Netflix’s philosophy on human resources pretty much flies in the face of everything we’ve come to expect from Silicon Valley tech giants. Instead of costume parties and unlimited foie gras, Netflix gives out big stacks of cash – and little other else – to people who get the job done.
If they don’t get the job done? Well, I believe this quote from Netflix CEO Reed Hastings sums it all up:
At most companies, average performers get an average raise. At Netflix, they get a generous severance package.
Where did this philosophy come from? Obviously, Hastings, as co-founder, set the tone. But perhaps the biggest influencer on Netflix’s culture is its longtime “Chief Talent Officer”, Patty McCord.
McCord is the author of Netflix’s 124-slide culture code, which Sheryl Sandberg famously described as “one of Silicon Valley’s defining documents.” McCord has also been an outspoken critic of traditional HR practices, leading to some of the most memorable and thought-provoking quotes regarding the department.
Such as? Well,
1. During 30 years in business I’ve never seen an HR initiative that improved morale. HR departments might throw parties and hand out T-shirts, but if the stock price is falling or the company’s products aren’t perceived as successful, the people at those parties will quietly complain—and they’ll use the T-shirts to wash their cars.
So what does McCord think is key to motivating employees?
2. The best thing you can do for employees—a perk better than foosball or free sushi—is hire only ‘A’ players to work alongside them. Excellent colleagues trump everything else.
Gotcha. So what happens if you accidentally hire someone who isn’t an “A” player? McCord has a solution for that.
3. I said goodbye to the whiners and the babies and the people who didn’t believe. If they didn’t believe then we had no chance at all.
But isn’t that cruel? Shouldn’t you put the person on a PIP (performance improvement plan) to avoid firing?
Nope. Listen to what McCord has to say about PIPs:
4. Traditional corporate performance reviews are driven largely by fear of litigation. The theory is that if you want to get rid of someone, you need a paper trail documenting a history of poor achievement. At many companies, low performers are placed on Performance Improvement Plans. I detest PIPs. I think they’re fundamentally dishonest: They never accomplish what their name implies.
And here she is reflecting about a time she actually tied putting an employee on a six-month PIP, and it didn’t work. Looking back, here’s what she had wished she’s done:
5. I could have told the employee, ‘here’s what I’m going to need six months from now, and here’s the talent and skills I’ll need.’ Then you tell her, ‘It’s not you. I don’t want you to fail. I don’t want to publicly humiliate you.’
Okay, but the goal is not get into that situation in the first place, right? Companies should offer a lot of development and training along the way, right?
Nope again. Here’s McCord on development:
6. We develop people by giving them the opportunity to develop themselves, by surrounding them with big challenges to work on. Mediocre colleagues or unchallenging work is what kills progress of a person’s skills.
Okay, but shouldn’t you try to make your place a good place to work as well? For example, some companies have “Chief Happiness Officers”, so that must be a good thing, right?
7. At a recent conference I met someone from a company that had appointed a “chief happiness officer”—a concept that makes me slightly sick.
She goes on:
8. Too many (HR teams) devote time to morale improvement initiatives. At some places entire teams focus on getting their firm onto lists of “Best Places to Work” (which, when you dig into the methodologies, are really based just on perks and benefits).
So what should HR do?
9. Instead of cheerleading, people in my profession (HR) should think of themselves as businesspeople. What’s good for the company? How do we communicate that to employees?
Okay, let’s talk policies for a second, a big role for any HR department. What policies should a company set?
None, according to McCord. Her view:
10. Most companies spend endless time and money writing and enforcing HR policies to deal with problems the other 3% might cause. Instead, we tried really hard to not hire those people, and we let them go if it turned out we’d made a hiring mistake.
Did it work? Apparently…
11. Over the years we learned that if we asked people to rely on logic and common sense instead of on formal policies, most of the time we would get better results, and at lower cost.
Well, compensation structures are another big part of HR. For example, bonuses are a good idea, right?
12. I don’t do bonuses because they’re too hard to tag and to be realistic. If you try to do it, there’ll be that one geek on the team who makes a complicated process up to figure out why and how we give bonuses. But didn’t I say we have a high performance culture? Do we need to incent people to perform? If you’re the kind of person who wouldn’t make a bonus, then we don’t want you. The performance bonus is you’re employed or not.
Instead, McCord just believed in paying people really high base salaries. But what if a recruiter at another company calls? Employees shouldn’t pick up the phone, right? Or, if they do, the last thing they should do is tell their boss, right?
13. Many HR people dislike it when employees talk to recruiters, but I always told employees to take the call, ask how much, and send me the number—it’s valuable information.
Well, many companies use their stock options as a way to retain employees. Is that a good idea?
14. Most tech companies have a four-year vesting schedule and try to use options as ‘golden handcuffs; to aid retention, but we never thought that made sense. If you see a better opportunity elsewhere, you should be allowed to take what you’ve earned and leave. If you no longer want to work with us, we don’t want to hold you hostage.
Hmmm, okay. Well we have the money thing covered pretty well – how about titles? What would McCord say when she hired someone and they wanted a better title at Netflix because they are worried it will look bad on their resume?
15. I say, ‘Well if you come to Netflix, we’re going to pay you $350,000 a year to work on something no one else on the planet has ever done. And should you accomplish that, when you go on to your next company and they ask you why you went from this title to that one, you say because they paid me $350,000 a year and I got to accomplish all of this. They’ll get it.
How about new ideas? What does McCord think when she hears about new HR initiatives, like Taco Tuesdays or microbrews on tap?
16. Sometimes you just have to use your reptile brain. If something sounds stupid, it is stupid.
How about a rule to treating your employees? Well, here’s one of McCord’s main tenants when it comes to dealing with people:
17. Humans hate two things: being lied to and being spun.
Alright, so this list has been a lot of things not to do. What should companies do when they are starting off?
18. Here’s what you want in your first 100 employees: the best talent you can afford, who work hard and believe. The belief part can actually outdo the other two. It’s more than passion. Passion is such an interpretive statement. People need to believe.
Pretty good advice.
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