helped clients get. So it’s a tremendous partnership.
Then, when the employee retention tax credit (under the CARES Act) came out, that said, “Here’s another subsidy that if your business was hurt by COVID, you can get an employee retention tax credit, you can get so much per employee.” We were the first to come out with that and say to our clients, “Let us figure that all out for you.” A lot of clients didn’t even know it existed.
On average, the client got $190,000 from the government to help them recruit employees, pay them more and help them stay in business. All told, we’ve done about $8 billion in employer retention tax credits for our clients.
Rooted in Rochester
ROCHESTER BEACON: Paychex is obviously headquartered here in Rochester and has been since it began. What is it about the city which has been such a good fit for the company and how do you view the future economic outlook for the area?
MUCCI: I’m pretty optimistic. There’s just a tremendous wealth of talent coming out of the local colleges and universities.
There’s a lot of people that, if you don’t get them coming out of the colleges and universities, they may go to New York City, or they may go somewhere else a lot of times. But, because they grew up here, they’ll realize that, hey, while it was good, Rochester is also good in ways they didn’t see before.
It’s been a great place to get very productive, bright, educated employees who also have a great kind of, I guess we always would say, “mid-Western kind” of ethic about the way they work.
You’ve got to have a vibrant community, so Rochester’s got to keep working on that, to make sure that it’s vibrant to keep people here. But I think it’s a great family town, and certainly coming out of the colleges, if we can recruit that talent, that’s great. But also, I think people want to be here long term with their families.
So we’ve had great luck here. We’re very happy to be here in Rochester. Being one of the largest employers in town, we’re very proud of that.
ROCHESTER BEACON: You are remaining chairperson for Paychex, but what are your personal plans after handing over the CEO position?
MUCCI: I grew up in Elmira in New York, and came to Rochester to go to college at Fisher. So, my wife and I have been here ever since.
We have two sons, one lives here in Rochester with two granddaughters, so we really want to spend time with grandchildren. We have another son and two grandchildren in Charlotte, N.C. So, this will give me a little more time to spend a little more time down there too.
It’ll just be, we’ll spend a little more time in Charlotte and in Rochester, both to be around the family as they grow up. I don’t want to miss that time, but Rochester is still home.
I probably will do some more nonprofit work as well. I’ve been involved in a lot of nonprofits, the United Way, Catholic Family Centers, pretty much every (charity) walk that you can imagine. And I love that work. There are unbelievable nonprofit agencies in this town, and they can always use help. So, I’m sure I’ll get more involved in those again.