Most of you probably subscribe to Netflix. Some of you may be Netflix addicts (House of Cards, Orange Is the New Black). But even if you are not an addict and do not subscribe, you have heard about Netflix. It is the company that obliterated Blockbuster and pretty much every other video rental store.
Netflix is not just a business innovator it is a workplace innovator. In a world where the battle to hire talent makes a wolf pack struggle over a recent kill seem like a Brady Bunch dinner, having a highly regarded and distinctive culture can mean as much as a marquee VC backer on your board. An obvious question, then, is how does Netflix’ culture make it such an innovator?
Patty McCord was Netflix’ not-so-secret weapon. She started at Netflix in the early days having done the entrepreneurial thing with its founder, Reed Hoffman, once before. Early on, McCord wrote a 124-page slide deck that has become famous for defining the Netflix culture and setting a standard for workplace innovation. Today, much of Netflix’ success is attributed to its successful culture and what McCord wrote.
The Netflix Culture Story
Netflix is one of “those” companies. If does not have a vacation policy, a travel policy, and (praise the gods) does not have annual employee reviews. Instead, the culture was designed to attract what McCord calls “fully formed adults.”
McCord’s slide deck explains that Netflix’ culture is formed around nine values, described as the things Netflix looks to when determining who gets hired and promoted (McCord does not like the term “fired” so she describes that step as helping people move on):
It provides detail about each of those values and the seven aspects of the company’s culture. It does not just list the values and aspects, it goes into detail about what each means.
Take the “no vacation policy” example. Netflix started with a standard vacation policy. Then, an employee pointed out that the company did not track hours worked per day or per week. So, the employee asked, why did the company track vacation time? Apparently the answer was “for no good reason” so it stopped. The company focuses on getting things done not the time it takes to get them done.
The culture Reed Hoffman, Patty McCord and the other executives established has allowed Netflix to transition from a mail-order DVD rental business, to a streaming video business, to an original content production business.
As they say, if the story ended there it would be nice. But it did not. At one point, Netflix was struggling with the costs and benefits of the DVD business versus the streaming business. McCord was a strong backer of splitting into two businesses where subscribers would pick one or the other. The idea failed—big time. In fact, it was such a disaster that Netflix decided it was time for McCord to move on. The culture that McCord helped create decided she no longer was a good fit.
Lawyers Fear Meritocracy
The Patty McCord story petrifies lawyers. Clients and consultants point to law firms and moan that they are not innovative. The new ideas, say lawyers, will not come from law firms. Many think clients will need to come up with innovative ways to deliver legal services. I believe it will be other service providers, looking to push law firms aside and cash in on the bonanza of legal spending. I believe it because it already is happening.
But imagine if lawyers decided to become innovative. What if law firms said “hey, what our clients need is high quality, timely, efficient legal services.” We will track our lawyers and other employees on what they do not how long they take to do it. We will bill our clients for value, not for effort. We will respect those we hire as “fully formed adults” and focus on what is important.
From the perspective of law firm partners, if this Utopia came to be, they would face an interesting world. But it also would be a riskier world. If a partner did not produce, did not satisfy clients, did not innovate, the firm would not have room for her. Firms would become meritocracies instead of fiefdoms.
Some might argue that law firms already have moved toward meritocracy. Most firms, however, still operate on the quick to hire, slow to fire principal. Once you make equity partner, it takes a lot for a firm to help you move on.
Lawyers Shy Away from Trust
Law firms today are not institutions built primarily on trust. There was a time when this was not the case. Law firms were much smaller, the partners typically grew up in the firm, and through working together over they years they came to trust each other. Most firms did not have multiple offices, so the partners frequently interacted and those interactions bred familiarity and trust. Today, of course, large law firms have offices spread around the world. The partnership includes many lateral partners and, given the size of the firms and the many practice specializations, most partners never work together. It is not uncommon as a client to work with two partners in a firm who have never worked together and never met. It is hard to build institutional trust in such an environment.
Since most law department lawyers come out of law firms, law departments also can be organizations that lack trust. Within the law department (an environment often resembling a small law firm) the lawyers probably do trust each other and their colleagues. But they do not trust the lawyers toiling away in the law firms. We see the result each day when it comes to things like acting as “fully formed adults.” Read through the billing guidelines of major corporations, if you do not believe me.
Build Trust, Make a Buddy
If you have not built trust within your law firm, and if your clients do not place a lot of trust in you, then being an innovator can be hard—or nearly impossible. Innovation means taking risks, failing, and doing things outside the norm. In a Netflix environment, which starts from the premise that its employees are “fully formed adults” who can be trusted to do the right thing, taking a chance at something innovative is not taking much of a chance. Everyone knows you will fall short occasionally, as will they, and that is okay.
If a law firm environment, where the norm is protect your clients, not trust your partners to do the right thing by you, and watch out for number one, taking a chance is more like walking off a cliff. The fall is not that bad, but the landing hurts.
If you are a law department and you do not trust your outside lawyers on day-to-day legal work, then you certainly do not trust them to be innovative to your benefit. Instead, you probably question each thing they do wondering whether you get any benefit from it or if it is just another way to tack on a few more billable hours.
We need to break the lack-of-trust bottleneck. Firms and clients can do that, even in a billable hour environment. Like other lack of trust situations, it starts with communication and plenty of it. Watch a buddy movie and somewhere along the way you will hear the line, “I just can’t believe he would do that.” When you know someone well, you believe in them and they believe in you. In those movies, faith in the buddy character seldom is misplaced. The movie works, because it reflects real life.
So if you want your law firm to innovate to your benefit, you need to meet with them and build that trusting relationship. If you refuse to do that, you should not blame your law firm. Instead, think about what you do when your clients do not trust you? Do you go the extra mile? Do you innovate on their behalf? Do you take on extra burdens? Or, do you spend time with those who are willing to invest their trust in you? If you want your lawyers to innovate for you, then you need to be their buddy.