How She Built Netflix’s Culture | Patty McCord

This week on Upstream, we're releasing an awesome interview with Patty McCord, former Chief Talent Officer at Netflix. Patty discusses the famous Netflix Culture Deck that she co-authored, how company culture evolves over time, how to have arguments at work, and more. This episode originally aired on Turpentine's HR Heretics, our show about the people side of company building. For more like this, you can find HR Heretics linked in the description. Please enjoy the episode.

Let's get into it.

Patty, get into it. I'm into it.

Thanks so much for spending time with us. I actually wanted to jump in on the culture deck. Sheryl Sandberg called it one of the most important documents in Silicon Valley. It's been 14 years.

I know.

Shared 15 million times. Looking back, what did you get wrong, if anything, in the Culture Deck?

Well, let's back up a little bit. The Culture Deck, I didn't write it. Reed and I didn't write it. We wrote it with the management team at Netflix over a period of 10 years. If you go back and look at it, every chapter is built on the chapter before. So we rewrote those, I think it's 9 of them, 6 times in the time that I was there. Early on in the company, we laid off a third of the company. It was a very cost-intensive business because we had to buy DVDs and stamps and envelopes and the people to put them in there. And the more successful we got, the more money we spent. So we were just burning through our VC money. Right? And it was like, God, we gotta cut costs. What do we do? We don't have anything to cut but people. And that Christmas DVD players dropped to $99. And you had one and you had one. We all had one under the Christmas tree. And the only thing, the only marketing we could do was in the box was a coupon that said, try Netflix for free. And our business went whoosh. So we were doing twice as much business with a third as many people, and it was more fun.

Huh.

And it turned out that everybody had like a bigger job and more responsibility. And our goal was not very esoteric. It was like, don't die. Yep.

Right?

Do not die. And so what we found was that that smaller team that was really, really focused on one thing, DVD by mail, amazingly great. was really powerful. So that's when we wrote the chapter called High Performance. High performance for me as an HR executive took maybe 4 or 5 years to pull off, 'cause I had to have a recruitment team that would hire the best people for the jobs that we had in the future, not for the best people that we had in the jobs that were now. I had to convince my CFO that a severance agreement was better than a performance improvement plan. And I had to convince all the lawyers of that. Right? So I basically started like looking around every day and saying, are there things that we're doing that don't matter? Are there things that we're doing that slow us down? And if it slows us down and we only have so much time to be successful, then maybe we don't need to do 'em.

Yep.

Okay, so then we have a team of high-performance people. Then we're like, well, what about freedom and responsibility and context, not control? So if you go back through and you look at the deck, you'll see that if it wasn't for the chapter before, the chapter after couldn't have happened. So that's the true story of the Culture Deck.

Wow.

And that's why I wrote my book after I left Netflix was when I started consulting, every startup founder would throw the deck on the table and go, we wanna do this. I'm like, all right, you ready to get started?

I've talked to a lot of founders and HR folks or any business leader, They're like, the Culture Deck, we have to apply it. We'll just overlay it onto this and we'll just copy it. Just knowing you for about 12 years now, we've talked about this deck a lot. I say it's not really a playbook. I mean, hell, it's not even a playbook for them. It's more like a journal, like a journal of your life that you rewrite and change and evolve and build off and tweak as you learn more about yourself.

Yeah, that's a really good description of it.

This term playbook and deck, I just get... I get hives when people tell me that.

Well, you know what?

It's a freaking journal.

They didn't even know it. We didn't write it for anybody but us. So how we used it at the beginning was Reed and I would meet with whoever we hired in a quarter who could usually fit in the room. And we'd go over the deck and say, this is what you can expect. And sometimes in those meetings, I'd see people kind of go, oh, shit. Or be like, ooh, they're not going to let us. True story. We're driving to work one day and he goes, you know, I met this woman last night who has this really cool company called SlideShare and they share PowerPoint presentations online. I'm like, God, that's a great idea. I wish I'd thought of that. Wonder what people are gonna put out there. He's like, well, I put the deck out yesterday. I'm like, you did what? 'Cause it's so edgy, right? I'm like, oh, Reid, you're gonna scare away, you're gonna scare away all my, you know, my potential candidates. And he goes, only the ones we don't want.

Exactly.

It changed the way we interviewed the next day. Now I wasn't interviewing you to see if you had all the right acronyms on your resume. Now I was saying, tell me about the stuff you've actually delivered. Tell me about what you've done wrong that you would do differently again. It created a conversation that was really important for us to be clear about who we were and we were not I'm not saying everybody should. It's funny that people are like, I want to do this.

I want to be like you.

But you can't if you're in a medical device company. You can't if you're in a manufacturing organization.

But it also gives candidates the opportunity to opt in or opt out.

Yeah. And have real conversations. I remember when we could finally interview people who had offers from Facebook or Google or the cool companies. And they'd say, can I work on anything that I want? I'm like, no.

We rent movies.

It's not Google. We're not everything to everybody. We do this one thing. And if you're not really interested in this problem, then that's okay. There's lots of opportunity at Google.

To play devil's advocate on the culture deck, lots of twists and turns. The next chapter is written on the first one. And you all were just super dynamic. You moved fast. You switched very quick. How did you take the employees along with that? Because I can see Right? Nolan, we know this. They love to complain. What are you lunatics doing? I don't know what's going on.

You don't know what you're doing.

There's so much change. There's so much change.

That's one of my favorite stories that's in the book.

And they're expecting a ton. How did you take them along or did you even freaking care?

This guy said to me, he goes, I don't think that management understands that everything's changing and it's not like it used to be and we used to know each other's names and we used to know what everybody was doing. I mean, I don't think management understands. I'm like, well, I'm a vice president and I report to the CEO, so let's call me management. Okay, you and I have had this conversation seven times, and I've had it four times with Reed. So I'm gonna say part A of your sentence is false. Management hears you. We understand. Do you know why things are different?

