The co-creator of Netflix's culture deck explains how to decide which employees to fire - and how to avoid the pitfalls that render so many startup founders 'irrevelant'

Shana Lebowitz,Sherin Shibu

Aug 31, 2019, 15:15 IST

The co-creator of Netflix's culture deck explains how to decide which employees to fire - and how to avoid the pitfalls that render so many startup founders 'irrevelant'

Courtesy of Patty McCord; Samantha Lee/Business Insider

Patty McCord.

Patty McCord was the original chief talent officer at Netflix. Now she's an HR consultant and the author of the book "Powerful."
During a Business Insider webinar, McCord shared some of the most common people-management mistakes she sees - and how to avoid them.
Those mistakes are hiring and promoting people just like you, not talking candidly with employees about their future, and sticking around too long in the company you built.
You can watch a recording of the webinar and read the transcript below.
Click here for more BI Prime stories.

Since it was publicly released in 2009, Netflix's culture deck has been viewed more than 19 million times.

In 125 slides (a more recent version is available on Netflix's website), Netflix broke down radical management practices like not putting a cap on vacation days and encouraging employees to interview elsewhere.

Two of the masterminds behind that infamous deck are Reed Hastings, Netflix's cofounder and CEO, and Patty McCord, the company's very first chief talent officer.

McCord left Netflix in 2013. Since then, she's started her own HR consultancy, where she works with organizations ranging from early-stage startups to giant banks. And she recently published a book titled "Powerful: Building a Culture of Freedom and Responsibility," which distills the most important management lessons McCord has learned throughout her career in HR.

McCord recently participated in a Business Insider webinar, in which she shared the biggest people-management mistakes she sees - and how to avoid them. We learned about the "six-month exercise" for pinpointing which employees to fire, the algorithm that can help you decide whether to quit your job, and the best way to deal with a micromanaging boss.

We've also included a recording of the webinar below.

The following interview has been edited for length and clarity.

Shana Lebowitz: Thanks for joining today's webinar with Patty McCord, the co-creator of Netflix's influential culture deck. I'm Shana Lebowitz, correspondent at Business Insider, and we're excited to have Patty here today talking about the most common management mistakes. Patty was the first chief talent officer at Netflix. Now she is an HR consultant to organizations ranging from early stage startups to giant financial corporations. She's also the author of the book "Powerful: Building a Culture of Freedom and Responsibility." Patty's about to go over three of the biggest management mistakes and how to avoid them. Patty, thank you so much for being here today.

Patty McCord: Thanks for having me. I'm excited about it.

Lebowitz: We're very excited to have you. Why don't you give us a brief overview of the original Netflix culture deck, and why you think it was so influential?

McCord: We actually wrote it as an internal document, as a guideline for our own employees at Netflix, so that they could understand what it was going to be like to work there, and the things that we were aspiring to do, and the way we are going to behave with each other.

A couple of fun facts about the Netflix culture deck. One, it took 10 years to write, and we used it internally as an onboarding document. When we pushed it to the internet, we didn't do it so that everyone could read our treatise and copy the way we worked. We did it so that our candidates could get a brief overview of what it would be like to work at Netflix and it would change our interview cycle. So there's a lot of myths around it. But it wasn't a treatise on how to work.

Lebowitz: Thanks so much for giving us that little breakdown. [According to a poll pushed out during the webinar, most viewers manage between one and 10 employees.] Have you done a lot of work with managers who manage between one and 10 employees?

McCord: Sure. I think that's pretty common and it's a really great size of a team. When you have a small team, you can get a lot of work done. This might be a good way for me to remind everybody that my definition of management is that managers create great teams that do amazing work on time that serve the customer.

When you look at your role as a manager, whether you're managing 10 people or 100 people, the purpose of your being there is to create a great team that does amazing work. Then you worry a little bit less about the day-to-day, in terms of how I should direct people or should I do lists, should I do emails, should I do meetings? You work more on what a great team looks like and what you're going to create. What does success look like to us?

Lebowitz: That makes a lot of sense to us. We're going to give a little plug for your book here. Patty is the author of "Powerful," where she distilled the most important management lessons she's learned during her HR career. Is there a unifying theme behind all these lessons that you can share with us?

