At Netflix, employees do not apply for, much less grovel for vacation, or seek approval for expenses. They even give their boss feedback in public. In many Nigerian firms, these would be justifiable grounds for dismissal!
The corporate culture at Netflix rests on three central tenets: talent density, candor, and removing controls.
Eighteen years after it went public, the company’s stock price had gone from $1 to $505 by comparison, $1 invested in the S&P 500 or NASDAQ index when Netflix listed would have grown by less than $10 over the same period. This validates their method.
Netflix is now one of the world’s leading subscription streaming entertainment services with over 204 million paid streaming memberships globally and a market capitalisation of $245billion with revenue of $25 billion last year.
In the book, “No Rules Rules: Netflix and the Culture of Reinvention”, written by Erin Meyer and Reed Hastings, Netflix CEO, the company provides an account of how its culture evolved.
Talent density
Netflix does not hire a hundred medium employees and pay them medium salaries, they try to hire maybe only 10 and pay them top of the market- up to ten times what medium employees earn. The idea is that performance is contagious.
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“A fast and innovative workplace is made of up ‘stunning colleagues’ – highly talented people, of diverse backgrounds and perspectives, who are exceptionally creative, accomplish significant amounts of important work and collaborate effectively,” said Hastings.
This is radically different from what obtains in most companies. Since many workers are sloppy and hiring decisions doesn’t always prioritise competence, they put controls, policies, and processes to deal with slackers and bad behavior. HR is often reactive, even adversarial, and the CEO is a little tyrant-in-training.
Netflix believes the role of the leader is to develop a work environment consisting exclusively of high performers, exceptionally creative and passionate. And treat them like adults by eliminating most controls. Yet, make them understand, there’s no tolerance for shoddy work or bad behaviour.
Increase candor
In many companies, there are complex policies designed to ensure that the normal polite human protocols are strenuously adhered to. Feedback is top-down and passion is not a metric for performance review. Often, there are ongoing low-grade cold wars among staff and turf wars among management staff.
At Netflix, things work differently. Candor is encouraged and failing to speak out is tantamount to being disloyal. Performance reviews are not used. Employees are taught how to give well-intentioned feedback and managers are transparent. No closed offices, no hidden financial records, and locked spaces.
And most importantly, employees should never please their boss!
Remove controls
In most companies, even outside Nigeria, the value of creative work is measured by time.
Netflix believes this is a relic of the industrial age when employees did tasks that are now done by machines.
“Today, in the information age, what matters is what you achieve, not how many hours you clock,” said Hastings.
Applying this principle to the Nigerian civil service would probably reveal that entire government ministries and departments, as well as state legislatures, are useless contraptions.
Netflix has no vacation policy, employees decide if and when they feel like taking a few hours, a day or week, or a month off work.
The company does not track vacations but managers explain the context where the right decisions can be made. For example, you know as an accounting staff taking a vacation in the middle of an audit is unwise.
Netflix does not have a spending or expense policy but managers set the context about how to spend money upfront and check employee receipts at the back end. It is one thing to take a prospective client to lunch on the company’s money, it is another thing to order champagne and caviar.
Employees are taught to imagine before spending any money that they would be asked to stand up in front of their boss and CEO to explain why they chose that flight ticket, hotel room, or another item and how it is in the best interest of the company. If they would be uncomfortable explaining the expense, it would probably wise to check in with their manager.
Giving employees more freedom led them to take more ownership and behave more responsibly. It also makes it easier to weed out the bad eggs.
The world of work is changing and old rules no longer sternly apply in a marketplace where retaining talent, ramping productivity, and achieving inclusive growth have become increasingly harder.
In most companies, decisions are made in the structure of a pyramid, the CEO at the top, the employees who are lower level, who can make small unimportant decisions.
Netflix shows that it can work from the ground up, that giving employees interfacing with customers/clients more power to employ initiative, after having trained them on the context for making decisions, and reinforcing their ability to employ social intelligence can produce stunning results.
While the world has left the industrial age, the employment practices of many companies in Nigeria have stayed behind. This is especially evident in the public service. Imagine if teachers pay are linked to students’ academic performance or the Minister of Petroleum’s performance is judged by how many projects come on stream or Nigeria does not have Federal Character or that a boy in Yobe is not required to guess two answers right to admission into a Unity school? Perhaps, a culture of excellence would be the norm.
The Nigerian civil service like many private firms prioritise showing up rather than delivering value, marking time rather than making a difference.
This is seen in the unease about remote work even as thousands of hours are wasted daily in mind-numbing Lagos traffic, in the reluctance to give workers vacation, in salaries that are so pitiful that workers divert creativity to ‘side hustles’ at the expense of their current job.
Many policies that are drawn up by Admin or HR personnel with limited knowledge about the processes surrounding the firm’s core business, chip away at creativity and passion.
Companies with a conventional corporate culture marked by clearly defined hierarchies, dress codes, and using time to measure productivity, will struggle to retain top talent when they compete with companies like Netflix who offer to treat people as adults.
Some are rethinking this model. For example, GE founded in 1892 recently eliminated its traditional performance review in favor of more frequent conversations between management and employees and is allowing more of its people to work remotely.
Yet at Netflix, anything less than stellar performance is inexcusable. Whereas many firms tolerate a modest talent density (a measure for the ratio of talent per employee) at Netflix it is dogma.
“At most companies, employees are treated like children, if you want to buy a new computer, or start new initiatives, you will have to ask for permission, but at Netflix, they treat their employees like adults and this is what gets this innovation going,” said Erin in an interview.
Netflix has a low tolerance for mediocre performance. When performance ebbs, it fires the staff, paying out a generous severance package. It believes the workforce should be divided between creative and operational employees and pay the creative workers top of the market. It counsels against paying performance-based bonuses and recommends paying it as part of the salary.
“At Netflix, they say we are a team, not a family. So there is no job security, their managers are asked to use something they call the keeper test, which is I need to think to myself on an ongoing basis if you say you’re leaving the company, will I fight to keep you, if I would, then I know you’re a keeper, but if you’re not, then I find another person,” explains Erin.
However Netflix approach may not be suitable for a company whose goal is to have its people follow a process that will eliminate error and create consistency like a factory, this may not apply. But if your main goal is to innovate faster and be flexible, the Netflix strategy may be just right for you.
