Why Learn from Netflix about Freedom and Responsibility?
No matter how you look at Netflix, it’s a great company – from industry shattering products, innovations that have changed human behavior to building an excellent corporate culture, that is now envy of all.
Vacation Policy: Great example of Balance between Freedom and Responsibility
Case in point is the vacation policy of Netflix. Contrary to most organization’s policies, Netflix does not track how many vacation days employees take just like most of other organizations which don’t track how many hours people are working on daily/weekly manner. So employees are taking vacations, all along responding to emails at night and working during evenings, weekends and every possible odd hours even while they are in vacation. This great example of balance between freedom and responsibility prompted this blog post.
Expense policy: “Act in Netflix’s Best Interest”
Yes, that’s it – 5 words which will guide all decisions made in terms of expenses, entertainment, gifts and travel for employees of Netflix.
Recently on Linkedin Slideshare, Netflix published “Netflix Culture – Freedom and Responsibilities” in 124 slides. Here are few key concepts that has impressed me immensely and I’m making a note of them in this blog post as something to ponder upon.
- Company Values:
- Are your company’s “values on the wall” actually being practices or they are just “nice-sounding values”? e.g. Enron’s values were Integrity, Communication, Respect, Excellence. Talk about irony!
- What are the actual company values?
Actual company values are the behaviors and skills that are valued by fellow employees.
- What are such company values at Netflix, which determine hiring and promoting?
- Judgement: Make wise decisions by identifying root causes and be able to strategize short term and long term tasks.
- Communication: Be able to listen and understand as well as be able to communicate concisely while remaining calm.
- Impact: Be able to accomplish tasks. Focus on results than processes. Be biased-to-action, and avoid analysis-paralysis.
- Curiosity: Learn fast on strategy, customers, market and suppliers. Be able to contribute outside your specialty.
- Innovation: Find practical solutions to hard problems. Challenge pre-existing assumptions. Nimbly simplify processes.
- Courage: Will say what I think even when it’s controversial. Question actions, inconsistent with values. Take smart risks.
- Passion: Thirst for excellence (and inspire others to be excellent).
- Honesty: Non-political with disagreeing with others. Not afraid to admit mistakes.
- Selflessness: Go with what’s good for the organization, rather than what’s good for you (your group)
- Keeper Test, Managers use:
- Of which of my people, if they told me they are leaving for another company (on similar role), would I fight hard to keep?
- Pro sport team culture vs Corporate culture
- In Pro-sport team, as there are fixed spots, there is a cut-throat competition for the same spot.
- In corporate culture, more talent there is, there is more room for cooperation by helping each other.
- So internal “sink or swim” or “cut-throat” behavior should not be tolerated.
- Meaning, always help each other to be better.
- Loyalty is good to some extent. Goes both ways: between the company and the employee.
- Hard work: Brilliant Jerks vs Hard Workers
- Hard work is irrelevant. Accomplishment is the key.
- Sustained B level performers with A in effort means, they qualify for generous severance, with respect.
- Sustained A level performers (regardless of effort or hours worked) qualify for higher responsibility.
- In procedural work, best performers are x2 better than average. While on creative front, best performers are x10 better than average.
- Definition of a great workplace = Stunning Colleagues means a great workplace. Nothing else matters.
- So what’s Netflix culture?
- Values are what we value
- High Performance
- Freedom and Responsibility – Responsible people thrive on freedom and worthy of freedom.
- Context, not Control
- Highly aligned, loosely coupled
- Pay top of the market
- Promotions and Development
- Then, who is the ideal employee? (Rare)
- Self motivating
- Self aware
- Self disciplined
- Self improving
- Acts like a leader
- Does not wait to be told what to do
- Attitude: Picks up trash laying on the floor
- Processes vs Creativity
- Processes create short term stability.
- Processes encourages little thinking and allows minimal errors.
- Efficiency trumps flexibility when rules are favored. However lack of rules means chaos.
- Creativity is killed – few innovating mavericks remain on the team!
- Processes are good, when is company is winning and has a large piece of the pie. However, when market shifts due to technology, market needs or competition, company painfully grinds to irrelevance due to processes and lack of creativity.
- Solution is in the company’s ability to increase the talent density faster than the rate of growth of complexity. This solution will eliminate all of the below “bad” options:
- Staying small allowing high creativity however it will have small impact due to the fact you’re small.
- Grow but avoid rules. This spells chaos.
- Enforce processes as you grow. This will generate efficiency however cripple creativity, flexibility when needed (especially when the market goes sour).
- Solution option: Avoid chaos with ever more high performance people, not with rules. This simply means, increase talent density, while minimizing growth complexity.
- Context vs Control
- This is probably one of the most eye opening statements for all managers at every level: When one of your talented people does something dumb, don’t blame them. Instead ask yourself, what context you failed to set.
- Manage through context not control
- Corporate Teamwork: How to be Big and Fast and Flexible – Option #1 below!
- Highly aligned, loosely coupled: Define goals at high level and let the team execute with minimal cross-functional meetings.
- Tightly coupled monolith: Mavericks gets exhausted. Top down decisions.
- Independent silos: Alienation, suspicion between departments as everyone doing their own thing.
- How much to pay each employee? (Short answer: Consistent Market Based Pay)
Here, titles are not very helpful. However, being in “top of the market” is critical to build a star in that role. “Top of the market” does not mean the company has to do better or worse. It’s collective to economy, inflation, market demand and performance.
- What could person get elsewhere?
- What would it cost us for replacement?
- What would we pay to keep that person, if they had bigger offer elsewhere?
- Employee Success
- Focus on salary not bonus.
- Trust employees on cash vs stock options.
- No vesting or deferred comps. Let them leave, however make it so, no one leaves. They come to work because of passion not because of deferred compensation system.
- Don’t rank against other employees as in “top 10%” or bottom “30%”. Can all of us be “top 10%” compared to global pool of candidates. This allows employees to help each other and not be competitive.
Generally speaking, learning from a successful company like Netflix on corporate culture and responsibility is a great opportunity. Using the insights presented by Netflix should only help all companies from small to large short term as well as in long terms regardless of how they are doing in market today or in future.