Finished reading the newly published No Rules Rules: Netflix and the Culture of Reinvention by Netflix Co-founder Reed Hastings and Professor Erin Meyer (the author of The Culture Map) yesterday. I pre-ordered this book last month in anticipation and started listening as soon as it was available in Audible. This book narrates a fascinating view of the Silicon Valley giant Netflix’s radical corporate psychology and culture. I got my share of shocks when I first read Netflix Culture Deck a few years ago for the first time, the document that was claimed by Facebook COO Sheryl Sandberg as probably the most important document ever to come out of Silicon Valley. Before being hired by an ex-Netflix leader at Marqeta (Manish Pandit), I worked at Roku for one and half years which was a spin-off from Netflix. There a big chunk of my team-mates I worked day-to-day were from Netflix including my hiring managers (Shobana Radhakrishnan, Ken Chu). Hence Roku not only shared the same building with Netflix but the culture and principles to a good extent. For example, Reed Hastings touch-based on a story in this book where an employee got an offer lot more than what he/she asked. In reality, this happened to me while I joined Roku. So I know that each of the stories told is not only real but very frequent or common practice as a matter of fact.
A few months earlier I read Netflix’s other Co-founder and first CEO Marc Randolph‘s That Will Never Work. That was more about insights of the initial formation of Netflix as a viable business, which was amazing on its own. But in No Rules Rules, Hastings tries to share the unfolding of some of the most controversial and bold moves on how Netflix makes decisions on how to hire, build, compete, fire, and expand. Unless we know how successful Netflix as a business is, most of these counterintuitive rules would be frowned upon (and even now it does) by any reasonable person. As of now, Netflix is worth 220 Billion USD market cap, with 8600 employees serving 193 million paid users (including 73 million in USA) in 190 countries. Let it sink in first, before you think what do they know.
In this book Hastings talks about Netflix’s culture of Freedom and Responsibility. The idea is to optimize for innovations via risk-taking instead of error prevention. These items slowly and organically got implanted by Hastings in Netflix’s DNA. I don’t think it’s easy to replicate it. Also it has to be handled in a holistic manner, the attributes below support each other. For example, you can’t have No Decision-Making Approvals Needed without The Keeper Test which in turn you can’t do without top of the market pay.
- No Vacation Policy – Employees decide when, how long, how many days a week they work or take vacations. Hard work is not appreciated at Netflix, only the work that brings results and/or learnings.
- No Expense Management Policy – Whether employees fly by first-class or economy, it’s their own judgment. Employees are supposed to work in the best interest of Netflix. If any audit finds something that is done in a questionable spirit, the person in question will be immediately terminated, so second chance.
- No Decision-Making Approvals Needed – There is no hierarchy of decision makings. Every person is supposed to know their job best as informed captains. They have to make their decisions and move forward. If things don’t work out and fail, they need to capture the learnings out of it.
- Say What you Think – Employees are not supposed to please their bosses. They are supposed to say what is right, again in the best interest of Netflix.
- 360 Degree Feedback – Instead of yearly or half-yearly goals, performance reviews, it is encouraged to give frequent candid feedback to each other. For a Netflix employee, it’s very common to receive 10 to 30 feedbacks every year as part of 360 degree feedback from all across the board. Hastings himself received 71 feedbacks in a year.
- Lead with Context, not Control – As part of empowering, managers and leaders are supposed to give context to their direct reports instead of controlling them on how to do their job.
- The Keeper Test – The compensation philosophy of Netflix is to pay top of the market, often substantially higher than the best other possible offers an employee may get in the market. This is to attract the best talent to fill up for each of the openings. Instead of thinking Netflix as a family, Hastings developed the motto of a sports team where the best players will always be selected. Anyone less than that will be given a severance package and told good bye. To make sure only the best remains in the team, managers are strongly encouraged to ask themselves about each of their direct reports whether if they get a better offer to move to another company, will the manager do everything possible to try to keep them in the team. If not, then don’t wait to say good bye to that employee right away!
- Going Global – Hastings touch based on their collective learnings as they went to different countries with different cultural, behavioral misalignment with a very American Netflix style. So the company collectively learned how to synthesize it with time.
Here are some of the highlights in Netflix’s journey.
- 1997 – Netflix is launched as an online DVD rental
- 1999 – digital distribution launched
- 2000- Blockbuster refused to acquire Netflix
- 2002 – went IPO
- 2007 – launches video streaming
- 2010 – expands outside the US (Canada)
- 2011 – launches and then kills Qwikster
- 2013 –
- entered the content-production industry with House of Cards
- Anthony Wood launched Roku taking the Netflix in-house streaming player, with investment from Netflix
- 2020 – Ted Sarandos Named Netflix Co-CEO Alongside Reed Hastings