Episode 6

Culture

Hosted by Okta's Frederic Kerrest and Epic Magazine's Joshua Davis

Featured on iTunes' Business New and Noteworthy

Company culture is hard to explain, harder to build and yet easy as hell to mess up. But here's what we do know: a business cannot succeed over time without a great culture. So, how do you foster the right kind of environment? How can it go astray, and can you save it when it does? In this episode, we talk with Carl Eschenbach, Parker Harris, Aaron Levie and Patty McCord about culture's impact on your brand and what it takes to build a team that can go the distance.

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Next Episode

With every successful company, there comes a moment when things really start to click. But what happens when you hire 10, 20 or 200 new folks a week to handle the new business coming in? How do you inspire your team when you no longer know many of the people around you — at the company you founded? In this episode, we talk with Amy Pressman, Patty McCord, Melanie Perkins, Fred Luddy, and Carl Eschenbach about how to empower your people, scale your traditions and show employees you care — even when you can’t grab lunch with every one.

Guest List

Carl Eschenbach

Partner at Sequoia Capital

Parker Harris

Cofounder and CTO of Salesforce

Aaron Levie

Cofounder, CEO, and chairman of the board of Box

Patty McCord

Former head of HR at Netflix

Transcript

00:03
Joshua Davis
This idea of risk taking or whatever is, again, one of those platitudes that I think people miss the essence of, and the key is you want to encourage environment for people to be able to take a risk. When it fails, they don't get put on now the bad projects. Just do the right thing and people know the right thing, they do.
00:24
Patty McCord
I had been 15 years in the Silicon Valley and I'd seen every trendosaur and I really wanted just to work with grownups.
00:38
Joshua Davis
Welcome back to Zero to IPO, a show that looks at each stage of growing a company from just a tiny little idea to-
00:47
Frederic K
A massively successful public company.
00:49
Joshua Davis
On today's show, we're going to talk about culture. Oh, you want me introduce myself? I was ready to go.
00:56
Frederic K
Go.
00:56
Joshua Davis
I'm going. My name is Joshua Davis, and I am the co-founder of Epic Magazine and a contributing editor at Wired.
01:03
Frederic K
My name is Frederic Kerrest, I'm the chief operating officer and co-founder at Okta.
01:07
Joshua Davis
Today on the episode we're going to talk about culture, which is this kind of wishy, washy thing and a lot of people, a lot of founders don't think of that it matters. Like why does it matter?
01:18
Frederic K
Well, it matters because you're trying to build not just a company, not just focused on revenue, not just focused on products, but it's a living, growing organism and in our business, in high technology, it's about how do you attract, hire, retain, grow the best people in the world? Frankly, if you're fortunate enough to build a company from one, two, three, five employees at the company to 100 or 1000 or 10,000, they are the ones driving the company forward.
01:46
Joshua Davis
Today on the show, we're going to drill down on that.
01:48
Frederic K
We're going to hear from Patty McCord, the woman behind the game changing Netflix Culture Doc, Sequoia Capital's Carl Eschenbach, Box's Aaron Levie, and Salesforce.com's Parker Harris.
01:59
Joshua Davis
This is an All-Star lineup of culture pros and we're going to start today with Aaron Levie of Box which he originally came up with in college eventually taking it public at evaluation of 1.7 billion.
02:11
Frederic K
Here's Aaron explaining why he likes it when his employees talk back.
02:17
Aaron Levie
Every day I'm being challenged a dozen times. I hope that that's what's happening and I see all the time situations where I have some massive blind spot and I just don't have the context for something. You want to be challenged constantly because maybe I'm right, maybe they're right, maybe neither of us are right, and we have to get to the right conclusion as quickly as possible to make the right call. I come in with 13 years of context about decisions we've made in the business, and in some case that's incredibly helpful because I can accelerate decisions in some areas. In some cases that's obviously incredibly that's an incredible liability because I might think that we've tried something one way didn't work that one time, but somebody has a new version of that. I'm looking at it and thinking that it's the same thing when it's not, and if they don't challenge back and say, "No, actually, you're seeing this in the wrong way," then we might miss a massive opportunity. Because I'm being too myopic, because I'm basing something off of our history and how we've done something. All the time we're making better decisions when we can be challenging each other in that way. We have a core value which is be candid and assume good intent, and that's one of our seven core values, and the idea is built into obviously the value which is be as candid with one another as possible, trust that the person you're being candid with-
03:39
Joshua Davis
They're not trying to screw you.
03:39
Aaron Levie
... is not trying to screw, is not intentionally doing something stupid. Start with a foundation of trust but then work from there to come to the best solution possible.
03:48
Joshua Davis
Yeah, I have two questions. First one is how do you have seven? We used to have seven, I got told repeatedly no one could remember seven things. We had to shorten them four, I got [inaudible 00:03:56] by this and then I come in here and you're like, "I got seven." Not only that, they're each like three sentences.
04:02
Aaron Levie
You haven't seen the full paragraph versions then. No, I'm not going to claim that seven's a best practice, I'm sure that it used to be like-
04:10
Joshua Davis
We have four words, they're just words now.
04:12
Aaron Levie
Wow.
04:13
Joshua Davis
Do you know seven?
04:15
Aaron Levie
