Lessons Learned From the Netflix Culture

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I recently finished reading Powerful: Building a Culture of Freedom and Responsibility by Patty McCord, former Chief Talent Officer at Netflix. Hat tip to my former colleague Kelly for the recommendation!

The Netflix culture has drawn quite a bit of attention since their Culture deck was made public. In many ways, the book was an expansion on the key bullet points in the deck, but I found the additional context and detail in the book really interesting.

There’s no question that Netflix has been extraordinarily successful over the past decade. It was interesting to get a peek behind the curtain at the culture of the company and a first-hand account of how it contributed to their success.

Here are some notes and highlights I made as I went through each chapter.

Chapter 1: The Greatest Motivation is Contributing to Success

McCord pushes back against what she views is a “prevailing philosophy of management today” in that great productivity comes from:

  • Motivating people with incentives
  • Holding them accountable by making sure they know you’re looking over their shoulder
  • Having a series of cascading goals from department objectives to team objectives down to individual objectives and a formal review process for measuring performance

She argues (and I agree) that high-performers inherently want to do great work. Traditional businesses get in the way be instituting policies and procedures that actually impede work getting done. The job of management within a company is to hire world-class talent, provide them with the tools and information necessary to tackle a hard problem, and get out of the way.

Great teams are made when every single member knows where they’re going and will do anything to get there. Great teams are not created with incentives, procedures, and perks. They are created by hiring talented people who are adults and want nothing more than to tackle a challenge, and then communicating to them, clearly and continuously, about what the challenge is. (p. 17)

My takeaways:

  • Keep policies and procedures lean. Constantly question why we do things a certain way and if it’s having the desired outcome.
  • Consistently reiterate the challenge we’re tackling. Tangentially, when setting goals for your team, reiterate specifically why they’re important and how they tie in to the overall challenge.
  • Hiring is incredibly important to get right!

Chapter 2: Every Single Employee Should Understand the Business

In the first chapter, McCord pushed back against formal policies and procedures. In Chapter 2, she answers the question of, “What takes the place of these formal policies and procedures?”

The more time managers spend communicating and elaborating and being transparent about the job to be done, about the challenges the business is facing and the larger competitive context, the less important policies, approvals, and incentives are. (p. 28)

Businesses need “a strong heartbeat of communication” (a phrase I’ve come to love). She argues that if people aren’t informed by leadership within the company, they’ll probably be misinformed by others (media, web search, rumors, etc).

How do you know when people are well enough informed? Here’s my measure. If you stop any employee, at any level of the company, in the break room or the elevator and ask what are the five most important things the company is working on for the next six months, that person should be able to tell you, rapid fire, one, two, three, four, five, ideally using the same words you’ve used in your communications to the staff and, if they’re really good, in the same order. If not, the heartbeat isn’t strong enough yet. (p. 38)

My takeaways:

  • As a manager, a big piece of my job is to make sure this heartbeat of communication is as strong as possible. “The job of communicating is never done.” Constantly make sure everyone on my team has the information necessary to do their job well.
  • Make sure I understand the business model, objectives, and vision of the company. If I don’t understand it, I can’t communicate it effectively to my team.

Chapter 3: Humans Hate Being Lied To and Being Spun

McCord emphasized the importance of encouraging and practicing radical honesty, both in performance conversations and regarding larger business issues. Otherwise, the culture will fail to evolve to be fully open, and people will be afraid to share ideas and opinions.

At Netflix, they instituted an annual feedback day where everyone at the company was asked to send “Start, Stop, Continue” feedback to anyone at the company. The purpose was to provide a platform for widespread transparency and overcome the anxiety inherent in delivering critical feedback. This feels similar 360 feedback cycles I’ve done in the past.

My takeaways:

  • Model openly admitting when I’m wrong. This encourages the transparency and candor I’d like to see continue within my team.
  • Remember this: “Telling the truth about perceived problems, in a timely fashion and face to face, is the single most effective way to solve problems.”

Chapter 4: Debate Vigorously

There are few things I love more than a great debate, one in which both sides are exchanging ideas with the goal of reaching a better outcome (not being “right”). McCord argues this kind of debate was central to Netflix’s ability to continue reinventing itself. Everyone was taught to ask, “How do you know that’s true?”

She dropped a few tips throughout the chapter on how to do this well including:

  • Insist that opinions (and therefore, debates) be fact based and well founded.
  • Debates should all essentially be about serving the business and our customers. That’s the end target – not being “right” or inflating your ego.

