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March 19 - March 26, 2022
Netflix assumes that you have amazing judgment, . . . . And judgment is the solution for almost every ambiguous problem. Not process.
“You can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something—your gut, destiny, life, karma, whatever.
to encourage people to question how the dots are connected.
If you have a team of five stunning employees and two adequate ones, the adequate ones will sap managers’ energy, so they have less time for the top performers, reduce the quality of group discussions, lowering the team’s overall IQ, force others to develop ways to work around them, reducing efficiency, drive staff who seek excellence to quit, and show the team you accept mediocrity, thus multiplying the problem.
Felps first found that, even when other team members were exceptionally talented and intelligent, one individual’s bad behavior brought down the effectiveness of the entire team. In dozens of trials, conducted over month-long periods, groups with one underperformer did worse than other teams by a whopping 30 to 40 percent.
A fast and innovative workplace is made up of what we call “stunning colleagues”—highly talented people, of diverse backgrounds and perspectives, who are exceptionally creative, accomplish significant amounts of important work, and collaborate effectively.
WE HATE CANDOR (BUT STILL WANT IT) Few people enjoy receiving criticism.
The first technique our managers use to get their employees to give them honest feedback is regularly putting feedback on the agenda of their one-on-one meetings with their staff. Don’t just ask for feedback but tell and show your employees it is expected. Put feedback as the first or last item on the agenda so that it’s set apart from your operational discussions. When the moment arrives, solicit and encourage
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
two behavioral necessities to get employees to give the boss candid feedback. Don’t just ask for feedback but tell and show your employees it is expected
Netflix managers invest significant time teaching their employees the right and wrong way to give feedback. They have documents explaining what effective feedback looks like. They have sections of training programs where people learn how and practice giving and receiving it.
4A FEEDBACK GUIDELINES Giving Feedback AIM TO ASSIST: Feedback must be given with positive intent. Giving feedback in order to get frustration off your chest, intentionally hurting the other person, or furthering your political agenda is not tolerated. Clearly explain how a specific behavior change will help the individual or the company, not how it will help you. “The way you pick your teeth in meetings with external partners is irritating” is wrong feedback. Right feedback would be, “If you stop picking your teeth in external partner meetings, the partners are more likely to see you as
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Bianca’s intent was only to help Rose succeed (Aim to Assist). She outlined specific actions Rose could take to improve her performance (Actionable). Rose received the feedback with thanks (Appreciation).
CLARIFY AND REINFORCE THE DIFFERENCE BETWEEN BEING SELFLESSLY CANDID AND A BRILLIANT JERK
If you are promoting a culture of candor on your team, you have to get rid of the jerks. Many may think, “This guy is so brilliant, we can’t afford to lose him.” But it doesn’t matter how brilliant your jerk is, if you keep him on the team you can’t benefit from candor. The cost of jerkiness to effective teamwork is too high. Jerks are likely to rip your organization apart from the inside. And their favorite way to do that is often by stabbing their colleagues in the front and then offering, “I was just being candid.”
A week later, his manager stopped by my desk unexpectedly. He told me that he was aware of my exchange with the engineer and didn’t think I was technically wrong, but did I know that the engineer had been demotivated and unproductive since I talked to him and was it my intent to make his staff unproductive? No, of course not. The manager continued: Do you think you could have told my engineer what you needed to, in a way that left him feeling positive and motivated to fix it? Sure, I probably could do that. Good. Always do that in the future, please. I did.
With a climate of candor, the boss is no longer the primary individual to correct an employee’s undesirable behavior. When the entire community speaks openly about which individual behaviors advance the company, and which don’t, the boss doesn’t have to get so involved in overseeing an employee’s work.
“When Greg was here, he left the office every day before dinnertime, and so did the other employees. He’d take frequent vacations to Okinawa Island or to Niseko to take his kids skiing, and when he returned he’d show us all photos. He asked us about our vacations too, so we all started taking them.
Greg, an American, managed to get an entire office of Japanese people to work and vacation like Europeans. He didn’t create rules or nag. He just modeled the behavior and communicated expectations.
SET AND REINFORCE CONTEXT TO GUIDE EMPLOYEE BEHAVIOR
SET CONTEXT UP FRONT AND KEEP AN EYE ON SPENDING OUT BACK
Before you spend any money imagine that you will be asked to stand up in front of me and your own boss and explain why you chose to purchase that specific flight, hotel, or telephone.
We managed to pull off Stranger Things because each member of the team was wildly competent. Rob is a super-brilliant negotiator. So when one of the show’s stars didn’t want to sign a multi-year contract, he knew exactly what to say. Laurence was the finance guy. He’s supposed to be watching the money. But he did his entire finance job while spending all other waking moments doubling as a production executive—things like
The success of Netflix is founded on these types of unlikely stories: small teams consisting exclusively of significantly above-average performers—what Reed refers to as dream teams—working on big hairy problems.
Bill Gates, whom I worked with while on the Microsoft board, purportedly went further. He is often quoted as saying: “A great lathe operator commands several times the wages of an average lathe operator, but a great writer of software code is worth ten thousand times the price of an average software writer.”
