People & Leadership

7 ways Netflix reinvented HR

The Netflix presentation discussing their approach to HR and culture has proven to be a 'game changer' amongst other tech startups and further a field.

“If you want to build a ship, don’t drum up the people to gather wood, divide the work, and give orders. Instead, teach them to yearn for the vast and endless sea.”

Those are the words of author of ‘The Little Prince’ Antoine de Saint-Exupéry, but also displayed proudly on Netflix’s website about working at the organisation and its culture and values.

The company, and its former Chief Talent Officer Patty McCord, are synonymous with great company culture.

In 2009, their revolutionary culture deck was made public, setting out Patty McCord and CEO Reed Hastings vision and approach for attracting and keeping the best.

It has since been viewed more than five million times.

The strategy was set around seven key points outlining a culture based on company values, hiring top talent, giving employees the freedom to succeed.

Their ideas – such as unlimited vacation – seemed revolutionary at the time and often promoted responses from the HR community such as: “Are you making this up just to upset us?”

Meanwhile, in 2018 Netflix announced a record-breaking $11bn in revenue and over six million subscribers.

Netflix’s original seven values

So, what is Netflix’s secret sauce for success? And, does its approach stand the test of time almost 10 years later?

1. ‘Values are what we value’

Instead of something written on posters and stuck on a wall, values should be lived, breathed – and actually valued, Netflix explained.

This means do as I do, not as I say. Leaders and managers, Netflix explained, need to live and breathe the company values in everything they do.

2. High-performance

According to Hastings, your employees should operate as a highly performing sports team, not a family.

You join the company to compete, and every day you do your best to contribute to the success of the team.

However, being part of a dream team means that employees are always expected to be on their A-game, caring about each other and knowing they might not be part of the dream team forever.

Those operating at an ‘adequate’ level are offered a generous severance package (which is generally a minimum of four months of full pay) so they can be promptly replaced by someone who is a better fit.

Netflix also explains that there’s no room for ‘brilliant jerks’ – the cost to effective teamwork is too high.

3. Freedom and responsibility

This one is also simple: be honest and treat people like adults.

If you are looking for people to take ownership, innovate, be smart and creative, then you need to give them the freedom and responsibility to do so, McCord explains.

Ultimately, responsible people thrive on freedom and are worthy of freedom.

Netflix, McCord and Hastings are of the view that if you’re careful to hire people who will put the company’s interests first, then 97% of your employees will do the right thing.

Most companies spend a great deal of time and money writing and enforcing HR policies to deal with problems the other 3% might cause.

4. Context, not control

Don’t control staff, rather provide context to get the best results out of them instead.

Netflix believes only by understanding the full context of its business can employees really help the company grow.

In the words of McCord: “The best managers figure out how to get great outcomes by settling the appropriate context, rather than by trying to control their people.”

5. Highly aligned, loosely coupled

Setting a common goal and allowing your teams to achieve it without heavy-handed supervision is vital for Netflix.

Teams across the company must work to the same strategy ensuring they are highly aligned but loosely coupled, meaning they are not constantly checking each other’s work or sitting in endless meetings.

6. Pay top of market

Hire the best and pay top dollar for it, McCord explained. Netflix always pay top of the market salaries. In their words: “One outstanding employee gets more done and costs less than two adequate employees.”

7. Promotions and development

Netflix believes that people should shape their own futures within a company rather than have a career plan shaped by the company.

The company scrapped formal yearly reviews early on. It found them to be too ritualistic and infrequent.

Managers and employees were asked to have regular conversations about performance as an organic part of their work.

Patty McCord’s overall advice for HR and People leaders?

Instead of cheerleading, talent managers should think of themselves as business people, McCord says.

They should be asking themselves: What’s good for the company? And then they should implement strategies to address these.

Ultimately, when a company is at the top of its game, so too are its people and their morale.

Has Netflix’s approach stood the test of time?

Fast forward to today.

Patty McCord has since left her role at Netflix, potentially partly because of the culture she built, some argue. It was simply time for her to move on.

“We did it like the grown-ups that we are and that’s part of the culture,” she explained.

Although documentation of their culture has evolved into a more concise document on Netflix’s website, its values remain largely unchanged, with two additions: ‘Informed captains’ (not waiting for consensus) and ‘Disagree openly’ – the idea that silent disagreement is unacceptable and unproductive.

The company’s current Chief Talent Officer, Jessica Neal, lives by McCord’s tenants and has evolved the culture while staying true to its core values.

Her advice?

To continuously evaluate your values and keep moving forward. “We’ve had to work hard to evolve the way we work,” she said.

“A lot of people talk about ‘maintaining’ a culture, and that’s sort of doesn’t make sense if you think about it. In a relationship, you’d never want to maintain – you’d want to be better than you are. What we’re trying to do is be better than we are today.”

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