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The Future of Work

She Created Netflix's Culture And It Ultimately Got Her Fired

Patty McCord created Netflix's revolutionary culture, treating employees "like fully formed adults," but did that culture force her out?

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During her 14 years at Netflix, Patty McCord kept a head-down approach, isolating herself within Netflix’s walls, to eventually come up with the brilliant 124-page document called "Netflix Culture: Freedom & Responsibility." So far, it's been shared over 13 million times on Slideshare and has been called "the most important document ever to come out of the Valley" by Sheryl Sandberg.

So when the streaming giant’s former chief talent officer was asked to "move on" from the company in 2012, there was a lot of speculation as to why she left. Steve Henn at NPR attributed McCord’s departure to her backing a plan that split the company into two: one for DVD services and the other for streaming. The plan also increased subscription prices, which led to 800,000 cancelled subscriptions.

Patty McCord

McCord, who now works as a consultant and advises companies like Warby Parker on leadership and culture, dismissed the idea that her departure was linked to the disastrous plan, saying there was no "direct correlation." The best way she could explain the separation is like a romantic breakup: "Have you ever broken up with somebody?" asked McCord. "Would you tell a complete stranger what happened on that day?"

She continues: "I’d been there a really long time. I’d done a bunch of great stuff. The company was in the middle of a change again, moving into global streaming and original content. It was a good time to pause. It was a good time to ask, ‘Is this the right thing going forward or should we give somebody else a chance?’"

"When Reed [Hastings] asked me to come to Netflix to build this great company, I said, ‘well, how would you know if we had done it?’ And he said, ‘oh, I’d love to come to work every day and work with these people and these problems.’ And he said, ‘well, how would you know?’ And I said, ‘I want us to be a great place to be from.’"

McCord admits that she was sad to go because she had been there for a decade and a half, but that "it wasn’t the end of the world" and that she wasn’t worried for "a nanosecond" that the company culture wouldn’t go on.

How The Culture She Created Led To McCord’s Departure

Netflix’s pioneering approach to culture, like not needing permission to take time off or its policy of no employee annual reviews, is meant to attract "fully formed adults" who are OK with the business being run like a pro-sports team rather than a family. The company’s unconventional HR practices led many watching the game to think of the culture inside the world’s largest subscription streaming video service as "a system."

McCord calls system "a funky word" and that she couldn’t have lost her job to it because "systems aren’t human."

She explains: "It’s not like it’s a secret set of rules. It’s an evolutionary process. The culture of Netflix is still evolving and always will. The Netflix culture deck was not written as a tablet of stone. It wasn’t written for anybody else other than the people who worked at Netflix."

Maybe it was no system, but it was Netflix's culture—a culture that was shaped largely by McCord—that led to her departure in many ways.

While at Netflix, McCord was tasked with telling hundreds of employees when it was time to "move on." In 2001’s dot-com bubble burst, followed by the 9/11 attacks, Netflix laid off a third of the company’s 120 employees. The company’s inner-sports team-like workings meant that even hardworking people got cut and "players" could change from time to time without it supposedly getting personal. In an interview with NPR, McCord mentioned letting go a product testing employee who "was great," but eventually lost her job to automation:

So I called her up. I'm like, what part of this is a surprise? … And she goes, yeah, but, you know, I've worked really hard; this is really unfair. I'm like, and you're crying? She's like, yeah. I'm like, will you dry your tears and hold your head up and go be from Netflix? You're the—why do you think you're the last one here—'cause you're the best. You're incredibly good at what you do. We just don't need you to do it anymore.

All of which to say is that McCord also lost her job because she worked herself out of one. She came to the company to create an enviable culture—which she did—and she left it sustaining and abled and in the end, there was really no need for her anymore at Netflix. She had played a good game, but the team no longer needed her as a player.

The Two Rules For Goodbyes

McCord’s frequent job of notifying people when it was time to leave led to her two rules for goodbye: You can’t be surprised and you keep your dignity. And she played by those two rules when it was time for her own departure.

"I was like,' geez this sucks' because I had been there a long time," said McCord. "But, not really, I wasn’t surprised, if I think about it. But I hang out with Reed all the time. I hang out with my ex-husband. You can break up with someone and survive if you have a deep relationship with somebody. When you agree that the number one priority is the right thing for the company and you agree that the person you report to gets to make the decision of what they want the team to look like, then you can’t ever be surprised."

She adds: "It’s the same thing if you decide to leave. It’s our own careers and our company and I’d like us, societally, to not have these emotional breakups. When you’re part of something for that long, you’re never really not part of it."

After her many talks with Hastings, McCord says the two decided her departure was the right thing to do.

"We did it in a way where I had a lot of dignity, the company knew all about it, it wasn’t a big freak-out, I didn’t disappear in the night," she explained. "We did it like the grown-ups that we are and that’s part of the culture."

Remember, "companies don’t exist to make you happy. You know that, right? The business doesn’t exist to serve you. The business exists to serve your customers," reminds McCord.

"No Pain, No Gain"

Despite her very public exit from the company, McCord’s stance on risk is that it's worse to be in the "safe zone."

She says: "No pain, no gain. No risk, no reward. Everything I’ve ever done was embracing the idea of risk. When I coach startups now, I say, to me the ideal next culture that one of you is going to create is one where people is like, ‘oh we’re changing everything? Cool! That will be so fun! You mean we’re starting over? How great will that be?' And then people will look to embrace change instead of hanging on to what happened before."

"Netflix was always a company that took risks. And they turned out right most of the time and the ones that didn’t turn out right, you never hear about. Same with any other company. This one was just a very public one so everyone wants to point to it as a turning point. And I think it was a turning point for the company. I think that things were going extraordinarily well and all things seemed possible and there’s a million references to what happened there and how the company learned from it."

In fact, McCord says the risk itself isn’t the biggest deal. It’s the "picking yourself up and trying again, that’s the great lesson," she says. "Companies get strong from—it’s like anything else you do—it’s the hard stuff that makes it stronger."

When she coaches startups now on effectively implementing a culture of risk-taking, she says that as long as the business risk is for "the sake of innovation," for the "sake of making [the company] better," then it’s worth it. And doing that culturally requires the leadership team to demonstrate it.

McCord explains: "If you see someone in leadership declare very strongly that they believe something and they’re going to do something and they do it and it doesn’t work out, it’s very important to see that same leader stand up in front of everybody and say, ‘I was wrong. Here’s the information I had going in. Here’s why I did what I did. Here’s what I failed to see.’ That creates an organization where you learn to present to your teammates the risk by presenting the potential downside and the potential upside and you get other people to work with you on it. And if it doesn’t work out, then you say, 'OK we learned something there.'"

Early-stage startups do this all the time," she continues, "this is like breathing. Most of what you learn in the very early stages is what not to do. It gets harder as it gets bigger because the consequences are bigger."

And after 14 years with a team, there's just more skin in the game.

Related: What Netflix's Amazing New Unlimited Parental Leave Policy Really Means

Slideshow Credits: 01 / Photo: Pascal Le Segretain/Getty Images;

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