INTRODUCTION

Netflix is an on-demand movie and series streaming service, established in 1997 and today has +33M users and +2000 employees. The founder and CEO is Reed Hasting.

WHY IS IT AN INTERESTING CASE STUDY ?

Prior to founding Netflix Hasting had founded and sold Pure Software, and with this experience his next goal was to build a company that would protect entrepreneurial spirit and avoid bureaucracy. Hasting has developed a personal take on business management, which significantly differs from most traditional practices. In Netflix, Hasting’s primary weapon against bureaucracy and pitfalls of growth has been to create a culture, which he frames as Freedom and Responsibility with the tag line “Our culture is focuses on helping us achieving excellence”.

Many of Netflix’s management techniques contradict with dominant thinking in traditional organisations, especially human resources. According to founder and CEO Reed Hasting this is because legacy practices are developed for manufacturing firms to reduce variation, whereas Netflix and other creative firms must create variation to be innovative.  Two of the more remarkable principles are “Unlimited vacation” and “adequate performance gets a generous severance package”. In short, there is only room for high performers, but those that stay have maximum freedom.

KEY LESSONS

  • Culture is the strongest mechanism for nudging group behaviour and a company culture should be designed to help the organisation achieve its goals.
  • Spend time and resources on hiring people who will put the company’s interests first and agrees with the values of the workplace. Then 97% of employees will do the right thing and you need less time and money on enforcing HR policies that deal with problems the other 3% might cause.

MANAGEMENT TECHNIQUES

  • Culture code deckInitially Hastings only shared his personal presentation of the codified Netflix culture internally, however, in 2009 the deck was made publicly available. The presentation has more than 11M views on the day of writing and is a broadly used example of modern management.
  • Guiding principles. Netflix has 7 core principles: Values are what we Value, High Performance, Freedom & Responsibility, Context, not Control, Highly Aligned, Loosely Coupled, Pay Top of Market, Promotions & Development which are also exemplified in their culture code deck.
  • Tours of duty. While Netflix does not use the term “tours of duty” (yet), Hasting is quoted for telling his managers “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? The other people should get a generous severance now, so we can open a slot to try to find a star for that role.”
  • Leadership feedback. Hastings has actively sought feedback from new associates on the company culture and his theories about it. 
  • 360 feedback. Netflix has informal 360-degree reviews instead of formal performance reviews. The process is for people to discuss things they would like for colleagues to start, stop or continue. While they initially used anonymised surveys, the surveys are now signed and often used as starting points in team face-to-face meetings. The rationale is that associates are better off with feedback that is communicated honestly and respectfully on a regular basis, than from a yearly five-point scale.

SOURCES

Netflix Culture: Freedom & Responsibility by Reed Hasting.

How Netflix reinvented HR by Patty McCord

Self service build and deployment at Netflix by Gareth Bowles.

Tours of Duty: The New Employer-Employee Compact by Reid Hoffman, Ben Casnocha and Chris Yeh.