The “No Rules” Culture: How Leaders Can Rethink The Workplace

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Photo courtesy of Patty McCord

[The following is the full raw transcript for a LEADx Podcast interview, which has been lightly edited for clarity.]

Kevin Kruse: What happens when you eliminate rules, policies, and procedures?

Hello everyone. I'm Kevin Kruse. Welcome to the LEADx Show where we help you to stand out and to get ahead. Can you tell I'm extra excited today? Because it is a special show. I'll be chatting with one of the giants of Silicon Valley. She's not a tech founder, she's not a CEO, but she's someone who has shaped the culture of numerous companies including several of my own.

And our quote of the day, “My first company, Pure Software, was exciting and innovative in the first few years and bureaucratic and painful in the last few before it got acquired. The problem was we tried to systematize everything and set up perfect procedures.” That comes from Reed Hastings, CEO of Netflix.

Did you like my dramatic reading there? I have no idea what Reed sounds like. I should learn how to do impressions probably if I'm going to be reading their quotes. The Netflix culture deck, if you don't know what that is, it is a 124 page PowerPoint presentation which has been viewed over 13 million times. This is probably the only PowerPoint presentation that has ever been viewed 13 million times. Sheryl Sandberg has called it the most important document ever to come out of Silicon Valley.

Our guest today co-created that presentation with Netflix CEO Reed Hastings and more importantly, she shaped the unusual ‘no rules culture’ that enabled Netflix to thrive during her 14 years as chief talent officer. She is one of my business heroes. This culture deck has shaped the culture of LEADx and my previous companies, AXIOM, ACI, used it at Kenexa. Her new book is Powerful: Building a Culture of Freedom and Responsibility.

She shares what she learned at Netflix and teaches leaders how to build their own high-performance culture that can meet the challenges of today's rapid pace of change. Our guest is Patty McCord. Patty, welcome to the LEADx Show.

Patty McCord: Thank you. Thanks for having me.

Kruse: So we're going to talk about your new book in just a minute but I always ask our guests the same first question. I believe failures are stepping stones, there's no win or lose, only win or learn. I'm hoping you will share some painful failure of yours so that we can learn from your experience.

McCord: When I worked at Sun Microsystems, a long time ago, I ran diversity programs and part of what I got to do was I got to present to the executive staff once a quarter. I had to look at our numbers, a lot of affirmative action stuff and the work that we were doing around diversity and I thought I was very young in my career, was a big, big deal for me to go into E staff and so I thought wow, I'm kind of buddies with all these guys. And Scott McNealy the CEO sent some email out that I thought was bullshit so I wrote him this big long response. And I thought, there we go, I just fed it to him. Talking power to the man. Somebody came down and said, “Scott sent me to talk to you directly.” I'm like, “Oh really? What did Scott have to say?” They're like, “Shut up.”

Kruse: He wasn't sending a compliment.

McCord: He wasn't sending a compliment. And so I learned to A) Be circumspect. And honestly I've used that lesson sometimes when I coach people on how to have difficult conversation with somebody, I say, “Get mad at them on email. I mean, go to your computer and just type, use every swear word, don't worry about punctuation, just say what the hell you mean. But instead of pressing send, press print and then print it.” I tell, “Here are the instructions. You have to follow them carefully. You have to take that, fold it in half and put it in a drawer. It must cure for 24 hours. It's very important, the curing period. Then after 24 hours, remove the piece of paper, open it up and take that black Sharpie and exes out all of the emotive words. All the emotion.”

Kruse: Love that, love that.

McCord: I f'ing think you are the … take it all out. I'm like 'cause you have an issue. You're mad about something but you need to get to what it is you're mad about not how mad you are. So that's my learning from that one.

Kruse: That's a great summary. Get at the issue that triggered it but not expressing how mad you are. I like that difference. Like that difference.

McCord: It's important to do that because you're mad.

Kruse: Right, right, right.

