The transcript from this week’s MiB: Patty McCord of Netflix is below.
You can stream/download the full conversation, including the podcast extras on iTunes, Bloomberg, Overcast, and Soundcloud. Our earlier podcasts can all be found on iTunes, Soundcloud, Overcast and Bloomberg.
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ANNOUNCER: This is “Masters in Business” with Barry Ritholtz on Bloomberg Radio.
BARRY RITHOLTZ, HOST: This week on the podcast, I have an extra special guest. Her name is Patty McCord and she was the chief talent officer in charge of things like HR and culture at Netflix and she is also the author of a new book, “Powerful: Building a Culture of Freedom and Responsibility.”
If you were at all interested in what it was like to be in Silicon Valley in the 80s and 90s, how Netflix came together and why we are now in the fifth era of Netflix from DVD to streaming to go down the list to original content to whatever the next things they’re working on, if you’re curious as to how companies recruit and the importance of corporate culture, you will find this conversation fastening.
I found her to be delightful. She is extremely knowledgeable about also was things taking place both in the world of corporate HR and within technology and startups. Rather than me just babble incessantly, let’s jump right into it.
My conversation with Netflix’s Patty McCord.
My extra special guest today is Patty McCord. She was the chief talent officer at Netflix for 14 years. Her presentation on the subject of corporate culture has been shared almost 15 million times, no less a star than Cheryl Samberg called it, the single most important document to ever come out of Silicon Valley. She is the author of a new book, “”Powerful: Building a Culture of Freedom and Responsibility,” Patty McCord, welcome to Bloomberg.
PATTY MCCORD, FORMER TALENT OFFICER, NETFLIX: Thanks for having me.
RITHOLTZ: So, I’m excited about this because A, I am a big Netflix fan and B, you wrote a really interesting book about the concept of corporate culture and how to implement it. Let’s talk a little bit about your background and how you ended up at Netflix.
In the late 80s, for four years you ran the corporate diversity program at Sun Microsystems, how did you up at Sun, a girl from Dallas? How does that happen?
MCCORD: Let’s see. I started at InTech as a recruiter, so I started out in a company called Seagate and I recruited —
RITHOLTZ: Oh sure, hard drives.
MCCORD: Hard drives, yes, I recruited assemblers and then technicians and then engineers and then vice presidents and then I ran staffing for them and I did it because my husband, then was an artist and I was working with him and it was too boring for me, I needed to be someplace social.
So, I said, “I just need a Mr. Coffee,” but I just needed to be with other people at a Mr. Coffee, so that’s how I did the recruiting job and so, I got pretty hooked on the technology I really liked the people in the things we were doing.
RITHOLTZ: So, from Seagate the Sun, how did that happen?
MCCORD: Seagate to — because I interviewed somebody for a position at Seagate and now, this is later, yes, it was at Seagate, and she was from Sun and I called to make her a job offer and she said, “Oh, I didn’t like you or your company or your team,” no, “I didn’t like your company or your team but I really liked you, so why don’t you quit and come work for me here at Sun.”
RITHOLTZ: Get out of here.
MCCORD: Yes, it was crazy. So, she bugged me for about two years.
RITHOLTZ: Who did you work with at Sun? Was this the Scott McNeely or —
MCCORD: Yes, it was the McNeely era. Yes, McNeely who told me one time when I was presenting on diversity to the executive staff, so the executive staff at that time was Carol Bartz, Ed Zander —
RITHOLTZ: Wow.
MCCORD: Scott McNeely, you know, Eric Schmidt.
RITHOLTZ: That’s a murderous row right there.
MCCORD: Yes, and Scott told me one time, “No, I wasn’t born with a silver spoon in my mouth, Patty, mine was platinum.”
RITHOLTZ: That’s pretty funny.
MCCORD: It was a different era.
RITHOLTZ: To say the least. So, how do you go from Sun to Netflix?
MCCORD: Let’s see. I went to Europe for Sun.
RITHOLTZ: Where in Europe?
MCCORD: I was in Scotland. We had a plant there in Scotland and I went because our theme du jour in HR at that time was, “Going global,” and I came back I was like, “Hey, I’m global,” but we had switched themes and now we were “reengineering.” I remember saying, “Oh you mean, we are going to have layoffs?” “No.” “We are reengineering the workforce.”
You know, Barry, I think that may have been the seed of my hatred for HR speak.
RITHOLTZ: So, rightsizing was the phrase I remember. It was so deplorable. Reengineering is such a neutral set —
MCCORD: Isn’t that nice?
RITHOLTZ: It’s such a neutral sentence.
MCCORD: And it’s so geeky. It’s reengineering — reengineering —
RITHOLTZ: We’re reengineering, oh, are we giving people new job descriptions? No, we’re firing them.
MCCORD: That’s right.
RITHOLTZ: But we’re going to call it that.
MCCORD: We’re going to call it reengineering because we didn’t do that. So, then, I took a job at Borland which was a software company that was a rival to Microsoft Office at the time.
RITHOLTZ: Did they ultimately end up buying WordPerfect, am I remembering that correctly?
MCCORD: Yes.
RITHOLTZ: But they had some competitive —
MCCORD: Yes, it was, and then Microsoft competed by basically undercutting the product and price and wiped it all out.
RITHOLTZ: Right, changed APIs. They always did a lot of fun stuff.
MCCORD: Yes, but here is a fascinating thing, you know, I am in HR, I’m not particularly — I wasn’t critically technical at the time. I went to Borland and I had a 286 standalone computer, and I came from Sun where I had a Spark station, but I could publish newspapers on my desk and so I asked somebody to bring me something. I’m like, “Don’t we have this in soft copy? Can I get it off of the “net.” And they said, “I’ll bring it to you.”
And the person came to me and handed me a floppy drive —
RITHOLTZ: Sneaker net.
MCCORD: Yes, a floppy drive, and I’m like, “Hey, thanks,” and then I held it in my hand like, “What am I supposed to do with this?” I didn’t really anything, but it was desktop applications. I could use the product myself. It was really cool. I worked a lot with the spreadsheet group with Quattro Pro and it was definitely —
RITHOLTZ: But still HR, so from HR and recruiting how do you make the transition to “I’m all about culture, I’m all about talent.” how does that take place?
MCCORD: Well, I think that when you recruit, you are all about talent anyway.
RITHOLTZ: It’s not just money, perks, stock options.
MCCORD: No, no. It’s matchmaking, right, it’s about knowing what problem a team is trying to solve, who are the right people to do it, getting under their skin to understand what drives people like that, particularly technical people. You know, their wired really differently and I like different kinds of problems. I was really curious about that and then when I started recruiting like executives then that was another insight into what’s leadership really like? What are people really about?
So, I was at Borland and one of my VPs that I work with had taken a job at a small startup and he took it because he really liked the CEO there and so I called him up one day and said, “Hey, how’s it going? How’s your HR person? He said, “Oh, the HR person’s terrible. We’re getting rid of them.” I am like —
RITHOLTZ: How do you recruit and HR person?
MCCORD: I said, “Great, why don’t you hire me?” And he said to me, “You told me if I recruited out of Borland, you’d break both my legs.”
RITHOLTZ: Oh, I need substance too.
MCCORD: Yes, like I didn’t mean me. And he said, “Lots of luck, I am not going to do it. The CEO’s name is Reed Hastings,” so I hung up the phone. I remember back in the day, you could dial *69.
RITHOLTZ: Sure.
MCCORD: And it would call back, I called back and Reed’s sister who was the receptionist answered the phone, and I said, “May I speak with Mr. Hastings?” And she put me through.
RITHOLTZ: Just like that?
MCCORD: Just like that, so I said, “You don’t know me, but I’m going to be your next HR person.” And that’s how I met Reed and I went in for an interview and during the interview, he asked me about my HR philosophy. Now, remember I’d been at Sun, so I could speak fluent HR.
“Reed, I believe that it’s imperative that each individual in the organization are empowered to be engaged in the relationship between the corporate objectives — ” And he said to me, “What are you saying? Do you people even speak English? How is this supposed to help me sell software?”
And so, I got in an argument with him.
RITHOLTZ: Really?
