Powerful: Building a Culture of Freedom and Responsibility

by Patty McCord

I love discipline. My whole career I have gotten along well with engineers, because engineers are very, very disciplined. When engineers start to whine about a process you’re trying to implement, you want to really dig into what’s bothering them, because they hate senseless bureaucracy and stupid process. But they don’t mind discipline at all.

We wanted open, clear, and constant communication about the work to be done and the challenges being faced, not only for a manager’s own team but for the company as a whole. • We wanted people to practice radical honesty: telling one another, and us, the truth in a timely fashion and ideally face to face. • We wanted people to have strong, fact-based opinions and to debate them avidly and test them rigorously. • We wanted people to base their actions on what was best for the customer and the company, not on attempts to prove themselves right. • We wanted hiring managers to take the lead in preparing their teams for the future by making sure they had high performers with the right skills in every position.

Ask any very successful person what their fondest memories of their career are, and they will inevitably tell you about an early period of struggle or some remarkably difficult challenge they had to overcome.

I think Reed expressed in that statement exactly what people most want from work: to be able to come in and work with the right team of people— colleagues they trust and admire—and to focus like crazy on doing a great job together.

We had been creating an annual road map and doing annual budgeting, but those processes took so much time, and the effort wasn’t worthwhile because we were wrong all the time. I mean, really, we were making it up. Whatever our projections were, we knew they would be wrong in six months, if not three. So we just stopped doing annual planning. All the time we saved gave us more time to do quarterly planning, and then we went to rolling three-quarter budgets, because that was as far out as we thought we could ostensibly predict.

They were all built upon the realization that the most important job of management is to focus really intently on the building of great teams. If you hire the talented people you need, and you provide them with the tools and information they need to get you where you need to go, they will want nothing more than to do stellar work for you and keep you limber.

They put their confidence in people who’ve proven they can produce, and hand in hand with the freedom those people are given is the understanding that it’s they who are accountable for the quality of shows.

IN BRIEF ▶ The greatest team achievements are driven by all team members understanding the ultimate goal and being free to creatively problem-solve in order to get there. ▶ The strongest motivator is having great team members to work with, people who trust one another to do great work and to challenge one another. ▶ The most important job of managers is to ensure that all team members are such high performers who do great work and challenge one another. ▶ You should operate with the leanest possible set of policies, procedures, rules, and approvals, because most of these top-down mandates hamper speed and agility. ▶ Discover how lean you can go by steadily experimenting. If it turns out a policy or procedure was needed, reinstate it. Constantly seek to refine your culture just as you constantly work to improve your products and services.

Clear, continuous communication about the context of the work to be done. Telling people, “Here’s exactly where we are, and here’s what we’re trying to accomplish.” 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.

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, so that the company is spotting issues and opportunities in every corner of the business and effectively acting on them. The irony is that companies have 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.

Over time, we developed “new employee college.” For one whole day each quarter, every head of every department would make an hourlong presentation on the important issues and developments in their part of the business.

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.

IN BRIEF ▶ Employees at all levels want and need to understand not only the particular work they are assigned and their team’s mission, but also the larger story of the way the business works, the challenges the company faces, and the competitive landscape. ▶ Truly understanding how the business works is the most valuable learning, more productive and appealing than “employee development” trainings. It’s the rocket fuel of high performance and lifelong learning. ▶ Communication between management and employees should genuinely flow both ways. The more leaders encourage questions and suggestions and make themselves accessible for give-and-take, the more employees at all levels will offer ideas and insights that will amaze you. ▶ If someone working for you seems clueless, chances are they have not been told information they need to know. Make sure you haven’t failed to give it to them. ▶ If you don’t tell your people about how the business is doing and the problems being confronted—good, bad, and ugly—then they will get that information somewhere else, and it will often be misinformation. ▶ The job of communicating is never done. It’s not an annual or quarterly or even monthly or weekly function. A steady stream of communication is the lifeblood of competitive advantage. QUESTIONS TO CONSIDER

Part of being an adult is being able hear the truth. And the corollary is that you owe the adults you hire the truth. That is actually what they want most from you.