Why?

Like because we're successful. I said, "Do you know what we want to be when we grow up?" He's like, "I'm like a global corporation." You could tell he was like. I'm like, it's okay, you won't be here. Because you're a startup guy. And I mean, then that's, you know, that— and the thing was that we literally made it up. And so because we made it up, we could try something and go, that was stupid, let's not do that anymore. Or that has promise, let's see if we can work on that.

But people have a hard time with that change.

Yeah, well, they do.

And you hear it all the time. To your point, you would— like, Kelly and I hear it all the time as well. in the CPO job, how did you guys think about it? Did you care?

One thing I'll jump in and I'll let Patty— one thing that I love about her leadership is just, just the human aspect of it. Like literally saying, I don't know, or we don't know what we're doing. It's changing. I mean, I've never seen employees just stop and nod as fast as you just saying, we don't know.

Get over it.

Right?

Like, you know, if you want a predictable company, you should be at IBM.

Yeah. They'll respond to that.

Yeah. I mean, but like, and if you don't want to be part of the change— so I have a couple of sayings I tell people. So when they come and say, management made this stupid decision and I don't agree with it, I say, okay, I have 2 questions to ask you and the second one's more important. One is, if you were in management, what decision would you have made? More importantly, if you're in management, what information would you want to have to make the best decision? So you teach people how to use the scientific method. You teach people that you're expecting them to think, right? Could you—

Right.

I don't care about your opinion, I really do not. Problem finders, worth nothing. Problem solvers, ooh, weight in gold, right? So it's, but you have to model that behavior and you have to teach that behavior. And I think it's one of the things that's really hard right now with our distributed workforce. I mean, I love, remote work, and we can talk about how amazing those things are. But there's part of seeing great leadership in action that inspires people to be great leaders.

And those don't have to be very complex things.

They're not. I remember this—

Leadership in Action is a genius—

Did you see that I asked a lot of questions in the development meeting? I'm like, I did, and all of them were kind of dumb. Like, so you asking questions is not very noteworthy.

Yeah.

Right? You didn't have any suggestions for how we could do it better.

Yeah.

And so that's kind of— it leads me to feedback, right? But most people think that feedback means telling people something negative in a nice way so that they won't feel bad. Right? That's the shit sandwich, right?

Yeah.

It's the nice thing, the bad thing, the nice thing. And what it really means is if you're really— if the person you're giving feedback to knows that your objective in giving you feedback is to make you better, to make the company better, to make the customer happier, then you're much more willing to listen. But you're not willing to listen to just the feedback. The part of it that people miss is like, and here's what you could do differently. And here's what the effect would be. And here's what the effect of the way you're communicating The other part is like we totally— so feedback is like, as a parent, you know, guilt-tripping. That bad thing you did, that's a bad thing. Don't do that again.

Shame.

You should feel bad. Shame. You should feel shame when you do that.

I talked to my therapist about it with our kids right now. She said shame, embarrassment, the 2 things that I'm doing. I'm like, okay, no wonder I'm mad.

But you're gonna do it again, right? I mean, it's just so ineffective. And if you think about effective feedback, it's when I say, Kelly, thanks for speaking up in this meeting about that because you've been complaining to me about it for months, but you've never said it out loud in front of everybody else. And thanks for your suggestion on how to do it better. Do that again and you will do that today.

100%.

100%.

So my understanding of how Netflix did feedback was once a quarter, the team would get around a table and then everyone would give that person feedback. I'm sure that's a little bit overdramatized.

No, but I mean, that's one of the ways we did it. I mean, I probably tried 20 different ways when I was there. I never got it right.

Interesting.

And I don't know what the answer is. I really don't. But I do know that the closer to in the moment it is, the more effective it is. And also that you can be just straight with people and that people can hear anything if it's true. Right? It's that sugarcoating that we put on it. You know, you could have better interpersonal relationships with cross-functional teams if you worked on better communication. And you're like, what the hell is she talking about?

Yeah, what does that mean?

Yeah. And so with real examples in real time, especially in the moment, then that matters. So I tried that.

Do you do it in the moment of like, like in a group setting, or do we grab this person after the fact?

Like, depends on how entrenched they are, right? It's really, really great to grab this person in the moment and do it in front of everybody else. And they're like, oh my God, can you believe what she said to him?

Interesting.

And she lived, right? Because when I was at Sun, they'd be like, career-limiting moment right there. We just saw that one.

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Well, this is interesting. This is kind of spicy. We were talking about this in the backyard before here. I have a hypothesis. It's not about how you're doing at Netflix. It's great. People have trauma.

People, right?

I mean, Nolan, this is a t-shirt of his. The average tenure is 18 months in executive roles, or even for highly talented people, especially in Silicon Valley. We move. 18 months, 2 years, you move companies, and bad shit can happen. And you have trauma and you have scars. And so you kind of have to like retrain these people that it's okay to get feedback. You're not going to get burned, or you are going to get burned, because different companies, different founders, different leadership teams have these different cultures. And people are trying to move around and adapt to them.

I think it's deeper. What you're talking about is deeper because that idea that Your tenure in a company should last longer than 18 months is a complete lie. And it's been a lie since the '60s. I mean, really, seriously, are we still talking about this shit?

I agree. Right?

The career pathing stuff. It's like the world moves really fast. 18 months is long enough to learn a ton of stuff. You know, bad stuff happens to all of us. Whether we want it to or not. If you're 18 months in any job that's exactly the same as what they hired you to do, you should probably not expect a lot in the future. Lots of people don't, and that's perfectly okay. But you got to choose a company that's going to have you have the same 18 months of experience over and over and over and over again.

Yes.

