Once, I overheard her telling Reed that our executive meeting had been very productive, before asking him who’d done most of the talking.
“Marc and I did,” he said.
“Do you think other people in a meeting should talk, too?”
Reed stared at her for a second, and I wondered if he’d answer.
He nodded. “Point taken.”
Patty’s role went far beyond merely Reed, however. It’s hard to overstate how enormous an impact she made on Netflix, as director of HR. Frankly, it’s hard to overstate the impact she made on the entire field of human resources. She completely redefined it.
I’ve written in this book about how Netflix’s culture, at least originally, wasn’t the result of careful planning—of aspirational principles or cultural manifestos. How it was a reflection of the shared values and behaviors of the founders. How we trusted each other, worked hard, and had zero patience for traditional corporate bullshit.
All of that is true. But what happens when the team grows?
When a company is small, trust and efficiency go hand in hand. If you’ve got the right people on your team, you don’t need to tell them exactly how you want them to do things—in fact, you often don’t even need to tell them what you want them to do. You simply need to be clear about what you want to accomplish and why it’s important. If you hired the right people—smart, capable, trustworthy—they’ll figure out what needs to be done, and they’ll go ahead and do it. They’ll solve problems on their own before you even know the problems exist.
And if you didn’t hire the right person? It’ll be apparent, really quickly.
Our early culture at Netflix was born completely out of how Reed and I treated each other. We didn’t give each other a list of tasks we expected the other to be doing and then “check in” frequently to make sure everything got done. We just made sure that each of us understood the company’s objectives, and which aspects each of us were responsible for. It was up to us to figure out what needed to be done to accomplish those objectives. And it was up to us to be honest with each other—radically honest.
I’ve written about what that looked like—or, more accurately, what it sounded like. Raised voices, argumentative meetings, blunt statements about how an idea was stupid or wouldn’t work. Sometimes it was hard for people to understand that Reed and I really liked each other—that we’d found that we were most productive when we dropped all the bullshit and just said what we meant. Reed and I had been doing this since those early days in the car on 17, and we’d never stopped. Whether it was just the two of us or a twenty-person departmental meeting, we felt that we owed it to the company (and each other) to make sure that we’d teased out the proper solution—or, more accurately, beat it out of each other with 4-irons and billy clubs. Sometimes the discussions would become so boisterous that Reed and I would lose ourselves totally in academic gymnastics, finally stopping only when we realized that one or the other of our ideas—or, more usually, some combination of the two—was obviously the solution, and that it was time to move on. It was not unusual for Reed and I to look up after a particularly loud session to see the quiet, stunned faces of our colleagues around the table, with expressions that seemed to ask, “Why are Mommy and Daddy fighting?”
But they got used to it.
Radical honesty. Freedom and Responsibility. These are phenomenal ideals, but for our first couple of years, they weren’t really written down. We approached things on an ad hoc basis.
Here’s an example.
At some point in 1999, one of our engineering managers came to me with a peculiar request. His girlfriend had moved to San Diego and he was trying to keep their relationship on stable footing. “How would you feel,” he asked, “if I left work early on Fridays to fly down to San Diego?”
He explained that he would work from there on Monday, fly back home Monday night, and be in the office Tuesday morning.
My answer probably surprised him. “I don’t care where you work, or what hours you work. Work from Mars, for all I care. If all you’re asking me is about when you work and where you do it, that’s an easy answer: it makes no difference to me.
“But,” I continued, “if what you’re really asking me is whether I’m willing to lower my expectations for you and your group so that you can spend time with your girlfriend? Well, that’s an easy answer, too. No.”
He looked at me uncertainly. I could see his dreams of San Diego weekends fading away.
“Look, where and when you work is entirely up to you. If you can run your group effectively on three and a half days a week in the office, all power to you. Go ahead—I’m envious. Wish I was smart enough to do that. Just remember: You’re a manager. Part of your job is making sure that your team knows what you want them to accomplish and why it’s important. Do you think you can do that without being around?”
Needless to say, his girlfriend was a free agent shortly thereafter.
I gave that engineer freedom to make a choice, but also reminded him of his responsibility to the team. I was radically honest with him—I doubted that he’d be able to keep up his end of the deal if he took off early for San Diego every week—but ultimately I left it up to him.
The manager felt empowered, free to make a choice about his own lifestyle, and the company ended up benefiting from his renewed focus. Everyone won.
Well, almost everyone. The girlfriend in San Diego probably didn’t see it the way I did.
Freedom and Responsibility weren’t just for managers, either. Take our receptionist, for example. When he started the job, there wasn’t a seven-page list of all the things he could do or not do all day—Keep the desk clean. Don’t eat at the desk. Instead, his job description was a single sentence: Put the best face forward for the company.
