How The Architect Of Netflix's Innovative Culture Lost Her Job To The System

Transcript

RACHEL MARTIN, HOST:

For most Americans, Netflix means free time - binge watching "House Of Cards" or "Orange Is The New Black." In Silicon Valley, Netflix is best known as a company where hard work is irrelevant. Steve Henn from our PLANET MONEY podcast has the story of one woman who helped build a workplace that doesn't track what you put into your job but instead what you create.

STEVE HENN, BYLINE: Patty McCord started at Netflix in the early days. The office furniture was card tables. They were sending DVDs through the mail. And the thing that made Patty really rethink what a job should be, how the workplace should work, happened when the dot-com bubble burst and they had to fire a bunch of people.

PATTY MCCORD: So we laid off a third of the company - a third. We were only 120 people or so, but still, it's one, two, three, one, two, three.

HENN: They fired movie reviewers and engineers. And you know how every company has that guy in the corner somewhere, and everyone's like, what exactly does that guy do? That guy - he was gone. And at first, it felt bad, but then, weirdly, it felt good. Bill Kunz was an engineer there at the time, and he says they just got more done.

BILL KUNZ: We have to. We have no choice. So now we've got double the reason to do it. So let's go, y'all.

HENN: Was that fun?

KUNZ: Oh, yeah. Oh, yeah

HENN: At the time, Patty was carpooling to work with Netflix's CEO, Reed Hastings.

MCCORD: We're in the car driving, and I'm like, why is this so fun? I can't wait to get to work. I don't want to go home at night. I mean, we're working so hard. What is it about this? And Reed's like, go find out (laughter). Let's find out. Let's write it down.

HENN: So Patty did. Over the next few years, she put together this slide deck like a PowerPoint presentation that, weirdly, goes viral. Today, it's been viewed 12 million times. Sheryl Sandberg, the COO at Facebook, once called it one of the most important documents to come out of Silicon Valley. And the slides are surprising. One says, hard work - not relevant.

Today, Netflix offers unlimited vacation time, high salaries. This company doesn't care how long you're in the office, but they do care about what you produce. And you have to produce. Here's another slide. We are a team, not a family. We are a pro sports team, not a kids recreational team.

Netflix fires people, even hard-working people. Patty remembers one worker who did product testing. She was great, but she lost her job to automation. And this worker was super upset.

MCCORD: So I called her up. I'm like, what part of this is a surprise? She said, well - I'm like, we've been talking about this as a strategy for years. You've been in every - I've sat next to you. I mean, we've talked about this. And she goes, yeah, but, you know, I've worked really hard; this is really unfair. I'm like, and you're crying? She's like, yeah. I'm like, will you dry your tears and hold your head up and go be from Netflix? You're the - why do you think you're the last one here - 'cause you're the best. You're incredibly good at what you do. We just don't need you to do it anymore.

HENN: And the rules were the same for the top people too. When Netflix changed strategies around streaming videos, they let go an entire team of engineers who basically had helped build the company. Today, Patty calls herself the queen of the good goodbye.

How may people do you think you have fired?

MCCORD: Oh, I would really like to remove that word from our vocabulary. It's like, we don't shoot people.

HENN: OK. What word do you like? Severed is no less pleasant than fired.

(LAUGHTER)

MCCORD: No. You just move on.

HENN: How many people have you moved on?

MCCORD: Oh, hundreds.

HENN: I talked to a lot of former employees were OK with this deal. I mean, after all, Netflix pays well. But some talked about a culture of fear - always been worried about being fired. Patty says the company's culture is a big reason for its success. She says it keeps Netflix lean and nimble. So when DVDs are no longer a thing, Netflix mastered streaming. When Hollywood raised prices on movies and TV shows, Netflix created House of Cards.

Yet eventually, this lean, nimble machine Patty McCord helped create - it reached up and got her. A few years ago, Patty backed a disastrous plan to split Netflix into two companies - one for DVDs and one for streaming. Customers would have to pay more, and many just hated it. Eight-hundred-thousand cancelled their subscriptions. It was front-page news.

MCCORD: I'd read that stuff, and then I'd go throw up. It was a hard time. We were so - it was so hard.

HENN: Patty took a lot of the blame, and that year, she was asked to move on. She still doesn't like to talk about it. She said leaving was painful and awful and sad because no matter what those slides she helped write say, the people who built Netflix with Patty McCord still feel like her family, even though, really, they're a team, and Patty has been cut. Steve Henn, NPR News, Silicon Valley. Transcript provided by NPR, Copyright NPR.