MCCORD: I said —
RITHOLTZ: At the job interview?
MCCORD: Yes, at the job interview. I am like, “Well, you don’t know me.” And he’s like, “Well, you’re not telling me anything.” So, we have this big tiff, and I go home and my husband then said, “How’d it go?” And I said, “Well — ”
He said, “You’ve got to grow up and be a good girl. You are the breadwinner of this family. We have three children. You’ve got to start acting like a normal person.” So, he hired me.
RITHOLTZ: Wait. Nothing intervening, having a tiff over corporate speak.
MCCORD: Oh, we came — I came back for a couple of interviews and I was going to —
RITHOLTZ: You walked that back a little bit.
MCCORD: I walked that back and I said I was sorry and then I was going to report to the CFO and I joined six months before the IPO. I joined at the cusp of our international expansion. This was a job where I got to be in charge of HR and it was a tiny little start up and there was literally nothing.
RITHOLTZ: How many people were there when they were about to go IPO? A hundred?
MCCORD: A couple of hundred maybe. Maybe be more than because we’d opened our —
RITHOLTZ: And when you left?
MCCORD: — European office. We grew that company through a merger and acquisition. Every time we acquired a company, we doubled, so when I left, we were a couple of thousand. We had required four companies in five years. That was Pure Software, Pure Atria, it was acquired by Rational, it was acquired by IBM, but it’s an important part of my story because Reed was a first time CEO.
It was my first time actually running a whole HR department and so, I was very aware of policies and procedures and I would take, if we acquired your company, I’d take your handbook and our handbook and I’d smoosh them together, and I try and have overall comprehensive policies that would piss off the fewest people that I could piss off, right?
Anyway, so then, the company, we got acquired and they did what any — what we did whenever we acquired a company, they wiped out all of the upper management.
RITHOLTZ: Wait, who acquired you guys?
MCCORD: Pure Atria was acquired by a company named Rational, okay, so Rational acquired us. Reed and I and the rest of the executives were gone and I started consulting then and Reed started investing in other startups at the time and Netflix was one of them.
RITHOLTZ: Oh, so this is — when you started with Reed, it wasn’t Netflix. What was the company?
MCCORD: It was called Pure Atria or Pure Software when I was first —
RITHOLTZ: Now, I understand.
MCCORD: — there.
RITHOLTZ: So, when he went off and invested in Netflix, how did he end up as CEO and how did he bring you along?
MCCORD: He was cofounder and he was Chairman of the Board for a year or so, may be more and then he decided to go in and run the company with the co-founder Marc Randolph at the time and the company was expanding and so he called me up to join them and I said, “No” because I thought it was a really stupid idea.
RITHOLTZ: DVDs through the mail.
MCCORD: Yes.
RITHOLTZ: Hold that thought because I want — I share your thoughts and we’ll talk about that. Let’s talk a little about culture. It’s become such a huge issue in our society and there is somewhat of a well-documented culture problem coming out of Silicon Valley.
Uber is probably you know, the poster child, but we’re seeing things at venture capital firms, at Google and elsewhere where there’s a little bit of a bro mentality and not necessarily the healthiest culture. How difficult is it to build a culture for a big company? And if you have to step into a mess like Uber, how hard is it to turn that supertanker around?
MCCORD: Let’s start with what I define culture as. I’m very Margaret Mead about it.
RITHOLTZ: Okay.
MCCORD: It’s the way you behave. It’s the stories that you tell. It’s what you do when no one is looking, it’s what employees see management do and say. It has almost nothing to do with what you write down.
So, the famous Netflix culture deck I didn’t write. It was a collaborative thing that we did to onboard people and it took us about 10 years to create. So, culture isn’t something you declare and then it’s so.
RITHOLTZ: It is an ongoing evolution.
MCCORD: Yes, so if you’re in a large corporation and you’re setting out to empower people, but everyone has asked five people for permission to do anything then talking about empowerment is absolutely ridiculous.
Secondly, I know everybody wants to point to the Silicon Valley as the birth place of brotopia and actually, Emily Chang is a Bloomberg reporter who wrote the book, I think it’s a fabulous book and I learned a ton and I lived it.
So, her research was really good about it, but the issues that are happening in the corporate world right now are happening all over the place, so I just got an interview, a couple of weeks ago by a reporter in “The Guardian” in the UK and she said, “Oh, you know, the people in Silicon Valley must be just freaking out because of their employees going rogue and going to the internet and complaining about sexual harassment. What are you going to do about this horrible thing that’s happening out there?”
And I said, “Well, first of all, going rogue, you mean like using social media like we all do? We don’t really think about that as like a rogue thing anymore.”
RITHOLTZ: Like Facebook — he’s tweeted, he’s gone rogue.
MCCORD: Yes, I said, “You know, it is a problem that people in companies feel like nobody inside the company is listening to them and so in order to get an audience, they have to go to a bunch of strangers on the internet, that’s a serious cultural problem, but going rogue isn’t,” and second of all, I said to her, “Because you’ve never experienced any sort of harassment as a female reporter in the UK, right?”
And she’s — you know, it’s crickets on the other end of the line. I am like, “This is a problem. It is a real problem.”
RITHOLTZ: There’s actually a phrase called “reporting while female” that raises all sorts of harassment —
MCCORD: Yes, so this covers every single person — woman and if you want to do the #MeToo Movement in every single business around the world from maids to mavens, right, so it’s not an issue of the Silicon Valley.
The Silicon Valley however has a particular problem that’s a result of so many men in tech. So, because of the overwhelming, you know, we had talked earlier about how I ran diversity at Sun in the 90s, so I actually started running affirmative action, which morphed into diversity, so I knew the numbers.
And when I read “Lean In” 10 years later and I looked at the numbers because I knew what they were, right, because I did affirmative action reporting for the number female — the numbers were worse.
RITHOLTZ: Oh my goodness.
MCCORD: So, the number of women in technology had declined and it just — and I looked back and I realized, you know, back in the day in the 90s, we celebrated our diversity up one side and down the other.
I mean, my Cinco de Mayo party had a Rigo Chacon, you know, I had the mariachi band. It was amazing and I didn’t fix pay, right? We could’ve fixed equal pay back then and we didn’t, right, and so —
RITHOLTZ: What would the pushback have been if you had said at the time, by the way we should pay male and female engineers the exact same amount and this will allow us to recruit the best people across the entire industry.
MCCORD: Because that’s not how we recruited. Because the actual — the actual fact of recruiting went like this, “Tell me how much you make?”
RITHOLTZ: We will give you 20% more.
MCCORD: We will give you —
RITHOLTZ: Thirty percent more —
MCCORD: Eleven percent more.
RITHOLTZ: Okay.
MCCORD: Right. We will give you whatever it takes to hire you and so, those were the negotiations and that was what was perceived to be the negotiation. I was just reading my friend, Jenna Rich just wrote an article yesterday about — she’s a headhunter in Silicon Valley who has been around for a really long time and she said, “You know, if you ask what the salary range is for a particular position, and that’s between 150 and 200, women will think 170 is a good offer and then will always argue for 200,” right?
So, some of it is cultural, some of it is bias, some of it is the types of positions that we’re in and so now, I jested in an HR conference yesterday and I stood up in front of them and I said, “All right, let’s be clear. Which are the three most female dominated departments in any company? Sales and marketing, HR and finance.” And I stand with my legs apart and my hands at my side in a fist and I get all shrill and I’m like, “Fix pay. We own it.” We own compensation.
So like, we are women. We own our own compensation. So, let’s fix the systems that keep it down.
RITHOLTZ: So, in other words the women in the accounting department, HR these are the people who help determine what the internal pay structure of a company is going to be.
MCCORD: Yes, which is a lot of what my company is about. My company — I am sorry, which is a lot of what my book is about. What my book is about is re-examining all the institutions inside of a company and saying, if we had to start over again, would we do it the same way? Right?
So, that’s the reason I wrote the book “Powerful” is that I believe that we’re actually harming ourselves by using the same methodologies for managing people and managing compensation and managing recruiting that we’ve been using since the 60s.
