Patty McCord, the former chief talent officer of Netflix, talks about ugly PowerPoint presentations, empowering staff and slaying monsters. She also clarifies how the company’s forthright culture, which she helped create, resulted in her dismissal.
The thing you quickly learn about Patty McCord is that she’ll tell it to you straight. Take her famous culture deck slide show, Netflix Culture: Freedom & Responsibility, for example. Facebook COO Sheryl Sandberg called it “one of the most important documents ever to come out of Silicon Valley”. McCord, on the other hand, was aghast when she found out that Netflix CEO Reed Hastings had released it online in 2009.
“It’s the ugliest document known to humankind. Little yin-yang symbols – it’s just graphically horrible,” says McCord, one of Netflix’s earliest employees.
“I thought it was going to scare away all of our candidates. But Reed said, ‘Only the ones we don’t want’. And it was true. The quality of our interviews went up by, like, 100 per cent on day one.”
McCord has never been one to mince words. In fact, delivering hard, cold truths is her modus operandi.
When one Apple engineer applied for a Netflix job, he described himself as a workaholic. Since he was recently married and had a child, he was concerned that, without structure, he’d never make it home.
McCord told him that his current job sounded like the right place to be – and denied him a job.
“The essence of what’s scary about the Netflix culture is that we were honest enough to say this isn’t for everyone and this isn’t for life,” she says.
In part, these stories are what makes the Netflix culture so compelling. Instead of publishing a treatise on how everybody should operate, McCord’s culture deck simply pointed out ‘this is who we are’.
Something else McCord wouldn’t compromise on was hiring the A-grade players. By shaping a culture of flexibility and responsibility, Netflix would continue to attract and nourish the most innovative people with the best chance of sustained success.
“My definition of effective management is great managers who build fabulous teams that do amazing work, on time, with quality. Done. That’s it.”
When the gig is up
Hiring an A-team member is one thing. Being able to push them out the door when they are no longer required is another. Yet McCord insists it’s crucial.
As an advocate for radical honesty and tough love, she does not believe in a vague unspoken promise that if you do well in your job and work hard, the company will take care of your career. As she tells it, Netflix will hire you to do something, and once you’ve done it, there’s every chance it will say goodbye.
“The deal with Netflix is scary. We say, this is the truth. And if we hire you to do something and you’re done, we’re going to very lovingly say goodbye,” she says.
That’s because if Netflix only wants top talent on its team it has to be willing to let go of people whose skills are no longer a perfect fit by providing them with “generous severance packages”.
After all, long-term retention plans don’t really fit with nimbleness, flexibility and innovation – all of which are essential when you’re trying to “kill a big monster” named Blockbuster (which we’ll touch on later).
Eventually, McCord may have fulfilled her charter a little too well. As a Fast Company’s headline about her departure from Netflix screams: “She Created Netflix’s Culture And It Ultimately Got Her Fired”
In an Australian Financial Review article, McCord said this of the tap she got on the shoulder from Hastings in 2012: “It made me sad. I had been working with Reed for 20 years”.
Indeed, the two were neighbours who carpooled to work together in the company’s early days.
But McCord claims the communication with Hastings surrounding her departure was more two-way than the Schadenfreudian headlines let on.
“For years (we discussed it). People don’t understand that. But I’d been there for 14 years – for God’s sake, it was time for somebody else to have a chance.”
And while McCord insists she’s “perfectly okay talking about it”, she does add this: “I often ask reporters, ‘While we’re here can you tell me about your last breakup after a really long relationship? One that you’d like me to put in writing?’ It’s a juicy question, I understand it, but Reed and I remain very good friends.”
Another door opens
McCord’s departure from Netflix in 2012 paved the way for her latest endeavour, her book, Powerful: Building a Culture of Freedom and Responsibility.
When she first left Netflix she recalls how she would do public talks about her approach and see HR professionals walking out midway. But now her ideas appear to have resonated more broadly.
“The book explores, on a broader scale, my thoughts about the things we could do to improve the way we manage people,” she says.
“And I used my experience at Netflix as a jumping off point for that. I was able to do a lot of experimenting and testing with the way we operate at Netflix because it was the nature of the business we had.”
This experimenting was mostly made up of throwing out old standbys of corporate HR – employee engagement programs, annual performance appraisals, even losing the standard cap on days off for holidays and the need to formally request time-off.
“A lot of [these policies] are a hangover from the industrial age – back when most people were the kinds of workers where it mattered whether you were at work on time and present. The digital age is very different because we all work remotely.”
Fear and anxiety
In the years since McCord’s departure, Netflix has been criticised for cultivating a culture of fear. A scathing Wall Street Journal article outlined accusations that the company’s flexible and open performance appraisals instilled anxiety, and fears of underperformance had amplified instability.
While emphasising the company’s rapid growth, McCord says there will always be pockets of unhappiness in any company. Just as there will always be pockets of employees who think they’ve “died and gone to heaven” because they are working for a world-leading streaming service.
In the end, she puts it down to finding the right candidates. For some, a culture of freedom and responsibility sounds appealing until you’re actually working within it.
“It’s like my story of the Apple engineer. He really wanted to work at Netflix. I said, ‘I know you do, but I’m not sure you’re really going to thrive here.’ It’s OK to want more structure. It really is.”
Netflix, and the culture she helped create, have always had their critics. McCord is used to it, and she says the success of Netflix speaks for itself.
Netflix tallied its third Emmy award a year after McCord left, and the company has now reached almost 139 million subscribers globally. Last year it briefly surpassed Disney in market value and it was worth US$156 billion at the time of writing.
The truth is, Netflix owes its very existence to criticism. Back in 2000, Blockbuster, a multi-billion-dollar company which filed for bankruptcy in 2010, famously turned down purchasing Netflix for just $50 million.
McCord recalls an incident when an analyst asked Blockbuster CEO John Antioco what he thought of Netflix during an earnings conference call she was listening in on. “He said, ‘They are nobody. They are nothing. No one will ever do this. Do not ever ask me about that stupid little company again.’”
Connect with difference makers and hear from world famous disruptors such as Dominic Price and Stewart Friedman at this year’s AHRI’s National Convention and Exhibition in Brisbane from 16 to 19 September.