Powerful: Building a Culture of Freedom and Responsibility

by Patty McCord

I am not going to claim that tackling the challenges of rapid change is easy in any way or for anyone. The good news is that we found that inculcating a core set of behaviors in people, then giving them the latitude to practice those behaviors—well, actually, demanding that they practice them—makes teams astonishingly energized and proactive. Such teams are the best drivers to get you where you need to go.

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.

To build that kind of company, we were intent on creating a culture of great teamwork and innovative problem solving. We wanted people to feel excited to come to work each day, not despite the challenges but because of them. I’m not going to say that working at Netflix wasn’t often extremely hair-raising. Some of the decisions we had to make were radical plunges into the unknown, and that was often truly scary. But it was also exhilarating. The Netflix culture wasn’t built by developing an elaborate new system for managing people; we did the opposite. We kept stripping away policies and procedures.

Most companies are clinging to the established command-and-control system of top-down decision making but trying to jazz it up by fostering “employee engagement” and by “empowering” people. Compelling but misguided ideas about “best practices” prevail: bonuses and pay tied to annual performance reviews; big HR initiatives like the recent craze for lifelong learning programs; celebrations to build camaraderie and make sure people have some fun; and, for employees who are struggling, performance improvement plans. These foster empowerment, and with that comes engagement, which leads to job satisfaction and employee happiness, and that leads to high performance, or so the thinking goes.

As for empowerment, I simply hate that word. The idea is well intentioned, but the truth is that there is so much concern about empowering people only because the prevailing way of managing them takes their power away. We didn’t set out to take it away; we just overprocessed everything. We’ve hamstrung people.

company’s job isn’t to empower people; it’s to remind people that they walk in the door with power and to create the conditions for them to exercise it. Do that, and you will be astonished by the great work they will do for you.

Here is my radical proposition: a business leader’s job is to create great teams that do amazing work on time. That’s it. That’s the job of management.

It’s a matter of identifying the behaviors that you would like to see become consistent practices and then instilling the discipline of actually doing them. We

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

What do I mean by organically? I mean their goals and the ways they allocate time and resources, as well as the problems they’re focusing on and approaches to solving them, are constantly adapting to the demands of the business and customer. They are growing, changing organisms. They aren’t rigid structures bound by predetermined mandates about objectives, staff, or budget.

Excellent colleagues, a clear purpose, and well-understood deliverables: that’s the powerful combination.

We also challenged the conventional practices for crafting both company-wide and team strategy. 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.

Ted says that his core approach has been asking his team to focus on finding the best creative talent with the skills to execute, and then giving those creators the freedom to realize their vision. That has been the greatest differentiator between Netflix and the Hollywood studios, he says, allowing his team to compete so effectively for top creative talent and to launch such breakthrough shows.

I’m not at all saying that teams don’t need direction setting and coaching. They do. But the ways in which they’re given direction and feedback are often far from optimal. At the same time we were experimenting at Netflix with eliminating processes, we were also experimenting with better ways of communicating where the company was heading, what goals to be driving toward, and how people were performing. The Greatest Motivation Is Contributing to Success

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.

People Don’t Want to Be Entertained at Work; They Want to Learn

I fell in love with being a businessperson, and I didn’t want to be happy-face HR den mother anymore. I also fell in love with explaining very clearly and fully to everyone in the company why we were making the decisions we were, how they could best participate in achieving our goals, and what the obstacles would be.

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.

Never underestimate the value of the ideas, and the questions, that employees at all levels may surprise you with.

They’d say something like “I tried to explain it to him but he’s too stupid to listen.” My answer was always “Well, then you made it too complicated to understand.” The rule I would give them was this: explain it as though you’re explaining to your mother.

But surely employees need to be at a higher level before they’re told so much about the down and dirty of the business, no? What if the department is in trouble? What if the company is struggling to build a market for a big new product? Won’t they be freaked out? And can they really be trusted with so much information? Of course, some information must be kept private, but you can absolutely convey the intensity of the competition you’re up against and share the major challenges being faced.