I do know the seven, I would say that this came a couple years after the garage period, but I cannot implore entrepreneurs, founders, anybody enough, go in as early as possible and make sure your culture is defined as possible in terms of what you're trying to create. I think, unfortunately, this idea of core values and principles has turned a lot into platitudes in companies and then it gets taken not seriously or people get cynical or skeptical about them. I'm a massive believer that you can run your company off of them, that it can be responsible for 80 to 90% of your decisions, it can simplify those key moments as a company when you have to make a call of going left or going right. I think all companies need to have their set of unique values. For ours, it's blow our customer's minds which is the customer success one. We are constantly thinking about how can we take the customer experience to another level, and not only focus on the ones I think are most the deepest and internalized. Take risk, fail fast, get shit done. I just mentioned be candid, assume good intent. Another is be an owner, when we see something that we don't feel is a proud moment in a decision that could be unethical moment decision, it could be one related to HR, it gives us such a straightforward Northstar of how to decide where to land on an outcome. We expect all Boxers to "make mom proud or make dot dad proud" or at this point just make anybody that you feel that you want to make him proud. That gives us this really, again, simple navigation device in making sure that we're aligning the culture with the environment that we want to create. Those are some of the values that we live by and we do feel are fundamentally important to running the company.
06:05
Frederic K
Certainly, are written down, are they written down on the website?
06:07
Aaron Levie
They are on the website, they are on every employee badge, they are all throughout the experience.
06:13
Joshua Davis
There's something to the mythos of the garage in Silicon Valley like this is where the product is born. This is where you're doing the engineering, and listening to you, I think that perhaps there's something else that's really important that people overlook in those early days, which is establishing a culture.
06:31
Aaron Levie
Yeah.
06:33
Joshua Davis
You guys came into it already knowing each other but you had to formulate it, you had to build a company around these friendships. How important was that to you in your early thinking in those days about like we have a culture here that's going to make us successful, it's not just the product?
06:49
Aaron Levie
I think we didn't know how unique it was early on because none of us had ever worked at another company other than through an internship. It was hard to realize that this way of operating, this way of challenging each other, this we're going to debate about really the business topic but then two minutes later look like best friends on a completely different unrelated issue. We didn't know that that was this unique thing, but it was early executives that came in and said, "Hey, there's something special that we have to keep at the core of everything we do." That's where starting to say, "Okay, let's write down our values. Let's see what is it about this irreverence and this pushing back on each other, and this risk taking approach because you ultimately trust each other. How do you codify that and then maintain it as we scale? I think that was something we just had no understanding of and it was really driven by early employees to recognize that we could build a different kind of company if we maintained this set of values in this set of way of operating.
07:58
Frederic K
Is it possible as a company grows, I mean, you guys have thousands of employees now. How do you maintain that culture? Is it possible to maintain as you turn into something different?
08:10
Aaron Levie
I get feedback all the time and I think it's again a testament of the big candid culture where somebody will say, "Hey, you went in too hard on that message or that issue or you're going to confuse people and distract them by saying that one thing about this part of the business or product." It's obviously an important reminder that your communication bears a lot of weight and that you've got to make sure that you're using it judiciously. At the same time, I have a lot of not fully formed ideas that I will throw out on the table and you want to debate those things and it will be distracting at times. People will be like, "Oh, shit, the CEO said that." We have to take it more seriously and I want to have a disclaimer that says, "Don't take this more seriously unless I say take it more seriously." Because I want to be able to just go and hash out an idea and-
09:05
Joshua Davis
And are people okay with that? As the CEO as you say?
09:08
Aaron Levie
Yeah, I think you have to create a safe environment where I think that there's some cultures where that's not okay whatsoever because there's like folklore of like, "Oh, that one team got fired for doing the wrong thing or saying the wrong idea." If you create an environment where people don't get fired for having crazy ideas from a brainstorming standpoint and they say the wrong thing or there's a level of support for risk taking. I think this idea of risk taking or whatever is, again, one of those platitudes that I think people miss the essence of. The key is you want to encourage environment for people to be able to take a risk. I don't know that we're world class in this, but we have to find a way where it's okay to go out, do something that is a well thought out risk. When it fails, be able to go right back at it and try again at a different area. Obviously, when it succeeds you continue to parlay that and build on top of that, but it is really about this encouraging of risks and then supporting and learning from failure but not shunning failure in such a way that everybody is so afraid to do it that you then end up causing no risk to happen whatsoever.
10:24
Frederic K
Let me just be very clear, this is a journey.
10:28
Aaron Levie
You're never as focused as anybody wants you to be and I'm still trying to ... What I can guarantee anybody who's any boxer today is that I'm much more focused today than I was five or 10 years ago. That might be shocking to, again, people that work with me on a regular basis but again this is a journey. I've had to evolve how do I find a way to work collaboratively in such a way where I can hopefully lend some value in the experiences that I've had over 13 years of seamless marketing in this business. Maybe in a couple areas where I think that I can uniquely add some perspective without disempowering people and going out and doing great work. That's very tough and I'd give myself a C- at doing it in practice, but I know that I can get to B+ at some point, I believe I can.
11:23
Joshua Davis
Freddie, Aaron talks about being challenged a dozen times a day by people. Is that your experience or do you just like live in a cocoon and nobody says shit to you?
11:33
Frederic K
The latter.
11:35
Joshua Davis
It must be nice.
11:36
Frederic K
