As I became familiar with software engineers, in particular, and observed how they work, I realized that it’s a misconception that more people make better stuff. With our teams at Pure, and all around Silicon Valley, I could see the power of small, unencumbered teams.
The typical approach to growth in business is to add more people and structure and to impose more fixed budgetary goals and restraints. But my experiences at fast-growth companies that successfully scaled showed me that the leanest processes possible and a strong culture of discipline were far superior, if for no other reason than their speed.
Later, at Netflix, we had a striking realization about this after we had a big, very painful layoff. In 2001 we had to lay off a third of the company. The dot-com bubble had burst, and the economy had gone bust with it, and we were on the brink of bankruptcy. It was brutal. Then that Christmas the cost of DVD players dropped and they became the big gift, and the business took off. Now we had to do twice the work with two thirds the people. We couldn’t hire anybody except people to put DVDs in envelopes. We had so many new customers that we didn’t have enough inventory, and we had to put every tiny cent of profit we had into buying more product. And yet everyone was much happier. I was carpooling to work with Reed one day, and I said to him, “Why is this so fun? I can’t wait to get to work. I don’t want to go home at night. We’re working so hard, but it’s great. What is it about what we’re doing?” He said, “Let’s figure it out.”
Our first big realization was that the remaining people were the highest performers, and it taught us that the best thing you can do for employees is hire only high performers to work alongside them. It’s a perk far better than foosball or free sushi or even a big signing bonus or the holy grail of stock options. Excellent colleagues, a clear purpose, and well-understood deliverables: that’s the powerful combination.
When I Saw the Light
Reed and I and the executive team were determined to figure out how to sustain the creative spirit and extraordinary level of performance our teams were demonstrating as the company rapidly scaled up. We were going to have to start hiring fast, and we wanted to ensure that we maintained our exceptionally high talent density—the high quotient of top performers that had seen us through the downturn so deftly. We began to systematically explore how we could free people up to do their best work while also providing the right amount of guidance and feedback to keep teams on track yet able to dramatically change course if necessary.
This was when I learned in a much deeper way about the drivers of high-performance innovation. For the first time in my career, as a member of the executive team, I was directly engaged in developing the product itself. It wasn’t a highly technical, complex software product, as at Pure. We were an entertainment company, and I was a huge movie fan. I was also, as I would say often to tweak the engineers, normal. I was the customer. I became fascinated with how we were developing the product. We were huge fans of A/B testing, rigorous experimentation, and open debate about what was right for the product. In product development, if something doesn’t work, you get rid of it. I realized we could apply that same principle to managing people.
I understood that part of the reason large teams are crippled in their ability to innovate and move fast is that because it’s hard work to manage them, companies build infrastructure to make sure people are doing the right things. But the teams I saw that accomplished great stuff just knew what they most needed to accomplish; they didn’t need elaborate procedures, and certainly not incentives. Most technologists will tell you that a small team of brilliant engineers will do better work than a large team of hardworking ones. I started thinking: Why would that be true just for engineers? Is it because they are so special and smart? At that time, much as I love engineers, I was pretty tired of their being treated as the special, smart people. To my mind, people across the full spectrum of functions would love nothing more than to be free to tackle projects in the way they think will produce the best results in the shortest possible time. So often, though, they are thwarted by management second-guessing them or by inefficient systems. I wondered: what if people in marketing and finance and my own group, human resources, were allowed to unleash their full powers? They would operate like high-performance engineering teams. In retrospect, that was the moment I left behind traditional HR and took on a new role as the COO of culture and the chief product manager of people.
I began to scrutinize our organizational structure and design. At that point, we had created departments, and Reed and I had agreed that as much as we could, we wanted to keep their management flat because that gave us so much speed. After we’d had to let many middle managers go in our big layoff, we had noticed that everyone moved much faster without all those layers of opinions and approvals. Now we decided that maybe people could move even faster and get more done if we started doing away with policies and procedures. We analyzed every single truism and best practice, just as we analyzed the product. Often when Reed would propose a cut, it sounded so crazy I needed to sleep on it. But as we kept trying things, we kept getting good results. Take our no-vacation-policy policy, which has received a great deal of press. We told people to take the time they thought was appropriate, just discussing what they needed with their managers. And do you know what happened? People took a week or two in the summer and time for the holidays and some days here and there to watch their kids’ ball games, just as before. Trusting people to be responsible with their time was one of the early steps in giving them back their power.
I discovered I loved throwing away convention. One of my favorite days was when I stood up in front of the company and said, “I’m going to get rid of our expense policy and I’m going to get rid of the travel policy, and I want you to just use good judgment about how you spend the company’s money. If it turns out to be a disaster, like the lawyers tell us it will, we’ll go back to the old system.” Again we found that people didn’t abuse the freedom. We saw that we could treat people like adults and that they loved it.
I started to challenge the conventions around hiring people too. With the company growing like mad and the nature of the business changing so fast—we could see streaming rapidly approaching—we knew we had to build an organization that would always have a really strong talent pipeline. At the time, when I hired a manager, they typically wanted to work with their favorite headhunter, and I knew I had to change that. We needed to be more strategic. I could have tried to get the five best headhunters in Silicon Valley to work for me exclusively. But I decided to throw out the traditional recruiting practice and create a headhunting firm within the company. Instead of hiring people who had worked in other companies internally, I started hiring people who’d worked for headhunting firms to build that capability inside. Because we had that competency, I could tell a manager, “It’s okay if you lose a couple of people, because we can get great new people for you fast.”
We also challenged the conventional practices for crafting both company-wide and team strategy. We had been creating an annual road map and doing annual budgeting, but those processes took so much time, and the effort wasn’t worthwhile because we were wrong all the time. I mean, really, we were making it up. Whatever our projections were, we knew they would be wrong in six months, if not three. So we just stopped doing annual planning. All the time we saved gave us more time to do quarterly planning, and then we went to rolling three-quarter budgets, because that was as far out as we thought we could ostensibly predict.
We experimented with every way we could think of to liberate teams from unnecessary rules and approvals. As we kept methodically analyzing what was working and how we could keep freeing people to be more creative, productive, and happy, we came to refer to our new way of working as the freedom and responsibility culture. We worked for years to develop it—and the evolution continues today. I’ll describe the additional components in the chapters to come. They were all built upon the realization that the most important job of management is to focus really intently on the building of great teams. If you hire the talented people you need, and you provide them with the tools and information they need to get you where you need to go,
