Editor’s note: This article was first published in January 2014, and its figures are as of then, including McCord’s 14 years at Netflix (she left in 2012) and the rise of more than 1,000% in Netflix shares over the previous five years.
Patty McCord was Netflix’s chief talent officer for 14 years, in charge of recruiting talent for the company. Why should we listen to Patty? First, because she was a key piece in Netflix’s share price rising more than 1,000% on Wall Street over the last five years. And second, because she has shown more than once that she can bring a very constructive approach to a company’s corporate culture.
Patty McCord created a document (we include it at the end of the article) that soon became Silicon Valley’s HR bible. Business Insider has compiled some of her most important lessons, which have changed the way many of today’s business leaders see things. These are the six main points.
1. Hiring only A players is what benefits the business most
When a company’s employees work alongside excellent professionals and people, they are happier and more productive. If you mix A players with mediocre or bad ones, the A players will spend most of their time fixing the problems and mistakes of the B players.
Patty tells the story of an engineer who, after the dot-com bubble burst, was left working on his own and forced to stay until the early hours of the morning doing every task himself, because the company had been forced to lay off his team. After a while, the company told him to be patient: it would soon hire new people to work with him.
He told them there was no hurry, because he was now working much better and was happier.
(Read: 14 science-backed ways to be happier)
2. Logic and common sense work better than formal policies
According to Patty, they work much better and end up being cheaper for the company.
In her view, most companies invest time and money in writing HR policies, complying with them and enforcing them.
Using common sense and logic usually leads to better decisions for the benefit of both the company and the employee than many company policies do.
Likewise, many problems between a company and its employees can be solved by talking like adults. Talking like adults means speaking openly with bosses, colleagues and subordinates.
3. Get rid of formal reviews
The problem with formal reviews as most companies practise them is that they are too ritualistic and too infrequent, argues Patty McCord.
People are not honest enough, and issues that should be dealt with quickly are put off until the “audit” marked on the calendar.
A company’s success in human resources rests on constant feedback.
In many functions within a company, such as sales, engineering or product development, it is fairly obvious how well or badly people are doing, so there is no need to build bureaucracies or rituals to measure performance. Regular, informal feedback is less rigid and works better.
4. Performance improvement plans don’t work
McCord says she detests these plans: she believes they are fundamentally dishonest, because they never achieve what their name implies.
When low-performing employees are given goals they cannot meet because they lack the skills, they are usually called into meetings where the manager comes across as a villain for exposing someone’s failings, while the employee feels just as miserable at being criticised.
Sometimes more time goes into performance improvement plans than into training employees or building their skills, which would be far more useful and less costly in the long run. In the end, the lack of agreement between the two sides ends in the dismissal of workers who were never given the chance to be taught.
(Read: 7 things the world’s most successful people have in common)
5. Rethink pay and hiring policies to recruit people who already have great jobs
Netflix had to make drastic, fast changes, so it had no time to train anyone. At the time it needed the best professionals in their fields, people who were already fully trained.
Some of them were already working at the company, so Netflix designed a performance-based pay programme in which extra effort was rewarded, and those who met their targets also received generous bonuses.
On the other hand, why run a selection process and wait for the ideal candidate to walk through the door when we can go and find them at one of the big companies?
In the same way, if an employee can’t keep up with the changes and isn’t happy working at the company, don’t hold them hostage: give them an incentive to leave.
See also: How to improve your company and give your business a makeover
6. Make sure people know what “high performance” means
Performance is often well defined but not based on the business’s real objectives, and people don’t know how to work towards “high performance”.
Patty gives a simple example: if your company has a performance bonus plan, call in an employee at random and ask whether they know specifically what they should be doing right now to increase their edge. If he or she can’t answer, the HR team is not doing a good job, because it is not making things as clear as it should.
The best HR professionals, she adds, shouldn’t behave like cheerleaders, throwing parties, organising trips and handing out company T-shirts and pens. They know what is good for the business, and their job is to help people work as well as possible for the company, and to help the company treat its employees as well as possible.
Here is Patty McCord’s full document (in English): Culture, from Reed Hastings.
Further reading
- Some biases that lead recruiters to make bad hiring decisions
- A brilliant strategy for hiring only pleasant people at your company
Featured image: Coolcaesar, CC BY-SA 4.0, via Wikimedia Commons.
