Powerful - Patty McCord | Manas J. Saloi

I recently completed “Powerful: Building a Culture of Freedom and Responsibility” by Patty McCord. In her book, she shares what she learned working as a Chief Talent Officer at Netflix and elsewhere in Silicon Valley.

Note: While reading a book whenever I come across something interesting, I highlight it on my Kindle. Later I turn those highlights into a blogpost. It is not a complete summary of the book. These are my notes which I intend to go back to later. Let’s start!

People don’t care about free sushi

“Our first big realisation was that the remaining people were the highest performers, and it taught us that the best thing you can do for employees is hire only high performers to work alongside them. It’s a perk far better than foosball or free sushi or even a big signing bonus or the holy grail of stock options. Excellent colleagues, a clear purpose, and well-understood deliverables: that’s the powerful combination.”

“We analysed every single truism and best practice, just as we analysed the product. Often when Reed would propose a cut, it sounded so crazy I needed to sleep on it. But as we kept trying things, we kept getting good results. Take our no-vacation-policy policy, which has received a great deal of press. We told people to take the time they thought was appropriate, just discussing what they needed with their managers. And do you know what happened? People took a week or two in the summer and time for the holidays and some days here and there to watch their kids’ ball games, just as before. Trusting people to be responsible with their time was one of the early steps in giving them back their power.”

Everyone should understand the business

“My aha moment reminded me of when my son was six and playing soccer. My husband was the coach, and I’d go to lots of the practices. Watching the kids was hysterical. They’d just clump around the ball. I asked my husband in the car on the way to the team’s first game, “So what’s your strategy for the game?” He said, “Well, I was going to really attempt to have everybody moving down the field in the same direction at the same time.” I responded, “You know, I think that’s achievable,” and he said, “Well, but in the second half, they’ve got to go the other way.”

The World Cup fell later in the season, and I had the kids over to watch. When they saw the view of the game from the blimp, they realized, Oh! That’s what a pass looks like! Business is no different.

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”

“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.”

Key points

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
Ensure That Communication Flows Both Up and Down It’s vital that communication go both ways
Never underestimate the value of the ideas, and the questions, that employees at all levels may surprise you with
Research also shows that word of bad customer experiences spreads to twice as many people as that of good experiences. Everyone in customer service, from day one, should understand exactly how the experience they provide customers directly impacts the bottom line

Questions you need to ask

As you survey your company-wide policies and procedures, ask: What is the purpose of this policy or procedure? Does it achieve that result?
Are there any approval mechanisms you can eliminate?
What percentage of its time does management spend on problem solving and team building?
Have you done a cost-benefit analysis of the incentives and perks you offer employees?
Could you replace approvals and permissions with analysis of spending patterns and a focus on accuracy and predictability?
Is your decision-making system clear and communicated widely?

People must be able to ask questions and offer critiques and ideas. Ideally, they should be able to do so with all managers, up to the CEO.

“Here’s a great example. During new employee college, Ted Sarandos explained what’s called windowing of content. The term refers to the traditional system that developed for feature film distribution: a movie would first come out in theaters, then go to hotels, then to DVD, and at that point Netflix could bid to pick it up. During the Q&A, an engineer asked Ted, “Why does the windowing of content happen like that? It seems stupid.” Ted recalls that the question stopped him cold. He realized that although it was the convention, he really didn’t know why, and he answered frankly, “I don’t know.” He told me that the question stuck with him and that it “made me challenge everything about the windowing of content, and years later, it contributed to my complete comfort with releasing all episodes of a series at once, even though no one had ever done that in television.”