Yeah, it's actually not that nice. I actually don't know that I agree with Aaron because I bet that he very much like myself and other entrepreneur leaders don't actually get a lot of the core information back on a daily basis. About what's going on in the company, about how it's going with anything, including the culture. Why? Because no one wants to give the founder bad news. So, actually, figuring out what's going on at the ground level, what's going on inside your company, with your employees, with your investors, with your customers, you have to be very good at listening and reading those tea leaves.
12:10
Joshua Davis
How do you do it? How do you get out of your cocoon as a CEO, COO, founder?
12:16
Frederic K
Yeah, I just prefer not to and I just sit in the cocoon.
12:18
Joshua Davis
You just stay in your cube?
12:19
Frederic K
Yeah, it's great, sounds awesome. Everyone is just telling me I'm a genius and it looks beautiful every day.
12:23
Joshua Davis
But I've heard you talk about walking around and forcing yourself to talk to people.
12:28
Frederic K
This is something that a lot of experienced season successful entrepreneurs have mentioned to me, including some of the folks we've had on the show like Carl Eschenbach. Some of the key things they've done, for example, is when they walk around the office. They're not staring at their phone, they put their phone in their pocket and they look at other people and they look them in the eyes and they say hello and they ask them how it's going. Those are some of the key moments where you're trying to build that culture, you're trying to foster that.
12:51
Joshua Davis
One of the guiding lights that Aaron sites is this concept of making mom proud. That's how he makes a lot of decisions and uses that as a barometer. As the company grows, that becomes increasingly important. It can't be just the acts that you do as the founder, though that's important, you have to establish these benchmarks. How did you do that at Okta?
13:17
Frederic K
Well, first of all, ideally, Josh, these are things that you do naturally, so you want to build a culture in a way that makes sense. It makes sense for you, it makes sense for your organization, makes sense for the people around you.
13:27
Joshua Davis
But to some people it's not natural, it's like not everybody has the full tool set.
13:32
Frederic K
I get it, I'm just saying hopefully it's a natural thing, right, Josh?
13:35
Joshua Davis
If it's not.
13:35
Frederic K
If it's not, though, you need to go out of your way and think about how you want to be explicit or how you want to do specific things to drive the culture you want. I can think of a very good example, at Okta we went public on Friday, April 7, 2017. Not that I remember the date and the time but if I did, that's what it would be. Monday, April 10, 2017 was a Monday just like any other Monday for me. So I was on a sales call at 7:00 AM pacific time, I wanted to make it very clear, not only to myself, but to my organization and to those sales folks and to the executives around it. But even to the folks who are working every day with customers trying to find new customers, trying to find new prospects, Monday is just a day like any other. IPO, awesome, feel good about it. For the weekend, pat yourself on the back. Monday morning it's back to work. That, Josh, is just one example of leading from the front, of behaving the right way. But as the company grows, as things change, you also have to be flexible, you have to understand things are going to change within the company, within the people, within the leadership, and that's the things you have to get comfortable with.
14:36
Joshua Davis
It might also mean you're a workaholic.
14:38
Frederic K
That sounds like something we should take offline.
14:43
Joshua Davis
As a company grows, people have to evolve as well. You evolved in your role, you weren't doing the same thing week after week, month after month, right?
14:51
Frederic K
That's right.
14:52
Joshua Davis
Our next guest, I , had a similar experience as he grew VMware from 200 people to 20,000 people. He learned something really important about scaling culture.
15:06
Carl Eschenbach
First of all, you have to create a culture where feedback is welcome and constructive criticism is welcome. When you see things happening that you don't agree with or it's not part of the value systems of the company because they do slightly change as you get bigger, you have to call them into attention. Unfortunately, at times, you have to make a public action of certain situations to make people recognize like they didn't do the right thing and we're not going to tolerate it. There are those tough times you have to do that. I remember I used to say it every single sales kickoff conference, here's your guard rails, here's the guidelines. We're going to give you all of them. If you go outside of them, there's probably a good chance you're going to crash. I used to say, "You all look absolutely beautiful in orange, but not orange with your hands behind your back." The caution is everything you say, everything you do, every business transaction you are involved in directly or indirectly to a channel in your customer, ask yourself to use your line, "Am I okay if this is printed on the front of the wall street Journal or the New York Times?" If the answer is yes, proceed, if there's a slight even answer of no, do not proceed. It's not worth it. Just do the right thing, and people know the right thing. They do, it's whether they choose to do it. I always say character is defined by what you do when people aren't looking. When you're alone and you have to make those tough decision, that's when your real character is, "I know what you're saying and you're in a public setting."
16:47
Frederic K
So that's one thing that you can ... I mean, you can manage things like that and you have an idea of what's going on when there's 200 people, when there's 500 people. How do you make sure that those ideals, that approach continues when you have 20,000 people?
17:03
Carl Eschenbach
Freddie, it is hard, don't get me wrong, it's hard and issues pop up in the most far remote places in the world. They just do. But you can have systems and controls in place, a lot of it is training and enablement, a lot of it who is who delivers the training and enablement. Do you have senior executives who are part of the messaging around your value system and your goals? And the importance of the compliance around the company. I think it's how you message it, the frequency of which you mention it, and just making sure when you start to get big, the best way to ensure success around compliance, governance, and controls is by making sure you have the right leaders in the right job. Those right leaders have the right mentality and right ethics personally and professionally because they're the ones who are really going to drive this message for you. As much as you can say it from a pulpit or from a stage, when everyone leaves a sales kickoff from Freddie and they all go back to their things, they start to do, "Who's there? It's the leadership that's going to really measure it." And then when something happens, you address it. But I think it's enablement, it's training, it's a lot of communications, provide those guidelines. You do the best you can but you're always going to have scenarios. I'm not going to be naive and say that we don't have issues, everyone will. It's not if something happens, it's when it does and when it does it's then about how you react, how you message it and how you set the example that this will not be tolerated.