Most companies in the current world want you to have pretty fresh experience. I was at Netflix for God, forever, right? 14 years. But I always tell people, like, I used to tell Reed, the CEO of Netflix, I'm like, okay, here's the deal with me. I kind of think of them as degrees. And after between 4 and 5 years, I get bored. And then I kind of start making trouble. And then, you know, then you gotta let me go. So he's— I'm like, so you should know that. And so we get to my 4 and a half years, and we're going from—

2.5.

DVD to the technology of streaming. It's like, oh, new company. So a lot of times you can have that 18 months of experience. That's why I'm such an advocate of— so now that I've done this for so long, the job of management is to build great teams that produce amazing work on time with quality that satisfies the customer. Done. That's it. That's all, right? But the point is, it's to produce great teams for the future, not to make sure that everybody that you hired in the past gets a career path.

That's so counter to what many HR people think today.

I know.

And push internally to CEOs. They want a career path, they want levels, they want it nice and structured in this box. And you're basically just saying like—

It's not true. It's bullshit. I mean, it always has been and it always will. So I do a talk in Canada before the pandemic. There's 500 CEOs and their HR people in the audience. And I say, raise your hand if you're in the job that you had when you graduated from university, CEOs. How many hands go up? Zero. I'm like, okay, raise your hands if you and your HR partner think that the most important measurement for people is retention? 500 people raise their hands. I'm like, does that not seem fair to you?

Right.

It isn't true for you, but it's true for all of them. It's just, it's a crazy metric, right? It's a crazy metric. And it's just, it doesn't work that way. It's just, if you're successful, your company will change. Do you hear me? If you're successful, Your company will change.

And people will leave and new people will come in. People will grow, people will renew, people will leave and start new companies and buy your products.

And some will come back.

Right.

That's right.

And the people that are there will be fine. They'll be fine. We can talk to them as adults about change.

I mean, another thing I've been talking about a lot since I've left is if you can wrap your head around creating a company that's a great place to be from, Let me say it again, a great place to be from so that your job as a leader is to create resume-worthy projects and products, then you take that with you forever.

Why do you think folks are still grasping onto this retention? What is it? Are they scared?

Because they're scared. Yeah. I mean, you get older and you have to You have families, you have obligations, and you want predictability. I mean, we're humans. We wanna know our cave's gonna be there and that the woolly mammoth will be there for supper. I mean, whatever it is, right? And so that's not illogical to not want security. It's just not true to promise it to people.

Especially in a hypergrowth business.

Especially in a hypergrowth business, especially for entrepreneurs. I mean, You know, I'm lucky because I have been part of a couple of really successful startup companies, but I am not the norm. You aren't, Kelly. You guys are— I mean, you know, the norm is like, well, I went to hell in a handbasket because it was either a great idea that was a feature, or it was a great idea that's part of something else, or it was a great idea that with bigger resources and complexity, then you can grow it in a way you couldn't do it on your own. I mean, that's the norm. And so what we don't tell people early in their career is the truth. It's highly unlikely you will join this firm and be here for the rest of your life. But it's highly likely that every couple of years you're going to be in a significantly different job.

I want to talk about your relationship with Reed.

Yeah.

How long did you guys know each other or have known each other?

Reed Hastings, the CEO of Former CEO of Netflix. He retired last year. Let's see, my relationship with Reed. I met Reed because when I was at a company called Borland, one of our executives left and he had a lot of options on what to do next. He was gonna either be a professor at Harvard or he's gonna join a startup. And he joined this startup and I was coaching him on, you know, what choices to make. And I said, well, why'd you choose this one? And he said, because I think the CEO is really talented and I think he has a lot of Potential. So I was pretty frustrated because the company wasn't going very well. So I cold-called. Are you old enough to remember *69?

Yes.

When somebody called you, you'd do *69, it would dial the phone back, right? So I did *69 and Reid's sister was the receptionist. She answered the phone and I'm like, hi, my name is Patti McCord. Can I speak to Reid Hastings? She puts me through. You know me, right? I said, hi, you don't know me, but I'm going to be your next HR person, and I'd really like to come and meet you. And he's like, what? Who are you?

Cold Albert and Reed.

Amazing.

Yeah.

So it's like VSTAR 69.

What year is this?

This is, I don't know, '80s, '90s, early '90s, right?

That's OG Patty. Yeah.

Anyway, I got an interview with him and And in the interview, he said something about, what's your HR philosophy? And I'm from Sun, so I speak fluent HR. Reid, I believe that every employee should be able to reach out with their personal goals and objectives and align them with the core competencies of the business and the organization and find a way to—

HR bingo.

HR bingo, man. I just flow. And he looks at me and he goes—

You didn't throw engagement in there?

Oh, I had them all. I had them all. Engagement, empowerment. And I believe that employees should be empowered. What the hell are you talking about? I mean, we sell software. I don't understand what you people—

Stop it.

He's like, do you have an original thought in your head? And I said, you don't know me. And he's like, yeah, well, I'm not gonna if you're gonna keep answering. So we get in this big fight and then they called me back. And it was because the other person, They just didn't like it very much. Just limited options.

Just came down to limited options.

Process of elimination. Yeah.

A pipeline of 2.

And my background is recruiting, right? So this is the first time I've ever been like a real HR generalist and a professional. So I go in, I'm like, hi, Reid, I want to talk to you about the structure of the organization, where we're going. He's like, yeah, no, I didn't ask you. Why don't you go away? Like, we got work to do, and I really don't need you to help me do that. So I told you outside, like, so we had this endless series of conversations over years where I'd say, you know, if you'd asked me what you should do in this situation, I would've said probably not what you did. And I would suggest something different. And he would say, note that I didn't ask you.

Mm-hmm.

