Netflix and The Culture of Reinvention

Good morning. I hope you’re well and that someone is bringing you coffee in bed…

Six weeks ago, I wrote to you from Inside Covid. A week later, as Covid spat me out, I wrote that I’m Still Standing. Since then, we have explored some big topics – What Future Do You Want?Life Is Not A Solo Flight; and last week, Knowing Yourself (thank you to the many people who mailed me to share how that particular letter helped them. It always means a lot to me to hear from you.)

Today we focus on building organizational culture. We do so through the lens of Insead professor Erin Meyer and Netflix co-founder Reed Hastings’ No Rules Rules: Netflix and the Culture of Reinvention.

I appreciated Meyer and Hastings insistence that the Netflix way-of-being is important for their business – highly creative, needing constant innovation, subject to extreme disruption – but that it may not be for your business and even for everywhere within their business. There are areas that need rules and processes, and they have them. The same might be true for your business. As Hastings puts it, “When a mistake would lead to a disaster, rules and process isn’t just nice to have, it’s a necessity”.

Too often, I see one business’s experience crudely uprooted and jammed into the soil of another organisation, only to create expensive mayhem. It is refreshing to encounter authors who clearly remind you that their learnings are shaped by their context. It’s your job to adapt it for your business.

 / Strategy 

The book starts with Hastings reflecting on his experiences from his first business.

He says that “Policies and control processes became so foundational to our work that those who were great at coloring within the lines were promoted, while many creative mavericks felt stifled and went to work elsewhere. I was sorry to see them go, but I believed that this was what happens when a company grows up.

“Then two things occurred. The first is that we failed to innovate quickly. We had become increasingly efficient and decreasingly creative. In order to grow we had to purchase other companies that did have innovative products. That led to more business complexity, which in turn led to more rules and process.

“The second is that the market shifted from C++ to Java. To survive, we needed to change. But we had selected and conditioned our employees to follow process, not to think freshly or shift fast. We were unable to adapt and, in 1997, ended up selling the company to our largest competitor.”

It is often a risk in business. Compliance gets celebrated over creativity, eventually resulting paradoxically both in strangling complexity and atrophy.

When Hastings started Netflix, he was determined not to repeat his mistakes and so emphasized building a culture that would unlock innovation and quick decision-making.

He drove the creation of a low-rule, highly flexible environment because in his view that “…even if your employees spend a little more when you give them freedom, the cost is still less than having a workplace where they can’t fly. If you limit their choices by making them check boxes and ask for permission, you won’t just frustrate your people, you’ll lose out on the speed and flexibility that comes from a low-rule environment.”

The consistency is amazing. Netflix wants flexibility so they embed it in their leave and reimbursement policies. They integrate the principle, knowing that the learning from one area of the business will eventually spread throughout.

Where in your organisation are there inconsistencies? You want nimble decision making and creativity, but before a talented executive can buy a chair, they need five signatures, and it must be in corporate colours?

Throughout the book, Meyer and Hastings, keep reminding us that the Netflix culture (and its success) is the consequence of connected ‘dots’.

Their dots are talent density, increasing candour and reducing control.

What are yours?

They describe how Netflix went through a process over years of gradually increasing the intensity of each of these. They experimented, they learnt, they tweaked.

They make it clear that each element is a mutually reinforcing part of an interlocking system.

Their leave policy is famous (leave at Netflix is unlimited). I’ve seen a number of businesses try to adopt it, mostly unsuccessfully. It fails because it is seen as a ‘cool idea’, rather than being integrated as part of an intentional set of actions and processes (No Rules Rules) to generate specific outcomes.

Netflix doesn’t require you to apply for leave because they don’t want the administrative costs, they do want responsible decision-makers, and they put a lot of effort into ensuring that you understand the context in which you make your personal leave decisions. The policy exists to build a specific competency. Be conscious that your policies always create cultural outcomes, whether you’ve thought about them or not.

They spend an enormous amount of time creating and communicating context for their people (NB: Context is not a growth target, that’s a measurement. Context is “this is where we are going and why”).

Context goes hand-in-hand with candour. Unless you’re willing to share information widely it is hard to build an organisation that understands context. If the whole organisation doesn’t have context, then they’re not able to bring all of their knowledge, skill, and experience to solving the challenge.

Hastings puts it like this, “The more employees at all levels understand the strategy, financial situation, and the day-to-day context of what’s going on, the better they become at making educated decisions without involving those above them in the hierarchy.”

Without care candour can be a disaster, it can become a neat cover for toxic behaviour – “I was just being candid”. Netflix insists that all feedback must be given with positive intent and must ‘aim to assist’.  Again, there’s a goal in mind, “When giving and receiving feedback is common, people learn faster and are more effective at work.”

Hastings speaks about ‘sunshining’ failures. The Netflix view is that failures are worthwhile if they are made whilst in pursuit of achieving strategic goals and provide good learning to the business. To achieve the learning, the failure must be ‘sunshined’, so that others can learn from it. Similarly, the successes are intentionally celebrated, not just for the ‘feels’ but for the learning.

/ Self 

Hastings is clear on his responsibility to embody the culture. He sets the example.

With the leave policy, he ensures that he takes a lot of leave, is uncontactable, and shares his holiday experiences. It creates safety for others to feel that they can do it too.

With candour, he consciously seeks feedback for himself. Meyer shares that in 2019, Hastings wrote the following in a company-wide memo:

“360 is always a very stimulating time of year. I find the best comments for my growth are unfortunately the most painful. So, in the spirit of 360, thank you for bravely and honestly pointing out to me: “In meetings you can skip over topics or rush through them when you feel impatient or determine a particular topic on the agenda is no longer worth the time… On a similar note, watch out for letting your point-of-view overwhelm. You can short-change the debate by signaling alignment when it doesn’t exist.” So true, so sad, and so frustrating that I still do this. I will keep working on it. Hopefully, all of you got and gave very direct constructive feedback as well.”

He shares that he makes mistakes. He takes the feedback. He looks to improve. He models a way of being for his leadership team.

He goes as far as to be intentional about how he acts when he receives feedback.

He coaches himself and his leadership team to provide ‘belonging cues’ to the people who’ve given them input. He explains that “A belonging cue might be a small gesture, like using an appreciative tone of voice, moving physically closer to the speaker, or looking positively into that person’s eyes. Or it might be larger, like thanking that person for their courage and speaking about that courage in front of the larger team.”

Culture doesn’t exist in a scorecard, or on a Powerpoint slide. It comes alive in leaders’ values and how they behave.

Hastings demonstrates that time and again. He reflects that he often says to Netflix leaders, “When one of your people does something dumb don’t blame them. Instead ask yourself what context you failed to set. Are you articulate and inspiring enough in expressing your goals and strategy? Have you clearly explained all the assumptions and risks that will help your team to make good decisions? Are you and your employees highly aligned on vision and objectives?”

/ Soul

To close today, here is some beauty from the Cape, this short clip of a caracal mom and kitten on Chapman’s Peak will make you smile, and I was lucky enough to catch this sunset on an evening walk this week.

If this is the first time you’re reading strategy, soul, & self, you can subscribe here. You can follow me on Instagram and LinkedIn.

Karl

PS: If you’d like to know what it is like to work with me, this is what some of my clients have said about their experience of working with me.

PPS: I have a few openings in my schedule from mid-September. Send me an email if you’re interested in exploring coaching with me.

(this letter was first published on 29 Aug 2021)

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