18:43
Frederic K
How do you see that coming? How do you know that's happening? Can you see around? Like what do you do?
18:48
Carl Eschenbach
That is a great question because, admittedly, I made a number of mistakes in this area, because when the business starts to accelerate, it's going well, you can get into a bad habit and you always want to promote from within when you can, but you can over rotate. A number of times, including myself, I just was like growing so fast, I made decisions to put people in these roles in management and quite frankly, I did them personally a disservice. You just know, and this is the other thing we talked about-
19:23
Joshua Davis
Why? Wat was wrong?
19:25
Carl Eschenbach
Because they just didn't know how to make ... just because you're a tremendous individual contributor doesn't mean you have management skills, you have communication skills, you can connect with people the right way. So, Freddie, we made mistakes in this area, I made mistakes in this area, and then I finally came up with this mentality. I use it today, actually, with all of the younger companies I'm fortunate enough to work with. We are now going to hire people that VMware can grow into, we're not going to hire people that can grow with VMware. We basically said we are going to be successful, we're going to scale this company, we're going to crush this market, and we're going to go get people who are way more senior than all of us including myself. Also, quite frankly, on one hand if forced tough conversations with a lot of people, but those conversations were actually very much welcomed by the person on the other side of the desk. Because typically when you're growing fast you don't sit down and talk about here's a personal growth plan, this is what you need to do to get better, this is ... We didn't stop promoting from within, we slowed it down. It actually forced a conversation that actually helped everybody.
20:39
Joshua Davis
I love that line of Carl's where he's like every one of you looks beautiful in orange but not orange with your hands behind your back.
20:46
Frederic K
Especially, when he says it with that level of sincerity.
20:49
Joshua Davis
Yeah, this is something that you need to spread and accompany, this sense of morality. It has to come from the top. You have to set the standard.
20:58
Frederic K
Yeah, and I think it's pretty interesting if you compare here, Aaron and Carl, Josh, they actually have pretty similar approaches to company culture, but just very different ways of executing it. It's fair to say they both have a pretty solid sense of the importance of culture and I think that's something that our next guest might just be the world's greatest expert at.
21:22
Joshua Davis
Our next guest has a very strong perspective and vision for what company culture should look like.
21:28
Frederic K
You're talking about Patty McCord.
21:30
Joshua Davis
I'm talking about Patty, exactly. Patty famously created the Netflix Culture Doc as the head of HR at Netflix. A document that is so significant it went viral and changed not just technology companies in Silicon Valley, but corporate culture around the world in many respects. She's the author of the book, Powerful Building a Culture of Freedom and Responsibility. So let's hear from Patty about where it all began.
21:58
Patty McCord
I've been thinking about culture for 30 years, so by the time I got at Netflix, I was halfway through my journey. At that point, I was very cultural anthropology focused, which is culture is about rituals, culture is about what you say, culture's about the stories that you tell. The fireside chats with employees that happen all the time, the stories that keep getting told, the origin story.
22:24
Joshua Davis
The lure.
22:24
Patty McCord
The lure, right, the celebrations, the rituals. I had been 15 years in the Silicon Valley and I'd seen every trendosaur and I had come from where I thought we held engineers in particular up as godlike creatures who were to be fond over and nurtured so they could do amazing work and the rest of us were their handmaidens and I was just sick of it. I wanted to place where ... and I couldn't have articulated this then, I couldn't have, but I really wanted just to work with grownups. That was the most important thing to me is like the number one thing I wanted that was different than I had experience was just not tolerating people when they don't act like adults.
23:17
Joshua Davis
Right, there's a lot of that in Silicon Valley. You can obviously just not hire people who don't act like adults, you can fire people who don't act like adults, are those the two key components or is there more to it in terms of encouraging people?
23:34
Patty McCord
No, there's a lot more to it. On the Netflix story, figuring out how to do that holistically and systemically through an organization takes years. The original Netflix Culture Doc took us 10 years to write. There were chapters in there that took me four years to pull off like-
23:55
Joshua Davis
Was the original Doc just like two slides?
23:58
Patty McCord
No, the original Doc was the first nine behaviors that we value, the behaviors that you should expect from each other when you work here. What it is, it's about constantly evolving the who are we, how do we operate, how do we act, how do we think about it, how do you think about it when you're a 30 person company, when you're a 300 person company, when you're a global company. These are all different things and it's this constant evolution and nurturing and paying attention to it.
24:30
Joshua Davis
You say it changes, perhaps, as the company changes, as the company gets bigger. Can you talk about some examples of how the culture might shift from when you're 30 people to when you're 3000?
24:44
Patty McCord
That's where the concept of freedom and responsibility which came later in the Doc is so important with adults. Which is at some point when it's bigger and everybody doesn't know what everybody's doing, then you have to create discipline around communication, around objectives, around ... as soft as it sounds like there's a really important part of trusting your colleagues to do the right thing. In the Netflix Culture Doc it's called context, not control. But it's basically like if I'm going to be surrounded by adults who are really smart and capable and we're clear about what we need to get done, at some point, I need to not be in the meeting with you. I need to assume that you're having meetings with the right people and getting the right stuff done.