McCord: But it's a matter of turning that into a productive dialogue. I just got off the phone this morning with a reporter who was saying, “What's HR's role in the new Me Too movement? Shouldn't HR be doing a better job policing?” I'm like, oh God, either you finally get away from being mom and now you’ve got to police again. Now we're going to have, “Shh, shh, HR's in the room, don't say anything.” And that's just a horrible place to be. And I told somebody else couple weeks ago about the letter from the woman at Uber—another reporter who called and said, “I bet some compelling companies are afraid their employees are going to go rogue and go out on the internet and starting voicing these issues nobody's ever heard of.” And I'm like, go rogue? Is what you call participating in social media which we all do? So they're all rogue already.

I said, “You know the reason why people do that is they don't have anybody in their company that they feel like they can trust.” To go say, “Hey, I gotta tell you what happened to me,” and that that person's not only going to listen but say, “Wow, how can I help you have that conversation with that person so they know it's wrong?” And be, “How are we going to, depending on the severity of what you're telling me, what are we going to do about this?”

Kruse: Right, right, makes a lot of sense. Now I always ask our guests also this follow-up question around a lot of our listeners for the LEADx Show are younger, newer in their career and we're going to dive deep into some talent management stuff from your book but in general, what advice would you give to a first time manager who she wants to grow into a great leader? What advice do you give her when she's starting out?

McCord: Learn how to set context for people well. That's probably the most effective leadership trait that I've ever seen. Which is the more you see yourself as teacher rather than teller or permission giver, the more effective your team will be. And ‘team’ not ‘family,’ right? Because I'll tell you, I've learned so much since I left Netflix from professional coaches because it's in the book, the one about Scott Bowman the NHL superstar coach, about how he gives people feedback. Every 10 games he sits them down and they go over, he writes a review, some feedback and they write some feedback and they get feedback from their fellow players and they look at the next 10 teams that they're playing and the next 10 games. They put together a plan and it has a timeframe and it has specifics so every person is working on, what they're, how they're going to be a productive member of the team. And he does that every 10 games for every player in the team.

At the end of that interview somebody said, “We know you hate the annual performance review, what would you do differently?” And I said, “What he said.” The idea of context is really, really important. Who are our competitors? Where are we at? Let me go through the PNL with you and let you understand how the financials work before we talk about the budget for your department.

How do we understand, what feedback are we getting from our customers? Who are they? How do we know them? How do we stay in touch with them? How do we send out involvement? That I learned every time I moved up my career ladder it was like wow, I knew something I didn't know before. Gotta go back and tell my team. Hey guys, look at, I just figured out how this works. It's incredible. This constant just keeping people informed.

The other thing that early stage managers don't do very well is they don't predict and estimate very well 'cause you don't know. But the better you can get at putting time wrappers on things, the more effective you'll be.

Kruse: That's great.

McCord: Because otherwise when people say, “Someday,” to five people, one of them thinks it's tomorrow afternoon, the other one thinks it's not ever going to happen. And if you mean by the end of the year, then everybody's on the same page.

Kruse: Right. That's great. I have an ear for language, I love that be a teacher not a teller and this idea of coach. I've often said, “I wish all the business cards that had people's titles as manager in it, you cross it off and put coach and it would just change so much about what's going on.”

McCord: Me too. I say, “There's only one job of management.” Here it is, it's one sentence, you ready? Build a great team that does amazing work on time with quality and serves customers. Done.

Kruse: Love it. There it is in a sentence.

 

McCord: That's it. That's it. We don't to need to make everybody feel good.

Kruse: Right, right, that's right.

McCord: Because sometimes I tell HR people, especially the ones that tell me that their job is to create employee happiness which nauseates me a little bit. I say, “You know, go find five successful people in your company and ask them to tell you about a time that they felt that they were doing great work that mattered. That they did something that really moved the business forward. Just describe that to me.” And they will always describe something hard.

Kruse: Right. Not necessarily happy or stress-free or work-life balance.

McCord: They won't say craft beers and macadamia nuts. They're going to say, they may have been involved, but they're going to talk about yeah, it's the hard things that they did when you didn't think you could do it.

Kruse: Right, right. And in your book, it was a question I was going to come to but we'll transition to it now. You take a few swipes at employee engagement. And employee engagement is a topic I've written a lot about, I speak a lot about. But I don't think we're going to be so far off the mark because I say, my definition when I talk about engagement is the emotional commitment we have to our organization and its goals. It's not happiness, it's not satisfaction, it's not lack of stress or any of those kinds of things and you do concede that there's some research that seems like if we care about our work, we are likely to do, perform better, sell a little more, service, all that kind of stuff.