She responded, “Well, we’re going to have to have a full curriculum with conflict management and interpersonal communication.” Those are probably the two most popular classes in the training canon, and I’m sure they’ve helped some people become better managers.

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.

“Did you make fun of the engineers?” And I’d say, “Yes, but seriously! They’re complaining that the hot tubs were not hot enough, the towels aren’t fluffy enough, and the pool is too cold.” And he’d reprimand me, “You know our engineers are our most important resource and you have to give them special treatment!” I just wasn’t buying that. As I said before, I’d gotten quite tired of their being treated like gods.

‘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.

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. I once received an extraordinarily helpful piece of feedback that is a model for being direct and suggesting the solution.

Somebody asked me once, “What would you fire me for?” I said, “That’s a good question. Let me think. Well, certainly embezzlement, sexual harassment, or breach of confidentiality. Wait, I know what I’d fire you for. If we were discussing something that went wrong, doing a postmortem, and you said, ‘Oh, I knew that was a problem but nobody asked me.’ Then I’d probably run you over in the parking lot, because you would allow something to go wrong that you saw was coming.”

This may be why a study by the Corporate Executive Board found that companies that actively fostered honest feedback and had more open communication produced a return over a ten-year period that was an astonishing 270 percent higher than that of companies that didn’t.

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.

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.

Probably the main reason the company could continually reinvent itself and thrive, despite so many truly daunting challenges coming at us so fast and furiously, was that we taught people to ask, “How do you know that’s true?” Or my favorite variant, “Can you help me understand what leads you to believe that’s true?” For

Over time, this sort of questioning helped cultivate curiosity and respect and led to invaluable learning both within and among teams and functions.

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.

Data is great; data is powerful. 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. I

“There is lots of intuition that is acted on, and I look for people for the team who are smart enough to read the data and intuitive enough to know how to ignore it.”

Ted’s team hasn’t followed the pilot model; they green-light production of a whole season all at once.

“Can I say something? Can I stop you right there? So I need to hire somebody from your firm to sit down with each of my employees for two hours to fill out this form”—it was online, but it was essentially a form—“and with the roll-up of all these goals, it’s going to spit out an algorithm and it’s going to give me what?” He said, “Well, HR will finally have data.” So I asked him, “What will they do with this data?” And he answered, “Well, they’ll finally have it!” Can I just say, What??! Why should anyone spend so much time and money just to create data?

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.

Our debates there underscored that no one, no matter how experienced or high level, could fully understand customer needs and desires purely on the basis of their experience or brilliance.

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.

People are emboldened to speak up when they see that their views will be heard and they can really make a difference.

I cautioned earlier about the limited value of formal employee-development practices such as conflict-resolution and management classes. There is simply no comparison between the learning employees may take away from such courses and what they’ll gain from participating in debates about business decisions. Ask anyone at your company whether they’d rather spend a day in a negotiation seminar or be able to ask—with impunity—a tough but fair question of a high-level manager at a big company meeting or engage in a serious debate with their managers about the problem they’re being asked to solve. I promise you, nobody but nobody is going to choose the seminar.

Relentlessly Focus on the Future

“Are we limited by the team we have not being the team we should have?”

Training well and spotting growth potential are vital skills for team leaders. I was always looking for hidden talents in people that would allow us to give them the opportunity to grow, and I encouraged all of our team leaders to do the same. Sometimes these gifts were obvious, but often they weren’t, even to the employees themselves.

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. So often companies give people half of a job they need done, because the person can’t do the whole job. I realized that we just couldn’t afford to do that. We needed people who could do the whole job. We were also determined not to make the incredibly common mistake of promoting into management roles strong performers who are simply not well suited to managing.

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.

How much of your time are you spending on the development of your team’s skills, and how satisfied are you with how quickly people are getting up to the speed you need?