McCord: There's two things I want to tell you about the book. The first one is each of the chapters was topical, so you don't have to read it in order. You can bounce around if you want. If you think, 'My biggest issue is recruiting,' then read that chapter about recruiting. At the end of every chapter I've done your homework for you. I've done all the highlighting. So there's five questions to ask about your team and five points to be made in each of those chapters. So that's a tip about reading the book.

But I think more important about the book is the title itself. I titled the book "Powerful" because I was tired of the idea that you can go around empowering people. I found that the reason why we talk about empowerment all the time is because we've taken power away from most employees. Back to the people who are listening to the webinar who are managing others, if you really want to make sure that your employees have power, then recognize they have it when they walk in the door. What happens is we take it away with too many rules and too much structure and too many guidelines. The book is about recognizing the power that people have when they come to work every day.

Lebowitz: So not having too many strict rules is your rule of thumb.

McCord: Combined with the idea that we're all adults. If you're employing children, you're breaking the law. So I'm assuming nobody out there listening is doing that. When we assume that people are responsible adults before we assume that they're not, then things can happen in a really amazing way because we're not worried about somebody trying to do something wrong or somebody making a mistake or somebody cheating us or all the rules that we've put in to the way we work. If we just start assuming that you're smart and you're an adult and you want to come to work and do a good job, then you think about what rules really matter and what may not anymore.

Hiring people who are just like you can sabotage your company's success

Greg Sandoval/Business Insider

Patty McCord, former chief talent officer at Netflix.

Lebowitz: Why don't we dig into those management mistakes that you've seen: hiring and promoting people who are just like you, not talking with employees about their future, and lingering too long in the company that you yourself built. Why don't we start with the first. What's wrong with hiring and promoting people who are similar to you?

McCord: First of all, it depends on what your product is. For most of us, we have products that serve customers. I'm going to use a cliché here: If you're a white male programmer and you're creating a consumer-based product and you've hired other people who are just like you, but 50% of your consumers are women, or more than 50% of your consumers are women, you don't have the voice of the customer represented in the team of people that are building the product. So that's one thing. You want to have teams that reflect who it is that you're serving.

The second thing is you get this groupthink happening and you say, 'I want to hire somebody who's really smart, who's quick on their feet, who makes decisions quickly. Somebody good looking, someone just like me.'

Then you have a room full of people who are just like you. Nobody ever comes up with an idea that you wouldn't come up with on your own. So what you want is diversity of representation of your customers. You want diversity in ways of thinking. You want lots of people who are going to come at a problem from a different perspective.

Your coworkers are your team - not your family

McCord: I talk a lot about 'team, not family.' When you think about the people you're managing and what you're trying to do at work as a team that's attempting to win, if you think of any sports team, you don't want a team that's just full of quarterbacks. You don't want a team that's just full of baseball pitchers.

You want everybody to be able to play their position on the field in an incredibly great way with other people so that you win. So that's the reason I think about not hiring people that are just like you.

The other thing is taking that team perspective. I was at a talk not too long ago in Texas and the coach of the San Antonio Spurs was onstage and he was really inspiring. I love sports coaches because they really give me insight on how to create great teams, but it was a very sensitive audience. Somebody in the audience said, 'Oh, you scour the country for the amazing players to be on your team and they play their hearts out and they want to win every single time. Then, at the end of the season you have to cut them. Doesn't that just break your heart?'

He said, 'No, it doesn't break my heart at all. This is professional basketball. They get it.' I was in the audience thinking, why can't we just say that to people sometimes? Why can't we say, 'We want you to join our team, we want you to build this thing, we don't know how long it's going to take, but when it's done, we'll have a conversation about what you're going to do next and how you might contribute'?

I don't think those conversations are painful or terrible or that you have to be specially trained to be able to have them. I think we can just have conversations with people about the way they work.

Not every high performer is skilled at self-promotion

Netflix

Netflix headquarters in Los Gatos, California.

Lebowitz: You said something really interesting that we've covered here at Business Insider before, which is how employers tend to hire and promote people who look and act just like them. People want people who have similar interests, someone they'd want to hang out with and talk to. As you said, Patty, this isn't necessarily the best practice.

