Introduction

Netflix thinks that “as they grow, they have to minimize rules”. Different approach as what we all know, experience, read. And … Netflix is definitely not a startup anymore! I would like to share with you a document from Netflix I found on SlideShare about their culture and some quite innovative management ideas they have put in place. Feed for thoughts ;-)

Netflix – the company

Sources: Wikipedia, Netflix Shareholder communication

• Netflix (NASDAQ: NFLX) is an online DVD and Blu-ray Disc rental service, offering flat rate rental-by-mail and online streaming to customers in the United States.
• Established in 1997 and headquartered in Los Gatos, California, it has amassed a collection of 100,000 titles and approximately 13 million subscribers.
• The company has more than 55 million discs and, on average, ships 1.9 million DVDs to customers each day.
• More than 90% of subscribers have evangelized Netflix. More than 70% of subscribers had an existing subscriber recommend Netflix.
• Number of employees (2009): 2’000+

Netflix reference guide on freedom & responsibility culture

Source: Netflix presentation on SlideShare

Worth an entire read, as the presentation is meant for reading, more than presenting ;-)

Some abstracts:

Their nine values

Great workplace is stunning colleagues:

Great workplace is not day-care, espresso, health benefits, sushi lunches, nice offices, or big compensation,
and we only do those that are efficient at attracting stunning colleagues

The keeper test managers use:

“Which of my people,
if they told me they were leaving in two months
for a similar job at a peer company,
would I fight hard to keep at Netflix?

Hard work- not directly relevant

• It’s about effectiveness – not effort – even though effectiveness is harder to assess than effort

• We don’t measure people by how many evenings or weekends they are in their cube

• We do try to measure people by how much, how quickly and how well they get work done – especially under deadline

Our model is to increase employee freedom as we grow,

rather than limit it, to continue to attract and nourish
innovative people, so we have better chance of long-term continued success

Seems like 3 bad options

1. Stay creative by staying small

2. Try to avoid rules as you grow, suffer chaos

3. Use process as you grow to drive efficient execution of current model, but cripple creativity, innovation, flexibility, and ability to thrive when market inevitably shifts

A fourth option:

• Avoid Chaos as you grow with Ever More High Performance People – not with Rules

• Then you can continue to run informally with self-discipline and avoid chaos

• The run informally part is what enables and attracts creativity

With the Right People,

Instead of a Culture of Process Adherence,
Culture of Freedom and Responsibility,
Innovation and Self-Discipline

Mostly, Though, Rapid Recovery is
the Right Model

• Just fix problems quickly

– High performers make very few errors

• We’re in a creative-inventive market, not a safety-critical market like medicine or nuclear power

• You may have heard preventing error is cheaper than fixing it

– Yes, in manufacturing or medicine, but…

– Not so in creative environments

“Good” vs “Bad” Processes

• “Good” processes help talented people get more done

– Web site push every two weeks rather than random

– Spend within budget each quarter so don’t have to coordinate every spending decision across departments

– Regularly scheduled strategy and context meetings

• “Bad” processes try to prevent recoverable mistakes

– Get pre-approvals for $5k spending

– 3 people to sign off on banner ad creative

– Permission needed to hang a poster on a wall

– Multi-level approval process for projects

– Get 10 people to interview each candidate

Vacation policy and tracking

Until 2004 we had the standard model of N days per year

We’re all working online some nights and weekends, responding to emails at odd hours, and taking an afternoon now and then for personal time.

We don’t track hours worked per day or per week, so why are we tracking days of vacation per year?

We should focus on what people get done, not how many hours or days worked.   Just as we don’t have an 9-5 day policy, we don’t need a vacation policy.

Summary of Freedom & Responsibility:

As We Grow, Minimize Rules.
Inhibit Chaos with Ever More High Performance People.
Flexibility is More Important than Efficiency in the Long Term

Appropriate context

The best managers figure out how to get great outcomes by setting the appropriate context, rather than by trying to control their people

Context, not control

Provide the insight and understanding to enable sound decisions

CONTEXT – Strategy – Metrics – Assumptions – Objectives – Clearly-defined roles – Knowledge of the stakes – Transparency around decision-making

CONTROL – Top-down decision-making – Management approval – Committees – Planning and process valued more than results

Setting the right context

Managers: When one of your talented people
does something dumb, don’t blame them.
Instead, ask yourself what context you failed to set.

Again, context vs. control

Managers: When you are tempted to “control” your people, ask yourself what context you could set instead

Highly Aligned, Loosely Coupled

• Highly Aligned

– Strategy and goals are clear, specific, broadly understood

– Team interactions are on strategy and goals rather than tactics

– Requires large investment in management time to be transparent and articulate and perceptive and open

• Loosely Coupled

– Minimal cross-functional meetings except to get aligned on goals and strategy

– Trust between groups on tactics without previewing/approving each one – groups can move fast

– Leaders reaching out proactively for ad-hoc coordination and perspective as appropriate

– Occasional post-mortems on tactics necessary to increase alignment

Annual comp review

• Hiring is market-based at many firms, but at Netflix we also make the annual comp review market-based

– Applies same lens as hiring

• Essentially, rehiring each employee each year, for purposes of comp

– At annual comp review, manager has to answer the Three Tests for the personal market for each of their employees

Development

• We develop people by giving them the opportunity to develop themselves, by surrounding them with stunning colleagues and giving them big challenges to work on

– Mediocre colleagues or unchallenging work is what kills progress of a person’s skills

• Individuals should manage their own career paths, and not rely on a corporation for planning their careers

Innovation & execution

• Need a culture that supports rapid innovation and excellent execution

• Both required for continuous growth

• There is tension between these two goals; between creativity and discipline

Team work and high-performance people

• Need a culture that supports effective teamwork of high performance people

• High performance people and effective teamwork can be in tension also – stars have strong opinions

Cross-posted on the Innoveo Blog