Powerful: Building a Culture of Freedom and Responsibility

The foundation of a great business book is a great story and boy does Patty McCord have a great story. She joined Netflix right at the start, carpooled into work with the CEO each day and spent 14 years pioneering a radically performance focused HR approach. What makes her journey especially exciting and valuable is that her experience at Netflix isn’t just a reaction to the unique circumstances Netflix was in - pioneering a new market and a new technology- its the fact that McCord and CEO Reed Hastings set out from the start to build a company based on a different approach to people. So this isn’t the Netflix story told from a people and HR perspective, the Netflix story was always going to be told from a people and HR perspective, that’s what makes what happened at Netflix so valuable as a case study for everyone else. McCord and Hastings had worked together before and had noticed that as companies grow and startups become scale ups, something bad happens. The talent density tends to drop. The ratio of super top high performers becomes less. It’s something I’ve personally seen and heard of a hundred times. It’s what is behind the constant warnings to entrepreneurs “Watch your culture as you grow”. These warnings are made with good intention, but they are ultimately useless as they come with no guidance as to what to do, how to “watch your culture” and what practically to do to keep that fast growing, autonomous startup mindset as you grow to hundreds or thousands of employees. Powerful is that guidance, it’s the manual. With several decades of work in the Valley, Patty has developed a love for working with software engineers and that influence means she applies a product manager’s approach to HR. She has a goal of operating with minimal process and constantly tests eliminating procedures. But she does this in an agile way, like a good product manager would. She sets a low bar for people process innovation - “Is it safe to test?”, rather than “will this work”. If it is safe let’s change the process (commonly “lets remove the process) and see. If it turns out he policy was needed just re-instate it. There are some things in the book that can only work in the Valley, in that unique place where VC cash at times is plentiful and the oversupply of jobs to talent distorts things like no where else on Earth. It’s easy to focus on these things, like “constantly ask your staff to interview elsewhere and see what they are worth” and dismiss the book as not practical to your situation or industry. But that would be a tragedy because the vast majority of the learnings and advice in this book are applicable to so many businesses and organisations. The new employee college, teaching every single person how to read the P&L, tacking everyone how the company makes money, teaching everyone the key projects and key performance indicators for each department, communicating to everyone constantly what the 5 big challenges are the company is faced with, encouraging a practice of constant, respectful, radical honesty and feedback, understanding that great jobs are challenging jobs where great things get done, accepting that perks and food are at best peripheral decoration and the core thing you need at work is amazing people to work with and a great challenge to overcome - these are the central tenants of Powerful and they are applicable to any business, anywhere. Powerful is beautifully written and Patty has an engaging, irreverent style. I flipped between the Kindle version and the audio book and can heartedly recommend both, sometimes its great to hear Patty’s voice and emphasis in the material. Powerful is a fantastic read for managers, leaders, CEO’s, HR people - anyone at any level who cares about business and people and wants to help the people they work with do their best work.

I had heard of the Netflix culture deck and was inspired by it to learn more about the company. Patty McCord shares the strategy of how a startup can move at crazy fast speed through scale up to international corporation. Whilst I can see how the strategy she outlines works, I still can’t help but feel there is a lot of us vs them. She is talking from the POV of an executive (us) about employees that are pawns in a game of global domination (them). How do we find them, hire them, promote them (to us), and fire/let go of them. There is a lot of management innovation in here which I liked - and some that still smacks of strong hierarchy which I didn’t. But - there is enough in here to still make it worth a read. If I were to start a startup, I would follow a lot of the advice she has. Even the rapid staff turnover - however, I would ensure that those coming through could take the option of money and/or ownership (shares). Otherwise we are creating companies that are once again just set up for the owners and investors to take all. I think that model needs to change.