McCord: I think that's a really foolish notion that we've come up with the last couple of years, the good culture fit. I remember interviewing somebody one time, and we were doing a roundup that we used to do after every interview cycle. Everybody gets in the room and talks about the candidate and everybody in the room was like, 'She was so funny. I just loved her idea. She was great. I mean, I just want to go have a beer with her and listen to her jokes.' I'm like, 'Yeah, but we're not hiring her to have a beer with us. We're hiring her to do a specific task, which she just isn't qualified to do.' So you [the hiring manager] want people that get you and get your jokes.

I have to tell you another story that's fun. There's a woman that we had promoted at Netflix who's very introverted, very, very shy, wasn't particularly articulate, didn't like speaking in front of groups. I wasn't really sure if she could make it. I was a little worried about it and we were doing a breakout session at one of our offsites and I said, 'Wouldn't it be great if we knew what people watched at 9:00 in the morning, by demographic?' She said, 'Well for working moms, it's nothing because they're working. For stay-at-home moms, if their children are in school, they're often watching yoga.' She could break down the demographics of our customers at that time, too.

She could do it by geography. She could do it by time. She could do it by demographics. It was amazing. By the time she got done with this, all of us around the table were like, 'Oh my God, this brilliant person. She's just a fountain of information. Thank god we have her.'

It's not just the hiring of different kinds of people, it's recognizing when different kinds of people make their contributions, which also leads to the promotion part of it. In many companies where people promote people who are just like them, they look for leadership qualities that they can recognize because they see it in themselves.

If you're a manager of a very small team, you have to train yourself over time to really open your eyes and see what kind of talent is out there, and think about what kind of talent you're going to need for the future. That may be a different skill set, may be a different group of people than the people that you have now.

Lebowitz: Let's talk about a potential solution to this problem of unconscious bias. Here [refers to the slide on screen] we have a quote from the former president of the WNBA saying that she actually looks for people who are the opposite of her. So is that something you'd recommend, Patty?

McCord: I think it's a good start. I have a methodology that I'll give to you and I think it helps us get around this problem. What you want to do is take a look at if your team was amazing in six months. Not just a little bit better, but amazing. Say to yourself, 'What would be occurring then that's not occurring now?' Then you drop down and go, 'Well, what would people need to know how to do in order to accomplish that in six months?' Then you say, 'What kind of skills and experience would it take to be able to accomplish that thing in six months that we're not doing right now?'

Just by doing that exercise [comparing] the team that you have and the success that you want your team to have, you'll realize it's different people.

You'll realize that if you had the right team, you'd already be doing those things in some ways. So when you start focusing on the problem that you're trying to solve, or the gap you're trying to fill in your team, then you're going to be a lot more open to anybody who can fill that gap or solve that problem.

Always hiring somebody opposite seems like too simple of a solution to me. But it is a truism that oftentimes when you're trying to solve something you've never seen before, it's very likely that somebody who's not like you at all is going to be the right person to help you solve that problem.

Giving employees constructive feedback rarely works

Lebowitz: That's a really nice segue into the second management mistake, which is not being honest with employees about their future at the company. That's something that you just touched on in the last few minutes. So why, in a nutshell, do you think this happens so often?

McCord: We're just really bad at giving people honest feedback. So there are a couple of [reasons why]. One of them is that we've trained ourselves to think that feedback means constructive criticism, which means telling somebody something that they did wrong, but in a nice way, so it doesn't hurt their feelings. It's not very effective.

That's kind of like guilt-tripping if you're a parent. 'If you do that bad thing, you should feel bad about it. And the next time you do that, I want you to feel really bad about it.' It's not very effective feedback.

But if I tell you in the moment, in a meeting, 'Hey, Shana. We've had this discussion for about two hours and I know that you've talked to me about it privately, that you're really interested in what we're trying to decide here. But you haven't said anything. Could you give us your opinion? It'd be helpful if you spoke up.'

You don't freak out because of that. You say, 'Oh yeah, actually I have an opinion,' and you can talk about it. The thing about getting great at giving feedback and getting great at talking to people about their future is to practice doing it. I recommend that if you do one-on-ones with your employees, make every third or fourth one-on-one about performance. Not just about their performance, but about your performance and have an honest conversation. It doesn't have to take forever. You don't have to have an outline; you don't have to write it down.

