A summary of how Netflix built a culture of reinvention
No Rules Rules articulates how Netflix has preserved its innovative qualities despite its scale, by instilling a culture of ‘freedom and responsibility’.
One of the book’s basic premises is that as companies grow, they tend to adopt a mindset that focuses on using controls for error prevention. While appropriate for manufacturing – e.g. pharmaceuticals, aerospace, and automotive – this is harmful to innovation.
At Netflix – where creativity, speed, and flexibility are the objectives – a different approach has been taken.
In musical terms, it’s the difference between the synchronised precision of an orchestra, and the sophisticated improvisation of jazz.
I don’t have time to read it — what are the book’s main messages?
To build a culture of speed, agility and innovation, Hastings and Meyer advocate that leaders:
1. Constantly increase ‘talent density’, to create a team formed entirely of star players
1a. Move ‘less than great’ performers on, or skilled people with a bad attitude, using a generous severance package. This increases the organisation’s ‘talent per head’ – reducing time spent managing poor performance and increases your remaining team’s motivation.
1b. Pay top of market for (creative, not operational) roles, to get – and retain – the very best talent. This reduces the overall number of people you have to hire, as the best are exponentially better than the adequate. Encourage your people to engage with recruiters to understand what their ‘worth’ is, and proactively adjust their compensation accordingly.
1c. Use the ‘keeper test’ to constantly evaluate how the team line-up – rather than ‘the family’ – could be improved. Have managers ask “which of my people if they told me they were leaving for a similar job at another company, would I fight hard to keep?” Have team members ask managers ‘how hard would you work to change my mind if I were thinking of leaving?’ to solicit feedback (and reassurance if required). Avoid stack ranking systems, as they can create internal competition and discourage collaboration. when an employee is let go, speak openly about what happened and answer staff questions candidly, to diminish their fears of being next and increasing their trust in the company.
2. Use radical candour to continually improve each member of the organisation
2a. Teach feedback, and embed it in regular meetings. Good feedback comes from aiming to do the right thing, is adapted to the receiver’s culture, and is actionable. Receiving it well requires showing appreciation, and accepting or declining it appropriately.
2b. Create and demonstrate a culture of leadership transparency - get rid of closed offices, stop assistants acting like guards, and share the financial performance of the company to all employees. As long as you've already shown yourself to be competent, talk openly about your mistakes and encourage your leaders to do the same, so your people will be more willing to take risks.
2c. One or two times a year, have a 360 degree written feedback report – but don’t link it to reward increases, don't make the comments anonymous and don't restrict who can contribute. This can also take a ‘live’ form, where teams share feedback over dinner, with roughly 75% developmental rather than positive, using the ‘stop, start, continue’ framework.
3. Remove (almost all) controls, to increase the speed and flexibility of the organisation
3a. Eliminate holiday tracking, provided leadership set a good example and set context around the business impacts of what leave is taken when. Eliminate expense approvals, with guidelines to ‘spend money in the organisation’s best interests’ and auditing to catch abuse.
3b. Disperse decision-making to empower those closest to the coal face, teaching staff not to seek to please their boss, but instead to test ideas, and then make their own decision. Employees have the ability to place multiple bets, and are judged on the collective performance of their ‘portfolio’ of bets (and the resultant learning), not the result of any single bet.
3c. Lead with context not control, getting alignment by providing and debating all the key insights that will allow people to make good decisions in a loosely coupled structure, instead of telling them what to do in a rigid hierarchy.
Conclusion:
These steps needs to be taken gradually, and in order – 1a, 2a, 3a, 1b, 2b and so on. Otherwise, the impacts could be disastrous e.g. a low quality workforce with no controls, or a team with high talent density without the candour required for it to reach its full potential.
This book is absolute dynamite – it’s phenomenally useful and powerful. But I dread to think how many organisations will badly or selectively implement bits of it, and cause misery for their employees in the process.
You can buy it here
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