25:32
Frederic K
I know that when I talk to other entrepreneurs, they often see that there are some people who are very good at the 20 to 200 zone. And then at some point they end up perhaps becoming the bottleneck or not being able to scale enough or delegate enough or trust as you're saying. You really make a point of having a good experience on the way out the door.
25:56
Patty McCord
Yeah.
25:57
Frederic K
Talk to us more a little bit about how you think about that, where that came from? Because that's not a natural thing. The natural thing is like you're fired.
26:06
Joshua Davis
You're fired.
26:06
Frederic K
We're not part of the family. You said, "Hey, it's not about a family by the way." That's like the natural personal thing, it's like, "Oh, it's hard to have that conversation."
26:14
Patty McCord
We talked about the team versus family thing for a lot longer than it appears because it didn't like, okay, we had layoff, I stood in front of everybody and said, "We're not your family, we don't lay off your children. This is a team, we're going to start talking about it as a team." When you start changing that mindset, that changes things. If you have a crazy idea, which all startups are, and you put together the right people who could actually hone it into something that might actually make money or gain customers at some point. You start, you develop a strategy and strategy is not what you're going to do, strategy is what you're not going to do. The ones the companies that are going to make it are the ones that figure out one thing and focus on it and do it extraordinarily well. When you get that, all of those magic things happen at the same time. You got enough money, you got the right people, you've got a compelling prospect, you've got customers, you're going to have revenue. It's like, "Okay, all that comes together, then it's about execution." Almost instantly the things, the problems you have to solve, go from problems of difficulty which we just talked about which is ones where you just keep pushing until you figure it out to problems of complexity or scale. It's about what are your priorities? What are you going to do? What are you not going to do? What is important to do?
27:28
Frederic K
That is so, I mean, I totally screwed that up. Three years ago we had a specific problem, I went out and hired the perfect person to solve a specific problem, which we did very well in like 18 months. And then I tried to find another role for the person and then sure enough like six or 12 months later, we parted ways but I wasn't smart enough to say up front, I was like, "Well, this is a good person and he can do a lot of different things so we'll find a role for him afterwards but this is a problem I need to solve right now.
28:02
Patty McCord
Yeah, I think the essence of what we're talking about here, we want to talk about being an entrepreneur and being an innovator and doing all this stuff. And yet we walk into these relationships with these implied contractual relationships that haven't ever been true.
28:19
Frederic K
Let's talk about something that's in the Netflix Doc since you bring it up that you clearly thought, "Oh, this is how it's always done." And we're going to do it totally differently and it has impacted, we can talk about positively and negatively, generations of employees and employers thereafter, Okta included, myself included. No PTO or unlimited PTO, whatever. How did you guys come up with that? Because that's the first time I ever saw it printed anywhere-
28:50
Patty McCord
This how we came up with it, we've gone public. What we used to do was you accrued a day a pay period like 28 days a year, whatever it was, however many pay periods there were. It was an honor system and you shrew it up when you left the company. I basically didn't keep track of it and I kept track of the work that you got done, and when you left the company I'd say, "What do I owe you?" You'd be like, "What's the maximum?" I'd be like, "You know the maximum, it's 28 days."
29:16
Frederic K
160, yeah.
29:16
Patty McCord
Whatever it is, and you'd be like, "Okay, so you owe me 29 days." I'd be like, "Okay, great. Hey, so great, your trip to Maui turned out to be so fun after you were sick. So long this year, that's great." I think bye-bye because you just scan it, right?
29:32
Frederic K
Right.
29:33
Patty McCord
But that's an anomaly because most people didn't do that. At the time, and so this is in the early 2000, at the time, these investigators were very rigid and they were saying, "Here's an appropriate time off policy, you may use this one." Now, remember, I actually was a vice president of human resources and that person on my left ear says, "Of course, you have to pay up paid time off, everybody's got paid time off.
30:02
Joshua Davis
Right, this is what Microsoft does.
30:04
Patty McCord
This is what everybody does. This is the rules, this is in every handbook I've ever copied in my life, put my own logo on. So I go research it and I can't find any in California, I can't find any particular laws or statute that speak particularly to fit paid time off for exempt employees. So then my Patty experience brain kicks in, have I ever fired a salaried grown up, a salaried professional for being tardy or being absent? No, actually, if I stopped to think about it, I say goodbye to people who work all the time and they're weird.
30:39
Joshua Davis
Right, that's the issue.
30:42
Patty McCord
Here the issue is not. Just like so you say goodbye to people and it has nothing to do with how much time they're there. It's like sometimes you're like, "Please go home, please get a life, please be normal, you're getting weird on us." I realized that and I also realized that if I took a traditional approach then I would have to creative team of people in HR whose job it was to police other people's time off with zero knowledge of what was the appropriate thing to do.
31:11
Joshua Davis
Was that the aha moment where you're like, "Well, maybe we just have unlimited time off?"
31:16
Patty McCord
No, maybe we just say take enough time to have the life that you want to need to have and get your work done. But we had-
31:24
Joshua Davis
What did you call that?
31:26
Patty McCord
Let's see, what do we call it? We called it the no time off policy that wasn't a policy.
31:26
Joshua Davis
That was the title at the time?
31:26
Patty McCord
