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Performance Management

Now Airing: A Peek Inside the Netflix Culture Deck

Patty McCord's new book focuses on how the high-performing culture at Netflix was formed, which advocated honesty and using challenges as motivation rather than incentives.

Patty McCord Netflix

Patty McCord’s new book, “Powerful: Building a Culture of Freedom and Responsibility,” focuses on how the high-performing culture at Netflix was formed.

Patty McCord’s approach to HR culture in the workplace inspires some and sparks irritation in others. Her co-creation of the Netflix Culture Deck, a key onboarding document for companies, still follows her around, which is why she felt it needed an “instruction manual.”

Her book, “Powerful: Building a Culture of Freedom and Responsibility,” focuses on how the high-performing culture at Netflix was formed — advocating complete honesty and using challenges as motivation rather than incentives. Workforce intern Aysha Ashley Househ spoke to McCord about the difficulties of applying unconventional changes and what advice she has for employees who want to approach their bosses with this idea.

Workforce: What was the most difficult thing about applying the unconventional changes to HR?

Patty McCord: It happened gradually, and that’s the part that’s hard for me to explain to people. They think that either I woke up one morning, or Reed Hastings, the CEO of Netflix, woke up one morning and went, let’s undo everything. Let’s just topple it over. And that’s not how it worked.

We had worked together at another company and we just wanted to do it different this time. We wanted to make a place that we wanted to work at. One of the first things that we did that was really important was we wrote stuff down. So that was how the Netflix Culture Deck came about. We used it as an onboarding document. We value honesty. If we find that you’re spinning the truth then that’s not going to work here.

I remember when we decided that we were going to not have a time off policy. We were going to say, ‘Look we’re going to measure results, not whether or not you’re here.’ And if it turns out the way everyone tells us it will turn out then we’ll throw it away and go back to the way everybody else does it.

And the other thing was we were doing those things while we were making Netflix. We’re already inventing something that nobody else had ever done.

WF: What made you realize a change needed to be made in the work culture?

McCord: It was when I just started examining the why of what we did. If I said why do we do the annual performance review? What’s the purpose of it? Well, it’s to give people feedback on their performance. OK, does that mean constructive criticism, which is negative feedback — which nobody wants to give. Or is it giving you feedback: Wow you’re doing a great job, keep doing that. It wouldn’t be very effective to do either one of those things only once a year; it’s too infrequent. And people don’t get very good at it because they don’t practice it.

WF: Can you talk about some mistakes and what you learned from them?

McCord: Our marketing person came one time to a meeting and she said we’ve been counting subscriber growth as our only metric for success and the real metric for success is how long do you stay with the service. It’s a subscription service, right? She’s like, so we’ve been measuring the wrong thing. We should’ve been measuring retention rather than growth. And I looked at the CEO and I said good thing we didn’t bonus her for growth. She’s the one that said we’ve been measuring the wrong thing. And that was because she was a high performing employee who was looking at the right thing for the customer, not how to make her bonus.

WF: What is one thing you want people to take away from the book?

McCord: The idea of questioning what you do. And being able to have a good, logical answer to why. When I talk with big corporations I say I’m OK if you decide the way you’ve always done it is terrific and it works really great at your company. Just decide. Don’t just do it because you’ve always done it. Do it because you’ve decided that it works. One other thing that I wanted us to do, particularly as HR people, is to stop speaking a language no one understands. It makes us sound out of touch.

WF: One of your main points is to motivate people through a challenge instead of using incentives. What made you realize this is the solution Netflix needed?

McCord: I started thinking about the bonus system. We were moving so fast that I honestly couldn’t come up with an annual bonus plan because I couldn’t figure out what needed to get done right at the end of the year, and I could be 50 percent wrong because we were inventing things as we went along. I spent my whole life around bonus plans. And I found that the time it took to write them, to communicate them, to administer them and to re-jigger them every time, was time that was wasted that we could’ve been getting the work done. If I said I want to fill the company with high performing employees who are really talented and get great work done on time, then why do I have to bonus them for it? They’re already going to do it anyway.

WF: You mention that this is defying convention and it was scary to do that. What made you take that risk?

McCord: It worked. And it was the people I was surrounded by. They were taking risks all the time. They’re experimenting all the time. And that’s how we created a service that I’m sure you love. Because we kept taking risks and experimenting with it.

WF: How did you convince your managers to allow for these practices?

McCord: Well, since we created the idea with the CEO and the other executive vice presidents, we didn’t have to do much convincing. Early on as we started to experiment, I remember someone saying, ‘You know, you and Reed should grow up and forget this idea of utopian workforce and start acting like a grown-up corporation. Those of us from real companies are waiting for you to do that.’ And I remember sitting down with her saying what you’re hoping for quite possibly won’t ever happen, we’re probably the wrong company for you.

WF: Then what advice do you have for people who need to convince their management?

McCord: Start small and come up with a business reason for doing it. And use business metrics. The annual performance review takes 100 percent of our employee base and an entire month to administrate. So you take the total payroll dollars, divide by 12, take one month’s worth, and say that costs us this much. And my hypothesis is if we did it in smaller increments over time, that we might yield better results. Can we carve off a group of people to experiment with it? And then look at results. So, you need to speak in a business language, you have to start with what you think the outcome will be, and then it’s not a whole fail overhaul. It’s just one thing at a time. And it’s as much about what you stop doing as what you start doing.

WF: Did you have any input in the TV shows created?

McCord: No, in fact that story in the book [‘Orange is the New Black’] from Ted is when I interviewed him for my book and I’d been gone for five years. But no, the people that owned the making of the content would be making those decisions. I wouldn’t have put any input into that. It wasn’t my job.

WF: I have to ask: What’s your favorite show on NetFlix?

McCord: If you ask me in a month I’ll tell you something different. As dorky as it is, I just finished up ‘Grace and Frankie’s new season because I wanted to make sure I had some quiet time to watch it. I’ve been binging a lot because I travel internationally, so I download a whole season and watch it from beginning to end. I did ‘Godless’ on my way back from Australia. I love the quirky stuff. My daughter and I just watched ‘BoJack Horseman’ over and over again for like … look at the magazine in the back of her car, it’s Cosmopolitan!

Aysha Ashley Househ is a Workforce intern. Comment below or email editors@workforce.com.