I mean, really, it goes back a long, long way so, when you have a merit increase budget that once a year at the end of your annual performance review, we give you a 6.5% merit increase budget on the bell curve distribution with ratings and rankings and salary ranges and then blah-blah-blah.
And you start out underpaid. You’ll never catch up.
RITHOLTZ: Right, you’ll never catch up. We were just discussing the challenges in setting up a corporate culture or helping to turn one around at a bro-topia type shop like Uber, but let’s talk a little bit about the corporate culture and there’s a quote from the book that I really like, “A great workplaces is not espresso or lush benefits or sushi lunches, grand parties or nice offices,” what is a great workplace and how does culture play into that?
MCCORD: Well, a question I often ask people when they ask me that, so I will ask you that, if you think about the time you went home from work and you spontaneously told your spouse or your pet, “Oh, my god, it was a great day at work today.” It’s almost never that there were macadamia nuts and the cookies or that mojito was just right.
RITHOLTZ: Macadamia nuts are really —
MCCORD: They are really good and you might say that, but when it’s really about work and it really comes from your soul —
RITHOLTZ: Right.
MCCORD: It’s usually because you did something hard with other really smart people that you didn’t think you could do. I mean I —
RITHOLTZ: And it worked out well and it was well received and —
MCCORD: Yes, and I spend a fair amount of time with Silicon Valley happy people, people. What are you in charge of? I am in charge of making employees happy and I tell them —
RITHOLTZ: Happiness officer.
MCCORD: Well, I am like, that’s not a job, okay. That’s a thing to do, but it’s not a job because you know, I used to tell my team when I worked at Netflix and I thought of myself as the COO of the culture, right, I would say to my HR team, “Yes, we are a service organization. It’s not spelled S-E-R-V-A-N-T-S, and by the way the people we serve don’t work here. We serve the people that use our product.
RITHOLTZ: Right.
MCCORD: And so our job is to make sure that we get out of the way and make sure that our teams are comprised of brilliant people who can do the hard work of creating an amazing service that keeps people coming back to Netflix — Netflix as an example.
And now that I work with — you know, I work a lot these days with pretty large corporations and when you get really large, global corporations are hundreds of thousands of employees and you have internal departments like HR, they get pretty divorced from the business.
RITHOLTZ: That makes a lot of sense.
MCCORD: And so that for me, that combination, that’s the real critical way to change things. So since her talking — wrapping that in corporate culture, corporate culture is unique to every corporation because every corporation serves a different customer.
RITHOLTZ: That’s quite fascinating, so as the HR department starts to grow on the other side of the river from software developments, in asset management, it’s going to be research, portfolios, financial planning — all of that stuff becomes completely separate from how do you bring it back across the river? How do you get HR to serve the customer by working with the other divisions?
MCCORD: Well, you make serving the customer and understanding the business a core part of the knowledge of literally everyone that works in the company. There is nobody in any company that you should hire that doesn’t have the capability of understanding the basics of a profit and loss statement.
So, for example, I was just talking to somebody yesterday about customer service and she was new in customer service and she said, you know, “What can I do to really enhance this experience for people?” And I said, “Number one, don’t lie and tell them that this is the beginning of their lifelong career at the corporation because it’s not right. It’s usually a job that people are in for a couple years before they can’t take it anymore.”
“Two, teach them how to read a P&L so that they can know that if they have a customer that hangs up and says, wow, that was a great experience. I am going to tell my friend to use this.” That is actually a direct line marketing contribution to the business, straight to the bottom line because that’s marketing dollars that you didn’t spend because you acquired a new customer for free.
RITHOLTZ: It’s easier to keep customers than it is to get new customers.
MCCORD: It is hugely fiscally responsible to do so, right, and if I believed as a customer service rep, my job wasn’t to listen to cranky people complaining all day, but my job was to create an experience so that somebody would tell somebody else to join for free, right, that I was contributing to the bottom line, then I would learn more about what it is that I do.
Secondarily, I would learn a skill that I can take with me for the rest of my career. I could go into the next company and not say, “Wow, how many kinds of craft beer do you have?” But instead, “Do you have a profitable business model?” Right?
And most people don’t really — it’s crazy to me, I don’t think I understood that until I was 15 years into my work life.
RITHOLTZ: So, when did that — that’s really, you’re going right to my next question, what led to the realization that, “Hey, culture really matters.”
MCCORD: You know, I don’t know that it was birthed that way.
RITHOLTZ: There was no grand epiphany, it was a lot of little things.
MCCORD: No, the story I told you of when Reed and I worked together in that software company, when — it was a great company and we had a lot of great people. We made a lot of great products, but it was a company like every other company, and so when he asked me to join Netflix and I thought it was a dumb idea and I didn’t want to do it and what he did that compelled me was he said, “Let’s create the kind of company we want to work for. Like what if we’re successful again, but we love it, right? What would we do?”
And I said, “Oh, okay. If we did that, how would you know?” And he said, “Oh, I’d want to walk in the door every day and solve these problems with these people.” And then he asked me, “How would you know?” And I said, “Wouldn’t it be cool if we were a great company to be from?”
RITHOLTZ: A great company to be from.
MCCORD: Yes, and it changed everything for me. Like what if I could — on your resume, it is like, “Oh, you were at Netflix. Were you there during DVD — were you there? What did you do?” Because there would be an assumption that you did something amazing, right, and so the thing that we did differently there that didn’t seem crazy radical at the time and didn’t seem like a new wave of inventing culture was, we just wrote stuff down.
So, the famous Netflix culture deck was an internal document for on boarding people.
RITHOLTZ: You said something before that cracked me up that I just have to ask you about. When I first heard about, from my good buddy, Jeff Weitzman whose company got bought by Yahoo when he moved to Silicon Valley to Palo Alto in the mid-90s and has been happily ensconced in California ever since, we were talking about this and I am like, “DVDs by mail, who would ever want — you know, there’s a Blockbuster on the corner, why do I want to get DVDs by mail when I’m living here in the city. It sounds pretty silly?” What was your response when Reed first said to you, “Here’s what the business model of the company is.”
MCCORD: I thought it was ridiculous. You know, he was the only — there were three people I knew that had DVD players and they were all geeks like him, right, and I had three kids and a house full of VHS tapes, right. There was no way I was going to give up that space on my bookshelf.
RITHOLTZ: Right.
MCCORD: You know, and for those silly little things and I met him one time in the parking lot of an OfficeMax early in the morning. He had his kids in a stroller and I said, “What are you doing?” He goes, “Taking the kids for a walk.” And I said, “What kind of father are you? Going to an OfficeMax,” and he said, “I bought a postage meter. I’m mailing DVDs to myself and they don’t break.” And that’s how he told me the idea about Netflix.
RITHOLTZ: Really? So, that’s how he tested it. He mailed it to himself.
MCCORD: Oh, yes, it was crazy and so, when I think about my career at Netflix, I think I’m kind of a serial entrepreneur and so, I was very lucky because I got three separate companies when I was at Netflix.
The first one was, the DVD by mail business. Could we come up with a business model that would actually make money before we ran out? And that was very touch and go.
RITHOLTZ: So, what was the model? That you would send it to people, they could have one now at a time —
MCCORD: Our original model was late fees and due dates. It was just Blockbuster on line —
RITHOLTZ: And if you kept it, you would continue to hold it for as long as you —
MCCORD: Yes, and then, we did the subscription model.
RITHOLTZ: That made a little more sense.
MCCORD: So, that as the second kind of -we really were taking down Blockbusters, that was my second start up.
RITHOLTZ: Hold the DVDs for as long as you want and when you send it back to us, we will send you the next DVD in your queue.
MCCORD: I remember interviewing somebody one time and she said, “Oh, god, you know my daughter watches the “Little Mermaid” over and over again and I bet I’ve had that DVD for six months, you probably want it back.” I am like —
RITHOLTZ: No, you just bought it for three times you’re supposed to.
MCCORD: No, I am like, “You know, keep it as long as you want. We don’t care. We just want your daughter to be really happy.” And I am thinking the same thing. I am like, you could have bought it seven times over.
RITHOLTZ: What is it? What was it? $12.00 a month or $15.00 a month?