And then over time, he would come in and go, I did something you're not gonna like, so I might as well tell you before you gimme shit about it. And then after a while, it'd be like, I have this idea, what do you think? And because, you know, you guys know this, you know how we get our reputation? We're right more often than we're wrong. And somebody said to me one time, oh, my CFO at Netflix, he said, yeah, I don't like the way you are, who you are that much, but you're a diva. And like, you're always right about people, right? When we interview somebody and I disagree with you, you always turn out to be right. And I'm like—

That's true.

Well, first of all, let me just bathe in that you called me a diva for a minute. Not that you're right.

I was right.

Yeah, it was like, you know, whoa! Because, I mean, we fought all the time. And I said, do you know the thing is, Barry, we actually have the same skills. You know, yours is with numerals, mine's with people. It's pattern recognition. All right? So I don't care what they say on their resume. I care about what they've actually done, what they've actually delivered, what's, you know, and you wanna talk about like what rank Like, were they at Harvard? Which has nothing to do with the job we're hiring them to do. Yep.

Right?

So that's our strength, right? And so where we get the respect that we want is not demanding a seat at the table. I want— why doesn't HR have a seat at the table? I'm like, just earn it.

Right?

Have the table be set and somebody say, Oh my God, we should get Kelly.

But in your case, you were actually okay not being listened to, at least in the beginning?

Yeah, but I had to be right.

Right.

I made a policy with myself that I would never say, I told you so, because I would never have to. And you know what? Most of the time it's like, this person is not telling you the truth. What do you mean he's not telling me the truth?

You think he's lying?

I'm like, pretty sure.

There's so many HR people though, Patti, that don't want to let founders make mistakes. And I've found that that's the only way people learn, especially founders.

Yeah.

The whole let them fail.

I remember after I left Netflix, I was consulting to a company. This is when I was working Brannan Street. That was back in the day of the last dot-com boom. Everybody had the cool offices on Brannan Street. I'm like, I don't really do the side streets. I only work brand name. And I go in and this guy, it's a San Francisco office, it's all full of brick and there's 9 pool tables. I'm like, geez, you could put a lot of engineers in here to take the space of the 9 pool tables.

And bars.

So I say to the CEO, I say, what do you want for your company? What's your vision? He's like, we're going to be a well-oiled machine. We're going to deliver. We're going to produce. We're going to have great solutions for our customers. We're going to be just a team that's operating at maximum. I'm like, wow, that's great. Okay. So let's say you and I are playing pool and we have an executive— we have a leadership meeting at 2 and it's 5 to 2 and I'm about to pretty much kick your ass. Like, what happens? He goes, you're not going to kick my ass. We're going to stay here until I beat you. I'm like, uh-huh. You want to have a well-oiled machine? Be on time. It's that simple.

Yeah.

If you say you will, then do. People are, in all my years of doing this, you guys know this for sure, we're just ducks. We imprint on leadership and that's why your question was, why don't we let founders fail, we don't have to let them fail, but we have to give them a heads up that this has consequences. This decision, this act that you're doing has consequences. I'm not the founder, you are. You're the boss.

You're laying out the future.

I'm laying out the future. We talked about earlier, I'm not laying out the future as a business I'm laying out the future as a business leader.

From a specific angle.

From where I sit, I can see everything. When HR people are like, what HR metrics do you think are important? Like the P&L.

Revenue. Yeah.

Right.

And so if every quarter you have an executive management offsite and everybody puts together a slideshow of what they're going to do, and you notice that you're 3 quarters in and they haven't done it, Like, okay, there's something wrong. It's probably people. But you don't have to go, I don't think so. I think you're unhappy. It's not whether or not you're unhappy, you're just not delivering. So what's going on in there?

Yeah. The relationship with these founders, just working with a ton of them and you two, both of you, and talking with even more than I've worked with, it's a tricky Relationship, especially in this HR people, whatever we call ourselves now. What do we call ourselves, Nolan?

I have no idea anymore.

We're happy. We're people people.

In this job, because it has to be a balance between that business side and the relationship side. You can't be too far.

It's not a balance, Kelly. It's, it's— yeah, I guess it is.

But a lot of people don't do that. Like, how do you do it? And do you think HR leaders are doing that well? Since you've left Netflix, the last 12 years, how has it shifted?

Well, I mean, I've seen things shift so dramatically since I've left, right? So when I first left, it was chief happiness officers and all that crazy shit. I mean, and then there's the pandemic, like, oh my God, are tech bros cooking their own breakfast? How's that gonna happen? Like, how are they gonna get their own cereal? And then because of the pandemic, we literally had a vision into people's lives and realized, oh wow, they have children, they have spouses, they have obligations, because we can see it in front of us. And you know, up until then, we all believed that there were 2 personas that each of us had, the work person and the home person. And we, we told ourselves we could be 2 different people. Right? It was only when things cracked, or things, you know, your dad dies, or your kid gets sick or something like that. Only when the crack opens and you're like, well, I'm a mom too. I'm a dad. I'm a daughter. I'm a grandmother, whatever it is.

By the way, I do this too. Yeah.

And now we could see like, into everybody's Literally into their bedrooms usually, right? Or their laundry rooms and see that they got other things happening at home. And so I think that's a really, really healthy thing that's happened to work. And I don't think that— like, I get called all the time to talk about the future of work. You and I have talked about this.

Mm-hmm.

It's like, it's now. What are we waiting for? And if you go back, You'll be so sorry. It's just—

But it seems like we're getting softer. We've gone through a lot of adversity and it feels like we've come out on the other end really soft from where I sit.

Yeah. You're in the real world and I'm not anymore. So I get to pontificate all the time. It's like I was talking to somebody on a podcast the other day. I'm like, I love this. This place I have in the world now where I'm like this diva guru, right? And people are like, oh, you're so innovative. I never innovated anything. I just stopped doing stupid shit.