Netflix opened for business in 1998. Since then, the company has gone through ups and downs, survived changing technologies and markets, and become a moviemaker. Patty McCord was there for 14 years, starting in 1998. She was one of the people responsible for the HR policies that so many people want to hear more about. You can get some of those lessons from reading articles in the business press. Some feature specific practices, like the Netflix vacation policy. Others are about how you can be more “people-oriented.” But if you want to get an idea of why Netflix approaches HR the way it does, you need to read Powerful: Building A Culture of Freedom and Responsibility by Patty McCord. In Powerful, Patty McCord says creating a culture is an evolutionary process, and she thinks of it like an experimental journey of discovery. The book will introduce you to several of the policies that Netflix created, but it will also introduce you to that journey. Early in the book, McCord sums up the lessons shewill present. “The fundamental lesson we learned at Netflix about success in business today is this: the elaborate, cumbersome system for managing people that was developed over the course of the twentieth century is just not up to the challenges companies face in the twenty-first. Reed Hastings and I and the rest of the management team decided that, over time, we would explore a radical new way to manage people—a way that would allow them to exercise their full powers.” Read this book if you’re curious about Netflix. You’ll like it if you’re interested in new ways we can do HR. If you like thinking about how work will be different in the future, you’ll like this book, too. No matter what your other interests, you’ll get lots of ideas about things to try in your business. I’m glad that McCord waited for a few years after leaving Netflix before writing this book, Distance in time gives us perspective, and I believe the book is better for that. It’s also better because Patty McCord has worked as a consultant with other companies since leaving Netflix in 2012. We get the benefit of her experience at Netflix and her experience with other companies. I only have one tiny quibble with this book. Patty McCord writes about a high-tech, fast-growth company. If your company is like that, great, but most companies aren’t. Then what? Then you can ignore the few bits that only apply to high-tech, fast-growth companies and get all the other lessons from the book. I got many great quotes from the book. Here are a few of them. You can see more on my Goodreads page. “Yes, engaged employees probably deliver higher-quality performance, but too often engagement is treated as the endgame, rather than serving customers and getting results.” “Perhaps the worst problem with anonymous surveys, though, is that they send the message that it’s best to be most honest when people don’t know who you are.” “I love data. But the problem is that people become overly wedded to data and too often consider it much too narrowly, removed from the wider business context. They consider it the answer to rather than the basis of good questions.” “it’s absolutely great for employees to be happy, but that it’s best for both them and their companies if the reason they’re happy is that they’re doing great work with great people.” “One of the reasons that I’m no fan of the annual performance review process is that not only does it take up a lot of your HR department’s time, but it is so often removed from any true connection to business results and serving customers.” In A Nutshell Powerful: Building A Culture of Freedom and Responsibility by Patty McCord is a great business book. Read it for the story of Netflix, for a look at how cultures develop, and a whole bunch of ideas to try.

I came across Patty McCord’s name in another book about building and running great organizations (The Friction Project by Professors Sutton and Rao). I was intrigued by the story told about her honesty and her ability to challenge senior management on what was actually agreed to in meetings, and how that should be communicated to the broader group. Her book confirms these traits and teaches a lot more about how to build great teams. Quick read. Phenomenal read with great humor at times. Highly recommended!

“This book is a memoir of the building of Netflix.” Netflix practiced “incremental adaptation” by innovating, failing, and learning. Eventually, a great culture emerged that allowed Netflix to grow and remain competitive in a survival-of-the-fittest competitive world. Distilling their core cultural values and injecting them into people and especially teams, effectively fueled Netflix’s strategy and success. “Rapid disruption” assumes that everything changes; so, it’s good to embrace a culture of innovative team problem solving. Creating conditions that allow great teams to do great work is the essential responsibility of management. To execute that responsibility, management must recruit the best, empower people and teams, and get rid of policies and procedures that get in the way. To transform their culture, Netflix developed core values and identified specific behaviors and disciplines to ensure that people execute on them. Such behaviors included practicing: Open and clear communication, radical honesty, fact-based opinions, customer- and company-centric decision making, managing teams with integrity and responsibility, and modeling good behavior. Eventually, the famed Netflix Culture Deck was developed and widely distributed as the Netflix cultural manifesto.