Communication flow in organisations

Key points

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 you need to ask

How well do you think people throughout the company could describe its business model? Why not ask them to do so? No prompts allowed.
Do you share with employees the same information presented in your company’s earnings calls? How frequently do you show them the company’s P&L? Where are they likely to get data about how your company stacks up against the competition?
Is everyone aware of difficult challenges your company faces? Have you asked them their thoughts about how to tackle these? Do you have a disciplined process for disseminating information and discussing challenges?
What areas of your business do you think your people know little to nothing about? Could you ask a leader in that domain to come and talk to your team? Are there any other ways you could facilitate communication between the groups?
How well do you think your people understand who the customer is and what their needs and desires are? Do you regularly share customer research? Can you facilitate your team spending some time with customers?
If you were going to hold an off-site, what is the most pressing issue you would want your people to learn about and debate? How could you provide the richest possible presentation of information?
What existing meetings or forums could be used to carve out dedicated time for communicating more about the business context? Do you regularly review these meetings to be sure they still are effective? Do you set different agendas for different kinds of communication (for example, a weekly stand-up versus a quarterly all-hands meeting)?

The case for radical honesty & a culture of debate

“One of the pillars of the Netflix culture was that if people had a problem with an employee or with how a colleague in their own department or somewhere else in the company was doing something, they were expected to talk about it openly with that person, ideally face to face. We didn’t want any criticising behind people’s backs. Because I was the head of HR, managers would often complain to me about an employee or someone in another department. I’d always say, “Have you told her yet?”

The Netflix executive team modeled honesty in a number of ways. 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.

The conventional thinking is that if you allow people to be anonymous, they will be more truthful. In my experience that’s not the case. Truthful people are truthful in everything they do. And if you don’t know who is giving you feedback, how can you put their comments into the context of the work they’re doing, who their manager is, and what kind of employee they are? 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.”

Key points

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

Questions you need to ask

How open have you been with your team about the current prospects of your business and the most difficult problems the company and your team are dealing with? Do people at all levels know the challenges the company is facing in the next six months?
Are people free to disagree with a point made by someone in authority during a team meeting? Have they seen it done openly, in front of the whole team?
Are there team members who rarely, if ever, speak up with ideas and concerns? Have you called on them or spoken with them about contributing?
When was the last time you talked openly with your team about a mistake you made in addressing a business issue?
Is there someone on your team who is under performing but with whom you haven’t seriously discussed the problem? What impact do you think that person’s performance issues have on the rest of the team?
When you do discuss performance issues with people, do you generally feel that they have understood the specific problems with how they’re doing their work?
How valuable do you think it would be for your team to receive feedback from people in other areas of the company? Is there any way you can facilitate such cross-functional sharing?

Have a fact based opinion. Be right most of the times

“We set a standard at Netflix that people should develop their opinions by probing into facts and by listening with an open mind to fact-based arguments they didn’t agree with.

I love a distinction Ted Sarandos made to me about how data is best used. He said the decision making of his content team was data informed rather than data driven.

At one point a big disagreement arose between Netflix’s head of marketing and head of content concerning how we thought about our customers. It was developing into a real tussle, because both executives were very strong-minded, and both had good reasons for their views. Reed did a beautiful thing. He arranged a debate between the two, onstage, in chairs facing each other, in front of the rest of the executive team. And the really brilliant twist was that each one argued the other’s side. To prep for that, they really had to get into the other person’s skin.”

Key points

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 realisations
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

Questions you need to ask

What problem is your team working on, or what decision do you have coming up, that you could stage a formal debate over?
Having set the rule that people must state their case by marshalling facts, will you be prepared to concede that someone on your team makes a stronger case than yours?
Are there members of your team who have become too fixed in their views about an issue and whom you could ask to take the perspective of the other side in a debate in front of your team?
How well is your team set up to conduct formal testing of ideas and to obtain the data they need to draw strong conclusions? Are there any ways in which you could provide them with access to tools they may lack?
How can you help your people to consider data beyond the information that is familiar to them and that they know how to interpret? What biases might members of your team — and you — have about which data you should be considering and your interpretations of it?
Can you invite younger members of your team, and perhaps of other teams, to listen in on some of your debates? Could you or their direct manager coach them about how to participate themselves?
Can you establish a regular forum for the presentation of arguments about key decisions and the best ways to solve problems your team is working on?