We gave our receptionist a clear responsibility and near-total freedom to figure out how to accomplish it. It was entirely up to him what hours during the day someone needed to be there; up to him to figure out how to cover when he was away, or sick, or needed a day off. It was up to him to figure out which behaviors didn’t put the best face forward for the company (like eating lunch at his desk), and which helped. (I have a strong suspicion that he bought the popcorn machine.)
And you know what? We had a damn good receptionist as a result.
A culture of freedom and responsibility, coupled with radical honesty, worked like a charm. Not only did we get great results, but employees loved it. People who have the judgment to make decisions responsibly love having the freedom to do so.
They love being trusted.
But that just makes sense, right? If you fill your company with people who lack good judgment, then you have to build all kinds of guardrails to keep them in line. You have to define everything for them: how much they can spend on office supplies, how many vacation days they take, when they are expected to be at their desk.
Most companies end up building a system to protect themselves from people who lack judgment. And that only ends up frustrating the people who have it. Remember the engineers in the hot tub? If you treat people like children, it doesn’t matter how many beanbag chairs and beer parties you throw at them. They will resent you.
In 2000, we were growing fast. And we were still hiring people with good judgment. But even people with good judgment had questions about culture and rules—and they shouldn’t always have to find me or Reed to ask them.
We started to ask ourselves: What if you could build a process that was meant for people who had great judgment? What if you could free them from all the petty restrictions that drive the top performers crazy? How can we scale up this set of ideals that came so naturally to us, so that a growing company can benefit from them?
How do you codify culture?
That’s where Patty McCord came in. She was brilliant at pushing the boundary of rules and freedom. She identified that what was special at Netflix was our particular combination of freedom and responsibility. And then she endeavored to put structur
e in place not to limit freedom—but to encourage and preserve it.
How far can you take freedom? How do you ensure shared responsibility?
Patty came down on the side of common sense. For example: If you were traveling for work, common sense said there had to be some mechanism for expense reimbursement. But none of us wanted lengthy, time-consuming, and ultimately pointless approval processes for it. If we were trusting them to make decisions on the company’s behalf that could make or lose millions of dollars, we could certainly trust them to make decisions about what type of plane tickets they should book for themselves.
Same with vacation days. We hadn’t kept track of them before because we didn’t need to. The attitude was: If you need to take a day off, just take it. I don’t need to know about your root canal, or your kid’s school schedule. Just get your work done, and cover for yourself when you’re gone.
But when a company has fifty employees, things get more complicated. People want to know what they can and can’t do. Patty could have just replicated the standards of the time: fourteen days per year paid time off. Instead, she was curious. If we wanted our employees to take time off when they needed it, why couldn’t we also let them decide how much time to take and when to take it? What if we didn’t have a set number of vacation days? What if we just trusted our employees to get things done?
Unlimited vacation days and hassle-free expense reimbursement are almost clichés now. But they were groundbreaking at the time. In Netflix, Patty saw an opportunity to redefine the role of HR departments. No longer was HR just a lonely cubicle filled with employee handbooks, sexual harassment claims, and benefits summaries. Instead, she envisioned the department as a proactive agent for culture.
She saw an opening, and she drove a truck through it. She dismantled all the systems we had in place that limited the amount of freedom we granted our employees, and designed systems that were almost totally on the side of employee freedom. She fought hard to ensure that we didn’t inadvertently create new paradigms that collared our workers, while also implementing structures that made it clear what we expected from them. Part of why she was so successful is because she held everyone, including senior leadership, accountable. It didn’t matter who you were—Patty would call you on your bullshit. She was never afraid to speak truth to power.
She knew how to do something rare: scale up culture.
A good example: Remember new employee dress-up days? I’d long assumed that they would fall by the wayside as we got bigger. Asking someone to make a costume and endure a fake interview is easy when you’re only hiring one person a week. But once we had five, six, or a dozen new hires every week, it wasn’t all that practical.
But Patty saw the value in a quirky, film-oriented ritual. So she made it easier and more efficient: she filled an entire room in the new office with dozens and dozens of film-related costumes—Batman outfits, Wonder Woman capes, cowboy hats and fake six-shooters fit for a Western. New hires still had to dress up, but everybody had the same pool of outfits to wear. The pressure was off. It was just fun.
Patty also smoothed over some of our rougher edges. She tried to, anyway. For example, one of the only pieces of decoration in my office was an Austin Powers: International Man of Mystery promotional poster that a movie studio had sent me. It depicted the entire text of Dr. Evil’s soliloquy to his therapist, halfway through the film, in which he recounts in baroque language his bizarre childhood, describes in detail his comically insane father, and rhapsodizes about the “breathtaking” feeling of “a shorn scrotum.”
I knew it wasn’t the most HR-friendly wall hanging. But I couldn’t help it: I loved that movie. And that scene made me snort with laughter. It became an inside joke between Patty and me: Every time she popped her head into my office and saw my poster, she’d stifle a laugh and order me to take it down. And I would—at least until her back was turned. Then I’d put it right back up.