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Visit choosquad.com and mention Terpentine If you could rewind 20 years today and come back in and hang out with Nolan and I and all the kooks we hang out with in the current situation, would you? Why or why not? Would you do it again in this environment?

You know, probably not as successfully because I'm such a hardass. But yeah, I mean, so every podcast ends up with the lightning questions. We're going to ask you a bunch of questions.

Not this one.

And you're going to pretend like you didn't know them. And so I want you to act like it's spontaneous. And one of them is, what would you tell your younger self? And after I thought about it for a while, I realized I would tell, I wish I knew how good I was.

Then.

Right. I didn't know that I was good at what I did until I made 6 figures and I had a VP title. Then I was like, oh yeah, I'm kind of a pro now. But I was a great recruiter.

Yeah.

You know? And the reason why I was a great recruiter was I really loved what people do for a living. I mean, I loved going into the Robotics lab, watching people build little tiny arms. I mean, I thought that was cool. That relationship between what we do as professionals and what the other people do in our companies to make our companies successful should be like muscles. We're not outside of the company. We're not business partners. We are in the business.

Yeah.

I'm at Netflix and I'm walking in the lunchroom, Reid and I, and I see a bunch of engineers and they're talking amongst themselves. And then they're shispering. That's what I call talking shit in a whisper.

I love that. That's so good.

Shispering. Shispering. And then they stopped talking and Reid says, they're afraid of you. I'm like, no, they're not. And he goes, yes, they are. You control their title, their salary, whether or not they work there. I mean, what does it feel like? And I'm like, It feels like I have a lot of power. And he goes, yeah, what does that feel like? I'm like, what's it feel like, Reed?

Hmm.

This is the same thing. So I sit down with those engineers. I'm like, let's see, why are you shivering? Oh, my salary was just released on EDGAR the day before because I'm a Section 16 officer. I'm like, can you guys believe how much money I make?

They're like, whoa.

I'm like, I can't write a line of code. 2 of you have PhDs in math. I mean, seriously, why on God's earth is this chick making this kind of money? And they're like, eee! And I'm like, because I'm in charge of making sure we got the right teams in the right place at the right time. And so that means having the right people here, finding the right people, having the wrong people, people that move on, move on with dignity and grace. And I really hear you about your education and your expertise. So which one of you wants to go do the exit interview with the VP that I'm about to do? Anyone?

Anyone?

Anyone want to do that? So, but it's that scope. So let's go back to what HR people do. We do all this behind-the-scenes stuff on compensation and scope and reach of job levels and all that stuff that everybody wants to know, but they don't really know it. We don't really tell them. We don't really tell them that the Radford survey we use to figure out their compensation is 2 years old. Yeah, it's an art. And that the way we do it is the way we've done it since 1967. I did a talk with a couple of thousand compensation people one time.

Me.

With comp pay.

My eyes just went wide.

Yeah, I know.

I was just like, oh my God. So I was like, okay, the doors are closed. I'm one of you. I get it. Okay, here's what I want you to do. Raise your right hand. Everybody go home and write some checks and fix equal pay, for God's sake. How hard is this? Like, it's not— this is not, you know, brain surgery. This is called a spreadsheet that says average male salary, average female salary. If it's different, write a check, make it Simple. And then realize, go look in the mirror and realize that this inequity, you made it yourself.

But wasn't Netflix like that? Because Netflix was always top pay for top performance and it was individual markets.

Yes.

Right. And so with individual markets, you're going to have inequities. And so—

It depends. I mean, I can't say anything about when I left, but when I was there, one of the questions that was ejected from any interview was, what are you currently making?

Okay. Okay.

So I no longer allowed people to ask that in an interview.

I do remember one of the things about getting a raise was one of the best ways to do it was to go get another offer.

Yeah, I used to say— I sent a note to the whole company one time. I'm like, okay, just let me be clear. I know that headhunters are calling you. I know that we're popular. I know that people want you guys to come.

Okay?

So just do me a favor. Before you say no thanks, be sure you say how much income, tell me. Because that's how I'll know what market is. I think that the real intel around pay, competitive pay, especially in the Bay Area, is in recruitment. It's just a hard— again, that's another one of those nuts I've never really cracked.

But this comp piece, it's one slice of so many slices of this damn pie.

It's an important slice.

No, no, I'm saying it's a hard job is what I'm saying.

No, but but but it's all the the this is what I learned. It's the whole thing. You can't chunk it up like we do in HR. Well, comp does this, and employee relations does this, and the benefits people do this, and that da da da. And we all think we have these separate.

Correct.

It's all the same thing.

All the same.

So so I'm co I'm on the board of a company that does year-end performance bonuses. Right? So I'm meeting with the CEO, the CFO, the chief people officer after they've done two months of calculations figuring out what the performance bonus is going to be at the end of the year. Right? And it's based on company performance and stock performance, and then I'm like, okay, before we get started talking about the intricacies of the bonus program, which I I mean I think I'm a pretty smart person, but honestly I'm kind of twisted about it. Have you ever not paid it? What do you mean? I'm like, so 7 years, have you ever not paid the annual performance bonus? Well, I don't know that that's relevant. I'm like, it's totally relevant. Have you ever not paid it?

No.

I'm like, okay, so it's not a performance bonus. The only thing you have to do to earn this bonus is be employed on December 31st. So it's actually a retention bonus. It has nothing to do with performance. All these calculations that you're doing end up that people always get paid this bonus. And I'm like, so this is 5, 10 years ago in San Francisco. I'm like, and so your average employee is a 28-year-old single man who's living in the most expensive city in America. Why don't you just let him pay more rent?

It's so simple to say, but it's like, you guys have— Netflix did this years ago. This is not like a new concept, but it still hasn't been modeled.

Yeah, why not? You guys tell me.

That's what I want to know.