Talk about what we're doing well, what we could be doing better. How do you think we could improve things between us? How could I get rid of obstacles for you as your boss? What am I expecting that I don't feel like you're delivering? If we do that once a month, then it's not this big freak-out.

What I see most often in managers about giving feedback and about talking to people honestly about their future and their careers is that they just don't know how. Sometimes it's just a skill problem to be able to say, let's talk about what you're expecting and what's really going on here. Then you can talk about the details.

One of the Netflix stories I tell in my book is when we realized that we had the potential to be one third of the US internet bandwidth for the streaming service.

At the time we had one data center because we had built it to ship DVDs and we realized, wow, the team of people that we had who were brilliant, wonderful, fabulous, amazing folks were not people who had a lot of experience with cloud technology. When we sat down with that team and said, 'This is what could happen next year and none of you folks know what it is that we're doing here,' it was not an easy conversation. Some people were like, 'Well, I can learn that.' I'm like, 'I know, but not by next Thursday. We're going to need somebody who really has a lot of deep experience.' I remember it [becoming one third of the US internet bandwidth] was when we knew that it would happen within a nine to 12 month window.

I remember talking to people on that team and somebody said, 'Are you kidding? I've been here five years. I helped build this thing. Are you telling me I might not be part of that team?' I said, 'Maybe. I mean, I don't know. We can't let the team that we have be the barrier to our success for us and our customers. We have to put together the right team. We got some time to figure it out.'

Those conversations weren't fun or pleasant, but they weren't terrible. We could have an honest conversation. I think that people respect you as a manager when you can be really straightforward about this.

That story is a great example of what a fallacy the performance-improvement plan is. These people don't need to improve their performance. They're incredible performers. It was just a different team. So those are ways to wrap your head around how to give feedback, how to talk to people about their careers. Just do it often and be really honest. When your company changes or your direction changes or your customer base changes, or you scale, the more context you set with people about where the company's going and what it's doing, the more they can make good decisions about their own careers.

The best way to deal with a micromanaging boss is to teach them how to be a better leader

Lebowitz: We have a question from the audience. One of our viewers wants to know how you deal with a micromanager.

McCord: Oh, they're the worst. I think you try and get ahead of them if you can. You can anticipate micromanagers in advance. They're going to ask you for 10,000 details. Sometimes you want to just get prepared with the 10,000 details and just throw them out there first, so that the person doesn't get into doing stuff for you.

The other thing is to ask occasionally for an opportunity to do something on your own. Be able to say, 'On this next project, I'd really like to do this. Can you give me a week or a month? Let me prove to you that I can do it without direction.'

The thing about management is nobody's ever great at it. It's something that you get better at your whole life. The micromanager is doing it because they're probably fearful that it won't be done. How you change their opinion about that is you prove that you've got this.

Sometimes it starts small, and then the next time you can say, 'Remember that last time I did this on my own? I think I've got this one, too. Let's give it a try.' Then be honest about if it didn't work out, why didn't it work out? What could you have done better? What could your manager could have done to help you?

In some ways the best way to deal with the manager who's difficult for you is to teach them how to do it better.

There is also the alternative sometimes where you're matched up with somebody who's just not right for you. When that happens and you've worked for them for a long time and you keep expecting them to change, sometimes you have to be honest and realize that they're probably not going to. You then have to take charge of your own career and make some choices about who you work for, too.

Every manager should use the six-month exercise to build the best team possible

Reed Hastings via Slideshare

A slide from Netflix's original culture deck.

Lebowitz: I want to go back to something that you brought up earlier in today's webinar: the six-month exercise. You think about what your team will be accomplishing in the near future and whether this is the team that can help you get there. I'd love to hear you tell us a little bit more about why this exercise works and how exactly you use it.

McCord: The reason why I put the six-month time wrapper on it is that I find that people who are leading other people have a tendency to say, 'Here's our vision for someday.' They don't realize that when they say that in front of a group of people, some of the people think someday is 10 years out. Some people think 10 days out. So it's really important to say 'in six months.'