MCCORD: It was 20 and then 15 and then — but you know, those are old, old days —
RITHOLTZ: Sure.
MCCORD: — Netflix is 20 years old, right?
RITHOLTZ: That’s amazing.
MCCORD: So that was my second startup. It was DVD by mail. The third one was figuring out the technology of digital streaming and that was a very technical challenge that most people don’t realize —
RITHOLTZ: If only the company had a person in charge of HR with a lot of experience with engineers.
MCCORD: Yes, so I left as the company morphed to be what it is now, which is a global original content company.
RITHOLTZ: That’s the fourth business effectively.
MCCORD: Which the fourth business — knowing Reed, they are up to something that’s the fifth business in the future. I just don’t know it now because I’ve been gone for so long.
So, you know, while I love to reminisce about the days at Netflix because they were wonderful, what I want to talk about now is about the innovative spirit that we had there and the most important part of the culture there was this belief that if you put the right people in the room with the really hard problem that mattered and you took away all the constraints and gave them focus and a due date, this is one thing that startups don’t do very well.
You know, their endgame is someday, right? Instead of like, the end of the year or at the end of the quarter —
RITHOLTZ: Some hard deadline.
MCCORD: Some hard deadline and that’s partly because engineers are very schedule driven and are very — you know, it’s interesting, all the stuff that I talk about, I learned from them or from product managers, you know, like I say to HR people now, I said, “Look, let’s the annual performance review. What is it? We do it. Is it a feedback mechanism? Okay, let’s say we do that give people feedback on their performance.” And you new step back and said, “Let’s create a system to give people feedback for their performance.”
RITHOLTZ: Why only once a year?
MCCORD: Once a year? I mean, seriously? What else you do once year that you’re good at? That would be nothing, right?
So, I mean it’s just a bad — it’s a bad system for doing that, so if you are an innovative engineer, you would say, “Well, that’s dumb. Throw that away. Let’s start with the endgame and work backwards and test a couple of things so we can figure out a system that really does do that,” right? What a cool idea, right?
If you say it’s a system to fairly compensate people and you’re in a very dynamic work environment where compensation moves pretty rapidly —
RITHOLTZ: Constantly.
MCCORD: Constantly for different positions why would you do that once year by looking at a survey that looked at companies that were similar to you kind of last year? Right? I mean, so I’m okay if you choose to do what you’ve always done, so this is sort of my message — my revolution I want to start right now, which is choose it.
RITHOLTZ: So, what was the, you know, the pushback or the feedback from Reed when you start throwing away, “Hey, these are cherished and long-held corporate philosophy.”
MCCORD: Oh no, no.
RITHOLTZ: Throw it away.
MCCORD: No, no. The pushback was completely the opposite.
RITHOLTZ: Just do more of this.
MCCORD: No, no. It was Reed.
RITHOLTZ: Yes.
MCCORD: He’s the innovator.
RITHOLTZ: Oh, really?
MCCORD: Yes. No, it was Reed who would say, “How come you have to have paid time off?” And you know, the HR VP, I was a real HR person.
RITHOLTZ: Paid time off.
MCCORD: So, for example we — when we went public, we had come up with a new scheme for paid time off and —
RITHOLTZ: What that a legal requirement or just have it?
MCCORD: You know, we had at the time, we were paying people you accrue the day a month and it was an honor system and when you left the company we trued up.
RITHOLTZ: Right.
MCCORD: But the auditors didn’t like it because we were technically paying everybody months a year, it was all falling to the bottom line because you don’t true up until you leave the company.
The stocks guys didn’t like it because —
RITHOLTZ: I would never have even thought of that —
MCCORD: Yes, because it wasn’t like what everybody else was doing and then — and I didn’t want to write down, “Here’s your 10 holidays and here’s your 10 vacation days and here’s your six sick days.”
RITHOLTZ: In my office, we call that “Big Boy Rules.” Hey, you’ve got work to do and if you need to take time off, take a time off.
MCCORD: So, I didn’t want to write a policy that said that and yet tell the engineers, “I’m just kidding, I don’t really care what you do,” because engineers will look at that and go “Typical HR.”
RITHOLTZ: Right?
MCCORD: I sexually harass somebody and you’re going to fire me, but the time off policy, you don’t really care, right? So, is it a policy or is it inconsistent? It’s not a policy, so I say that to Reed. I am like, “This is what I think the engineers are going to think.” And Reed is an engineer who says, “Oh, yes.” Hey, by the way, do you have to have paid time off?
And the HR VP in me says, “Of course, everybody’s got paid time off.”
RITHOLTZ: Well, is it a legal requirement?
MCCORD: Right, so then the hanging out with Reed forever VP in me says, “You mean legally?” So, I go and Google it and I do some research and I can’t find any statute that requires paid time off for its salaried employees in California.
So, anyway we get rid of it, right? But where I become the COO is where Reed comes up with these crazy ideas like, well, maybe we don’t even have to have it — maybe we don’t even have — should we even have a travel policy? Should we have expense approvals from finance?
And I start thinking, well if we really have hired adults who are really smart and really capable and really responsible, then —
RITHOLTZ: Do you really need that?
MCCORD: Do we really need to do that? But I also have to operationally go back and say well, if there’s no one in finance that approves the expenditures, I still need to know what you’re spending.
RITHOLTZ: Right. So, how do you keep an eye on it —
(CROSSTALK)
MCCORD: So, then I’ve got to find — yes, so then, you embed a finance person in every organization who says, “Hey, by the way, you budgeted for individual expenditures at $10,000.00 a person and your run rate is 11. So, how are we going to think about that in terms of the budget?” Which is the real question to ask, not that I went to finance and they said no, right?
RITHOLTZ: It’s what are we actually spending the way we budget it for?
MCCORD: What are we actually — and it’s that product like look at everything that you do, right? So, what’s the purpose — what’s the purpose of the travel policy, right? Is it to save money? Then say, “Hey, by the way here’s your travel expenditure maximum, right?” Is it to be efficient? Then you have to think about who’s traveling for what and why, right?
And if you think about that in terms of what’s the right thing for the company? See, now, I’m teaching people it’s not about you, it’s about us. It’s about the P&L. It’s about the customer. It’s about the company. What’s the right thing to do in this case?
RITHOLTZ: And that adds up to a corporate culture, doesn’t it?
MCCORD: It does, right and so, we wrote down as we started to do these things, here’s what — so for example, if you look in the old culture deck, it says, there’s five words you’re going to act in the company’s best interest.
Now, the whole system around that means you have to hire people who do, right? You have to have people be responsible when they don’t. There have to be consequences, right?
Good and bad for when people act the culture, so the question you asked me was how did I come up with that? I didn’t. We did it collaboratively over many, many years and the thing that was different was we wrote it down.
RITHOLTZ: That’s just fascinating. We have been speaking with Patty McCord. She is the former Chief Talent Officer at Netflix. She is also the author of “Powerful: Building a Culture of Freedom and Responsibility.”
Be sure and check out our Podcast Extras where we keep the tape rolling and continue to discuss all things corporate culture.
We love your comments, feedback and suggestions. Write to us at MIBpodcast@Bloomberg.net.
Be sure and check out my daily column on Bloombergview.com. You can follow me on Twitter @Ritholtz. I’m Barry Ritholtz. You’re listening to Masters in Business on Bloomberg Radio.
Welcome to the podcast. Thank you, Patty for doing this. I am really enjoying the conversation and before we get to our standard favorite questions, there still a bunch of things I have to ask you that I didn’t get to.
First, you were right in the heart of Silicon Valley in the late 80s and throughout the 90s. What was that period of time like? How to be man?
MCCORD: It wasn’t — I mean, it was just something new and exciting every day. There were — you know, there is an energy in the Silicon Valley that anything is possible.
RITHOLTZ: Really?
MCCORD: Yes, I think partly because of the whole stand — Stanford, you know, young entrepreneur thing. You know, much has been said about the maligned millennials — a term I really hate, you know because when you are in your 20s, you were a millennial, I was a millennial. It was a while back.
