Powerful: Building a Culture of Freedom and Responsibility

This is one of a gazillion books about creating the team you need to be the next Netflix. Is it worth it? That depends.If you’re looking for a passionate, pleasantly irreverent, contrarian perspective on building a high performance team, then the answer is probably yes, and you should consider this book a 5+.If, on the other hand, you’re looking for definitive answers on how to measure performance and talent, this book is another 1 or 2.If you agree with McCord that the annual performance review is a colossal waste of time and money, and I could not agree more, great. And if you agree that no company has an obligation to guarantee career development to its employees, you’ll want to display the book prominently on your desk. In this regard, I do agree with her on the obligation part of the perspective, but not the return on investment of pursuing such a strategy, unless, of course, you are another Netflix, and you probably aren’t.Everything in life and business must be viewed in context. Building a high performance team is no exception. This model assumes that high-performance employees value nothing quite so highly as they value hard-core honesty and the chance to be part of a big, ugly shared challenge. And that fits some of the people some of the time in some companies at some point in their development. For Netflix it was a winner. For you? I don’t know.What you are guaranteed to get is churn, unless of course you are Netflix at exactly that point in the company’s development. McCord, to her credit, admits that she applied the same standards to herself as she did the rest of Netflix. And she left and the company apparently didn’t stop her, at least not successfully.I have no doubt she will be a huge success in consulting. Bigger than big, is my guess, particularly in the Silicon Valley biosphere. She definitely has something to offer.I liked the book. I really did. It’s a quick read and wonderfully written. Without the Netflix brand it’s probably over-priced but that’s okay. I happen to think Netflix is the greatest invention since the electric garage door opener, although I’m showing my age and the fact that I’ve always lived in cold, snowy climates.But after four decades in the corporate world, none of it in Silicon Valley, but with a decade of experience in China, where I managed a company that was successful despite my inability to speak the language, my unanswered question is how to specifically and objectively identify top talent. I fully understand the Justice Potter Stewart standard of “I know it when I see it,” and my record has been pretty good as both a CEO and a broad member evaluating CEOs.But I’d still like to better understand the why behind the what. I got whiffs of it in this book, for sure, but it ultimately fell short of being the Holy Grail – at least in that one regard.

Netflix is one of the world’s greatest companies. They didn’t become a great company because they have a great strategy. Let’s be clear about this: strategy never made any company great. They are a great company because the have a sound strategy AND a superb people management system. This book is a description of that system by the Human Resource executive, Patty McCord, who to helped create it.McCord writes: “…we found that inculcating a core set of behaviours in people, then giving them the latitude to practice those behaviours—well, actually, demanding that they practice them—makes teams astonishingly energized and proactive.” To transform a culture in a team or the whole company, isn’t achieved by formulating a set of values and principles. It is only achieved when the behaviours you desire become consistent practice.This book describes the eight practices below:1. The greatest motivation is contributing to success2. Every single employee should understand the business3. Practice radical honesty4. Debate vigorously5. Build the company now that you want to be in the future6. Have the right person in every single position7. Pay people what they are worth to you8. Perfect parting well with non-performing staff or staff who are no longer required, and be a great reference company to have worked at.I will touch on only three.The first principle is that motivation flows from being a contributor to success, not from incentives and perks. Talented people who are adult in their behaviour, want nothing more than to be challenged. This requires that you employ talented people and then explain to them, clearly and continuously, what exactly you expect from them.The common alternative is to create policies and procedures as a substitute for explaining clearly and continuously. The weakness of this approach is that the manual cannot anticipate the ongoing changes that are inevitably required.Netflix was changing too fast to be able to follow a policies and procedures manual. The company had to have a flat management which allows for speed in execution. This became clear when they had to retrench, and many middle managers were included. The result of removing a layer of management was a quickening of response times Netflix had not anticipated.As the fortunes of the company improved and it grew, the challenge became how to sustain the creative spirit and extraordinary level of performance the teams had been demonstrating. This stimulated McCord to ask: “What if people in marketing and finance and my own group, human resources, were allowed to unleash their full powers?”Netflix began by trusting people to be responsible with their time, got rid of their expense and travel policy, and in place simply demanded that employees use good judgment about how they spend the company’s money. The company lawyers warned it would be a disaster, but what emerged was that people didn’t abuse the freedom. “We saw that we could treat people like adults,” and that the staff wanted this. Netflix then experimented with every possible way to liberate teams from unnecessary rules and approvals.This approach required management to appreciate that their most important job is to focus on building superb teams. The best achieving teams were those where all members understood the ultimate goal of their work and were freed to creatively solve the problem of how to get there.Netflix was able to prove to itself that operating with the leanest possible set of policies, procedures, rules, and approvals, releases speed and agility.This led to the second principle that every single employee should understand the business.What is required in the absence of rules, processes, approvals, bureaucracy, and permissions, is clear, continuous communication about the context of the work to be done. It is an ongoing discussion about where we are, and what we’re trying to accomplish.In Netflix’s case they were changing from a system where you paid per rental of a movie which was mailed to you, to a subscription model where you paid in advance for future benefits. This change had profound operational implications. Too many companies when faced with new and difficult challenges “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,” McCord observes.Ask yourself these questions: Do your staff appreciate the most pressing issues facing the business? How much do you think they know about how their work contributes to the bottom line?If your instinctive response is that if you tried to explain, they would not understand, McCord advises: “The rule I would give them was this: explain it as though you’re explaining to your mother.” After all, if your staff aren’t informed by you, there is a good chance they’ll be misinformed by others.Communication between management and employees should flow in both directions. The more you actively encourage questions and suggestions, the more your people, at all levels, will offer ideas and insights that will amaze you.And the job of communicating is never done.To achieve all of the issues above, you have to have a focus on principle 6 - the right person in every single position.Netflix relied on the talent-management philosophy that “the responsibility for hiring great people, and for determining whether someone should move on, rested primarily with managers,” not on HR. HR is only an assistant in this process.They also required the deceptively difficult task of hiring a person who would be a great fit for the position (at whatever level,) and not just adequate. Building a great team is the managers’ most important job.“True and abiding happiness in work comes from being deeply engaged in solving a problem with talented people you know are also deeply engaged in solving it, and from knowing that the customer loves the product or service you all have worked so hard to make,” McCord explains. Money alone doesn’t buy love.This book is an accessible, very practical guide to managing staff at every level, based on insights from only one, very unique company – Netflix. However, it provides a valuable source of thought provoking ideas that you can easily adapt to your own circumstances.Readability Light -+--- SeriousInsights High --+-- LowPractical High +---- Low*Ian Mann of Gateways consults internationally on leadership and strategy, and is the author of the recently released ‘Executive Update.

