Patty McCord, Author, "Powerful: Building a Culture of Freedom and Responsibility" talks about her new book and ideas on how to manage people in large corporations, at her home in Santa Cruz, California, Wednesday, Jan. 31, 2018. Thor Swift for the Financial Times
Patty McCord, author of 'Powerful: Building a Culture of Freedom and Responsibility' © Thor Swift

Patty McCord, the former chief talent officer at Netflix, was recently contacted by a human resources executive with news of an epiphany. Reading Ms McCord’s book Powerful: Building a Culture of Freedom and Responsibility prompted the woman to cancel her company’s annual staff performance review. “Score one for Patty,” she says, emitting a loud, throaty laugh.

If it were up to Ms McCord, who joined Netflix in 1998 when it was a start-up, more companies would ditch their performance reviews, and other shibboleths such as signing bonuses, anonymous employee surveys and pay secrecy. She wants to shake up human resources, which has a reputation for being out of touch.

“You need to choose the practices rather than just do them because it has been done before,” she says. “The top-down hierarchical model doesn’t work any more,” she tells me over the phone from Texas, where she spent her childhood, though now she lives in California. “Bureaucracies have slowed down innovation.”

The 64-year-old writes as she speaks: bluntly. In the book she eschews the language of HR: “A business leader’s job is to create great teams that do amazing work on time. That’s it.” Out are the modish terms “employee engagement” and “empowerment”, which only get bandied around, she says, as workers lack power, and a belief that employees want entertainment rather than results. That is infantilising — and, as she likes to say, she is not “your mom”.

Netflix, which pivoted from DVD mailing company to streaming service and then to entertainment producer, has forged a reputation for producing high-quality on-demand programmes such as The Crown.

This image released by Netflix shows Claire Foy, center, and Matt Smith, right, in a scene from "The Crown." The New York Times website recaps each episode of "The Crown" in text stories, but it goes the extra mile. Through the miracle of hyperlinks and its own "Times Machine" function, the site links wanderers to the paper's original reporting _ and its original pages in PDFs detailing numerous actual events covered in the series. (Robert Viglasky/Netflix via AP)
Claire Foy and Matt Smith in Netflix's 'The Crown' © AP

It is renowned for its organisational culture. Company perks include unlimited time off and an expense policy that is simply to “act in Netflix’s best interests”. That is the upside of the culture: treating workers like grown-ups.

The flipside is intolerance of anything below high performance. Managers are expected to run the “keeper test” — that is, would a manager try hard to keep an employee from leaving? If not, they should ask them to leave with a pay-off.

Ms McCord wrote Powerful as a “how-to for HR professionals”. After she left Netflix in 2012, she went hunting for human resources innovations. “I couldn’t find much,” she says.

Instead, all anyone wanted to discuss was how to do the “Netflix deck” (see box below). “It took 10 years to write!” Ms McCord, who now advises blue-chip companies and entrepreneurs on culture and leadership, insists that Netflix’s culture cannot, and should not, be replicated wholesale by every company.

But surely HR policies honed over decades are there because they work? Ms McCord agrees, but only to a point.

She wants to prompt executives to interrogate “practices rather than just to do them because it has been done before”. They must also be alert to change. “You can’t keep a culture [as it was].”

Predictably, Ms McCord argues HR should have greater influence. She says part of the reason for turmoil at Uber, the ride-hailing app, which was criticised last year for ignoring sexual harassment allegations, was because “HR couldn’t speak to Travis [Kalanick, the co-founder and then CEO].” Yet they need to up their game, she argues, by understanding the core operations of a business and its profit and loss statement.

The #MeToo movement has underlined the ineffectiveness of HR. While gratified to see women speaking up about harassment and hopeful about an end to the start-up “frat house” culture, Ms McCord worries HR’s image as the “evil mom” is being reinforced.

The book’s relentless focus on brilliant performance can be exhausting for the reader. Does every employee have to be a star, all the time? “Work is work,” she says. “It’s not always a brilliant life-changing event every day.”

But she dismisses the idea that some jobs suit mediocre employees, recounting a conversation with a chief executive, who dared to make such a case. “I asked, ‘OK, who in your company doesn’t need to be brilliant? Like, which job?’”

When he tentatively suggested payroll, she replied: “Not every position needs to be filled with Albert Einstein, but they need to be very good at what they do.”

On Glassdoor, the job review site, one Netflix employee writes it is “open knowledge that the company isn’t responsible for your career progression”. It is a view championed in Powerful: “We should not make false promises of job security,” writes Ms McCourt. If a good employee no longer fitted their role, Ms McCord says, she has helped them find a new one elsewhere.

And so the end came for Ms McCord. In 2012, she got her own severance package. “It was time,” she reflects. “I left as Netflix transitioned to an international streaming model. It was a different phase that I wasn’t suited to . . . they were going into film. It wasn’t a surprise.” For someone who espouses radical honesty, she is touchy on the topic. Reporters, she hits back, are “obsessed with the break-up . . . Of course I was upset. Is life without Netflix unbearable? Hell, no.”

The deck: the slideshow that shapes the company’s culture

In 2009, Netflix’s 124-page presentation on its workplace principles — or “freedom & responsibility deck”, as it became known — went viral when it was published online. Sheryl Sandberg, chief operating officer at Facebook, said it “may well be the most important document ever to come out of [Silicon] Valley” — unusual for a PowerPoint presentation. An updated version was published last year at jobs.netflix.com/culture

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