RITHOLTZ: When we were millennials, we worked —
MCCORD: But, I remember —
RITHOLTZ: I was called a punk, not a millennial —
MCCORD: Yes, but here is what we had the same — what do you want when you’re twenty something? Everything. When do you want it? Now. Right? And there’s some of that energy that’s always been in the Silicon Valley —
RITHOLTZ: Sure.
MCCORD: Which is, it should be better and we should be able to make it better and so, let’s just go do it. You know, when I consult with startups, I tell them, “Look, here’s the three types of employees you want in a very early stage startup. You want the smartest people you can hire for whatever you can afford to pay them. You want them to work really hard because when you solve early-stage problems, they are problems of difficulty. And the way you solve them is you just pound at it.” You know, your white boards are full of lists of like not that, not that, not that I do it screwed up because you’re making stuff up, right?
If there — if it was a smart reasonable idea somebody else would already be doing it, so all startup ideas are stupid. So, when people say, “That’s a dumb idea,” it’s like, “Of course, it is it’s a startup.” And the third thing you want is you want people to believe, right?
And those beliefs in those early companies are not rational, right? And so, it’s like, Well, I think — ”
RITHOLTZ: Because you’re going to believe you have to beat the odds. You’re going to believe you are going to do something no one has done before, and that all the stars align and there is a giant cash —
(CROSSTALK)
MCCORD: Yes, right, and everybody is going to be a millionaire on the day of the IPO. I mean, these are all the myths that go with it, but you actually don’t want experienced people in those early days very often because they’ll say, “No, we’ve tried that. It doesn’t work.”
Now, as soon as you’re at the point where you actually have something and you actually have a customer and you might actually have a business and there’s actually a light at the end of the tunnel, then almost instantaneously, those are the wrong people because now, you say, “Okay how do we take this to a level of scale and complexity?”
And in the early-stage, people go, “Work hard without food or water, maybe beer.”
RITHOLTZ: Right.
MCCORD: Right.
RITHOLTZ: It’s not sustainable.
MCCORD: Well, and so you to say, “Well, or we could plan it.” So, that’s where, you know, I try and help people through those step functional changes in their organization.
RITHOLTZ: Is that why we so often see the founders not succeeding as CEOs?
MCCORD: It is why we sometimes see that happen, you know, I’ve seen it all. Like, a lot of the myths that we have I’ve seen busted, right, can cofounders continue to run a company? That’s never going to happen. It is never going to happen forever.
I work with were Warby Parker, their cofounder still run the company.
RITHOLTZ: Well, Reed Hastings, Google go down the list of people who —
MCCORD: Yes, well, they are founders, but I mean cofounders, right? In my day, there was only good be one Larry Ellison. There’s only one Bill Gates. There’s only one reed Hastings. You know, there’s only one at the top, but we see now a number of cofounding organizations that exist with cofounders for a long time, like two at the top for example…
RITHOLTZ: Yes, and that can work out.
MCCORD: Yes, so I think that — what I want to talk about now is the innovative nature of Silicon Valley, we can all pick up in terms of how we operate in business. So, when I go consult, we either talk to Bank of America or Fidelity or some very large organization. Now, they want to know — okay now, how do I undo this Albatross, you know, that we’ve created. That’s very efficient, it is at huge scale and has no ability to be nimble.
RITHOLTZ: Right.
MCCORD: …and all of these little Fintech companies are nibbling at my ankles and they move so much faster.
RITHOLTZ: They are faster and they are more innovative, they’re creative and they could address problems you’re not even aware of.
MCCORD: So, I have to tell you a story, it’s an interesting one. I’m consulting to one of these large institutions and somebody says, “Well how do you feel about remote working”? I said, “That’s an odd question to ask me in 2018”.
RITHOLTZ: Right.
MCCORD: And I said, “What do you mean by that?” He said, “Well, here at our bank in this particular city, we still require people to come in at nine and leave at five”. They have to show up for work and I said…
RITHOLTZ: Do they have to bring their own tools to (inaudible), is that what is what?
MCCORD: No, I said to him — I said, “Do you take away their cell phones if they walk out of the door at five”?
RITHOLTZ: What’s a cell phone?
MCCORD: Yes, exactly.
RITHOLTZ: What century are you in?
MCCORD: And it made me think, you know, it’s one of the answers to your question, it made me think, “Why did we have to use to show up to work? Oh, because our equipment was there,” right.
RITHOLTZ: Right.
MCCORD: And the thing I hold in my hand now, I used to have to ask a burly guy to help me get out from under my desk, right.
RITHOLTZ: Right.
MCCORD: So, you know, and I said to him like, “We all work remotely now.” I mean…
RITHOLTZ: There are issues of supervision and control and compliance.
MCCORD: Yes, well you know I’m not…
RITHOLTZ: However, you could…
MCCORD: Oh, I’m not a big fan of any of those, either…
RITHOLTZ: But if even if you’re mandated to do that, the technology exists whether the person is down the hall or in the other side of the country, you still — you could still monitor e-mail with whatever software you need to. You could still make sure they have all the tools that everybody in the room has. The idea of — you have to come into the office at nine and we prefer you stay at least until five, that seems almost…
MCCORD: You know, I…
RITHOLTZ: That’s antiquated.
MCCORD: I have been in situations, in innovative companies in the Silicon Valley where I think it’s really important to be at work. And here’s when I think it’s really important to be at work when you’re collaborating and inventing stuff.
RITHOLTZ: Absolutely.
MCCORD: When you need to walk up to somebody and go, “You know, I’ve got this idea, I just need to run it by you.” It’s funny, I said at Netflix at one point, “The only perk I want to have is showers.” Because, you know, how like you say, “I had this idea in the shower this morning, I thought,” well if we get stuck in the meeting, it’s like, “Everybody in the shower, don’t come out until you have an idea,” right, but I…
RITHOLTZ: My wife makes fun of me because I will rehearse presentations in the shower, not just because of the acoustics, it’s just a great place for a free…
(CROSSTALK)
MCCORD: So, back to remote, you know so —
RITHOLTZ: It’s so funny you said that.
MCCORD: I think a lot of planning and execution happens at work. A lot of innovation happens when you’re on the beach or…
RITHOLTZ: Lost in space, yes.
MCCORD: Lost in space or in the shower or whatever. I don’t think that having — I don’t think technology tethers us like all the things that you just said. I think it frees us to be able to participate in work kind of on our own schedule and so the idea when you said about command and control and compliance — I’m not sure that those things are necessarily part of a healthy work environment at any size at this point.
RITHOLTZ: Well, if you were a regulated entity, you have to check those boxes.
MCCORD: You do but like you said, you don’t have to check those boxes by walking around with a clip noting that everybody is here, right.
RITHOLTZ: No doubt about that.
MCCORD: So, that’s my whole point, you know. We should use the tools and the technology we have to innovate the way we work, just like we innovate the products that we use.
RITHOLTZ: When you think about — when you think about how — how — I’m looking for the exact word. When you think about how popular and attractive urban spaces have remained or become what you described, having all that intellectual capital in one space, having people in the same room, collaborating, innovating, inventing just brainstorming, that’s challenging to do remotely.
You need to be face-to-face for that ideally. I’m not saying you can’t do it other ways, but when everybody’s in the same room, it’s just for three hours it’s a different experience.
MCCORD: It’s true, but you know, I wrote my book collaboratively with a team of people that I put together all over the US, we’ve literally never been in the room together and they very much feel like my team and I know them really well and so I think technology changes that — let’s look at the technology of Skype-ing and, you know, remote…
RITHOLTZ: Screen shares and that stuff.
MCCORD: Yes, screen sharing, I mean that’s changed. So I’m a recruiter, I go back a long, long way right and phone screening used to be something that I was really good at because I listen a lot for nuances of voice, but I’m telling you, screen sharing changes everything.
RITHOLTZ: It’s a face-to-face meeting.
MCCORD: Seeing somebody’s language, having those conversations. You and I are talking about how much more fun this is.
RITHOLTZ: Live, right.
MCCORD: …because were in the same room together, but the closer you can get to that, the more I think you can still extend those collaborative conversations without having to physically be there.
RITHOLTZ: That makes perfect sense. So I have one more Netflix question. You were there for 14 years, what led to the decision to exit? Was it mutual, was it your decision? How did it all come about?