I don't know.
31:26
Joshua Davis
That was the technical term?
31:26
Patty McCord
I don't remember what the technical term was-
31:27
Joshua Davis
There was no time off time off policy?
31:29
Patty McCord
I probably have it somewhere but basically it was that the concept was managed locally, which was the hard part, honestly, that maybe when everybody else in the valley copied us, they didn't stop and think, "What would it take to manage this logically?" What it takes is it takes really good frontline managers who are really, really articulate about what needs to get done, what quality looks like. I know people that like the last thing that I would want out of a brilliant product genius is for them to work all the time. Because a lot of times those guys ... one of our head of product, he was into back country hiking and building his own igloo, and I remember thinking, "He needs more igloo time." Seriously, and this guy needs to get out of this building and in these because igloo time is when we get our new ideas.
32:32
Joshua Davis
Right, there's the no time off time off policy, then there's the igloo policy. That's what you get into the context.
32:36
Patty McCord
Yeah, why do we do this anyway, that's my ... I know one of your questions is why do I hate the annual performance review?
32:43
Joshua Davis
Let's talk about it, why do you?
32:45
Patty McCord
There's two things, usually, that the annual performance review gets caught up in. Is it a compensation review, is it that you pay for performance? Is it about your performance? Let's say it was about your performance, let's say we believe that if I give you feedback on your performance, you'll perform better.
33:03
Joshua Davis
Yep.
33:03
Patty McCord
Why on God's Earth would you do that only once a year? Literally, there's nothing else you do in your life that you're good at that you do once a year, nothing. So people say to me, "You're so good at giving feedback, how do you do it?" I'm like, "I practice."
33:16
Frederic K
Actually, basically you get your CPR renewed every two years but okay I get your point.
33:19
Patty McCord
Yeah, so I'm okay, I love the methodology, it just should happen more often. Then when it happens more often, it's more natural and you get better at it. Let me dive into feedback, just a little more level because it's important. We tend to think that feedback means constructive criticism which means telling you something bad in a nice way that doesn't hurt your feelings. The problem with that is-
33:42
Frederic K
Also known as the shit sandwich.
33:44
Patty McCord
It's the shit sandwich or guilt tripping, I always say as a parent you know how to do that. So now I say for that bad thing you did, that was bad and I've told you it was bad before and when you do it again, you better feel bad. Then the next time you do it-
33:57
Frederic K
He already feels bad [crosstalk 00:33:59].
34:00
Patty McCord
The next time you do it, because you will, you'll feel bad, right? It works but it's really not efficient. What we completely forget about in feedback is to say, "Right here right now dude, that's exactly what I'm talking about. You spoke up at this meeting, you have an opinion, you had a solution, yeah." You will do that five more times today because it feels great, because it's exactly what I wanted you to do. The other thing about feedback is that it means nothing if it's not actionable. It has to be this thing you do, it'd be better if you did this other thing because it will resolve from that. Okay, so now I'm going to slide over to compensation.
34:40
Joshua Davis
Let me ask you a question about something you've talked about in the past, which is the idea that as an employee, the employees should be periodically reminding and asking their managers, "Hey, how valuable am I to you?"
34:57
Patty McCord
So let me tell you what I tell women's groups when I talk to them. I say, "Look, when your company's all talking about engagement, they didn't put a ring on it. You're not engaged to them, you don't owe them anything. Oh, by the way, when you go interview with somebody, you are not cheating on your husband, you're finding out what you're worth. Because compensation is market based, particularly here. You are worth what somebody else will pay you. That does not mean you're worth what the highest person who's ever made money in that job is worth because they may have more skills and experience than you do. But one of the ways to find out what your worth is go interview.
35:31
Frederic K
What companies do you think are doing it right? Who do you admire when it comes to culture?
35:35
Patty McCord
The companies that I admire are ones that know who they are and are true to themselves. Part of the reason I wrote the book was people would flop down the Netflix Culture Doc and say, "We want to do that. We've been here a year now and we're ready to do that." I'd remind them that it took us 10 years to write that. That it's this ever evolving thing and there's no way that the Netflix culture is the right culture for another company.
36:03
Joshua Davis
I think that might be one of the key insights that I've gotten from this conversation, which is that the team that you start with is a great team, an amazing team, an inspiring team. But if you're really going to grow this thing, if it's going to become huge, you have to come up with a new, amazing team at each stage and it's not going to be the same amazing team. It may for a transition period feel like you're losing the soul of the company, you're losing the character, this family, but you build a new family but you don't like the word family .
36:38
Patty McCord
I don't do family at all.
36:38
Joshua Davis
You don't like the word family?
36:39
Patty McCord
No, I don't like it. Great teams are not families who all go to church together, and it's great teams are people that come at problems from really different solutions. That's that owning it as a leader and understanding where your blind spots are and making sure you surround yourself with people that complement them. It's just part of it. The other thing is get better at it, that's why I'm saying about the annual performance review, especially, as leaders, you should be really good at giving people feedback in the moment.
37:16
Joshua Davis
There's a number of things that Patty talks about, Freddie, that are controversial. Let's take, for example, this idea of unlimited time off. She was one of the first to institute it and it has now become completely the norm in Silicon Valley and in many other places. What's the policy at Okta, how do you guys think about it, what's the impact?
37:37
Frederic K