Just because Netflix was growing and had an honest-to-God HR person didn’t mean that we couldn’t have a little fun in the offices. Case in point: a little game we called Coins in the Fountain.
I don’t remember who came up with it. All I remember is that the male employees of Netflix played it constantly. The rules were simple: You put a coin in the bottom of the urinal. The next person to use the facilities would see it and either ignore it, or reach into the bowl and take it. It was a sort of sociological experiment: How much money would it take for someone to do something disgusting and unsanitary, and reach into the bowl?
The game only worked, of course, if not everyone knew they were playing. But whoever seeded the urinal would usually tip me off. We learned a lot of interesting things about human nature, playing that game. For instance: a quarter would disappear much more quickly than three dimes. No one would touch paper money, unless the denomination was over five dollars. The highest cash value ever achieved was when someone threw in a twenty-dollar bill. It languished in the urinal all day, and was still there when I left at six for dinner with my family. But when I came back to the office later, at eight or nine, it was gone.
I still have my suspicions.
Another game we liked to play involved the kitchen. It was a typical mid-90s setup, the sort of thing you might recognize from Dilbert cartoons or The Office: refrigerator stocked with forgotten Tupperware, microwave stained by dozens of exploding popcorn bags. This was years before nitro-cold-brew taps dominated the kitchen spaces of American startups. We were decidedly more old-school. No on-site chef for us. Most of us brought our lunches to work.
This game was also a kind of willpower test, but in reverse—and with snacks. It arose from a common problem with shared kitchens and communal food. Anytime anyone brought a snack to share among the whole office—a dozen donuts from the shop down the street, or a bowl full of leftover Halloween candy—it would vanish within minutes. That’s what long hours and stress will do to you. Crumpled fun-size Milky Way wrappers and powdered sugar littered the tabletops mere seconds after a batch of snacks had been dropped off.
Eventually, we made a game out of it. Was it possible to bring a snack that would last more than a few minutes in the kitchen? Could you bring something that would get eaten…but only over the course of an entire day?
The challenge wasn’t to bring a food item so disgusting that no one would touch it. That would have been too easy. Just bring rocks. The point was to bring something just strange or unpalatable enough that it would eventually disappear, but would take an entire workday to do so. You had to walk a tightrope between delicious and unsavory, familiar and strange.
Here’s an example:
One day, I brought in a huge bag of dried shrimp and seaweed from the Asian market in Sunnyvale. Delicious, if you like that kind of thing. But pungent, strange-looking, and most definitely not for everybody. I opened the bag and filled one of our popcorn bowls with the stuff, then camped out at a table with a good view of the kitchen. Within seconds, Boris had sidled up to the bowl and, his mind elsewhere, working on some coding problem in his head, reached in for a handful. The look on his face when he realized that he wasn’t eating popcorn or M&M’s was priceless.
I cackled inwardly. For the next three hours I watched as Te, Christina, and the rest of the office ambled up, tasted a bit of the sea, and left after one bite. The only person who showed absolutely no reaction to the shrimp was one of the engineers. He took a little bowl of them back to his desk and snacked away happily.
They lasted until five.
Another time, I brought in a dozen Balut. You might have heard of them? They’re a delicacy in Laos and Cambodia: fertilized duck eggs that have been incubated for seventeen days, then boiled. There are embryos inside, tiny little ducklings. For obvious reasons, they’re off-putting to most people. As a result of their preservation and curing, their yolks are a deep, dark green. The whites are dark brown. They look—and smell—like dinosaur eggs.
I neatly sliced a few, arrayed them on a paper plate, set out
forks, and even made a sign: Duck Eggs! Try one!
Surprisingly, they only lasted two hours.
The new offices were at the northern edge of Los Gatos, and bordered Vasona Lake Park. They were big. Two stories, open floor-plan. This was no converted bank. It was a Silicon Valley office building, built to house a company. It was big enough to grow in. Whenever you hired somebody new, all you had to do was fit a few cubicle walls together.
I was on the south side, upstairs, with all the front-end web people, content producers, analytics, and marketing. Reed was on the other side of the building, hunkered down with the finance team and back-end developers. If we both stood up at the same time, we could see each other across the cavernous space.
We’d come to a détente on the issue of the shares. In the end, I’d agreed that a third of the shares Reed wanted, if he was to come in as CEO, would come from me. The other two-thirds he was going to have to ask the board for. Which he did—and which he got.
That spring, soon after the move, Reed had brought in two major hires who made a huge impact on the business. Barry McCarthy was the first one. A seasoned executive and former investment banker, he’d been working as the CFO of Music Choice, which piped music into homes through a set-top cable box. He had an MBA from Wharton and decades of experience as a consultant and investment banker. He was unlike anyone in the office—a hard-edged, East Coast preppy with a diploma from Williams College. In the shorts and sandals world of Los Gatos, his Brooks Brothers blazers stuck out like a sore thumb. Which is, I suspect, exactly why Reed liked him.
That Will Never Work Page 20
