Powerful: Building a Culture of Freedom and Responsibility by Patty McCord

Powerful: Building a Culture of Freedom and Responsibility (2017) is Patty McCord’s account of what she learned at Netflix, where she was Chief Talent Officer for 14 years. She believes most companies have it wrong when it comes to recruiting and managing talent: high performance requires freedom, transparency and responsibility.

As Chief Talent Officer of Netflix, she helped CEO Reed Hastings create the renowned Culture Deck which made Netflix’s HR principles and management style world famous. The deck was downloaded millions of times. Sheryl Sandberg once said the presentation “may well be the most important document ever to come out of the Valley”.

Being transparent and telling people what they need to hear is the only way to ensure they both trust and understand you.

Patty McCord is a champion of “radical honesty” in the workplace. She advocates saying good-bye to employees who are no longer in a position to fit the evolving needs of the company. She believes all employees should be “fully formed adults”: they need no monitoring and surveillance. She accuses the old mainstays of corporate HR of being a waste of precious resources: annual performance reviews, retention plans, etc. are useless when you deal with adults. Her book is a must-read for all HR professionals who want to embrace change and help their companies compete in the digital economy.

“Being transparent and telling people what they need to hear is the only way to ensure they both trust and understand you”. “Part of being an adult is being able to hear the truth”. “Keep reminding yourself that people have power. (…) Appreciate their power, unleash it from hidebound policies, approvals, and procedures, and trust me, they will be powerful.”

• Patty McCord in Powerful

How Netflix created a new way of working

When it comes to reinventing HR, Netflix has become world famous. As a company set to perpetually reinvent itself in a fast changing digital world, Netflix developed the high-performance culture and the management it needed to adapt fast. “We created a distinctive culture that supports adaptability and high performance”, writes Patty McCord.

Though most companies must “become great adapters” in our fast-changing economy, Netflix may be a particularly stark example from which to draw lessons. As an organisation, Netflix got rid of the elaborate and cumbersome HR system developed in the corporations of the 20th century, to develop a lean culture that fosters innovative problem solving. That’s how it could move so fast from shipping DVDs to streaming films and series and then to producing high-quality content for a worldwide audience.

Netflix’s now world famous culture deck was downloaded more than 15 million times over the years because it appealed to a lot of people’s desires to transform their organisation and the way they work. The deck lists a series of core practices that underpin the company’s culture of innovation. These include:

• Open, clear and constant communication about the work to be done and the challenges being faced;
• Radical honesty in the workplace because adults are equipped to hear the truth;
• All actions are based on what’s best for the customers and the company…

Why we’ve had it so wrong about motivation at work

“The prevailing philosophy of management is that if you want productivity from people, you must first motivate them with incentive and then make sure they know you’re looking over their shoulders to keep them accountable”. But incentives and perks do not really motivate people. What Netflix’s talented workers want most of all is a set of challenging problems to solve and stimulating colleagues to work with. And Netflix recruiters must look for people who get excited at the idea of solving problems.”

What Netflix’s talented workers want most of all is a set of challenging problems to solve and stimulating colleagues.

These “adults” do not need to be watched and incentivised any other way. They can be free to “unleash their power” and solve the problems any way they see fit. They can take whatever holiday they need to recharge their batteries. They don’t need anyone validating their professional expenses. They are trusted to do what’s right for the company and the customers. “We saw that we could treat people like adults and that they loved it.”

The “freedom and responsibility culture” that Netflix succeeded in creating made it possible to meet extraordinary challenges. It also works wonders today for the creation of quality content: unlike traditional Hollywood studios, Netflix doesn’t micromanage its artists, which makes them free to create better films or series.

Why transparency and communication are so essential

In the absence of rules, processes, approvals and bureaucracy, Netflix developed clear and continuous communication among its people. Every single employee is expected to understand the business context and the challenges that their colleagues are facing. “People need to see the view from the C Suite in order to feel truly connected to the problem solving that must be done at all levels and on all teams.”

Netflix created a “new employee college” to teach every new hire about the business and encourage them to start asking questions. It fosters a culture of curiosity and openness. Even the difficulties and challenges must be shared with everybody so as to spur everyone to contribute to solving the problems. Also, “if your people aren’t informed by you, there’s a good chance they’ll be misinformed by others”. Keeping information secret is rarely a good bet in an increasingly digital world!

If your people aren’t informed by you, there’s a good chance they’ll be misinformed by others.

Netflix encourages “radical honesty” in the workplace. “Humans hate being lied to and being spun.” Sometimes we lie to “protect” people but adults do not need “protecting”: they are owed the truth. Constant honest feedback contributes to high performance and well-being. However the feedback must be constructive: it must be about behaviour (that can be improved) and not essential characteristics (that can’t be changed); it must be actionable and it must be delivered in a respectful manner.

Patty McCord found that once the feedback culture and mechanisms are in place, everybody tends to preferradical honesty. Conversely, the absence of honesty leads to cynicism: “cynicism is a cancer. It creates a metastasizing discontent that feeds on itself, leading to smarminess and fueling backstabbing.”

Adults do not need “protecting”: they are owed the truth.

Why HR is about building a team, not raising a family

HR people often like referring to their people as their “family”. But for McCord it is a fallacious metaphor for HR people to use. Companies do not raise families! She believes the sports team metaphor to be much more appropriate. HR professionals need to train their teams, spot growth potential, but also acquire new talent or get rid of low performers to maximise the team’s ability to win games.

A company like Netflix has needed different talents at different periods. When it made the move to streaming, the company needed loads of new technical people it didn’t have, and no longer needed some of the people it had had until then. “Have the right person in every single position” is Patty McCord’s essential HR motto. It implies letting people go when their skills no longer match your needs. “The right person in every single position” also implies that retention is not a relevant metric by which to evaluate team-building success.

Letting people go isn’t easy: “it’s hard enough letting people go who aren’t performing. It’s even more difficult to let people go who have done a great job”. But it is necessary for the company and the people too. To keep learning new skills, employees must regularly take new challenges. That’s how they cultivate their growth mindset and remain resilient. Working for Netflix is not a lifetime engagement (like marriage used to be), but a temporary challenge that helps people (and the company) grow. “If I hire people to rebuild my garage, when they’re done I don’t need them to rebuild the back of my house”, writes McCord.

It’s hard enough letting people go who aren’t performing. It’s even more difficult to let people go who have done a great job.

That’s also one of the reasons why Netflix has always believed in paying its employees well. They are encouraged to interview regularly and find out how much Netflix competitors would be willing to pay them. Most Netflixers have flourishing careers after they leave Netflix. “They have a great résumé because they’ve worked for you”. By remaining ‘desirable’ for other employers and making sure they have control over their careers, employees feel more confidence at work, “confidence to speak up more, to take more risks, to take on more and more responsibility.”

“Just imagine if you had an organization full of people who know they have power.”

Illustration: Pablo Grand Mourcel