A company is like a sports team, not a family

Just as great sports teams are constantly scouting for new players and culling others from their lineups, our team leaders would need to continually look for talent and reconfigure team makeup.

An appreciation of the core elements of a company’s early success is so important, and it can be retained as companies adapt and grow. But nostalgia that inspires resistance to change will fuel discontent and often undermine growth.

Key points

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

Questions you need to ask

Have you systematically assessed the skills of all members of your team against the capabilities you will need in six months to a year?
Are there some ways of working — such as programming and working with robots, collaborating cross-functionally, or mapping out and redesigning the customer experience — in which you can foresee your team will need strong experience?
Would your team’s performance be significantly boosted if you brought in a new top performer, or several, even if the cost of those hires would mean scaling down the size of your team?
What opportunities do you see on the horizon that your team could begin capitalising on now if you brought in some new talent? Perhaps there is a new technology that would allow you to offer a new or better service or product. Maybe a competitor is leaving market share vulnerable or a new market is developing?
In which areas is your team or company at the vanguard of innovation, with leading talent spearheading the effort, and in which are you running as fast as you can to catch up, or soon will find yourself in that situation if you don’t make some new hires?
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?

Finding the right people is also not primarily about “culture fit.”

“What most people really mean when they think someone is a good culture fit is that the candidate is someone they’d like to have a beer with. That approach is often totally wrong-headed. People can have all sorts of different personalities and be great fits for the job you need done. One of our great hires was Anthony Park, who was working as a programmer for a bank in Arizona when we reached out to him. On paper he certainly didn’t look like a slam-dunk fit. He was a “programmer,” not a “software developer.” He was also a pretty buttoned-up, quiet guy, so I worried a little about how he’d cope with our debate-like-crazy culture. We called him because someone told me he had created a Netflix-enhancing app, which he had posted on his website. We brought him in for a day of interviews, and everyone loved him as well as the app he’d created. When he got to me, shortly after we started talking he turned bright red. I asked him if he was okay, and he said, “You’re going to make me an offer, aren’t you?” And I said, “Yes, we are.” He said, “And you’re going to pay me a lot of money, right?” And I said, “Well, you’re not programming for a bank anymore. You know, you’d be here in Silicon Valley and it’s expensive to live out here. We’re going to pay you commensurate with what it will take for you to have a great life with your family here.” He seemed overwhelmed, and I asked again if he was all right. He said with amazement, “You’re going to pay me a lot of money to do what I love to do!” I did wonder how he’d fit in with the high-powered team he was joining, and I hoped they wouldn’t burn him out in a few weeks. A few months later, I sat in on a meeting his team was having, and it was really intense. Everyone was arguing. He suddenly said, “Can I speak now?” The room went silent, because Anthony didn’t talk much, but when he did, it was to say something really smart. Over time, everybody learned to pause and wait for him, and he would always say something that would make us all think, Dammit, why didn’t I think of that? Now he’s a vice president. Organizations can adapt to many people’s styles; culture fit can work both ways.”

Annual performance review is a waste of time

“I asked one very senior HR executive from a Fortune 100 company that I consulted to, “Can you tell me what business metric is affected by the completion of your annual performance review?” He said, “I don’t understand the question, Patty.” I repeated, “What business metric is directly affected by the completion of the annual performance review?” He said, “Again, I’m not sure what you’re asking.” So I said, “Might it be revenue, growth, profit? You know, the metrics that we measure our businesses with.” Then I asked him how much of his staff’s time was consumed by the process, and he said, “I really have no idea! But it’s worth it.” Nowhere else in our companies are we allowed to justify something that takes such incredible effort with merely a feeling that it’s worth it.”