Netflix is one of the world’s greatest companies. They didn’t become a great company because they have a great strategy. Let’s be clear about this: strategy never made any company great. They are a great company because the have a sound strategy AND a superb people management system. This book is a description of that system by the Human Resource executive, Patty McCord, who to helped create it. McCord writes: “…we found that inculcating a core set of behaviours in people, then giving them the latitude to practice those behaviours—well, actually, demanding that they practice them—makes teams astonishingly energized and proactive.” To transform a culture in a team or the whole company, isn’t achieved by formulating a set of values and principles. It is only achieved when the behaviours you desire become consistent practice. This book describes the eight practices below: 1. The greatest motivation is contributing to success 2. Every single employee should understand the business 3. Practice radical honesty 4. Debate vigorously 5. Build the company now that you want to be in the future 6. Have the right person in every single position 7. Pay people what they are worth to you 8. Perfect parting well with non-performing staff or staff who are no longer required, and be a great reference company to have worked at. I will touch on only three. The first principle is that motivation flows from being a contributor to success, not from incentives and perks. Talented people who are adult in their behaviour, want nothing more than to be challenged. This requires that you employ talented people and then explain to them, clearly and continuously, what exactly you expect from them. The common alternative is to create policies and procedures as a substitute for explaining clearly and continuously. The weakness of this approach is that the manual cannot anticipate the ongoing changes that are inevitably required. Netflix was changing too fast to be able to follow a policies and procedures manual. The company had to have a flat management which allows for speed in execution. This became clear when they had to retrench, and many middle managers were included. The result of removing a layer of management was a quickening of response times Netflix had not anticipated. As the fortunes of the company improved and it grew, the challenge became how to sustain the creative spirit and extraordinary level of performance the teams had been demonstrating. This stimulated McCord to ask: “What if people in marketing and finance and my own group, human resources, were allowed to unleash their full powers?” Netflix began by trusting people to be responsible with their time, got rid of their expense and travel policy, and in place simply demanded that employees use good judgment about how they spend the company’s money. The company lawyers warned it would be a disaster, but what emerged was that people didn’t abuse the freedom. “We saw that we could treat people like adults,” and that the staff wanted this. Netflix then experimented with every possible way to liberate teams from unnecessary rules and approvals. This approach required management to appreciate that their most important job is to focus on building superb teams. The best achieving teams were those where all members understood the ultimate goal of their work and were freed to creatively solve the problem of how to get there. Netflix was able to prove to itself that operating with the leanest possible set of policies, procedures, rules, and approvals, releases speed and agility. This led to the second principle that every single employee should understand the business. What is required in the absence of rules, processes, approvals, bureaucracy, and permissions, is clear, continuous communication about the context of the work to be done. It is an ongoing discussion about where we are, and what we’re trying to accomplish. In Netflix’s case they were changing from a system where you paid per rental of a movie which was mailed to you, to a subscription model where you paid in advance for future benefits. This change had profound operational implications. Too many companies when faced with new and difficult challenges “invested so much in training programs of all sorts and spent so much time and effort to incentivize and measure performance, but they’ve failed to actually explain to all of their employees how their business runs,” McCord observes. Ask yourself these questions: Do your staff appreciate the most pressing issues facing the business? How much do you think they know about how their work contributes to the bottom line? If your instinctive response is that if you tried to explain, they would not understand, McCord advises: “The rule I would give them was this: explain it as though you’re explaining to your mother.” After all, if your staff aren’t informed by you, there is a good chance they’ll be misinformed by others. Communication between management and employees should flow in both directions. The more you actively encourage questions and suggestions, the more your people, at all levels, will offer ideas and insights that will amaze you. And the job of communicating is never done. To achieve all of the issues above, you have to have a focus on principle 6 - the right person in every single position. Netflix relied on the talent-management philosophy that “the responsibility for hiring great people, and for determining whether someone should move on, rested primarily with managers,” not on HR. HR is only an assistant in this process. They also required the deceptively difficult task of hiring a person who would be a great fit for the position (at whatever level,) and not just adequate. Building a great team is the managers’ most important job. “True and abiding happiness in work comes from being deeply engaged in solving a problem with talented people you know are also deeply engaged in solving it, and from knowing that the customer loves the product or service you all have worked so hard to make,” McCord explains. Money alone doesn’t buy love. This book is an accessible, very practical guide to managing staff at every level, based on insights from only one, very unique company – Netflix. However, it provides a valuable source of thought provoking ideas that you can easily adapt to your own circumstances. Readability Light -+--- Serious Insights High --+-- Low Practical High +---- Low *Ian Mann of Gateways consults internationally on leadership and strategy, and is the author of the recently released ‘Executive Update.

