Running the show REED
Netflix’s CEO Reed Hastings has written his first book (along with academic Erin Meyer), No Rules Rules: Netflix and the Culture of Reinvention. It’s about what works for Netflix. It’s not for everybody, he told R Sukumar, last week over Zoom
Yet, it is a culture that has been studied intensively – since 2009, when Hastings shared the Netflix Culture Deck, all 127 slides of it, on the internet. It was controversial because it was peppered with, well, controversial ideas. Hastings spoke to HT about the book, which speaks of how to build a “culture of reinvention”. Hastings and Meyer list a three-step process. One: hiring the best; encouraging feedback; and removing policies (such as those on how many days of vacation time someone can take). Two: paying “top of market”; becoming “transparent” at the organisational level; and reducing “decision-making approvals”. And three: implementing the “keeper test” (would managers fight to keep a certain employee back? If not, let them go); creating “circles of feedback”; and using “context not control” to eliminate most rules. Edited excerpts…
Will it work for other companies?
We’ll see. The desire is to stimulate the conversation in creative organisations. The current model is influenced by factories because factories and industrial companies have generated so much wealth over the past 100 years. We tend to think like factories — the boss making the decision; the workers following the rules. In a creative company you want to stimulate and inspire people. In an industrial company you want to control people and supervise them.
There is not enough thought on culture for creative companies. In a creative company, you don’t know if a person is working 8 hours in a day or 10 hours or 12 hours. Yet in a creative company, we still have limited vacation. Really, 46, 48, 50 weeks of work … it’s in the noise. It’s not really very relevant. Yet we’ve inherited this industrial sort of paradigm on how many days of vacation somebody gets. That’s an example of the rethink.
The second is about information. At the highest level, it’s about making every employee a creative visionary so that in the mix of things they can make a company evolve. We take advantage of all of their creativity.
Some people will adapt to it easily. Others will have a big discussion and they will figure out what parts make sense to them. It’s hard to say how many companies will change but I am hopeful.
As a company grows, even if it is in a creative business, the component of routine work, what some call fetch work (as opposed to stretch work) increases. How do you manage that?
In your language we are trying to increase the percentage of work that is stretch work and decrease the percentage of work that is fetch work. And the way we reduce the fetch work is to reduce the processes that control small things — like expenses. What kind of hotel you can stay at — how much you can spend on this or that. We just have a blanket rule — do what’s in Netflix’s best interests. That does lead to a lot of small abuses.
What it does do is make it more fertile and attracts creative people. So, if you think of the big risk, it is not having enough stretch work — because then some other smaller firm will overtake you. Think of it as, we are willing to take on lots of small inefficiencies, we manage on the edge of chaos, but what we get is great commitment to improving the customer proposition — which is how we have grown over the last 20 years.
This can work only in sunrise sectors.
Cost-sensitive businesses — where the emphasis is on reducing costs…this isn’t a great match for them. It’s more for idea generation businesses. Where you want to standardise and take costs out, or safety is critical, like an airline — you wouldn’t want to run an airline with no rules.
There are things that we do and things that we don’t. As individuals, companies, managers. You are trying to change most of them. Being counterintuitive — such as encouraging people to talk to headhunters or go for interviews to assess their worth.
The industrial paradigm and the paradigm of lifetime employment — job as a property right; work is like a family. Those are strongly entrenched. Then there is the other side, like professional sport, where you play every year for your role. It’s all about performance. And every year professional athletes get competitive bids for their contracts — across teams — and it’s expected you will often switch teams in your career. What we are saying is that the team metaphor is much more productive for creative work, than the family metaphor. Partially because in creative work, the best people are 10 times better than the typical people.
Everything you have said seems to suggest that there are certain kinds of people who are a good cultural fit in your organisation, which probably places a lot of emphasis on hiring — it isn’t as simple as finding the best person.
One of the reasons we published the original culture deck and we did the book is to help prospective employees decide are we a good fit for them. We are a good fit if you thrive on challenge, and have the most amazing colleagues to work with, and learning and growth — and you can tolerate job insecurity. If your primary motivation is job security, then we are not a good match.
How does this culture take to WFH?
Hard to tell. We think of mandatory WFH (Work From Home) as very temporary. It’s not as good as being together and talking about things. But it looks like people are coping. It’s much harder if you live alone or live with small children. But we expect the pandemic to be over next year, and not come back. We are not optimising the culture for the pandemic.
There’s so much emphasis on performance, feedback, and no policies to tell you what you can do. Doesn’t that result in an environment that is a little edgy, a little stressful?
Yes. It’s high stress, high achievement, high learning. It’s good for people who enjoy the high achievement and the high learning and can tolerate the stress. I am not sure it will work for everyone, but it’s clearly worked for you.