Hiring great performers is a hiring manager’s most important job

Key points

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 company at the end of the process
HR must be businesspeople who truly understand the way your business works, even if that’s quite technical. They should be creative, proactive partners in the hiring process. Investing time in explaining to them the details of the talents you need will pay remarkable dividends

Questions you need to ask

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?
What change is under way in your business? How prepared are you to begin interviewing for the new talent you need in the event the change happens faster than you’ve expected?
How creative are you in looking for candidates?
How thoughtful and rigorous is the interview process your candidates go through?
How well do you think the recruiters working with you understand the details of the jobs to be filled and the qualities you are looking for in hires?

Pay people what they are worth to you

Key points

The skills and talents for any given job will not match a template job description, and salaries should not be predetermined according to templates
Information from salary surveys is always behind current market conditions; do not rely on them in making salary offers
Consider not only what you can afford given your current business but also what you will be able to afford given the additional revenue a new hire might enable you to bring in
Rather than paying at some percentile of top of market, consider paying top of market, if not for all roles, then for those that are most important to your growth
Signing bonuses can lead to the impression of a salary decrease in the year after the person joins; paying the salary you need in order to bring in a top performer is the better option
Being transparent with staff about compensation encourages better judgment about salaries and undercuts biases, as well as offering the occasion for more honest dialogue about the contributions of various roles to the company’s performance

Questions you need to ask

Who on your team has grown considerably in skills and proficiency since the time they joined, and do you think you are compensating them at a level commensurate with the value they are now contributing?
Do you know who on your team has been contacted for another job recently? Have you told all of your people that you want them to be open about discussing this?
How much do you think being tied to predetermined salary ranges is holding you back from building the best possible team?
What do you think your team could produce if you could hire as you’d like? Can you make that business case to management?
If you could select certain roles for which you would make the case for hiring star performers at top-of-market compensation, which would they be and why?
Do you regularly examine salaries for unintentional bias in pay? It doesn’t have to be a big-data exercise; perhaps just a look at average pay per title for men and women

Letting go of people is hard. But it is something you have to do

Key points

Employees need to be able to see whether their talents and passions are a good match for the future you are heading to, in order to determine whether they may be a better fit at another firm
People should hear frequently about how well they’re performing. Even if doing away with the annual performance process is not feasible for you, institute much more frequent meetings to discuss performance
If doing away with the annual review process is an option for you, try it! The process is a big waste of time and can become a stand-in for real-time information about performance
Either make performance improvement plans genuine efforts to help people improve performance or get rid of them
The chances you’ll get sued by an employee who is let go are vanishingly slim, especially if you have been responsibly and regularly sharing with that person the problems you perceive with their performance
The focus on employee engagement is misplaced; there is not necessarily a correlation between high engagement and high performance. There is also not necessarily a correlation between high performance in a current job and high performance in the job of the future
Use my algorithm in making personnel decisions: Is what this person loves to do, that they’re extraordinarily good at doing, something we need someone to be great at?
All managers can actively help their exiting team members find great new opportunities; goodbyes can be very good
Managers who adopt this more fluid approach to performance review and team building come to clearly see that it is better for all concerned and better for overall team performance

Questions you need to ask

What would be the equivalent for you of offering your team members individual general feedback on their performance ten games at a time?
Might it make sense to determine feedback frequency based on benchmark deadlines for achieving team goals, rather than according to a set time period? That might, for example, mean timing discussions according to the stages of completion for a project
Whom on other teams could you ask to provide feedback about your team members’ performance?
Can you say that every person on your team is doing a job they’re passionate about and great at and that you need them to be doing? If not, can you have a conversation with those who aren’t about other opportunities in the company they could consider or about the landscape of opportunity they can consider outside?
Are you building a network of managers at other firms to whom you can recommend your exiting team members?
How well are you keeping up on changes in business operations and personnel at firms that might offer good opportunities for them?

“Culture is the strategy of how you work. And if people believe it is a strategy and that it is important, they will help you think about it deeply and try things.” - Former VP of HR at Netflix Jessica Neal