Netflix often staged formal debates around central topics to model how good debating is done and demonstrate the importance to the broader organization.

Chapter 5: Build the Company Now That You Want to Be Then

This chapter was all about anticipating the needs of the organization and filling those needs through hiring and managing personnel. She argues that most managers can readily imagine doubling or even tripling size, but it often takes a different mindset to plan accordingly for 10-20x increases.

The basic problem is that most people start with the team they have, thinking, We’ll do more, and we’ll be amazing. The thing is, if you start with the team you have, sure you can do more, but it won’t necessarily be amazing. Instead, build the ideal team by starting with the vision down the road. Identify the problem you want to solve, the time frame in which you want to solve it, the kinds of people who will be successful at that, and what they need to know how to do, then ask yourself, What do we need to do to be ready and able, and whom do we need to bring in? (p. 77)

She alluded to the “sports team versus family” concept. This can be a tough pill to swallow for team members and company leadership alike. On one hand, companies want to take care of their people and help them grow. On the other hand, it’s important to understand that the people you have now might not be a fit for the company in 2-3 years due to a variety of factors. This isn’t an inherently bad thing! Needs change over time.

I appreciated the emphasis McCord put on employees managing their own growth. Netflix even encouraged them to interview elsewhere regularly to gauge the market of opportunities.

I believe the best advice for all working people today is to stay limber, to keep learning new skills and considering new opportunities, regularly taking on new challenges so that work stays fresh and stretches them. (p. 80)

My takeaways:

  • Challenge myself to become a “capacity builder.” These are leaders capable of building teams and anticipating challenges that come with 10-20x growth. It involves a different type of thinking. Currently, I’m more comfortable with incremental growth.
  • Continue learning and exploring opportunities for myself. I’m very happy at Zapier, but I think it’s prudent to keep my eyes open.

Chapter 6: Someone Really Smart in Every Job

This chapter reinforced many of the concepts from the previous one. A general thesis of the book is that happiness at work is derived from solving hard problems alongside very talented people. A piece of that equation then is to fill your organization with very talented people.

McCord expanded on her ideas around filling your organization with top-notch talent including:

  • Don’t evaluate your organization by retention. The measure should be “how many great people you have with the skills and experience you need. How many of them are you keeping?” Otherwise, retention goals could lead you to hold on to team members that no longer fit the needs of the organization.
  • Have really high hiring standards.
  • “Culture fit” doesn’t mean what you think it means. It’s not whether you’d like to get a beer with a candidate. People have all sorts of personalities, which may or may not mesh with yours. Culture fit should represent whether this candidate espouses your company values and has the necessary skills to excel in their role. That’s it.
  • “The interview and hiring process gives a powerful first impression about how your company operates, for good and for bad.”

Chapter 7: Pay People What They’re Worth to You

Compensation is incredibly challenging to get right even with all of the tools available for benchmarking and whatnot. McCord argues that compensation is ultimately a judgement call for an organization.

Her general advice is to identify positions within your organization that have the greatest opportunity for impact and finding the best people possible, paying them whatever is necessary to get them in. The rationale here is that these “Best in the World” types will drive such an enormous positive return due to their skill.

She also reinforced the idea that employees were encouraged to interview elsewhere:

We also encouraged our people to interview regularly. That was the most reliable and efficient way to find out how competitive our pay was. (p. 105)

Chapter 8: The Art of Good Good-byes

I loved this chapter! She argues that companies typically strive to be a great place to work. Netflix wanted to be that, but they also worked really hard to be “a great place to be from.” This meant they had high hiring standards, demanded high performance from their team, and treated them fairly when it was time to move on. This included helping them find a better fit elsewhere when possible.

One reason the sports team analogy is so helpful in managing people is that everyone readily understands that coaches are letting the rest of the team and the fans down if they don’t replace players who aren’t producing top performance. (P. 113)

I appreciated this simple algorithm:

I tell managers to use a simple rule when evaluating their teams…: is what this person loves to do, that they’re extraordinarily good at doing, something we need someone to be great at? (p. 121)

My takeaways:

  • I’m letting everyone down if I don’t hold my team to high (and reasonably fair) performance marks.
  • If it is time for someone to move on into a new role or organization, I want to be a “great manager to have worked for,” which includes helping grow people, place them in appropriate roles, and have the honest conversations when necessary because I care about the people on my team.
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