You're in the world. Like, why do we keep doing this stupid stuff? It's just because we always have, because people always do, because partly because I think that To be honest with you, I think that VCs typically come out of business. And when they advise their companies on what best practices are, they think it's what they did. Yeah. So best— the term best practices is another one that I just hate, hate, hate, right? It's like, it just means what everybody else does.

Yes.

That's all it means.

Well, ironically, the best practice term Is hindering us from changing, right? I mean, if you want to— I mean, Netflix is one of them, right? It takes courage to be that first one to do something different, i.e., not best practice, potentially.

Yeah, but they were so successful. Patty wrote a book. There's a culture deck that's been out for 15 years. Like, it worked.

Yeah, but, you know—

And it's still not being modeled.

It's not— look, so I'm talking to a friend of mine who had my job after I left, a couple of times after I left, Jessica Neal. And I was like, oh, thank God we don't have our jobs now. Because like in the middle of the writers' strike.

Yeah.

Right? I'm like, this would be gnarly compensation. But then we're both like, ooh, this would be juicy. Because what they want is they want residuals based on reruns. And that's not how it works anymore. Right? So they want to go back to the way it always was and get paid the way writers always have. But that's not The way it is now. So both of us were like, ooh, that would be really hard and really fun. So it's about getting people in our profession that really think like innovators.

Yeah. That's what's missing.

That's what's missing.

That's what's really missing. I totally agree with you, Polly.

So how do we fix that? I mean, you see more business leaders going to these jobs. Is that part of it?

Yeah, part of it. I mean, I see a lot of operations people going into HR now, and they're pretty good about that. They understand it.

They're not risk-averse either, these people. People are going in and ripping stuff up.

Yeah. And because they've been victims of it for so long. I mean, they've been able to be stymied. They can't do their own jobs because they got to wait for all this other stuff that doesn't make any difference. And I'll say this, I maybe leave you with this. I learned everything that I did from product managers, And from engineers. Right? So what I learned from them was, you know, nobody at Netflix said, let's make your remote control a smidge better. Right? Let's make it so you don't have 100 channels, you have 12. I mean, whatever. I mean, we did— we're like, rethink the whole thing. A great example is we knew that you would binge 20 years ago. Because as soon as box sets came out, everybody would want to load up their Q with box sets and watch them. So it's like, boy, if we could ever do this— yeah, it's hot in here. If we could ever do this, people would love it. Like, what if you could just keep fast-forwarding and watch things? So between that knowledge of consumer behavior and the ability to technically do it was probably 10 years.

Yeah.

But what I learned from them was, They would reverse engineer.

I think it's risk-averse. People are scared. People are scared to do things differently. And we were talking to David Hanrahan about this, and David said something really interesting. He's like, when I was younger, I used to be attached to my thing. This was the thing I was going to do. And every 6 months I'd go through a different thing versus coming at it from a first principles perspective and thinking about it as, If we're trying to build a hypergrowth business and these are the things we're doing, how do we get the best people in the building and how do we keep them here?

Here's how I did it. I did it just like the product managers did. I would say when I got rid of paid time off, I didn't get rid of paid time off, I got rid of tracking paid time off. And I stood on a chair back in the day when I could stand on a chair and talk to everybody in the company. And I said, look, My HR friends tell me I'm out of my mind, that this is just going to be terrible. Either everybody's going to work all the time or nobody's going to work at all.

Yep.

My lawyer friends and enemies tell me this is insane. We're going to be sued because men are going to take more time off than women or whatever. It's going to be discriminatory. And I said, and all that could be true. These are smart people who I really respect. But to be honest with you, I don't see why anybody on my team needs to keep track of when you're at work. I really think that this is best managed at the team level. So we're going to try it for 6 months. And if they're right and I'm wrong, then we'll do what everybody else does and call it best practices.

It's a great question. I just don't know why more of this doesn't happen. But maybe—

why don't—

back to when we were talking earlier, why don't founders Well, I was going to say a lot of it is the disposition, the personality, the risk aversion, and frankly, the dislike of HR crap in these companies.

Really, what you just said, though, is run it like an experiment.

Right.

Right.

I think if we started to frame these things more as experiments, they become a lot less scary to go test.

Totally. I know you guys are worried about it too, because I'm not just I'm not just talking to anybody. I'm talking to like— we had Wilson Sonsini was our lawyers. And Sonsini gets on the phone. He's like, Larry Sonsini, he says, Reed and Patty, I forbid this. This is the worst idea you've ever had.

Wow.

You absolutely should not do this. And we said, thanks, Larry.

It launches Monday.

And it was really— we learned a ton from it. When I left, it actually went south. There were people like, hey, by the way, wife's pregnant. I'll see you next year. People were like, what? We didn't put enough structure around it to say, hey, by the way, we're paying you an annual salary, so you need to do a year's worth of work.

It takes courage to do that. But if you run it as an experiment, you learn along the way, you make changes, nothing's set in stone.

Here's my big start. There's 2 things really, really important.

Adults.

Yep.

Right? These aren't high schoolers that you're employing. These are adults. They have mortgages. They have car payments. They have children. They have mothers. It's like, so these are adults. So do not put anything in place that treats them like kindergartners. And the second one is be a great place to be from.

So Patty, I want to talk about the topic of compartmentalization. In this job. Big word. But the real deal of it is we see a lot. We've seen a lot. We see a lot. We will see more. A lot comes at us. A lot of personal stuff. Just heavy, heavy shit. How do you— how have you compartmentalized that?

A couple of things. So my 2 rules for termination were you couldn't be surprised and you had to keep your dignity. And so when a manager would come in and say, I've had it with Kelly. I told her one more time. She does this again, she's out of here. She did it one more time, I want to fire her. And I'm like, great. Why don't you wait here and let me go ask Kelly how she's doing? Well, actually, I told her that in our one-on-one in May. I'm like, well, it's October. So what do you think she's gonna tell me? And then I go meet with you and you say, Shawnee, I mean, you know, he does this 2, 3 times a year and he gets really mad at me and he yells at me and I cry. And, you know, it's something about communication and I don't know what it is. And so I avoid him for a couple of months and then he's back and we do it again. So to be honest with you, I don't really know.