McCord: I agree with you a 100%. I think all those things are true. The thing I disagree with pretty fundamentally is the language that we use that no one else speaks and engagement's one of those words. When you talk about it that way, I couldn't agree with you more, I absolutely agree with you. But it's like the word ‘culture,’ does culture mean I want to have a craft beer and macadamia nuts with you or is culture how we behave? And is engagement like when I talk to women's groups I say, “Look, when your company talks about engagement they didn't put a ring on it.” That kind of engagement, that's not the kind I'm talking about. And oh by the way, when you go interview with another company to figure out what you're worth which is the only way to figure out what you're worth not where you're at in your company's salary range. Then that's not cheating on your husband, remember? You're not engaged.

Kruse: They were only looking anyway.

McCord: I think it's a really, we're switching subjects again but for your folks starting out early in their career, don't be lulled and seduced by the first company that you work at that you like and think “I've landed. This is it. I don't have to worry about my career anymore. I'm just going to be here 'cause they told me in my little startup that there's going to be room for me to grow forever.” Till they ran out of money. Or until somebody bought them. Or until they switched business models.

Kruse: There's no guarantees.

McCord: The skill of interviewing is a really important one to keep doing. The other thing about interviewing is it's really helpful to tell a stranger what it is you want and what you're great at because you tend to develop a relationship with your manager over time where you tell them what they want to hear or it's different than telling a stranger. The other thing about interviewing is I found interviewing to be particularly helpful when you're unhappy. Not because you want to leave because sometimes you don't know what you have.

Kruse: Right, right.

McCord: Sometimes you go on an interview and go, “Geez, it's not that bad.” Both people. But I thought we were messed up, these guys are really messed up.

Kruse: Some of my best team members are boomerangs. I was their first job out of college, they go, grass is greener and they come right back and are happy to.

McCord: Yeah, but don't you love that.

Kruse: Yes, yes, yes.

McCord: And you get a much better employee.

Kruse: I do and I want them to tell everybody what it was like at that competitor company.

McCord: Yeah, and even I remember talking to Julia Hartz, she's the CEO at Eventbrite, long time ago, years ago. And she said, “You know, I hate when I talk to you because you make me think that what if we're really successful eight years from now and I've put my heart and soul into all these employees, that you say are just going to leave me.” And I said, “Okay, let's imagine incredible success eight years from now at Eventbrite. What if it was 100 times as big, 100 times the reach. You're going to want a company full of people who have only worked here?” Really? They won't have ever seen scale. It's unlikely that this group of people can get you there. And I'm not saying they're not great people, I think they're amazing people but they're also going to some of them reach the end of the line as to what they can do that's meaningful here and they want to be around somebody else who's going to teach them something. And if everybody is rising at the same pace then nobody knows anything that everybody else doesn't already know.

Kruse: That's right, that's right.

McCord: Your careers, our careers these long wonderful journeys. I think about when I look back, the first question you asked me was about mistakes but I remember a team that I joined that was a mistake. I knew it three days in. My manager said to me at the end of the first month, “You know Patty, you have a lot of ideas. And we've had them on, they don't work so it would be really helpful to the rest of the members of the group if you would stop having them.”

Kruse: Stop having these ideas.

McCord: Or just keep them in there because we don't want any new ideas. We do things the way we've always done them. Our job in HR at this company is to make the rules and make other people follow them. You need to get behind that right away and be the kind of professional we need you to be. You read my book, ask me how well that went over. At the time, my kids were all under five and I could walk to their daycare. I was four minutes from home. I took that job for all the right reasons. All the right reasons. They hated me. They loved my skills but they didn't like me. When I left, I learned to appreciate the things they did really well. They were exceptionally good administrators. We talked about benefits of administration all the time and I realize that it bores me to death. But there are people it doesn't.

Kruse: Thank God. Thank God there are those people out there.

McCord: Thank God. Well no, I mean I really learned then when I went on to do my first startup and I was in charge of my own world, the first person I hired was one of them.

Kruse: Right, right.

McCord: The yin to my yang.

Kruse: Exactly.

