Unlocking the Secrets of Netflix’s Unique and Inspiring Company Culture …
Key insights from the book “No Rules Rules: Netflix and the Culture of Reinvention by Reed Hastings and Erin Meyer”
Netflix used to sell and rent DVDs to its subscribers. It had merely 100 employees and 300 subscribers after two years of its inception. They had $57 million in losses. When they attempted to sell Netflix to Blockbuster (one of the largest media companies at the time).
As of May 2023, Netflix has over 223 million subscribers across 190 countries making it one of the world’s largest media companies with a current market value of over $85 billion. It spent a whopping $17 billion on producing original content in 2021 alone.
Now few questions arise:
How did Netflix launch a streaming revolution?
What makes its shows and movies class apart?
What makes Netflix thrive in over 190 countries?
How has Netflix become one of the most successful and innovative media companies in the world?
The secret of Netflix’s global dominance lies in its very culture. A culture that values people over processes, innovation over efficiency, and has very few controls. It focuses on achieving top performance with talent density and leading employees with context not control.
Speaking of context not control, Nobody is tracking your holidays and your travel allowance at Netflix. The context behind it is that if taking a day, a week, or a month off is in the best interest of the company then don’t think twice before going off on a vacation. Weird right?
Millions of businesspeople have studied Netflix’s culture deck, Sheryl Sandberg, COO of Facebook, reportedly said that the culture deck may well be the most important document ever to come out of Silicon Valley. I’ll be decoding that culture desk in this article. Let’s get started.
Step 1: Build Up Talent Density: As Mary Kay Ash said, “The company is as good as the people it keeps.” Talented people make one another more effective. When every member is excellent, performance spirals upward as employees learn from and motivate each other.
Netflix hires the very best employees and pays at the top of the market. It coaches managers to have the courage and discipline to get rid of employees with average performance. From the receptionist to the top executives it hires high-performing and most collaborative employees.
It hires one “Rockstar” employee instead of several “good” employees and pays them at the top of the market plus an extra bonus over that of their personal market to keep them. Stunning colleagues accomplish significant amounts of important work and are very creative and passionate.
Step 2: Increase Candor: Netflix’s culture encourages you to speak up and you’ll hear a lot of candid feedback on your ideas as well. Even the CEO is not spared from this feedback loop. It is considered disloyal to withhold your candid feedback on an idea.
With feedback, high performers become outstanding performers. Frequent candid feedback exponentially magnifies the speed and effectiveness of your team or workforce. Through honest feedback, talent density increased despite the fact that the company hasn’t hired any new talent.
Step 3: Remove Vacation Policy Reed Hastings the CEO of Netflix takes 6 weeks of vacation a year and encourages everyone to do the same. He believes that what matters more is what you achieve, not how many hours you clock, especially when you are working for a creative company.
The context behind this “no vacation policy” is, if taking a day, a week, or a month off is in the best interest of the company then go for a vacation otherwise don’t. Netflix gives you freedom and expects responsibility in return. Freedom breeds responsibility.
No travel and expense policies exist either, but the context is the same if someone is caught abusing freedom regardless of their status. The employee is fired and Netflix speaks openly about it so that others know the consequences of behaving irresponsibly.
Step 4: Open The Books The company shares financial results internally weeks before the quarter is closed with the top 700 managers. Transparency is one of the biggest symbols of how much Netflix trusts its employees to act responsibly. Trust generates feelings of ownership.
Step 5: No Decision-Making Approvals Needed Dispersed decision-making, even a small executive way lower in the hierarchy can make million-dollar decisions. Leaders let you take your bets. When you give them the freedom to implement their bright ideas, innovation will happen.
The Netflix Innovation Cycle:
1. Socialize the idea.
2. For a big idea, test it out.
3. As an informed captain, make your bet.
4. If succeed, celebrate. If it fails, sunshine it. In order for this cycle to work the leader must teach her staff “Don’t seek to please your boss”
Step 6: The Keeper Test In order to encourage the managers to be tough on performance, teach them to use the keeper test: “Which of my people, if they told me they were leaving for a similar job at another company, would I fight hard to keep?”
This test has helped to elevate the talent density at Netflix to a level rarely seen at other companies. If each manager considers whether every employee on the team is indeed the best choice for the position and replaces anyone who isn’t performance soars to new heights.
All of these combined paved the way for innovation at Netflix. It’s not a family it’s a high-performing sports team with each player playing their best game to earn their position in the team and collaborating in a way to make the team win instead of competing against each other.
If you want to read more in detail about Netflix and its culture I would recommend you read the book “No Rules Rules: Netflix and the Culture of Reinvention by Reed Hastings and Erin Meyer”
That’s it from my side. Feel free to share it with people who are interested in reading about Netflix and its unique culture.
I appreciate you taking the time to read this article and paying attention to it.