The other reason I talk about that is that if you are an employee and you can ask that six-month question, then you can say to yourself, 'Is this a place I'm going to want to be in [in] six months? Is this a direction that I feel like is going to be useful for me? Are the activities that we're going to do what we're actually going to get done in the next six months? Are those things I'm going to be proud of?'

Sometimes I say that the job of management is to create résumé-worthy experiences. Usually something résumé-worthy takes at least six months. So that's a way to look at it as a manager and also as an employee. What's going to change? What's going to be better? The reason why I love it is because it's a positive expression of direction that you can drop down to very tactical things to accomplish.

For me, success is about results. If you can focus on what your great results are going to be for you as an employee, then you're going to be more successful. If you are managing a team, if you can focus on what success looks like for the team, what it takes to win, then the team has a better chance of being successful.

A startup founder should never feel too comfortable in the company they built

Lebowitz: We're going to start talking about the next management mistake. It's sticking around too long in a company that you have founded. I'd love you hear you tell us about how often this happens and why you think it does.

McCord: I don't think it has to happen all of the time. I worked for a founder/CEO who founded two companies and is still there. I think it's absolutely possible to keep growing with your company. But the mistake that I see, particularly in startups, is that people who start companies often get addicted to the chaotic energy that is a startup.

Startup companies by their nature don't have a lot of rules and they don't have a lot of structure. What happens is at some point when it's really fun, then you want to keep it that way, So people are like, 'I'm just going to keep doing what we've been doing because it's working really well. This is really fun.' The problem is if you're successful, particularly in an early-stage company, and you get some customers and you've got enough money to keep going, and you really look like you're going to make it, then your problems switch to problems of complexity and scale.

The thing about problems of complexity and scale is that you want some people around who've seen bigger complexity or larger scale. The sticking-around thing is often about how this company wouldn't be the same if I wasn't here, but failing to realize that in order for you to be here, you have to change, too.

Two things happen. One of them is you get comfortable and complacent in a company that you've been around for a really long time. You figure, 'I've got this all figured out. I can just coast and not worry about anything.' Then what happens is you become irrelevant.

The second part is you just don't wake up every day and say, 'What can I do better? How can I learn something new? What is it that I'm going to know tomorrow that I don't know today?' So it's that constant self-reflection.

We get busy. Our outside lives come into play and you don't always think about what you're going to do to make you better, to make your team better, to make your company better. But in order to keep moving forward, that's what you have to do.

I don't think it's a universal problem that people stay too long in one place, but it's a problem that could affect us all. You just have to be careful to pay attention and recognize it.

A simple algorithm can help you figure out whether to quit your job

Devi Pride

Patty McCord, author of "Powerful."

McCord: I have what I call my algorithm for success. I use the word 'algorithm' because I worked with a bunch of engineers my whole life. It goes like this: Is what you love to do, that you're extraordinarily good at doing, something this company needs someone to be great at?

If you come to work, no matter whether you're a leader or an employee and individual contributor, and you think, 'These people just don't recognize how great I am; they don't pay any attention,' that might be because the company doesn't need you to do that thing you do extraordinarily well. You're frustrated, and they want you to do something else.

A lot of things can affect that algorithm, but it's an important one for managers to look at when they start to say, 'Do I have the right person in every job?' And for employees to think, 'Why don't I want to go to work today? What is it? What is it that's bugging me?'

If I didn't blame my boss and I stopped and did Patty's algorithm, I'd realize, 'Oh, it's because I'm a builder and I spent the last four years building this thing, and now they want me to maintain it, and I don't want to do that.' So it's that 50/50 equation. It's not just the company that takes care of you; it's you that takes care of you and your own career.

When I talk to women's groups, I say, when your company talks to you about engagement, they didn't say they'd put a ring on it. Sometimes when you're unhappy at work, a really good thing to do is go interview somewhere else and find out what it is you love to do. If it's somewhere else, then you should go somewhere else.

There are 4 types of underperforming employees - and not all of them need to be fired

[According to a second poll pushed out during the webinar, the most common management challenge among viewers is helping underperforming employees.]

Lebowitz: Do you have a tip that you always give managers who are facing this challenge?