McCord: That the other thing I would say to early-stage managers is it's very, very tempting to hire someone who's smart, articulate, fast on their feet, good looking, someone just like me. And then you look around and you go, oh sh*t, now we have 30 people and they're all just like me. So we not only group speak but we have groupthink. We have group politics. We have group parties. It's all the same. Instead of making that first hire be somebody who compliments your skillset and who's better than you. Here's the other secret, I love this one. An early manager, you interview somebody and you think, God, she is incredible. Oh my God. But she makes $20,000 a year more than me and I can't let that happen. Because that would be unfair. So if I hire her I'm going to have to go to HR and tell me I need 40,000 more so that I'm making more than her. All bad ideas.

Kruse: Right, right.

McCord: You hire this amazing [person], you pay whatever it takes to get her. You get twice as much work done and then you do it again and then you do it again and then you do it again. And you're team is rolling. When it comes time for review everyone goes, “Oh my God, do you realize Dave makes an average of $25,000 less than all of his subordinates?” Time for big fat raise and promotion for that guy. Look at the team he put together. Look at what they're accomplishing. He never even said anything.

Kruse: Let me ask a follow-up on the salary and hiring. From a hiring manager, from an entrepreneur standpoint, I thought your book was very interesting in this, I've been influenced by companies like Basecamp or Buffer who have really transparent open policies and others do the thing where we will pay 90% of market rate. To be fair to everybody whatever the job class is, we'll use PayScale or some service and we'll pay 90% or we'll pay 50% in cost of living, whatever it is. That makes a lot of sense to me. Let's figure out, let's make sure rather than doing merit raises just because that get people out of whack, let's just make sure everybody's being paid market rate at whatever level.

But you argue that it's not really about looking at one of these services and pegging pay, you tell the story about someone that Netflix hired that was like double, I think, what you thought was going to be paid. And you resisted it at first to your team saying, “We can't pay this person that much.” And then you turned around and said, “Yeah we should.” How should a company, small company think about setting pay scales as they’re recruiting and trying to get these all-stars?

McCord: I think young companies shouldn't worry about it one single iota. I think young companies should worry about what they need to get done and putting the right team of people together to do it. It's an inefficient false sense of security to use the service unless those surveys are absolutely mapping the people that you're going to hire and the people that you work with to exactly the other companies that have people doing exactly that same thing. You've seen a survey right?

Kruse: Yes, yes.

McCord: They typically use generic job titles and then they have some descriptors around the job title. The first work of the survey, you just don't get to look at the survey, you have to map all your people to the jobs in the survey and all the people that you're going to hire to the jobs in the survey. And remember a survey itself is in arrears.

Kruse: Right.

McCord: It's not real time. It's last year. What people paid these jobs on average aggregate over a number of companies last year. So just know that's what you're working with when you go to a survey for expertise. If you say I'm going to peg everybody to 90th percentile and half of the people in the survey you don't even have in your company, then are you sure? To me, and there's a lot in that chapter about hiring and about compensation, when you start with a problem that you have to solve, all hiring should be based on starting with a problem you have to solve, what it's going to take somebody to be great at solving it. What people will have done in their past that's going to lend expertise to solving the problem. Who the other members of the team are already so that you can hire for the gap the delta, and some expertise that you don't have or somebody with more experience than you don't have or somebody who wants to join the team and learn and come up to speed quickly. Those are three different types of people.

Say I'm going to pay everybody in the 90th percentile, depends on who you end up hiring to help you solve the problem. Then, when you do that, then you want to get the best person that you can to solve that problem. The junior person who wants to come in and learn from all of your senior people isn't going to be as expensive as the person who knows more about it than everybody on your team. That's where I'm just saying don't get trapped in the ranges because you might overlook the right person. The other thing about it is if you look at the person who's going to most help you solve the problem and represents the filling of a hole in your team then you're more likely to consider someone who's not like the people you already have.

Kruse: Makes sense.

McCord: It allows you to have diversity. I don't have any problem with marking to a survey because it's data. The data you have about hiring is in your recruiting team. That's all I'm saying.

Kruse: I see, right.

McCord: Don't ignore the data that's in front of your face. In the book I also say that I used to say to Netflix employees, when a headhunter calls you, before you say no thanks, be sure you ask how much income, tell me.