When I was reading this book, I was reminded of Tom Peters' In Search of Excellence. We all know that within a short span of time since that book was published, half the companies in the book faced difficulties, including bankruptcy. Likewise the story of Netflix lacks compelling evidence that company culture is responsible for it phenomenal growth. It could very well be that Netflix was just lucky or in the right industry with plenty of financial wherewithal . The author may be falling into a "success delusion."

How to get the best out of your staff?I am always a bit wary of books that use the template of one company as the success formula for every company. Books like "Blitzscaling". As Freek Vermeulen and many others have explained, companies are too complex for a one size fits all approach.Powerful, building a culture of freedom and responsibilityHowever, it is Netflix and some of the suggestions in “Powerful, building a culture of freedom and responsibility” make a lot of sense. The book is best described as a hard-nosed version of ROWE (Results Only Work Environment).NetflixWe all know Netflix. It has continuously reinvented itself and is in my view a lot more sympathetic than “The four” and is likely to be more successful in the long run. It will be interesting what they will do when TV, AR, VR and gaming merge into one.Check your own HRMHere are a few questions for you: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.How well do you think people throughout the company could describe its business model?Do you share with employees the same information presented in your company’s earnings calls?Is everyone aware of the difficult challenges your company faces? Have you asked them their thoughts about how to tackle these?What areas of your business do you think your people know little to nothing about?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?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?Are people free to disagree with a point made by someone in authority during a team meeting?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?SimpleNetflix kept it very simple. Every Single Employee Should Understand the Business. Read that again. Every Single Employee Should Understand the BusinessLatitudeThey began with inculcating a core set of behaviours in people, demand these behaviours, but then giving them the latitude to practice those behaviours well. It makes teams astonishingly energised and proactive. The key word is latitude. Freedom to act. Treating people like adults and let them get on with it. That includes transparency and giving people the information they need. It means encouraging and stimulating questions and honest debate.Embrace the thrillYou want people to embrace the need for change and be thrilled to drive it. Netflix had come to understand that the most successful organisations in this world of increasingly rapid disruption will be the ones in which everyone, on every team, understands that all bets are off and everything is changing—and thinks that’s great. They wanted people to feel excited to come to work each day, not despite the challenges but because of them.Strip away the policies and proceduresWhich means they kept stripping away policies and procedures. What Netflix found that after they d had to let many middle managers go in our big layoff, they noticed that everyone moved much faster without all those layers of opinions and approvals. What takes the place of rules, processes, approvals, bureaucracy, and permissions? The answer: Clear, continuous communication about the context of the work to be done.People are adultsWhich means they don’t tell people what to do. Don’t do incentives. There is no better reward than making a significant contribution to meeting a challenge. Ask any very successful person what their fondest memories of their career are, and they will inevitably tell you about an early period of struggle or some remarkably difficult challenge they had to overcome.In Netflix’s view, a 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.Your jobA business leader’s job is to create great teams that do amazing work on time. Excellent colleagues, a clear purpose, and well-understood deliverables: that’s the powerful combination. The most important job of management is to focus intently on the building of great teams.The tips (not that dissimilar to “Principles”)The best thing you can do for employees is to hire only high performers to work alongside them.You go to war with the army you have, not the army you might want or wish to have at a later time.People need to see the view from the C suite 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.Fully and consistently communicated to everyone the behaviours you expect your staff to be disciplined about, starting with the executive team and every manager.Make sure that every single employee understand your philosophy and the behaviours you want them to executeCreate a culture deck.Create open, clear, and constant communication about the work to be done and the challenges being faced.Practice radical honesty.Truthful people are truthful in everything they do.It is not cruel to tell people the truth respectfully and honestly. To the contrary, being transparent and telling people what they need to hear is the only way to ensure they both trust you and understand you. Your people can handle the truth, straight and in person, and so can you.Encourage people to have