McCord: First of all, you've got to figure out what underperforming is. Then you have to do my six-month test. You have to say, 'What's going on here? Is this person in the wrong job? Do I wish that they were a different person with different skills? Do I need someone who is a different person with different skills?' If that's true, then you have to adapt. You can't just keep giving people feedback and say, 'Do better.' They don't know how. So you have to talk to yourself.

I used to draw this matrix. On the horizontal axis was skills. Are they low skilled or are they high skilled? If the issue is skills, then you have to inject time into the situation. If you've got somebody who's an accounts-payable clerk and they want to be a CFO next year, that's unreasonable. They will not perform to that level in a year. If it's a skill issue, what's the timeframe I need for the skill?

The vertical axis is about motivation. Do you [the employee] want to do it [your job]? Do you hate doing it?

When you break those up into quadrants, there are people who are highly motivated and highly skilled, but you've got to keep them happy all the time. There are people who are highly motivated, but don't have the skills. That's where you have to apply the timeframe. But if you have somebody who's not motivated and not skilled, then it's your job to replace them with somebody who is. That person [the current employee] is probably not very happy either.

The first thing you need to do is figure out: Is this person in that box? Then you have to say [to yourself], 'If you walked in the door, I'm not sure I'd hire you again.'

I see this all the time when people want to talk about millennials. What do you want when you start a company? You want people who don't have much outside life and can work all the time. Because the problems are just problems of difficulty. What happens is not only do the problems change, but people grow up and change. So if you are somebody who used to work 12 hours a day, six days a week, and suddenly you've got children at home, your motivation changes. Your life changes.

Figure out realistically how you have a conversation with somebody. It's about dissecting not just the individual, but the whole team itself, and where you're going, and what you're going to do, and putting time on it. So that when you sit down with somebody and you talk about their non-performance, you've also got to look in the mirror and see: Are you giving them good direction? Do they understand the context of what they're doing? Do they understand the urgency and why the urgency? It's working together to address the issue if you can. It's being honest.

The most important piece of management advice for startup founders is to learn from your mistakes

Lebowitz: I'm going to share another audience question. Do you have a framework for how a small founding team should think about talent and the most important talent needs during the startup phase?

McCord: It's about defining what success looks like and breaking it down as far as you can. It's hard in the early days because the thing about a startup is it's probably something that not many people have done before. It's hard to find somebody to emulate or a way to operate because nobody else has done it. I think the most important thing is communicating really, really frequently. I call it the 'stand on a chair' test. You want to change the way you communicate when you can no longer stand on a chair and talk and everybody can hear you.

The other thing is in early-stage startups it's really important to build a culture where you learn from your mistakes because you're going to make a lot of them. It's the nature of the beast. My Texas mama says the difference between a wise man and a fool is that the wise man doesn't make the same mistake twice. So you want to build a culture where you say, 'Hey, I think that decision that we made that we were so sure about, I think we were wrong. Here's what we know now that we didn't know then.'

You teach the organization how to stop and reflect back on what you did well and what you didn't do well. How do you repeat the stuff that you did well and how do you avoid making the same mistake over and over again? If you can be honest with that founding team, then you're going to build a culture where people can see other people operating straightforwardly.

Lebowitz: Thanks for that tip, Patty. Before we sign off, I want to ask if you can share with us a final piece of people-management advice.

McCord: Whether you're in a startup or you're in a very large organization, when you start to do the stuff that everybody else does, the stuff that you're supposed to do, or the stuff that you've done forever just because you've always done it, you want to start learning to question your guidelines and your rules and your processes and your procedures and ask why.

One of the things I talk about a lot is how I don't like the annual performance review. The reason is because you have to stop and say, 'Why did we do that? What's the purpose of that?' If the purpose is feedback, well, nobody does anything once a year that they're good at. If the purpose is compensation, then we should be really clear about how it works.

The one last piece of advice is to ask 'why' pretty frequently. Why is it we do this? If I had to start over again, would I do it this way still and be willing to throw things away? That's my best advice. Stop doing stuff that doesn't matter.

Lebowitz: That's awesome advice. Thank you so much to Patty and thank you everyone else for joining. I hope you learned something new about people management. Thanks, Patty.

McCord: Thanks for having me.