Kruse: Right, right, right. Get that data.

McCord: That gives me an idea of market. The example that I used in the book, I had a couple of them but one of them was an employee who Google had offered twice his salary. I went ballistic about that. That's bullshit. He'd only been with the company five years and then I realized, oh sh*t. We'll he'd been at the company five years working on our personalization algorithm, which, how many people in the world had done that? That would be no one.

Kruse: That was the story where you realized the fact that Google was willing to do that, that is the market rate. That showed that's the market rate.

McCord: That's the market rate. He is worth it.

Kruse: Right, right.

McCord: The same thing was for another person coming in who made twice as much as everybody else. I can have that, because I had that conversation with about one of my employees, I could say, “Well, does this person add to X value?”

Kruse: Right, right.

McCord: It's not just that they make that much. When you look at them the value of the position to the company then you're more likely to be fairer about how you pay. It's how women get screwed.

Kruse: I was going to ask practically speaking, it's one thing if someone's got twice the talent or their senior engineer versus a junior engineer. You've got three high level engineers' roles to fill and you've three great candidates and one says, “Well I'm making a buck 20 over at this company.” And another one says, “100.” The female candidate happens to mention that she's making 80. So many companies would be like, “Okay well we'll give you a 10% raise or 20% raise over what you're making now.” So they come in with the raise and there's this big pay gap in the same role.

McCord: That's right.

Kruse: What, as the hiring manager and as the company, should we never ask? That's getting legislated now. You can't ask what someone's currently making, that's being challenged in some places. Or do you go in and say, “Look in this role this is what we think market rate is based on all of our data.” And you lead with that.

McCord: Yes. Yes.

Kruse: You just lead with that.

McCord: And the not asking people what they make, it's a data point that's interesting but I think the discipline of not asking will help us wrap our heads around a new paradigm. That's the problem sometimes is you just gotta throw out what you do and start over to think about it differently. That's probably the whole point of my book. I spent all my time at Netflix around all these innovators, we made shit up. It was so fun. I thought, how come they're having all the fun? How come I'm supposed to do things the way everybody does it and call it best practices? I don't measure anything, how do I know that what Google does is the right thing for us to do?

And so that's thing one. Thing two is, we don't throw anything away. An innovator throws sh*t away all the time. You never start with “We're going to reinvent the way you consume video. I know, let's make a better TV.” You just wouldn't do that. You'd throw out all the notions. That's why when we innovate around management and people, some stuff we should just throw away and see if it mattered. If you throw it away and it turns out like oh my God, it's disaster, it's chaos or turns out that we really relied on that system, then bring it back. But sometimes you don't know until you get rid of it. And so that's how I feel about asking people about pay. I think it would be a really smart idea at least for a while to stop doing that and seeing if changes our perspective.

Kruse: Makes sense.

McCord: Because women the example I give in the book, and you just gave a great example. We give her 90, she's thrilled. Then she starts talking to her colleagues about pay because everyone does. And she's going to find out that every other man she works with makes 125. And she feels cheated, she feels screwed and nothing in the workplace has changed except that fact. Why she feels cheated and screwed, 'cause she's screwed.

Kruse: It's not fair.

McCord: It's not fair.

Kruse: It's not fair.

McCord: And so she's going to sit around and wait for somebody in the company to realize that and make it good. But the system will keep her down. The example I use in the book is, let's use that example of that woman. She's 20% below market at least. The company has a six and a half merit increase budget with a bell curve distribution and they realize, oh my God she's amazing and she's not paid enough. We're going to give her twice as much as the average. We're going to give her 12%, we'll give her a 13% increase. And we're going to say to her, “You are amazing. We are giving you a 13% increase. Twice as much as the average person in the company, aren't you happy?” She sucks by 7%. It's compounded 'cause she's been there a year. Year after year after year, she's screwed.

And even if she goes for a promotion, they're going to say, “Well let's see she's making 125 now,” and the same thing's going to happen, we're going to give her big fat bump to 134 and everybody else makes 160. It's because they've escalated faster in their career probably than her. My background is recruiting so I'm hardcore about this stuff. You want to make a lot of money early in your career? Change jobs every two years.

Kruse: Right, right.