“What’s your HR philosophy?” Remember, I’d worked at Sun and at Borland, so I answered in my fluent HR-speak: “Reed, I believe that everyone should draw a line from their personal ambitions and integrity and become empowered to contribute.” He looked at me and said, “Do you even speak English? You know what you just said didn’t mean anything, right? Those words don’t even string together into a logical sentence!” I responded with characteristic aplomb, “Hey, you don’t even know me!”

More important, though, is that honesty helps people to grow, and it flushes out the differences of opinion and alternative ideas that people so often keep to themselves.

He told me that when he started getting critical feedback from colleagues at Netflix, “It hurt. People told me, ‘Colson, you’re not good with communication; when you need to get a message out to a wide audience, you take too long to make the point and it’s unclear.’” His initial reaction was to think, Oh yeah? Well, I’ve got a lot of things to say about you too! But before long, he realized that “when you reflect on what they’ve said, you see it from their point of view, and you learn how to improve on those things. That directness was really helpful.”

Eric also shared with me a story that reinforced what I observed so often when managers weren’t willing to give their people tough feedback: that it puts undue pressure on the boss to provide cover and cheats the employee of the chance to improve. He recalled having held back a badly needed critique from one of his staff at Yahoo! and then having to make up for that person’s shortfalls, which was exhausting—and unfair to the employee. “I was too kind,” he told me, “and that means you’re a bad manager in a lot of ways. You end up sugarcoating things, and that’s doing them a disservice.”

The most important thing about giving feedback is that it must be about behavior, rather than some essentializing characterization of a person, like “You’re unfocused.” It also must be actionable. The person receiving it has to understand the specific changes in their actions that are being requested. The comment “You’re making a great effort, but you’re not getting enough done” is essentially meaningless. An action version would be “I can see how hard you’re working, and I really appreciate that, but I’ve noticed that there are some things you’re spending too much time on at the expense of others that are more important.” You would then establish a better prioritization with the person.

One was to conduct an exercise we called “Start, Stop, Continue” in our team meetings. In this drill, each person tells a colleague one thing they should start doing, one thing they should stop doing, and one thing they’re doing really well and should keep doing.

We wanted to make sure all of our people understood where we were going and what we were doing, and I realized that an essential part of that was understanding, really deeply understanding, what the business was up against. In most companies, no one owns the responsibility of communicating this information company-wide, and too often many people—whole departments, even—are left in the dark. Companies sometimes even delay making important strategy and operations changes because of worry about how employees will react.

Trust is based on honest communication, and I find that employees become cynical when they hear half-truths. Cynicism is a cancer. It creates a metastasizing discontent that feeds on itself, leading to smarminess and fueling backstabbing.

“You know, we’re about to make a decision that you’ve been telling me for four months you’re against, and you haven’t said a word. Have you changed your mind? Or do you feel like I’m not going to listen?” You have to exhibit the courage you want people to have, the courage to say, “I honestly don’t think that’s a good idea at all, and here’s why.”

But then one day we were talking about something and he said, “You were right. I was wrong about this one,” and it didn’t feel good anymore. Instead I was mad at myself because I hadn’t made my case more effectively earlier. I found myself wondering how I could have made a better argument. When leaders not only are open to being wrong but also readily admit it—as Reed did that day, and regularly did—and when they do so publicly, they send a powerful message to their teams: Please speak up!

IN BRIEF ▶ People can handle being told the truth, about both the business and their performance. The truth is not only what they need but also what they intensely want. ▶ Telling the truth about perceived problems, in a timely fashion and face to face, is the single most effective way to solve problems. ▶ Practicing radical honesty diffuses tensions and discourages backstabbing; it builds understanding and respect. ▶ Radical honesty also leads to the sharing of opposing views, which are so often withheld and which can lead to vital insights. ▶ Failing to tell people the truth about problems in their performance leads to an undue burden being shouldered by managers and other team members. ▶ The style of delivery is important; leaders should practice giving critical feedback so that it is specific and constructive and comes across as well intentioned. ▶ Consider setting up a system for colleagues to offer one another critiques. We created a successful one at Netflix and instituted an annual feedback day for the whole company to share comments with anyone they had thoughts for. ▶ Model openly admitting when you are wrong. In addition, talk about what went into your decisions and where you went wrong. That encourages employees to share ideas and opposing views with you, even if they directly contradict your position.

