June 15th, 2016
(written by lawrence krubner, however indented passages are often quotes). You can contact lawrence at: email@example.com
The most common advice that I give to managers is “You need to fire more quickly”. It’s the most common advice I give because it is advice that managers do not want to listen to. Even supposedly “tough” managers hesitate far too long before firing people.
McCord also convinced Hastings that he should ask himself a few times a year whether he would hire the same person in the same job if it opened up that day. If the answer was no, Netflix would write a larger check and let the employee go. “If you are going to insist on high performance,” McCord says, “then you have to get rid of the notion of retention. You’ll have to fire some really nice, hard-working people. But you have to do it with dignity.
“I held the hands of people weeping, saying, ‘I want to be here forever,’ ” McCord says. “I would tell them, ‘Nothing lasts forever.’ I would say to Reed, ‘I love them, too, but it is our job to be sure that we always have the right people.’ ”
In 2004, the culture was codified enough for Netflix to put it on a sequence of slides, which it posted on its corporate website five years later. It is an extraordinary document, 124 slides in all, covering everything from its salaries (it pays employees what it believes a competitor trying to poach them would) to why it rejects “brilliant jerks” (“cost to effective teamwork is too high”). The key concept is summed up in the 23rd slide. “We’re a team, not a family,” it reads. “Netflix leaders hire, develop and cut smartly, so we have stars in every position.”
After Hastings, the executive I spent the most time with at Netflix was Yellin, a former independent filmmaker who joined the company in early 2006, when he was in his early 40s. Yellin quickly distinguished himself by pushing back hard whenever he thought Hastings was wrong about something. “There was a culture of questioning, but I pushed the envelope,” he says. He also helped develop a style of meeting that I’d never seen before. At the one I sat in on, there were maybe 50 people in a small circular room with three tiers of seats, like a tiny coliseum, allowing everyone to easily see everyone else. The issue at hand seemed pretty small to me: They were discussing whether montages on the opening screen of the user interface would be more effective in keeping subscribers than still images or trailers. But the intensity of the discussion made it clear that the group took the matter very seriously. Various hypotheses had been tested by sending out montages to 100,000 or so subscribers and comparing the results with another 100,000 who got, say, still images. (This is classic A/B testing, as it’s known.) Every person present had something to say, but while there were strong disagreements, no one’s feathers seemed ruffled.
One of my last interviews at Netflix was with Tawni Cranz, the company’s current chief talent officer, who started under Patty McCord in 2007. Five years later, McCord, her mentor, left. When I asked her why, she visibly flinched. She wouldn’t explain, but I learned later that Hastings had let her go.
It happened in 2011, after he made his biggest mistake as chief executive. He split Netflix into two companies — one to manage the DVD business and the other to focus on streaming. Customers were outraged; for many, the move meant a 60 percent price increase if they kept both the DVD and the streaming service. With complaints mounting and subscribers canceling, Hastings quickly reversed course and apologized. In the three weeks following this episode, the price of Netflix shares dropped 45 percent, and Wall Street questioned the company’s acumen. Hastings decided to re-evaluate everyone in the executive ranks, using the litmus test McCord taught him: Would he hire them again today? One of the people this led him to push out was McCord.
One analyst said, ‘Once people start watching shows that don’t have commercials, they never want to go back.’
“It made me sad,” she said when I called to ask her about it. “I had been working with Reed for 20 years.” Netflix had just given the go-ahead to “House of Cards,” and McCord said she “didn’t want to walk away in the middle of the next thing.”
But she also felt a sense of pride. She was gratified that Hastings had taken her advice so thoroughly to heart.