Interesting, you say unlimited time off, that's actually not what it is. What Patty did is she got rid of the PTO policy, paid time off, and she said, "We're not going to have a paid time off policy anymore." I think it's very interesting if you think about why there was an existing PTO policy that has grown up through companies, it was originally back to the factory days where you would go and you would clock in and for every amount of hours that you clocked in, you literally punched a card. I remember very early when I was 17 I interned in a warehouse, and I actually had to punch a card and that would say how long I was working. For every one sets of four or eight hours, you would get 15 minutes off or whatever it was. Well, that's not how life works anymore, especially, in the high tech industry, people are working early, they're working late, sometimes they work on the weekends, sometimes they don't work for a few days. I think that's actually a very good example of a very good idea that was progressive that we have adopted I believe successfully. What you're trying to do is you're trying to run your company in the way that makes the best sense for you, for your employees, for the culture you're trying to create, for all these other business initiatives. You don't want the tail wagging the dog, you don't want a number of policies that are antiquated making you behave a certain way. You actually want the policies to reflect the way you want to run your business. I think it's a great example of change.
38:48
Joshua Davis
Patty also talks about the idea that great teams are not families who all go to church together. In fact, great teams are a group of people who come at problems from very different perspectives.
39:00
Frederic K
Our next guest, Josh, actually believed the complete opposite. Parker Harris, one of the founders of Salesforce.com, he's going to talk to us here about Ohana, which is the concept of family and how Salesforce really thinks about their employees as part of the family and how they can all find success together in this joy communal environment.
39:18
Joshua Davis
Given that Salesforce has consistently been ranked as one of the best places to work in tech, it's fair to say he knows a thing or two about building great company culture.
39:27
Frederic K
Parker's co-founder at Salesforce.com is Marc Benioff, and we heard the story of how they met in an earlier episode of the show. This time around, we're going to hear more about how Parker and Marc got Salesforce.com up and running, and our mutual appreciation of Hawaiian shirts help them make it happen.
39:44
Joshua Davis
At Metropolis Software is kind of ironic, I guess it's a California thing. The co-founders of that company practice what they called Aloha Fridays, which was on Friday, you get together as a company, you have beers or wine and food and hang out as a family. On Fridays, I do it less often now but on Fridays we would always wear a little hot shirts. Do you do that?
40:15
Parker Harris
We do that, we do that, every Friday when we have an all hands, I'm wearing a Hawaiian shirt.
40:19
Joshua Davis
That's great. Nice.
40:20
Parker Harris
And every new employee is allowed to expense one Hawaiian shirt to me personally. Very few of them do it.
40:25
Joshua Davis
To you personally?
40:26
Parker Harris
Yeah, to me personally.
40:26
Joshua Davis
That's great.
40:27
Parker Harris
Yeah, you get encourage it. Oh, yeah, my kids always laugh like where you going? Ironically, my son just got one from Patagonia and we were like, "What are you doing?" He's like, "Oh, this is cool now." I'm like, "Oh, see, I started it that logo or I participated in that that logo."
40:41
Joshua Davis
Your kids are laughing at you because they see you in a Hawaiian shirt and they say, "Where are going?" And you say, "I'm going to work."
40:46
Parker Harris
I'm going to work, yeah. We did that early on and it was just came from our background, from Marc's background every Friday and we would get together and hang out same as we did at our previous company.
41:01
Joshua Davis
Were you having the Friday gatherings because you were like, "Hey, it's the end of the week, let's have a beer. Let's relax, it'll be fun." Or was it a very deliberate strategy around building culture? Was it just like, "Hey, I just want to relax on Friday?"
41:15
Parker Harris
Well, Freddie knows this term, we are not strategic as a company, we're tactical and tactics dictate strategy. So we do not sit back and say strategically we're going to build culture, strategically ... It evolved through who we were and early on cultures formed by the founders and you can't really change it. That you can't change a culture, you can certainly herd it and erode it but it doesn't change. It's like can I change your personality? You'll change as you grow as you mature but you're still the person that you were a week ago, a month ago, a year ago. Culture, agile processes, all these things are so easy when you're 10 people, 20 people, 30, 40 people, it just happens, it's great. Of course we're agile, 20 developers, no problem. But you start to need to invest in these things as you get bigger.
42:20
Joshua Davis
You said sometimes that culture can erode. You said, "Look, it's not going to go completely away," but can you think of a time when it started to erode and what you did to catch it or bring it back or pull it back or-?
42:34
Parker Harris
Well, I don't think the culture has ever eroded, I think that people's behavior can align to the culture sometimes, not broadly, but ... For example, something we're talking about right now is we're the customer success company, we're all about trust and customer success, number one, we love our customers. And that's what we talk about all the time. We say our culture is customer success, we're seeing examples where we're maybe not living up to that, and we're hearing that in a reflection from our customers. What can we do about it? I'd say listening is probably the biggest thing, and are you hearing all the voices that you need to hear? Certainly, as a leader, a CEO, there's the risk that you'll only be listening to what people want to tell you and we're the customer success company, things are great, so we must not have any problems. That's what we were hearing and we listened to some new voices and we got some different answers
43:41
crosstalk
43:40
Frederic K
Or no one wants to give you the bad news.
43:42
Parker Harris
Or no one to give-
43:42
Frederic K
It's probably hard in your situation at this point where you are, co-found a company, Chief Technology Officer, member of the board, congratulations.
43:50
Parker Harris
Thank you.
43:51
Frederic K
People don't want to show up and be like, "Hey, Parker, I got all sorts of bad news. Check it out."
43:55
Parker Harris
Yeah.
43:55
Frederic K
Like that's not the first thing that people think about.