strong, fact-based opinions and to debate them avidly and test them rigorously.Get people to base their actions on what was best for the customer and the company.Get hiring managers to take the lead in preparing their teams for the future by making sure they had high performers with the right skills in every position.Find the best creative talent with the skills to execute, and then give those creators the freedom to realise their vision.Make sure that every single member of a team knows where they’re going and will do anything to get there.Hire talented people who are adults and want nothing more than to tackle a challenge, and then communicating to them, clearly and continuously, about what the challenge is.Hire people who absolutely love problem-solving.Do not fixate on metrics that don’t matter.Do not assume that current employees will be able to grow into the responsibilities of the future.Have the right person in every single position.Your HR people must be businesspeople.Pay top dollar for your best people.Be a great place to be from.Do not make false promises of job security.UnencumberedIf you look at the most successful companies of the last decade or so, many of them are Internet firms with teams that work very collaboratively and organically. Harnessing the power of small, unencumbered teams. Unencumbered being the operative word.Trust and transparancyNetflix learned that preparing people for changes to come led to a sense of trust around the company: trust that we would proactively take the company where it needed to go and that we wouldn’t mislead anyone about the changes. Transparency about the difficulty of the decisions didn’t make coming to them any easier, but the honest dialogue did mean that people all over the company were prepared. Too often upper management thinks that sharing about problems confronting the business will heighten anxiety among staff, but what’s much more anxiety provoking is not knowing. Transparency also helps ensure that people take ownership of the positions they’ve advocated and don’t get hopelessly caught up in finger-pointing after the fact.Business and sportsThe metaphor that Netflix uses is that the company is like a sports team, not a family. Read "Legacy". Netflix as the All Blacks of the business world. One reason the sports team analogy is so helpful in managing people is that everyone readily understands that coaches are letting the rest of the team and the fans down if they don’t replace players who aren’t producing top performance.Power to the peopleThe conclusion from Netflix, and it should not come as a surprise, is that when people feel that they have more power, more control over their careers, they feel more confidence, confidence to speak up more, to take more risks, to pick themselves up again when they make mistakes, and to take on more and more responsibility. It’s not your job to give it to them. Appreciate their power, unleash it from hidebound policies, approvals, and procedures, and trust me, they will be powerful.Get out of the wayIf all your employees have a shared vision, shared purpose, shared passion, shared guiding principles, an understanding and belief in the brand, you are 80% there. Combine that with team sports principles, transparency and radical honesty and you are 90% there. Also, read “Reinventing organisation”. Everything is culture. Heck, you might even become lovable.

This no nonsense approach to hiring talent and removing dead wood is an employee’s dream. We all work with colleagues that we know are less than optimal.However this approach only makes sense if driven from the top of the company and if the local resource pool is abundant in talent. For specialist roles a recruitment hiring process of +6 months is not uncommon, you cannot simply fire without already having another candidate significantly through the process. This is without the regulatory requirements or fear of discrimination overheads in modern workplaces.I think there is a half way house here that might work for companies, the constant feedback cycle and focus on productivity is useful.

A friend recommended this book for my son, who is doing a Masters in HR, but I had to read it first - I'm not a Netflix consumer, or even into streaming, so I was curious to read about a new approach to culture building in an industry about which I know nothing. I found it such a compelling read that I finished it in two sittings. I may be old school and I've been a senior manager in 'traditional' EU and US companies over the last 30 years, yet this is the most refreshing business book I've ever read. Huge congrats to Patty McCord and Reed Hastings for pulling off such a major sea change. McCord tells it well and I hope my son's generation will be open to this type of cultural agility as they help to create their futures.

Great book.I read a lot and run my own business and people are such a problem for growth!! This book has gone a long way in understanding how you can grow without having to pander to salary demands for under performers and also having to spend a fortune on perks that no-one seems to want!!It's also an enjoyable and easy read and from the horses mouth and definitely worth the read if you're in my position or any kind of HR or business person.

Only around 1/3 of the way through, but really inspiring book! Whether the ideas would work in my organisation doesnt concern me as it has made me review practices in a different way.