“Can you help me understand what leads you to believe that’s true?”

One of the great dangers in business is people who are great at winning an argument due to their powers of persuasion rather than the merits of their case. We had one guy who was just fantastic at championing his views. I mean, you’d listen to him and you’d just about be in a trance; he was so eloquent and so convincing. But he was almost always wrong.

Note that I say “fact driven,” not “data driven.” There’s been something of a deification of data in recent years, as though data itself is the answer, the ultimate truth. There’s a dangerous fallacy that data constitutes the facts you need to know to run your business. Hard data is absolutely vital, of course, but you also need qualitative insight and well-formulated opinions, and you need your team to debate those insights and opinions openly and with gusto.

He said the decision making of his content team was data informed rather than data driven. When Netflix launched House of Cards, lots of attention was given to how Ted’s team had done such a deft job of mining Netflix viewership data: they concluded the show would be a good fit in part because because the show’s star was popular with viewers, as was another drama set in the halls of Washington power, The West Wing. In reality, while the data gave a great assist, a huge part of the decision to go with the show was that the remarkably talented David Fincher was developing it.

Another big mistake made with metrics is thinking that they’re fixed. They must be fluid; they must be continuously revisited and questioned. This is where vigorous debate comes in.

One of the worst ways that companies fail to serve their customers, and therefore their own profitability, is neglecting to interrogate intensively enough what the data is really telling them.

“you learn how to come in and think about things in a structured way, anticipate the kind of questions you’re going to get, and have your argument as buttoned up as you can.”

But A/B tests showed that it made no material difference in customer retention or the number of movies or shows watched or any of the other hard-data measures of customer satisfaction.

Steve McLendon reminded me of another such counterintuitive test result, this one about the customer sign-up process. The findings floored him. We were constantly running tests on the process, but this was a particularly controversial one. The hypothesis was that we could boost the number of people who signed up for a free trial, and then ultimately subscribed, if we removed friction from the initial sign-up by not requiring people to input their credit card information. Steve was adamant that subscriptions would dramatically increase, yet the results were abysmal: they plummeted by half. He was so stunned that he really wanted to run the test again. Debating the result, we realized that, ironically, in trying to remove friction we had introduced more by effectively forcing people to go through a sign-up process twice.

But if I believe that you’re fighting for the good of the company, defined as doing the right thing for the customer, then I’ll be more willing to hear you. In the Consumer Science Meeting, as is human nature, often enough people would go off on a tear, slipping into argument for argument’s sake, but someone would always interject, “And how does this help the customer

You can orchestrate great conversations if you take a little time to set them up right and make it clear that everyone is seeking the best answer for the customer and the company, that no one is arguing simply to win. The way to do that is to set the context: to be clear about what the group is going to decide and the reason for the conversation. If the discussion digresses, or if someone is stubbornly digging in, you can always interject, “What problem are we trying to solve here?” or “What leads you to believe that’s true?”

IN BRIEF ▶ Intense, open debate over business decisions is thrilling for teams, and they will respond to the opportunity to engage in it by offering the very best of their analytical powers. ▶ Set terms of debate explicitly. People should formulate strong views and be prepared to back them up, and their arguments should be based primarily on facts, not conjecture. ▶ Instruct people to ask one another for explanations of their views and of the problems being debated, rather than making assumptions about these things. ▶ Be selfless in debating. That means being genuinely prepared to lose your case and openly admitting when you have. ▶ Actually orchestrate debates. You can have people formally present cases, maybe even have them get up onstage. Try having people argue the opposing side, poking holes in their own position. Formal debates, for which people prepare, often lead to breakthrough realizations. ▶ Beware of data masquerading as fact; data is only as good as the conclusions it allows you to draw from it. People will be drawn to data that supports their biases. Hold your data up to rigorous scientific standards. ▶ Debates among smaller groups are often best because everyone feels freer to contribute—and it’s more noticeable if they don’t. Smaller groups also aren’t as prone to groupthink as large groups are.

In my experience, one of the most important questions business leaders must regularly ask is “Are we limited by the team we have not being the team we should have?”