MCCORD: Everybody loves the break story, don’t they? What happened? We’ve been together for a really long time and the company was morphing. And so, as the company morphed into, you know, original programming, global — it was a good time to leave and we had just come out of the quick stir scenario, that whole disaster of splitting the company from DVD by mail business and…
RITHOLTZ: Right.
MCCORD: And so, we were both kind of ready to say, “Let’s move on or let’s do something different.” So, you know, I was sad that I left because I had been there for a really long time but I also was like super grateful that I’d been there long enough to see what I had seen.
RITHOLTZ: And you had a big pile of stock options, I assume.
MCCORD: I had a big pile of stock options and I’d been saying forever, forever and ever and ever, it would be a great place to be from.
RITHOLTZ: Right, and now you are.
MCCORD: And clearly sitting here in front of you, that turned out to be really true.
RITHOLTZ: Right and that sounds great. It’s kind of fascinating watching the company grow and they have the ability it seems to be as disruptive as Apple or Amazon has been. Stop and think about the current generation of millennials, they could care less about having a cable subscription.
MCCORD: Hey, let me push back.
RITHOLTZ: Okay.
MCCORD: They have already, it’s over. I’m not in Reed’s head anymore, but I’m telling you, world domination is so yesterday.
RITHOLTZ: Right, well I’m talking 2020 and you’re talking in 2010. So, it’s really just where the specific number at.
MCCORD: Since we’ve been talking about what Netflix is doing not with the tactical details.
RITHOLTZ: Right, but that — if you build a business from the perspective of the customer, don’t we all want to be able to watch whatever we want to watch whenever we want to watch…
RITHOLTZ: Sure.
MCCORD: …that’s personalized to us anywhere in the world.
RITHOLTZ: Yes, of course.
MCCORD: I think it’s kind of done and done.
RITHOLTZ: If it’s not fully realized, the overall trends, we’re not debating if, we’re debating when. Is it 2015, is it 2020 but it’s an assumption because…
MCCORD: I would argue it is 2018. We’re closer there.
RITHOLTZ: It’s not quite 100% because every time I go, “So, I’m a fan of the expanse and I fire up my Amazon fire stick and I have to say — was that an Amazon Prime, was that Netflix, was that Hulu?
MCCORD: Yes, yes.
RITHOLTZ: So there are so many choices you have to — you have to — and now Apple is throwing billions of dollars at it. There’s going to be a run of — there is no like flick on the TV, flip the channel.
MCCORD: I certainly hear you and I know that’ll get better because Amazon Prime and Netflix are tech companies at their heart.
RITHOLTZ: They all stink at organizing the materials and that goes for across the board.
MCCORD: Well, I don’t know.
RITHOLTZ: They are all…
MCCORD: I am going to argue with you because I just…
RITHOLTZ: You can argue all you want…
MCCORD: I just walked out of my hotel room this morning, so flip to channel guide on your hotel room.
RITHOLTZ: It’s better than — well, first of all it’s an unfamiliar set of channels. At home, if you still have cable or satellite and you flip to the guide, well, I know exactly where my favorite things are. I know where HBO is, I know where the sci-fi channel is. I know where BBC America is, those are my three go-to’s and there are a bunch of others, but I also know — I don’t know where Showtime is but I assume it’s near HBO. So I could go find it.
MCCORD: These are really good questions. I am going to have to call up my geeks and see what’s up.
RITHOLTZ: So then…
MCCORD: Because you know they’re working on it. You know that that’s obvious to everybody.
RITHOLTZ: When I go to either Apple TV or Amazon Prime or even Netflix. Netflix gives me a run of stuff and it — now, here’s the other issue, and this I think is our problem because neither you nor I are millennials. I suspect although I’ve asked millennials and they don’t — they don’t agree with this. I suspect it’s geared towards millennials and they look at me and say, “Well, who cares what you want to see, we’re putting your favorite list here and then Netflix originals here,” and then there’s a bunch of other things and that’s the order that these kids want it in their future. I just find there’s such a fire hose of amazing stuff and not like — my issue isn’t how do I find something I want to watch, there’s a million things I want to watch. I know what I want to watch. How do I go find that?
MCCORD: Yes.
RITHOLTZ: Like, “Jack Ryan” is coming in August. I know that’s good to be an interesting show. I don’t need to see that every time I log on. I have already made a note of it, it’s early in my favorites list. In August I’ll see it but why is that the second tile…
MCCORD: Funky, I’m not there anymore. I don’t really know but…
RITHOLTZ: …but generally, I mean that is…
MCCORD: But I would…
RITHOLTZ: That is — that user interface is the next challenge.
MCCORD: I will tell you that I am absolutely 150% sure that there are people all over the world working on this particular issue.
RITHOLTZ: No doubt, no doubt.
MCCORD: And where — where I saw the trend line, which I think is happening all over technology right now is that what’s been driving most of the solutions to what you’re talking about is not our age whether we’re millennials or boomers or what our habits are because you remember, innovators don’t start with what the problem is now. They start with what’s a solution going to be for everyone, right.
So it has hereto for had been personalization. That’s the magic thing. Can I use the data to give you stuff. Can I intuit what you’re going to want?
RITHOLTZ: Right.
MCCORD: And so now, we’re in the middle of the, “Well, is that a good thing or not” you know, debate that was certain to happen when big data began to touch every single one of our lives, right, just the whole Facebook scenario right now and the brush and meddling in all that you know, so personalization is great until somebody else gets to decide what’s personal to you.
So, I mean I think that’s a really interesting technical new frontier for us right now and since I’m not inside a company that’s doing that, I can’t take what’s happening, but I can tell you that knowing —
RITHOLTZ: I’ve met lots of people —
MCCORD: — knowing these people the way I know them, this is somebody’s full time, can’t go to sleep at night without thinking about what’s the solution to this issue.
RITHOLTZ: What I miss about the DVD era of Netflix —
MCCORD: Oh, you’re getting nostalgic old school on me.
RITHOLTZ: But it’s not, it was the ability to go to the website and organize my list, my queue —
MCCORD: Organize my queue.
RITHOLTZ: Right, but now, I want to be able to do the same thing for my Netflix screen, so that why are you showing me this run of documentaries, none of which I like, why is that even here? Why do I have to scroll through a thousand of these?
MCCORD: Again, Barry, I don’t work there.
RITHOLTZ: Listen, I am not asking you to solve this problem —
MCCORD: Fix it for me, Patty.
RITHOLTZ: I’m just identifying this is a genuine issue.
MCCORD: I bet you, somebody’s built an app to do it. I bet you, they have.
RITHOLTZ: Now, do I need an app between me and Netflix on my television?
MCCORD: The way you’re going to think about how you use all of these devices in the future is going to be a bumpy road as we start to solve some of these problems like that always happen.
Like, for example when I was there, okay, when I was there, I was there when the first ability — remember when — you want to go back in day? Back in the day, streaming wasn’t streaming.
RITHOLTZ: A decade ago.
MCCORD: It was downloading.
RITHOLTZ: Right.
MCCORD: And it was downloading into —
RITHOLTZ: With a buffer.
MCCORD: — a tiny little app on your on your screen on your PC that didn’t have very good sound. It was kind of choppy, so I was at Netflix from the — we invented the interface on your laptop to porting to every technology known to humankind.
I remember interviewing somebody from Motorola at one point who kept messing with his flip phone during the interview, and I said, “Will you put that thing down, I’m trying to talk to you.” Because you know, we’re going to be watching video on our phone someday.
And I said, pfft —
RITHOLTZ: Right.
MCCORD: That’s just not going to happen. And he’s like, “Yes it is. It is absolutely going to happen. You’re going to do it and you’re going to love it.
RITHOLTZ: That’s the AT&T commercial from like 1980.
MCCORD: Exactly.
RITHOLTZ: You will one day.
MCCORD: And I sounded just like you. That is not the way I want — I am never going — .
RITHOLTZ: I just want it usable. That’s all I want.
MCCORD: And so, if you —
RITHOLTZ: I don’t care how it is done, make it usable.
MCCORD: Because I lived my whole career there in Silicon Valley —
RITHOLTZ: You think it will happen.
