Powerful: Building a Culture of Freedom and Responsibility Hardcover – January 9, 2018

I came across Patty McCord’s name in another book about building and running great organizations (The Friction Project by Professors Sutton and Rao). I was intrigued by the story told about her honesty and her ability to challenge senior management on what was actually agreed to in meetings, and how that should be communicated to the broader group. Her book confirms these traits and teaches a lot more about how to build great teams. Quick read. Phenomenal read with great humor at times. Highly recommended!

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.

Netflix opened for business in 1998. Since then, the company has gone through ups and downs, survived changing technologies and markets, and become a moviemaker. Patty McCord was there for 14 years, starting in 1998. She was one of the people responsible for the HR policies that so many people want to hear more about.You can get some of those lessons from reading articles in the business press. Some feature specific practices, like the Netflix vacation policy. Others are about how you can be more “people-oriented.” But if you want to get an idea of why Netflix approaches HR the way it does, you need to read Powerful: Building A Culture of Freedom and Responsibility by Patty McCord.In Powerful, Patty McCord says creating a culture is an evolutionary process, and she thinks of it like an experimental journey of discovery. The book will introduce you to several of the policies that Netflix created, but it will also introduce you to that journey. Early in the book, McCord sums up the lessons shewill present.“The fundamental lesson we learned at Netflix about success in business today is this: the elaborate, cumbersome system for managing people that was developed over the course of the twentieth century is just not up to the challenges companies face in the twenty-first. Reed Hastings and I and the rest of the management team decided that, over time, we would explore a radical new way to manage people—a way that would allow them to exercise their full powers.”Read this book if you’re curious about Netflix. You’ll like it if you’re interested in new ways we can do HR. If you like thinking about how work will be different in the future, you’ll like this book, too. No matter what your other interests, you’ll get lots of ideas about things to try in your business.I’m glad that McCord waited for a few years after leaving Netflix before writing this book, Distance in time gives us perspective, and I believe the book is better for that. It’s also better because Patty McCord has worked as a consultant with other companies since leaving Netflix in 2012. We get the benefit of her experience at Netflix and her experience with other companies.I only have one tiny quibble with this book. Patty McCord writes about a high-tech, fast-growth company. If your company is like that, great, but most companies aren’t. Then what? Then you can ignore the few bits that only apply to high-tech, fast-growth companies and get all the other lessons from the book.I got many great quotes from the book. Here are a few of them. You can see more on my Goodreads page.“Yes, engaged employees probably deliver higher-quality performance, but too often engagement is treated as the endgame, rather than serving customers and getting results.”“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.”“I love data. But the problem is that people become overly wedded to data and too often consider it much too narrowly, removed from the wider business context. They consider it the answer to rather than the basis of good questions.”“it’s absolutely great for employees to be happy, but that it’s best for both them and their companies if the reason they’re happy is that they’re doing great work with great people.”“One of the reasons that I’m no fan of the annual performance review process is that not only does it take up a lot of your HR department’s time, but it is so often removed from any true connection to business results and serving customers.”In A NutshellPowerful: Building A Culture of Freedom and Responsibility by Patty McCord is a great business book. Read it for the story of Netflix, for a look at how cultures develop, and a whole bunch of ideas to try.