We had a rule of thumb for whether to promote from within or bring in a top performer from outside: did the job to be done require expertise that no one inside had, or was the work in an area that we were ourselves at the forefront of innovating? With cloud services, there was better expertise outside, so it was much more effective for us to bring people in. With developing data algorithms, we were at the forefront of innovation and saw that in Eric we had a top-rate talent inside.

At Netflix, when we were interviewing people, we told them straight out that we were not a career-management company, that we believed people’s careers were theirs to manage, and that while there might be lots of opportunity for them to advance at the company, we wouldn’t be designing opportunities for them.

If people were eager to take on responsibilities we couldn’t give them, or to do work that wasn’t a priority for us, we encouraged them to look for those opportunities elsewhere. We also suggested that our employees interview elsewhere regularly, so that they could gauge the market of opportunities. This also allowed us to get a better understanding of how sought after they were and what we should be paying them.

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. At Netflix we encouraged people to take charge of their own growth, availing themselves of the rich opportunities we afforded them to learn from stellar colleagues and managers and making their own way, whether that meant rising within the company or seizing a great opportunity elsewhere.

IN BRIEF ▶ To stay agile and move at the speed of change, hire the people you need for the future now. ▶ On a regular basis, take the time to envision what your business must look like six months from now in order to be high-performing. Make a movie of it in your head, imagining how people are working and the tools and skills they have. Then start immediately making the changes necessary to create that future. ▶ More people will not necessarily do more work or better work; it’s often better to have fewer people with more skills who are all high performers. ▶ Successful sports teams are the best model for managers; they are constantly scouting for new talent and culling their current roster. You’re building a team, not raising a family. ▶ Some members of your team may simply not be able to grow into high performers for the future you’re heading to. It is not the job of the business to invest in developing them; the job is to develop the product and market. ▶ Develop and promote from within when that’s the best option for performance; when it’s better to hire from outside, be proactive in doing so. ▶ The ideal is for people to take charge of developing themselves; this drives optimal growth for both individuals and companies.

Our overriding talent-management mandate had to be building the best team for the future we were creating.

We also did not have a bonus system. If your employees are adults who put the company first, an annual bonus won’t make them work harder or smarter.

We didn’t understand right away at Netflix that great colleagues and tough challenges to tackle were the strongest draws to working at the company.

Making great hires is about making great matches. One company’s A player may be a B player for another firm, and vice versa. There is no generic formula for what makes people successful, despite a great deal of effort and all sorts of assessments to try to come up with one. Many of the people we let go from Netflix because they were not excelling at what we were doing at the time went on to excel at other jobs.

him.” So I said to my recruiters, “Go get that guy.” I was amazed when he came in; not only did he have a very thick German accent, but he also stuttered. This guy was the great communicator? On top of that, he was clearly nervous; after all, he hadn’t interviewed for many years. It was truly painful, for him and for me. But when I asked him if he could explain to me, in really simple terms, the incredibly complicated technical work he was doing, he just transformed. He still stuttered, but he gave me a riveting explanation, and I realized, That’s it! He’s great at making really complicated things understandable.

IN BRIEF ▶ Hiring great performers is a hiring manager’s most important job. Hiring managers should actively develop their own pipelines of talent and take the lead in all aspects of the hiring process. They are the lead recruiters. ▶ The teams and companies most successful in staying ahead of the curve manage to do so because they proactively replenish their talent pool. ▶ Retention is not a good measure of team-building success; having a great person in every single position on the team is the best measure. ▶ Sometimes it’s important to let even people who have done a great job go in order to make space for high performers in new functions or with different skills. ▶ Bonuses, stock options, high salaries, and even a clear path to promotion are not the strongest draw for high performers. The opportunity to work with teams of other high performers whom they’ll learn from and find it exhilarating to work with is by far the most powerful lure. ▶ Making a great hire is not about bringing in an “A player”; it’s about finding a great match for your needs. Someone who is a high performer for one team may not be for another team. ▶ Get beyond the résumé. Be really creative about where you look for talent. Dig further than a list of experiences. Consider wide-ranging experiences and focus on people’s fundamental problem-solving abilities. ▶ Make the interviewing experience extremely impressive all the way through. You want every single person you interview to want to join the comp...

Can you name the two people you would call right away to talk to about taking the place of your top performers should they leave?