MCCORD: And you know it will. I know — every, you need to go from not buffering to streaming like to push the button and have it play instantaneously, that inside our company was probably a four-year effort.
RITHOLTZ: Wow, that’s amazing.
MCCORD: It’s harder than it looks.
RITHOLTZ: I remember when the news reports would come out and say 50% of internet traffic from eight until midnight is Netflix.
MCCORD: Yes.
RITHOLTZ: Or some insane — I don’t remember what it was, but it was some crazy —
MCCORD: Yes, I write a book about how we realized we are going to be third of the US internet bandwidth, we all just stopped in shock.
But now, you know, but Silicon Valley also has this thing called Moore’s Law and so —
RITHOLTZ: Which we’re theoretically coming up on the end of.
MCCORD: Which —
RITHOLTZ: Theoretically.
MCCORD: But engineers believe in as a religion, which is don’t worry. All of that —
RITHOLTZ: The bandwidth will show up.
MCCORD: It’ll show up, right? It’ll get solved because somebody — and I guess that’s a really important part of the message I’m trying to send, which is for every person, there some problem that’s really compelling and somewhere, there’s a company that needs someone to solve that really compelling problem, you know and that matching happens over the course of your entire career and that no company continues to give you that compelling problem forever, nor did they owe it to you.
So, that dance between learning what you love to do that you’re great at doing and finding the place that really need someone who loves to do and are great at doing that, that’s the dance of living our — living our careers for the rest of our lives.
RITHOLTZ: You are describing the current season of Silicon Valley. I don’t know if you watch the show.
MCCORD: Oh, god, yes, I love it, but —
RITHOLTZ: It’s that whole idea of here’s the problem we’re trying to solve.
MCCORD: Yes.
RITHOLTZ: If you people want to participate — you watch the show, you enjoy it.
MCCORD: I do.
RITHOLTZ: How much of a parody is it?
MCCORD: It’s really close. It is a really close, I mean I don’t like the stereotypes, but I know every one of those guys.
RITHOLTZ: They’ve claimed that there is no one individual, that it’s all a composite, so as to not make any one person —
MCCORD: By type, they are — there is always those types, but you said something really important, that’s what’s the essence of my book is, too, which is own your career, you know, don’t wait for somebody else to tell you what to do, don’t be a victim. Be proactive about doing great stuff that’s going to satisfy you, because otherwise you’re going to end up to be a victim and be disappointed.
And on the other side of things, my message to corporations is stop lying to people and telling them they’re your family and that we’re going to take care of you and we will always be fair because right now, that’s simply not true. It hasn’t been for a long, long time.
RITHOLTZ: I was going to say, nor has it been for a century.
MCCORD: Nor has it been for a long time, so I think that we can be grown-ups and have these kind of conversations for 20 or 30 years, which or 40, however long we’re going to work.
RITHOLTZ: So, let me get to my favorite questions.
MCCORD: Yes.
RITHOLTZ: These are what I ask all of my guests. I’m curious to see how some of your answers go, tell us the most important thing that people don’t know about your background?
MCCORD: I was going to be a teacher. I was passionately going to be a bilingual elementary school teacher.
RITHOLTZ: Why did that not happen?
MCCORD: You know, it didn’t happen because I got — I was a reader in antitrust litigation when I was in college in my student teaching year and they offered me a job at like three times what is salaried — what a tenured teacher would make and I took it.
And all these years, I felt really guilty because I’d given up my dream and I was at this executive office site one time, all men, right? We’re up in Sonoma and we’re writing down, you know, what would you tell your 20-year-old self or you know one of those things and I’m writing about how like I gave up my dream and I realized, I just looked around me and I was like, “Wait a minute. I speak fluent engineering. They’re taller than I expected and they’re all men, but I am a bilingual teacher.”
RITHOLTZ: That’s right.
MCCORD: I got —
RITHOLTZ: English and engineering.
MCCORD: Yes, I ended up doing it anyway. Who knew?
RITHOLTZ: Tell us about some of your early mentors who guided your career when you were just getting into HR?
MCCORD: I was thinking this morning about a woman named Nancy Hauge who was the woman I told you the story about at Sun who hired me and the first one-on-one I had with her, I had my pen and my little pad of paper to take notes and she said, “Now, write this down very carefully. I have something very important to tell you.” Poised. She said, “I’m your safety net. Fall.”
RITHOLTZ: That’s very nice.
MCCORD: Yes.
RITHOLTZ: Very nice.
MCCORD: And at that time, I was really worried about, you know, doing the right thing and following the right career path and so, that early advice really stuck with me forever.
RITHOLTZ: Who else influenced your approach to HR and the development of culture?
MCCORD: Oh, it’s totally Reed. My working with Reed Hastings was the most incredible innovative part of my whole career and I mean it’s because — it’s not that I rolled off the turnip truck and met Reed and everything was wonderful.
Our collaboration was really, really fruitful for the both of us. There are members of my family who will always say, “You know, you’re awfully lucky you’ve met Reed.” And I often say, “You know, he’s awfully lucky he met me.”
RITHOLTZ: That’s right.
MCCORD: And if we hadn’t both had the lives that we had before we came together, but at the point where, you know, when you start throwing things away and all bets are off, then it gives you the confidence to just keep going. I mean, in my field like what if you try something and it turns out to be the dumbest idea you ever had? Well, no biggie, you just go do what everybody else is doing and call it best practices.
RITHOLTZ: That is such a dangerous phrase. Tell us about some of your favorite books, be they fiction, nonfiction, HR-related or not.
MCCORD: Well, I just finished “Brotopia,” Emily Chang, Bloomberg reporter’s book. I love it a lot because she really researched a life that I led.
RITHOLTZ: I can imagine — first of all, she’s very, very good at what she does, but she’s also this very cute woman in the middle of San Francisco. I can’t imagine what sort of nonsense she deals with out there.
MCCORD: A lot.
RITHOLTZ: I would guess enough to write a book about.
MCCORD: A lot of nonsense, so I love Emily’s book. I was thinking of other books. I love “Lean In.” I love Gloria Steinem’s biography, right — you’ve got a trend here, yes. My daughter — my 20-something says, “Oh, well, mom, you know, you’re a 2.0 feminist.” I’m like, “Seriously?” I have a number like —
RITHOLTZ: What does that make her? She’s 3.0.
MCCORD: Yes, yes, it’s a whole different thing.
RITHOLTZ: Understandable. Any other books?
MCCORD: Not that I could think of right now.
RITHOLTZ: Okay, tell us what has changed within the industry of both HR recruiting and corporate culture?
MCCORD: We talked about it a little bit, I think — think mobile computing, if that’s the right way to — I think it’s funny that we call it a phone, right?
RITHOLTZ: Right?
MCCORD: When it’s a phone and it’s a camera and it’s —
RITHOLTZ: More power than —
MCCORD: — and it’s video, and it’s — yes. You know, it’s a computer, it’s a search engine and it’s, you know all of those things and I think that ability, it’s creepy sometimes when you’re in rooms of a hundred people.
You know, I do a lot of public speaking and when I first started doing it with younger audiences, I thought. “Oh, I’m too old. They don’t like me. It’s not very interesting. They’re all looking at their phones,” and then I realized, “Oh they tweeted every word I said.” So, that processing is really different and I wasn’t a Twitter user. I thought it was ridiculous and now, I’m completely a junkie because it’s such real-time information.
RITHOLTZ: Absolutely.
MCCORD: So, I think —
RITHOLTZ: Twitter is the new tape, we like to say.
MCCORD: Whatever or it’s the old tape and because you know, my kids will be like, “Oh, mom, it’s a snap, right, nobody tweets anymore.”
RITHOLTZ: Right, but they do.
MCCORD: So, that I think, that technology of having that ability with you at all times, I think that’s really significant and I think that will really change us.
RITHOLTZ: It’s made the world so much smaller because things happen in parts of the world and suddenly you have a bird’s eye view of exactly what’s going on in places —
MCCORD: Which has been going — I mean the idea that we can undo globalization is just like —
RITHOLTZ: It’s laughable.
MCCORD: It’s crazy stuff.