If "Powerful" was a cupcake, it would be one of those red velvet deals that people line up around the corner for. The book goes down easy because it is a powerful antidote to what's wrong with America's matrixed corporate culture. McCord's writing is powerful because she is upfront about taking only what works from Netflix to other organizations and encouraging folks to proceed incrementally, iteratively. The stories are great and turn a management book into a breezy read. I do wonder how the author would address the larger, shifting political context for the silicon valley firms she is writing about. The culture deck and the lessons in the book are largely proven/disproven through A/B testing and reliance on data-driven outcomes. The book describes how to build a highly-effective organization in that context; but now that many valley firms are big, these organizations will be drawn into addressing/solving larger social issues where math feedback is only part of the solution and new competencies may be needed. . If this book describes an "adolescent" company, Patty's next book could be about describing an "adult" company operating in a context where government institutions are failing us and corporate leadership is necessary to address the big stuff: inclusion, income inequality, BUI, election integrity, privacy norms etc. Which is really just a long-winded way of encouraging the author to keep writing!

This is one of a gazillion books about creating the team you need to be the next Netflix. Is it worth it? That depends. If you’re looking for a passionate, pleasantly irreverent, contrarian perspective on building a high performance team, then the answer is probably yes, and you should consider this book a 5+. If, on the other hand, you’re looking for definitive answers on how to measure performance and talent, this book is another 1 or 2. If you agree with McCord that the annual performance review is a colossal waste of time and money, and I could not agree more, great. And if you agree that no company has an obligation to guarantee career development to its employees, you’ll want to display the book prominently on your desk. In this regard, I do agree with her on the obligation part of the perspective, but not the return on investment of pursuing such a strategy, unless, of course, you are another Netflix, and you probably aren’t. Everything in life and business must be viewed in context. Building a high performance team is no exception. This model assumes that high-performance employees value nothing quite so highly as they value hard-core honesty and the chance to be part of a big, ugly shared challenge. And that fits some of the people some of the time in some companies at some point in their development. For Netflix it was a winner. For you? I don’t know. What you are guaranteed to get is churn, unless of course you are Netflix at exactly that point in the company’s development. McCord, to her credit, admits that she applied the same standards to herself as she did the rest of Netflix. And she left and the company apparently didn’t stop her, at least not successfully. I have no doubt she will be a huge success in consulting. Bigger than big, is my guess, particularly in the Silicon Valley biosphere. She definitely has something to offer. I liked the book. I really did. It’s a quick read and wonderfully written. Without the Netflix brand it’s probably over-priced but that’s okay. I happen to think Netflix is the greatest invention since the electric garage door opener, although I’m showing my age and the fact that I’ve always lived in cold, snowy climates. But after four decades in the corporate world, none of it in Silicon Valley, but with a decade of experience in China, where I managed a company that was successful despite my inability to speak the language, my unanswered question is how to specifically and objectively identify top talent. I fully understand the Justice Potter Stewart standard of “I know it when I see it,” and my record has been pretty good as both a CEO and a broad member evaluating CEOs. But I’d still like to better understand the why behind the what. I got whiffs of it in this book, for sure, but it ultimately fell short of being the Holy Grail – at least in that one regard.

Na minha de Organização Exponencial e Reinventando as Organizações, esse é um livro indispensável para o gestor do século XXI, independente se trabalha em uma startup ou não. O modelo Netflix de gestão de pessoas é validado e pode ser adaptado em várias esferas.

La cultura corporativa de Neflix es de las más importantes de Silicon Valley y posiblemente del mundo, su "culture deck" tiene miles de descargas, con una premisa en realidad muy simple: la empresa como equipo de élite. En el Culture Deck y en diferentes artículos de google se profundiza en esto, pero aquí McCord, la autora intelectual del tema (junto a Reed Hastings) profundiza un poco más en sus métodos y visiones. Es tan simple de entender que asusta, el caso es saber llevarlo a cabo

Excellent read for people looking for new ways to work with people. Loved how stories from the author are weaves into the book.

Good book esp for a new HR perspective.

Dirijo una pequeña empresa de desarrollo de software, estamos creciendo. Este libro llegó a mis manos en el momento indicado. Es muy interesante conocer el punto de vista de alguien que estuvo dentro de una de las empresas más emblemáticas de los últimos 10 años. Para mí no tiene desperdicio todo el contenido del libro, obviamente hay que ser capaces de distinguir los momentos en que se pueden aplicar sus recomendaciones, conocer el estado actual de la empresa por que no todo es para todos. Es una ventana para entender por qué Netflix es lo que es.