Right.

And so that part of it is where we can be really useful in coaching people about how to have real conversations with people about their performance, right? And so that you aren't surprised, right? It's not something that happens to you out of the clear blue sky. You've had conversations to say maybe this isn't gonna work out. The other one is, We talked about this a little bit earlier. We're not business partners, we're business people, and it's a business that we're running. And, you know, people would come in and tell me that, you know, spill their hearts and souls. I'm like, oh God, sounds horrible. Like, do you have a mom? Do you have a sister? Do you have a best friend? Because I'm not any one of those people.

Yeah.

Like, I'm an officer of the company. And so, like, sounds really sucky. But I'm not sure it's something that we need to resolve here.

Isn't that counter though to bring your whole self to work?

Yes, but you're bringing your whole self to work, right? You're not bringing your whole self to have all of your relationships there. I will tell you though, I've changed my mind about this a little bit, right? So the whole team, not family thing, I really, really mean that. I really do mean that. I think that we have opportunities to do things with people at work that we have nowhere else in our lives. It's different than a family. It's different than— I mean, there are wonderful things we do with our families, but we can't do at work. There's wonderful things we do at work that we can't do with our families because we just respect each other. What's interesting is now that I look back on it, and if I rewrote my book, I might change that to say, They're not your family, but it doesn't mean you can't make enduring lifelong friends with the people at work. It doesn't mean you can't love them, right? That you can have incredible respect for somebody else. But when you're together at work, you're together at work to do work. And so I don't know that— I don't know how I'd deal with that now. I really don't.

Yeah, I mean, it's a slippery slope. I don't know, Nolan, if you've experienced this, But the line between helping to coach through communication or awareness or these things that I kind of call them above-the-line things, all of a sudden, 3 minutes later, you're like, whoa, how did we get to where we're at now? It's very personal. It's very high stakes. It's very psychologist, psychiatrist. How do you know when that happens?

I think a lot of it's just trust.

do. And if you don't, if you can't recognize that line, it can backfire pretty bad.

A lot of HR pros get into the therapist zone. I mean, what's your take on that, Patty?

And they get their energy from that.

I think it's a really slippery slope, and I think it's detrimental to everybody involved, right? Unless you're a therapist, a trained— I mean, this is a profession. This isn't like, oh, you know what, let's be part-time therapists. We'll be friends and we'll be coworkers and I'll be your therapist.

I mean, it's like, No, right?

You want somebody who really knows what they're doing to deal with this. And most of us aren't trained to do that. And I think where we go bad or wrong is that you start off thinking, I can really help this person. And then you're just over your head.

Over your head.

Especially—

And it's very time-consuming. Very time-consuming.

Yeah, because that person thinks you're their therapist and they wanna be with you all the time and they wanna tell you about all the— and you go into that inappropriate zone really fast, really fast. The other thing is, you know, I guess the way— one of the ways that I've worked my way around it is I'm not your therapist, I'm not your mom, and I'm not your boss. You have a boss, right? So, you know, my favorite— one of my favorite phrases is, what did Nolan say when you told him that? I'm like, well, I'm like, if you can't— I couldn't say that to him. I'm like, you said it to me.

Yeah.

So what if we use— we can practice using different words if you think he'll listen to you better, but you just said it to me. So I mean, that's a way I think that we can turn around the therapist's role to the coaching role, which is, this is not an issue between you and me, and I'm not going to fix it for you.

But this is where it gets hard in this job, right? Because this job, to some employees, that's why you're here. You're a therapist. I should spend 6 hours with you a day if I want to. To a founder and a leadership team and a board, you're there to help the company make money and grow.

It's a misclassification.

It's almost like an impossible thing sometimes. And this is where I see a lot of HR leaders get pinched.

It's just no win. There's no way you win that one. I mean, no way you see—

That's what you're saying, though, right? It's just a misclassification and you have to have a hard line on what we do and what we don't do, and people need to understand that. And I think that's where a lot of the gray area lies today, is like employees don't really know what the job of HR is.

Yeah, and I mean, that's fair.

I was gonna say, and that's why you got to go out and say that, right? Yeah, a lot of HR teams, they kind of hang out behind the curtain, they do their thing. Well, what are you, what are you doing back there all day?

Exactly. Yeah, I mean, so it's, it's part of our job to be straight with them and tell them, you know, um, like I said, I'm an officer of the company. That's my job. It comes first.

You talked earlier about the early days of Netflix and the intensity and the fighting, right? The, hey, the CFO, Reed. I just feel like to Nolan's point earlier about the industry getting soft, I feel like that doesn't really happen anymore. One little argument, should I be here?

Should they be here?

It's a whole thing.

I'd be a total failure, wouldn't I?

No, but what happen to— for better or for worse, we're in this. We're going to kick and scratch sometimes. Who cares?

I feel like the stakes are just so high for— Yeah. I said to Reid, I'm like, oh, I hear you're one of the white guys who wants everybody to come back to work, come back in the office. And he's like, why do you always have to put white guy in front of it? I'm like, I'm just saying it's real. And I'm like, why do you want everybody to come back to work? And he said, We're too nice on Zoom. He said, for example, I couldn't see you giving me the stink eye, side eye, like, are you crazy in Zoom? Because you would never do that. Where if we were in the same room, I'd be like, oh, what do you have to say, Patty?

It turns out when you say something, we might actually have a real discussion.

