Today's post is about "No Rules Rules: Netflix and the Culture of Reinvention" by Reed Hastings and Erin Meyer. One-sentence summary: this is a really good book, very insightful, that makes you think about the processes in your own company and whether you could, or could not, implement what Hastings advocates. In other words, it is not just a puff piece designed to laud Hastings and Netflix, but a business book with genuine value for readers everywhere.
I'll admit that at first I found the book gimmicky, because it is split in sections by either author within each chapter and the reader will of course be more interested in Netflix CEO Hastings's perspective rather than INSEAD business professor Meyer's. Each segment by either author is preceded by a little drawing of their face to better set them apart and over the first chapter or so I couldn't shake the impression that the book lacked substance - but after a while I got used to the setup, and since Netflix is primarily a provider of visual entertainment I guess the little face drawings made sense for the Netflix brand. Perhaps I should have expected even more visual add-ons. Or maybe a book trailer! (Totally a book trailer!)
But once I got used to the setup, I really enjoyed this book. It is structured around nine core principles:
- First build up talent density... A great workplace is stunning colleagues. This is the most important because none of the rules below will work if you don't have high-caliber colleagues you can trust to act in the company's best interest. Being surrounded by top colleagues elevates your own thinking and pushes you to do your best." In Hastings's words: "For top performers, a great workplace isn't about a lavish office, a beautiful gym, or a free sushi lunch. It's about the joy of being surrounded by people who are both talented and collaborative. People who can help you be better." It is particularly important in a place like Netflix that delegates a lot of the decision-making to mid-level managers and lower.
- Then increase candor... Say what you really think (with positive intent). The concept of candor in the workplace deserves its own book, and thankfully someone has already written it: Kim Scott, author of Radical Candor. I absolutely love that book and recommend it any chance I've got.
- Now begin removing controls... Remove vacation policy, remove travel and expensive approvals. This is obviously not possible if you don't have the best of the best working for you, as you risk ending up with situations where mediocre people have made less-than-advisable purchases and straddled the company with the cost. You have to trust people's judgement first. In Hastings's words: "Set context up front and keep an eye on spending out back" and "Once you have a workforce made up nearly exclusively of high performers, you can count on people to behave responsibly... The trust you offer will in turn instill feelings of responsibility in your workforce, leading everyone in the company to have a greater sense of ownership."
- Fortify talent density... Pay top of personal market. (Surprising insight: "Bonuses are bad for flexibility." In more details: "Don't pay performance-based bonuses. Put these resources into salary instead. Teach employees to develop their networks and to invest time in getting to know their own - and their teams' - market value on an ongoing basis. This might mean taking calls from recruiters or even going to interviews at other companies. Adjust salaries accordingly.")
- Pump up candor... Open the books. This gave rise to interesting discussions in the book regarding whether employees need to be told about a possible restructuring if their jobs may be at stake - but may not be. Another insightful situation was debated regarding post-firing communication. Netflix always goes for transparency.
- Now realize more controls... No decision-making approvals needed. (1) Farm for dissent ("socialize" the idea, aka, get feedback) (2) For a big idea, test it out (3) As the informed captain, make your bet (4) If it succeeds, celebrate. If it fails, sunshine it.
- Max up talent density... The keeper test. This chapter described the team vs family metaphors of working for a company and the behaviors that align with the prevailing metaphors (hint: Netflix is not a family). There is an interesting paragraph about Netflix as a professional sports team. "These players are really close... But they are not a family. The coach swaps and trades players in and out throughout the year in order to make sure they always have the best player in every position." Hastings explains: "At Netflix, I want each manager to run her department like the best professional teams, working to create strong feelings of commitment, cohesion, and camaraderie, while continually making tough decisions to ensure the best player is manning each post." And now, for the keeper test: "If a person on your team were to quit tomorrow, would you try to change their mind? or would you accept their resignation, perhaps with a little relief? if the latter, you should give them a severance package now, and look for a star, someone you would fight to keep." (This is a question worth asking of the people about you too, although obviously you would not be in a position to fight to keep them. But if you think that your direct reports will pop up a bottle of champagne and cry tears of joy once you've left, it is worth asking if you are a good fit for the position.) The Keeper Test, in its shortest version, is: "Which of my people, if they told me they were leaving, for a similar job at a peer company, would I fight to keep at Netflix?" "Penguins abandon those in the group that are weak or struggling, while elephants rally around them and nurture them back to health." Hastings speaks out against Performance Improvement Plans, but only because Netflix's culture of candor has allowed employees to receive extensive feedback separately. He also speaks out against stack-ranking, with a set percentage of employees being shown the door. "Stack ranking sabotages collaboration and destroys the joy of high-performing teamwork." Some Netflix employees spoke about a culture of fear that they will lose their jobs at a moment's notice.
- Max up candor... A circle of feedback. Live 360 dinners with 25 percent positive and 75 percent developmental.
- Eliminate most controls. Lead with context, not control. The story of the Oscar-winning Icarus documentary alone is worth reading that chapter! There is also an interesting discussion about loosely vs tightly coupled systems, the goal of highly aligned, loosely coupled organizations and alignment as a tree, not a pyramid.
Most valuable in the book, besides Hastings's insights, were the vignettes with real Netflix employees illustrating this or that principle with an anecdote that had happened to them. You can argue whether Netflix's principles can be applied elsewhere (not every company will be able to hire and keep top-of-the-market) but the case studies brought home those principles in impressive fashion.
In summary, an excellent book.
Supplemental readings: Radical Candor by Kim Scott and Creativity, Inc by Ed Catmull.