McCord: That's really the truth. Now at some point your ability is going to play. You're not going to know very much 'cause you only hung around less than two year at a bunch of companies with increasingly more important titles and bigger responsibility and at some point you actually won't know what you're doing and then you'll plateau. But that is the fastest way. If money is what drives you, then move.

Kruse: On this issue, on recruiting and comp, the other thing you wrote some interesting things about I think the Netflix practice was to let the candidate decide base pay versus options, is that right?

McCord: Yeah, yeah, that was really controversial.

Kruse: Tell me more about that. Was it a one to one like, Kevin you make $150,000 base or every 10 grand of base you take away we'll give you 10 grand in options.

McCord: Here's what we did. Let's say your base is 100K, that's what your salary is and your company has a bonus program and you're eligible for a 20K bonus at the end of the year and you have stock options that you're a public company, you have four year options but I'm going to say one year's worth another 10K. Your total comp is 130. That's what your total comp is. I might say, and so that's where you get in trouble not asking about pay because you actually shouldn't just ask about salary, you should ask about the whole package. You kind of need to know that 'cause that person is making 85 might also have gotten a 20K bonus or have been a co-founder and have 500,000 options or something like that. Which by the way, 500,000 times zero is still zero but okay.

In that case, I might say, “Kev, tell you what. I'm going to offer you 140 and you should know we require a minimum in salary because we want to make sure that you're eligible for disability and you can pay your medical benefits and you should know that if you die your life insurance is two and a half times whatever you choose. And you can decide if you want to take less in pay.” We didn't give bonuses because we didn't want to hire anybody that couldn't make their bonus so we rolled it in. I don't think bonuses incent people particularly.

Kruse: Completely agree.

McCord: That's my experience. You might say, you go home and you tell your spouse, “Hey listen, here's what their situation is, the total comp's going to be 140.” Your spouse goes, “140? 40% increase.” Because they think you're making 100. And for many, many people, just that conversation blew their minds. Oh, oh, oh, oh, I'm 130. Geez that's a bigger number than I thought. And the spouse is like, “Take the money.” And very much the reason why we did it was when we were writing the chapter on freedom and responsibility and we were trying to figure out how stock options should work I realized that the four year vested options with the one year cliff are based on a retention model and golden handcuffs.

That's why everybody does options and now RSUs are a mimic of that type of program that's going to retain employees. And then I'm like, well that doesn't jibe with what I've said about everything else being a great a place to be from. What if three and half years down the road you decide you want to leave. Now I'm going to screw you out of four years worth of vesting. And I said to Reed, he goes, “Well everybody knows you shouldn't have too much money in the company because like Enron, you don't want to be concentrated in your own company.” Blah, blah, blah. I'm like, “Well everybody doesn't know that.” And some people early in their career without a lot of obligations are willing to bet it.

Kruse: Go higher one option.

McCord: Yeah, what if they want to have a high risk profile and it works for their lifestyle, who are we to tell them what's wise?

 

Kruse: Right, right.

 

McCord: It's your money. We don't tell them what car to buy.

Kruse: Right.

McCord: We don't tell them whether or not they can afford that house. And then some people have big, we're in Silicon Valley, I'm like, to be honest with you, when we came up with that program it was during the dot com bust the first time around and everybody was out of work and I said, “To be honest with you I think a lot of people would just rather have the money.”

Kruse: Oh yeah, pay the big mortgage.

McCord: Pay the big mortgage. But it was more around, it was a comp philosophy as much as it rolled into our whole management philosophy which is why don't we let people decide what they want to do. And the deal was, I even wrote it in the first draft of the first quote policy. It said no whining. No matter what you choose, no whining. I remember sitting next to somebody one time and our stock had moved from, it had this huge run-up and it was $100 a share, we had $100 a share stock and I was sitting next to him and I'm like, “Oh hell yeah. $100 stock, what are you going to get?” He looked at me and goes, “Private school tuition.” And I'm like, “Oh, right.”

Kruse: I like what you just said about that policy. I think you could come out with the directors of the Netflix deck. All the things that didn't quite make the final.

McCord: That's what the whole book is about.

Kruse: It's the director's cut.

McCord: You know I should call it that. I should call it the Director's cut. I like it.

Kruse: Isn't that great?