RITHOLTZ: It’s just so silly, so mobile computing/iPhones are the current major shift. What’s the next shift that’s going to take place?
MCCORD: I think that technology is going to enable us to work the way that is really efficient and effective, which is collaboration across geographies, across cultures, across you know, thinking about customers as global customers. I think that that will change. Speed, and that, you know, we have this belief I think from the 50s that business grows in a linear fashion. You know, all this up into the right charts that we’re so used to seeing and actually, I see it really evolving, right?
When I talk to the large financial institutions for example, that say, “I think we’ve got it, you know, we’ve been doing it like this for 300 years and we’re huge and momentum won’t stop us.” Well, you know —
RITHOLTZ: Tell CEOs that —
MCCORD: Tell Blockbuster.
RITHOLTZ: Yes, even better. That’s exactly right. Tell us about a time you failed and what you learn from the experience?
MCCORD: You know, this moment in my life and the whole #Metoo Movement, I think about the times I failed to stand up for what was right when I was there, you know, well maybe he won’t do it anymore and we really need him because he’s a sales guy and we have a hockey-stick end of quarter, right?
RITHOLTZ: Right.
MCCORD: So, let’s just — he won’t misbehave and it took me a long time to realize that people who misbehave inappropriately with each other, let’s take that particular example, are probably lying about the quarterly sales number, too.
RITHOLTZ: Right, or misbehaving with a client.
MCCORD: Or yes, so I think you know, if I look back and think about what I would do over again, it would be to own my shrillness sooner.
RITHOLTZ: What do you do about somebody who was just spectacular at their job, but brings so much baggage, it may not be worth it.
MCCORD: You let them work somewhere else.
RITHOLTZ: And that’s the end of the story.
MCCORD: I just told somebody yesterday, I was at a cocktail party last night. We were talking exactly about this and I said, “Well, you guys — ” It was a bunch of recruiters and I said, “You know, you can tell them in the interview.”
RITHOLTZ: Right.
MCCORD: I’ve done it many times, you know, we’re done with the interview and I say, “You know, you’re a brilliant guy and you have a lot of skill set, but you know, you’ve got an attitude that’s really off putting and I don’t think you’re going to be successful here. In case anybody has not told you this explicitly before, you fall into that category.”
RITHOLTZ: Right.
MCCORD: Right and we are just not doing it. Thanks a lot.
RITHOLTZ: And what’s the reaction to that?
MCCORD: A lot of times, like humble —
RITHOLTZ: Stunned silence or —
MCCORD: Somebody — people have said that to them in one way or another their whole lives and it’s until somebody says, “Well, we are not tolerating that.”
RITHOLTZ: Right, we don’t need it.
MCCORD: It’s the same with sexual harassment, right? You know, it makes me crazy. I don’t want us to be — I don’t want this to be an HR issue to fix, you know, “Go tell HR — ”
(CROSSTALK)
RITHOLTZ: This is a hiring issue. Screen that —
(CROSSTALK)
MCCORD: No, it’s a living every day issue.
RITHOLTZ: So, it’s a culture issue.
MCCORD: We need to not be the people that investigate sexual harassment after it happens. So, that’s — your question was, “What if I fail that?” I had failed at standing up going, “That’s what I am talking about right now. You just did it. Knock it off.” Right?
And saying in your 20s, “Look, when you look at my body instead of my face when we’re having a conversation at work, that’s weird. Please stop.” And when you’re young, you will go, “Oh, I didn’t realize I was doing that. I’m sorry. Thanks.” When you’re 45 —
RITHOLTZ: Yes, not acceptable.
MCCORD: And no one has ever said anything, then you think it is acceptable.
RITHOLTZ: That’s pretty astounding. What you do to keep mentally fit outside of work? What would we do for fun?
MCCORD: I have two grand dogs.
RITHOLTZ: Grand dogs?
MCCORD: Grand dogs.
RITHOLTZ: Your kids’ dogs.
MCCORD: Yes, kids’ dogs and grand dogs I think are close to as good as grand children because that way, you could give them back. We have a sailboat and we do a lot of sailing in the Monterey Bay, which is where I live and I’ve taken up gardening again.
I am going to now do all of those like things that semi-retired people might do if I ever semi-retire.
RITHOLTZ: We were just talking about the weather here in New York, the nicest thing about spring is all the shoots are coming up. All my raised beds, I am getting ready to replant. It’s really — this is my favorite time of the year or so it certainly seems that way.
MCCORD: It’s very zen, isn’t it?
RITHOLTZ: It is. Totally. Getting your hands in the dirt, there’s just something special about it.
MCCORD: Maybe the future is the combo of like your hands — one hand and the dirt and the other hand on your cell phone.
RITHOLTZ: No, when I’m out there, the phone sits —
MCCORD: Me too.
RITHOLTZ: — in the shade. If I’m lucky, I leave it on the charger inside, so I don’t have to deal with it, but there are times to be completely and totally —
MCCORD: That’s right.
RITHOLTZ: And now my two favorite questions, if we were talking about millennials, if a millennial or a college graduate came to you and said, “I’m interested in a career in HR.” What sort of advice would you give them?
MCCORD: Like, I’ll tell you what general career advice I give people early in their career. Anyway, I say it’s not what you know or who you know, it’s who knows what you know.
RITHOLTZ: Who knows what you know —
MCCORD: Who knows what you know, so the idea of a network, we used to call it networking is now part — is breathing, right? Because everybody is socially networked all the time.
RITHOLTZ: Right.
MCCORD: But I would say, early on, start building a group of people around you. It can be on social networking that know what it is you’re interested in, that you get to know because more importantly, it’s about owning your own career from the very beginning and not passively joining a company and waiting for them to take care of you and it’s about trying new things and figuring out what it is that you love to do.
So, I have in the book, I talk about my algorithm for success and it is a mathematical formula and it says, “It is what you love to do that you’re extraordinarily good at doing something we need someone to be great at.”
And so, when you’re early in your career, you don’t know, right?
RITHOLTZ: Right.
MCCORD: And so, it’s really important early to try things that you think you might not like to do to find out if you really don’t, right?
RITHOLTZ: Interesting, and my favorite question, what is it that you know today about culture and HR and the like that you wish you knew 20-plus years ago?
MCCORD: I wish I had realized my own power. I wish I realized how much it mattered. I mean, I came up with, you know, when I started — well, I started in recruiting, so that was a very measurable thing to do. I called this many people. I’ve got this many phone screens and this many interviews and I made this many offers and I got this many hires, and because I was an internal recruiter, I could see the sort of who worked out and who didn’t like when I put a butt in a seat that I knew wasn’t the right butt, right?
But I didn’t know how important what I did was. I thought it was administrative and then I went through a part of my career and part of my function where our job was to protect ourselves from those evil employees that might sue as.
RITHOLTZ: Right.
MCCORD: And I lived through that long enough to realize that when evil in place sue you, it’s usually because you did something that made them really mad, usually by not telling them the truth that made them think it was totally unfair that they were blindsided by something or tortured with their performance improvement plan into being told that they’re incompetent when they’re not. That’s when people sue you.
And now, you know I kind of live in this goofy, I tell HR people all the time, “You know, you know you think they think you’re schizophrenic. Half the time you’re there to make them happy with craft beer and the other half you’re protecting the company from them suing you. Like who are you?”
RITHOLTZ: That’s fascinating.
MCCORD: And so I think we’re a vital part of every organization and that’s putting the right teams together that get amazing stuff done.
RITHOLTZ: We have been speaking with Patty McCord, former Chief Talent Officer at Netflix and currently the author of “Powerful: Building a Culture of Freedom and Responsibility.”
If you enjoyed this conversation, be sure to look up an inch or down an inch on Apple iTunes where you can see any of the other 200 such conversations that we’ve had over the past four years.
I would be remiss if I did not thank my crack team who helps put together these conversations each week. Medina Parwana is our audio engineer/producer. Taylor Riggs is our booker/producer, and Michael Batnick is my head of research.
We love your comments, feedback and suggestions. Write to us at MIBpodcast@Bloomberg.net, I am Barry Ritholtz. You’ve been listening to “Masters in Business” on Bloomberg Radio.
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