No Rules Rules: Netflix and the Culture of Reinvention

by Reed Hastings

When removing travel and expense policies, encourage managers to set context about how to spend money up front and to check employee receipts at the back end. If people overspend, set more context. With no expense controls, you’ll need your finance department to audit a portion of receipts annually. When you find people abusing the system, fire them and speak about the abuse openly—even when they are star performers in other ways. This is necessary so that others understand the ramifications of behaving irresponsibly. Some expenses may increase with freedom. But the costs from overspending are not nearly as high as the gains that freedom provides. With expense freedom, employees will be able to make quick decisions to spend money in ways that help the business. Without the time and administrative costs associated with purchase orders and procurement processes, you will waste fewer resources. Many employees will respond to their new freedom by spending less than they would in a system with rules. When you tell people you trust them, they will show you how trustworthy they are.