McCord: I'm stealing that.

Kruse: Let me ask another detail thing. We've been talking about recruiting, we've got people, we've got great talent in. What are your thoughts on managing with goals and objectives? Google they certainly didn't invent them but they're kind of famous for OKRs, objectives, key results. Others do KPIs. What did you use at Netflix or what do you think is effective in terms of cascading goals, metrics, any of that stuff?

McCord: I'm glad you just reminded me what OKRs are because I always forget.

Kruse: I guess you weren't using them.

McCord: The acronym. I was thinking KPIs, what's that? Key performance indicator. Got it. HR bell. I don't have a problem with any of that stuff at all. I think it's great. I think everybody should be managed with goals and objectives and they should have timeframes and they should be really clear what goodness looks like. I think that sometimes we spend more time administering those programs than we do actually accomplishing them. On all of those things if we pushed it down to the local level where it was the manager's job to do a good job of setting goals and objectives. I fall asleep when people are describing those systems to me and the roll up and the roll down, and I key them in, the data.

I had a guy trying to sell me his HR software one time, he had, the whiteboard was full of all this stuff. And I said, “Okay, and then.” And he's like, “And then you'll have data.” I'm like, “Wow. Okay, and what am I going to do with that data?” “Well, you'll have it.” HR doesn't have a lot of data. And then you'll know, you'll able to map people's goals and aspirations to the objective of the company. I'm like, oh my God, now I'm going to sit in front of my computer and stare at that screen instead of sitting down and going, why are you unhappy? Oh, 'cause you want to do this and we don't have that job for you. Okay, the software spits out the job you want. We don't have it. That's just you know, we over process.

Kruse: So keep it a local level. A good manager, a good coach is going to have specific objectives.

McCord: Back to the story I told you about Scott Bowman. Are those KPIs or OKRs? I don't know what it is but he clearly had a system that worked well for him. He's the winningest coach in hockey history. So that story is in the book too, about how we went out, we were in a hockey stadium, and when he came up on stage this little 70-year man, the place went ballistic. It was total standing O for Scott Bowman because he was this hockey hero. I absolutely love clear prescriptive achievable important goals with time, time, time. If you're in a junior, if you're a junior person in a startup, the thing that is really, really hard to do well is put time wrappers on stuff. You can help yourself do that by asking, now by when do you want this?

Kruse: I've heard this advice, those two words, by when, as very powerful words that managers could be using.

McCord: Well you know that old adage the SMART goal: specific, measurable, achievable, relevant, and time-bound. You should be setting goals using all of that. But you can be asking the same thing. Okay, I got that it's important. I got that you want me to drop everything else and do it because you want it right now, like tomorrow? Well, I was thinking about next month. Okay. Or, okay you want it right now, you want it tomorrow. So you know that all those other things that you asked me to do, this, this, this, this, this, aren't going to happen. We're clear on that? Right? Okay, got it. Clear on it? Nothing else take precedent? We've got do this. We've gotta do it right now. Why? Because you realize that the thing that you asked me to do yesterday that was really critical won't get done and so this actually can't get done until that gets done. Just heads up. The relevant part.

And by the way, I can do it. I can do it right now. I can do it right now. It'll be a piece of sh*t. Because I'm going to hack it together and I'm going to do it to make the deadline but I'm not going to be thoughtful and I'm not going to test it. I'm just going to give it to you. So let's just both agree. Specifically what we're going to do and yes I can do it and this is why you're doing it and this is the reason why, but you need to know what's going to happen to the quality when I'm rushed and have to do something by tomorrow afternoon. I just did all those OKRs in the questions I asked.

Kruse: Right, right.

McCord: So when you're starting in your career, so get the information that you need from management. I always have all these HR people who will send all these notes out to all, there's an HR group that I have that's kind of these renegades. None of my managers know how to do anything, they're all young and inexperienced. Who has a class that can teach them how to manage? I'm like, oh God. The best class is to intervene at the moment and say, “Wow, we can do that better. Here are a couple different ways to do it.” When you're doing it. The best way to deal with conflict is when you're in conflict not in class. The story I just told you is the better you are as an employee of expecting good management, the better your management will be.

Kruse: That's great.