Managing people well is hard and takes a lot of effort. Managing mediocre-performing employees is harder and more time consuming.
the entire bonus system is based on the premise that you can reliably predict the future, and that you can set an objective at any given moment that will continue to be important down the road. But at Netflix, where we have to be able to adapt direction quickly in response to rapid changes, the last thing we want is our employees rewarded in December for attaining some goal fixed the previous January. The risk is that employees will focus on a target instead of spot what’s best for the company in the present moment.
Figuring out top of market can take a lot of time, but not as much time as finding and training a replacement when your best people leave for more money at another company.
When the market heats up and recruiters are calling, employees get curious. No matter what I say, some of them are going to have those talks and go to those interviews. If I don’t give them permission, they’ll sneak around and then leave without giving me a chance to retain them. A month before I made that statement, we lost an amazing executive whose talents we will not be able to replace. When she came to me, she’d already accepted the other job. There was nothing I could do. When she told me that she’d loved working at Netflix but she’d received a forty percent pay raise, my heart sank. I
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Divide your workforce into creative and operational employees. Pay the creative workers top of market. This may mean hiring one exceptional individual instead of ten or more adequate people. Don’t pay performance-based bonuses. Put these resources into salary instead.
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.
It’s not our job at Netflix to get involved in your housing situation or any other major aspect of your life. But it is our job to treat you like an adult and give you all the information we have, so that you can make informed decisions.
I recommend our managers seek to be as transparent as possible while also ensuring they can respond yes to the question, “Would I feel comfortable showing the person I let go of the email I sent?”
When you combine the data with Reed’s advice, this is the takeaway: a leader who has demonstrated competence and is liked by her team will build trust and prompt risk-taking when she widely sunshines her own mistakes. Her company benefits. The one exception is for a leader considered unproven or untrusted. In these cases you’ll want to build trust in your competency before shouting your mistakes.
When transparency is in tension with an individual’s privacy, follow this guideline: If the information is about something that happened at work, choose transparency and speak candidly about the incident. If the information is about an employee’s personal life, tell people it’s not your place to share and they can ask the person concerned directly if they choose.
As long as you’ve already shown yourself to be competent, talking openly and extensively about your own mistakes—and encouraging all your leaders to do the same—will increase trust, goodwill, and innovation throughout the organization.
most companies, even at those who have leaders who don’t micromanage, employees seek to make the decision the boss is most likely to support.
Our mantra is that employees don’t need the boss’s approval to move forward (but they should let the boss know what’s going on).
Is Sheila a stunning employee? Do you believe she has good judgment? Do you think she has the ability to make a positive impact? Is she good enough to be on your team? If you answer NO to any of these questions, you should get rid of her (see the next chapter where we’ll learn that “adequate performance gets a generous severance”).
If your employees are excellent and you give them freedom to implement the bright ideas they believe in, innovation will happen. Netflix does not operate in a safety-critical market, like medicine or nuclear power. In some industries, preventing error is essential. We are in a creative market. Our big threat in the long run is not making a mistake, it’s lack of innovation.
When some of those bets don’t pay off, we just fix the problems that arise as quickly as possible and discuss what we’ve learned. In our creative business, rapid recovery is the best model.
When I started at Netflix, Jack explained to me that I should consider I’d been handed a stack of chips. I could place them on whatever bets I believed in. I’d need to work hard and think carefully to ensure I made the best bets I could, and he’d show me how. Some bets would fail, and some would succeed. My performance would ultimately be judged, not on whether any individual bet failed, but on my overall ability to use those chips to move the business forward.
The Netflix Innovation Cycle If you have an idea you’re passionate about, do the following: “Farm for dissent,” or “socialize” the idea. For a big idea, test it out. As the informed captain, make your bet. If it succeeds, celebrate. If it fails, sunshine it.
The culture at Netflix had been sending
the message to our people that, despite all our talk about candor, differences of opinion were not always welcome. That’s when we added a new element to our culture. We now say that it is disloyal to Netflix when you disagree with an idea and do not express that disagreement.
Farm for dissent. Socialize the idea. Test it out. This sounds a lot like consensus building, but it’s not. With consensus building the group decides; at Netflix a person will reach out to relevant colleagues, but does not need to get anyone’s agreement before moving forward. Our four-step Innovation Cycle is individual decision-making with input.
One of the reasons I left Yahoo was that I didn’t feel ownership for anything. Even though I might have come up with an idea and started an initiative, by the time it got approved by everyone and his mother it didn’t feel like mine any more. If it crashed, I’d feel: “Well, thirty other people agreed! It’s not my fault!”
all your talk about chips and placing bets is a charade, and that you care more about error prevention than innovation after all. We suggest instead a three-part response: Ask what learning came from the project. Don’t make a big deal about it. Ask her to “sunshine” the failure.
To help your workforce make good bets, encourage them to farm for dissent, socialize the idea, and for big bets, test it out. Teach your employees that when a bet fails, they should sunshine it openly.
you have to get in the habit of doing something a lot harder: firing a good employee when you think you can get a great one.