43:55
Parker Harris
Yeah.
43:58
Frederic K
Sometimes it might be hard to also get that feedback. How do you get that feedback?
44:02
Parker Harris
Showing that you always want to hear that opposing view and then asking for it. You have to ask. People will not tell you, so I can't wait for you to tell me. I have to go and say, "Freddie, what am I doing wrong? How are we doing as partners with Okta? What more can we do?" And really push and ask and eventually you'll get the answers.
44:26
Frederic K
How do you empower 30,000 people, whatever the numbers, to own the way that they either do the culture or talk to customers? How do you do that? Clearly you've done something right, what are some of the tips and tricks you've seen or-?
44:42
Parker Harris
It's a lot of investment, so clearly all the classic stuff of onboarding when I think part of our culture we created a 501(c)(3) public charity when we started the company, so every new employee on their first week they do a day of volunteering together. It's part of teaching them and this is part of who you are at Salesforce and our expectation. That's Ohana is not our employee, Ohana is our family, it's our customers, our partners, our investors, our stakeholders, employees, everyone together. My advice is don't try to draw a firm line between what you're trying to do for customers to teach them who you are and as a culture, as a technology or an offering from what you're telling your employees. It really should be the same thing and you can leverage both. It sounds, I think from the outside of companies, you don't necessarily think about culture that much. You don't think about what companies do to create culture. Perhaps if you're starting a company, you might not be thinking that much about the importance of culture. You guys are extraordinarily invested in it, you spend a lot of time.
45:55
Frederic K
Yeah, people when we acquire companies, they come in and they're just surprised at how much we have meetings, these large meetings.
46:04
Joshua Davis
Not just like meetings about the sales but you're talking about meetings about culture.
46:09
Parker Harris
We combine the two, we combine the two. We don't have a meeting just about culture but culture's in every meeting so that's a different way of thinking about it. It's a constant investment. I think sense of humor, fun, enjoyment, that's part of, certainly, part of my personality and I think is really important in life if you spend a lot of time at work. If it's all serious, stress, you may not live a long life and you need it sometimes. We've had some serious bugs in our software that was super stressful and at some point you just need to not laugh at it because they're serious problems, but you need to have some outlets or if you know their mistakes are made or problems, you need to have a little perspective. I think that's part of it.
47:06
Joshua Davis
Freddie, Parker talks about the fact that you can't change a culture. He's like, "Can you change your personality?" It'll change maybe as you grow, as you mature, but you're still the person that you were a week ago, and so on. What does that say about how you build company culture?
47:22
Frederic K
I think what you hear from a lot of people who've been in an industry for 10, 20, 30 years is that it's very hard to change corporate culture after you've been going for a while. I want to be honest, when we started Okta in 2009, I did not think that corporate culture was a thing that we should focus on and really emphasize as much as ultimately we did.
47:42
Joshua Davis
Did you have to play catch up?
47:43
Frederic K
We didn't really have to play catch up so much but I give a lot of credit to Todd McKinnon, my co-founder at Okta because he really had seen more than I had around what worked in good culture and in bad culture. He really put a big emphasis on that and in hindsight, it was absolutely the right move. It's something that now I spend a ton of time and effort and energy on and I think for all the right reasons, it's very hard if you ever lose that culture, it starts to degrade to get that back on the right track.
48:14
Joshua Davis
So, Freddie, what do you take away from all this? We've now talked to a bunch of people with a real depth of experience around company culture, a lot of different perspectives, to be honest.
48:23
Frederic K
Well, Josh, I think what's important about company culture is that it actually represents what the founder or the founding team and/or the executive team thinks. It's not only about how they think, it's about how they should behave. Now, there's all sorts of details, some people think about it as a family, others think about it as the exact opposite of family. But what's the most important thing is that you think actively about culture, you create the culture you want, you espouse the beliefs that drive those kinds of values and visions, and that you repeat it. Because remember in high growth environment, you have new employees joining your company all the time. So really espousing the culture, pushing it out, encouraging all your employees to buy into it because, ultimately, they're the ones who are going to be on the front line interacting with your customers and other employees the most and they're the ones who need to drive it. It's not your culture, it becomes their culture.
49:12
Joshua Davis
Well, there you have it. This has been Zero to IPO's culture episode, and we'd like to give a special thanks to our guest today for taking time out of their day to talk with us. To the Martin Trust Center for MIT Entrepreneurship for collaborating with Okta to bring this podcast to life.
49:27
Frederic K
If you liked what you heard and you want to hear the next step in taking a company from zero to IPO, make sure to subscribe and give us a good rating on iTunes, Spotify, Stitcher, or wherever you listen to your podcast. I'm Frederic Kerrest.
49:40
Joshua Davis
And I'm Joshua Davis, and we hope you'll tune in for our next episode, Who are all these people?
49:46
Frederic K
Thanks for listening.
49:47
Speaker 7
When you're in a leadership position, you have to recognize that you have a megaphone strapped to your mouth and everything you say, no matter how big or small it is, you think it's 10 times add to the public market.
The caution is everything you say, everything you do, every business transaction you are involved in directly or indirectly to a channel in your customer, ask yourself to use your line, 'Am I okay if this is printed on the front of The Wall Street Journal or The New York Times?' If the answer is yes, proceed, if there's a slight even answer of no, do not proceed. It's not worth it. Just do the right thing, and people know the right thing.
Carl Eschenbach