McCord: I used to tell people when I promoted them, I'm like, “Congratulations on your promotion. You now have two things you didn't have yesterday. You have a new business card with a different title on it and you’re psychic because now everybody, all of your employees are going to be like, well you should know what I want, he's a manager. Yesterday you weren't psychic but today you are. Today you're supposed to know everything about everybody on the team because you're the manager.” And it's just a different day.

Kruse: It's just a different day. Let me ask you ask you a high-level question as we wrap up. Did you have any inkling when you were working on the policies which we all, outsider know as the Netflix culture deck, did you have any inkling how big that was big that was going to be outside of Netflix?

McCord: No.

Kruse: When did you discover like, oh my gosh, this is like getting all these views on SlideShare, or whatever. Or people are now talking about it.

McCord: True story about the Netflix culture deck. Reed and I had done another company together and this time we wanted to create a place that we wanted to work at and I wanted to create a great company to be from. So we decided to write it down. Reed liked PowerPoint because that's how he thought it's kind of like an outline form. He would come in with his PowerPoint slides and he and I would discuss it then we'd discuss with our executive team and then the rest of management team and by the time we would actually publish something internally to the company, it might take a year. It's written in chapters. Every chapter's written based on the chapter before it. It took 10 years to write the slide deck. Like I couldn't actually do Freedom and Responsibility until I nailed High Performance.

Kruse: Interesting. Sure.

McCord: I've got somebody at the door. And getting High Performance took about four years to get the right recruiting team, to train the people how to recruit. Blah, blah, blah. So 10 years. Reed and I are driving to work one day he goes, “Hey I met this woman last night,” he goes, “has this really cool company that puts PowerPoint presentations online.” I'm like, “That's a great idea. Wonder what people would put out there?” He's like, “I put the deck out.” I'm like, “You what? Reed it's just the ugliest thing known to humankind. I don't think the fonts are the same from chapter to chapter. I think we changed. Oh my God. No, there was yin-yang symbol.” And I said, “Second of all, you're going to scare away all my candidates.” And he goes, “Only the ones we don't want.” And it changed the way we interviewed that day.

Kruse: Wow, that's great.

McCord: That day. I mean people would read it and come in and go, “We don't get time off?” And it also created, interviewing created a bunch of massive rewrites. The reason, and what I would say to people is, they're like, “This is policy?” I'm like, “It's a PowerPoint presentation.” “I don't think I agree that you and Reed have told everybody they should go interview somewhere else.” I'm like, “Well it's not a command. It's a slide. Do you disagree with the principle or do you disagree with how it's written because if you disagree with how it's written, rewrite it and send to me, I'll change it.” It's a slide. So we never ever did it for anyone but us.

Kruse: That's a good almost warning. It's not that the ideas are wrong but I think there's a lot of startups that think they just like replace their logo on the Netflix logo on day one.

McCord: They tell me it all the time. they slap it down in front of me and go, “We want to do this.” I'm like, “All right, roll up your sleeves, took us 10 years.”

Kruse: Right. And it's evolving and it took time.

McCord: Oh by the way, they're still on it and I've been gone six.

Kruse: Right, right.

McCord: And it's not what's in these slides. It's in what people do. And that's the biggest problem with copying the Netflix culture deck is that people do these beautiful slides, they don't act that way. And then you make it worse. Particularly with technical people because a geek loves a conspiracy theory and they love a reason to be cynical and if you say, “We're going to be transparent and informative,” and you lie, oh baby. All bets are off.

Kruse: That changes everything.

McCord: All bets are off. Yeah, it changes everything.

Kruse: Patty, again, your new book is Powerful: Building a Culture of Freedom and Responsibility. Tell everybody where they can find out more about you and the book.

McCord: They can go to my website pattymccord.com and the book is on Amazon and Barnes and Noble and anywhere you get your books or audio.

Kruse: And we'll put all those links into the show notes and the articles as well. Patty, thanks for coming onto the LEADx show.

McCord: Yeah, thanks for having me.

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Kevin Kruse
NY Times bestselling author, Inc 500 entrepreneur, and keynote speaker on Wholehearted Leadership and Extreme Productivity. Download 'How Millionaires Plan Their Day: A 1-Page Tool' at http://kevinkruse.leadpages.co/1page/