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Preview — No Rules Rules by Reed Hastings
Read between September 07 - September 08, 2020
In 2002, two years after that meeting, we took Netflix public. Despite our growth, Blockbuster was still a hundred times larger than we were ($5 billion versus $50 million). Moreover, Blockbuster was owned by Viacom, which at that time was the most valuable media company in the world. Yet, by 2010, Blockbuster had declared bankruptcy. By 2019, only a single Blockbuster video store remained, in Bend, Oregon. Blockbuster had been unable to adapt from DVD rental to streaming.
We have a culture where No Rules Rules.
For many years, one of America’s biggest corporations proudly exhibited the following list of values in the lobby of its headquarters: “Integrity. Communication. Respect. Excellence.” The company? Enron.
They violate the principle that Harvard Business School professor Amy Edmondson calls “psychological safety.”
Each time this happened, I put a process in place to prevent that mistake from occurring again.
The first is that we failed to innovate quickly. We had become increasingly efficient and decreasingly creative.
If you give employees more freedom instead of developing processes to prevent them from exercising their own judgment, they will make better decisions and it’s easier to hold them accountable.
If you build an organization made up of high performers, you can eliminate most controls. The denser the talent, the greater the freedom you can offer.
Start by ripping pages from the employee handbook. Travel policies, expense policies, vacation policies—these can all go. Later, as talent becomes increasingly denser and feedback more frequent and candid, you can remove approval processes throughout the organization, teaching your managers principles like, “Lead with context, not control,” and coaching your employees using such guidelines as, “Don’t seek to please your boss.”
Netflix generally doesn’t believe in anonymity,
he didn’t exactly set out to build a company with a unique ecosystem. Instead, he sought organizational flexibility.
We were in cost-cutting mode, and we’d just let go of a third of the workforce, yet the office was suddenly buzzing with passion, energy, and ideas.
Suddenly, we were doing far more work—with 30 percent fewer employees.
a team with one or two merely adequate performers brings down the performance of everyone on the team.
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.
If you have a group with a few merely adequate performers, that performance is likely to spread, bringing down the performance of the entire organization.
Our number one goal, moving forward, would be to do everything we could to retain the post-layoff talent density and all the great things that came with it.
I became laser-focused on making sure Netflix was staffed, from the receptionist to the top executive team, with the highest-performing, most collaborative employees on the market.
I saw that getting feedback had an added benefit. It pushed the performance in the office to new levels.
“Only say about someone what you will say to their face.”
When giving and receiving feedback is common, people learn faster and are more effective at work.
HIGH PERFORMANCE + SELFLESS CANDOR = EXTREMELY HIGH PERFORMANCE
At Netflix, it is tantamount to being disloyal to the company if you fail to speak up when you disagree with a colleague or have feedback that could be helpful.
“I was just saying to my colleagues,” she explained, “that the way you are facilitating the discussion from the stage is undermining your message about cultural diversity. When you ask for comments and call on the first person who raises a hand, you’re setting just the type of trap your book tells us to avoid—because only Americans raise their hands, so only Americans get the chance to speak.”
“I’d love to give you some feedback.” We’d
A feedback loop is one of the most effective tools for improving performance. We learn faster and accomplish more when we make giving and receiving feedback a continuous part of how we collaborate.
The goal at Netflix is to help each other succeed, even if that means feelings occasionally get hurt.
I recommend instead focusing first on something much more difficult: getting employees to give candid feedback to the boss.
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.
When the moment arrives, solicit and encourage the employee to give feedback to you (the boss) and then—if you like—you can reciprocate by giving feedback to them.
“Brian, the day you find yourself sitting on your feedback because you’re worried you’ll be unpopular is the day you’ll need to leave Netflix. We
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 professional, and we’re more likely to build ...more
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The only remaining question is when and where to give feedback—and the answer is anywhere and anytime.
“Rose! This isn’t working! You are losing the room! You sound defensive! You’re talking too fast.
What if Sherry’s accomplishing amazing things working a twenty-five-hour week from a hammock in Hawaii? Well, let’s give her a big raise! She’s extremely valuable.
“Not that you can take more or less days off, but that you can organize your life in any crazy way you like—and as long as you do great work nobody bats an eyelid.”
“Lead with context, not control”
In the absence of written policy, every manager must spend time speaking to the team about what behaviors fall within the realm of the acceptable and appropriate.
The Netflix ethos is that one superstar is better than two average people.
Patty and I both noticed people seemed to be taking more ownership around the office. Just little things, like someone started throwing out the milk in the refrigerator when it got sour.
That’s when Patty and I coined the term “Freedom and Responsibility.”
SPEND COMPANY MONEY AS IF IT WERE YOUR OWN
ACT IN NETFLIX’S BEST INTEREST
At Netflix you don’t have to complete a purchase order and wait for approval to buy something. You just buy it, take a photo of the receipt, and submit it directly for reimbursement. But that doesn’t mean no one pays attention to what you spend.
The freedom we offer wasn’t a good match for her.