Yeah. That's what he said. He's like, we don't debate. We don't argue in the most positive way. When people ask me, me about what do I miss about working now, it's that. I miss going into a meeting and being like, I am so right. I am so right. Just wait till these people hear my argument. I'm going to so win this.

I feel like it used to be just a part of the job. Now it happens, it's like a thing.

And then when people talk me out of it—

It's a complaint. And I don't know what's going on.

It's a little HR complaint.

If you're seeing this, Nolan, but the softness out there, I'm like, we're brothers and sisters. We're going to fight.

We're going to scream.

It doesn't mean you need to leave or I should lose my job or if It's the weaponization of HR.

It's just like when we get into an argument, Patty, and then I don't like it, I'm gonna go tell my HRBP that Patty was mean, or Patty, you know, wasn't listening to me. And it's just like, I just— these are human relationships. It's business.

There's a difference between our role as coaches that's different than a role as a therapist. And the coach says, you know, when I— let's use my example I just used. Well, you just told me. However, if you tell Nolan what you just told me, he'll probably squash you like a bug. So let's find a way that you can use different words to get what you just told me across, right? That might be so that he can listen, right? And because you feel unhappy, Is not a legit result, right? And and so you have to teach people to go, and because you're unhappy, you're not very motivated, and you're not working very hard, and you're you know now it's a self-fulfilling prophecy. Yeah, now it's a self-fulfilling prophecy, and you're not actually doing anything, and now he's mad at you because you're not doing it. It was like like how do we stop the cycle? Stop the cycle. How do we create a healthy work environment. And also, I don't know how you guys do this. I mean, I'm just mystified. It's like, how do you tell people sometimes you just don't agree and that's cool?

Yeah. Disagree and commit. The Bezos quote I love is, will you gamble with me? I love that quote. And I honestly feel like more people should say it because we don't really know what's going to happen. None of us can predict the future. But we also can't continue to be so upset when someone does something different than what we want.

Yeah. And the other one is the results. If you constantly focus on the results mentality, which is you could be right and I could be wrong, let's see how it plays out and remember. Okay? And if more than once you come to me where I think you're being a big fat whiner and it turns out that you're right, then I probably should have listened to you more. But maybe the way you communicated with me wasn't a way where I could put a marker on what I perceive you to be whining about versus what it does to the business or the team or the group. I mean, it's that results orientation that I think that where HR people get in the slippery slope.

Last one for you, Patty, is you've been out of the game for a little while now. I think a lot of HR people are really tired right now.

I bet.

Do you miss it though? Do you miss being in the arena?

I miss being in the executive arena. I don't miss being in the HR arena as much, but because I haven't been for 20 years. I mean, the whole time I was at Netflix, I wasn't the HR person. I was a business person, and I've been gone 12 years. So that's 20-something years. So I think it's a challenge for people now, but I think it's an incredible opportunity. I mean, we don't have to go back. We can create our own future. It's right here in front of us right now. We can do all kinds of experiments. I mean, that's the, you know, when people say— I think I told you this earlier. Oh, we'd love to do what you did at Netflix, but we can't because we're regulated. We can't because our CFO won't. We can't because we're in Europe. We can't because— and we couldn't possibly work from home. And then 48 hours later, the whole fucking world worked from home.

Right.

It's like that muscle was always there.

Yep.

It was always there. And so now you know. And I think that to be fair about how people are responding right now, it's that But the pandemic was so emotional and so hard, and there was so much psychology to it, to be honest with you.

Yeah.

Right? It's like, you know, my son will tell me, he and his friends will say, you know, we're not so much worried about us. We're in our 30s, late 30s. It's the people who are new to work. And, you know, when you get out of college or it's your first adult job, Relationships with people who aren't your friends or aren't from school or aren't your family is the people you have at work. And we have a whole generation of people that didn't get to do that.

100%. I actually, full honesty, I don't think about that enough. I can't imagine starting Intuit when I was 21 years old on Zoom.

Yeah. I just never would have been— Never meeting another person in— Right? Never going out for drinks after work.

Never.

And you're in a 500-square-foot apartment.

Correct. So I do agree with this hybrid. I mean, full remote, I just can't. I personally can't wrap my head around it.

Yeah. Well, I mean, I'll talk to you on the other side of the spectrum. I also think that when people complain about the workforce and we don't have enough talent, blah, blah, blah. I mean, I'm an old lady now, but I'm a really smart old lady and I'm not done And I think we miss a lot of wisdom out there because—

We're inflexible.

We're inflexible about older people. It's like, they don't know, they don't know, they don't know. Of course they know. I mean, I've been in tech my whole life. You think I can't figure this stuff out? So there's a calm and a wisdom that's available to us too that's not just fresh and young and new. And it's that combining those 2 things could be so powerful.

Once again, it's not either/or. I feel like this either/or forcing is just—

Yeah.

And how we can learn from each other.

Yeah.

Right? I mean, there's so much— I mean, the reason I'm doing the podcast with you is because I learn a ton from talking to you because you're in the real world now and I'm not in it every day. But I know What I've learned, and I know it's possible.

Patty, this was gold. So appreciate your time.

Yeah, yeah.

Thank you, thank you, thank you.

Welcome, welcome, welcome.

Upstream with Erik Torenberg is a show from Turpentine, the podcast network behind Moment of Zen and Cognitive Revolution. If you liked the episode, please leave a review in the Apple Store. Hey everyone, Erik here. At Turpentine, we're building the first media outlet for tech people by tech people. We're the network behind the show you're listening to right now. We have a slate of hit shows across a range of topics and industries, from our AI and investing cluster of podcasts to shows that drive the conversation in tech with the most interesting thinkers, founders, investors, and influencers. like Econ 102 with Noah Smith. We're launching new shows every week and we're looking for industry-leading sponsors. If you think that might be you and your company, email me at erik@turpentine.co. That's E-R-I-K at turpentine.co, and let's partner together.

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