No Rules Rules: Netflix and the Culture of Reinvention

by Reed Hastings

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.

For our employees, transparency has become the biggest symbol of how much we trust them to act responsibly.

We “spin” by selectively sharing the facts, overemphasizing the positive, minimizing the negative, all in an attempt to shape the perception of others.

Spinning the truth is one of the most common ways leaders erode trust. I can’t say this clearly enough: don’t do this. Your people are not stupid. When you try to spin them, they see it, and it makes you look like a fraud.

if you explain plainly and honestly why you’ve fired someone, gossip ceases and trust increases.

When you succeed, speak about it softly or let others mention it for you. But when you make a mistake say it clearly and loudly, so that everyone can learn and profit from your errors.

If you have the best employees on the market and you’ve instituted a culture of open feedback, opening up company secrets increases feelings of ownership and commitment among staff.

the boss is there to approve or block the decisions of employees. This is a surefire way to limit innovation and slow down growth.

DON’T SEEK TO PLEASE YOUR BOSS. SEEK TO DO WHAT IS BEST FOR THE COMPANY.

these top-down models, because we believe we are fastest and most innovative when employees throughout the company make and own decisions.

only a CEO who is not busy is really doing his job.

Dispersed decision-making can only work with high talent density and unusual amounts of organizational transparency.

At Netflix, if you share all the context of your decision, you’ve done the groundwork. You don’t need approval. It’s up to you. You decide.

People desire and thrive on jobs that give them control over their own decisions.

The more people are given control over their own projects, the more ownership they feel, and the more motivated they are to do their best work.

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).

If your employees are excellent and you give them freedom to implement the bright ideas they believe in, innovation will happen.

If you hope for more innovation on your team, teach employees to seek ways to move the business forward, not ways to please their bosses.

“We don’t expect employees to get approval from their boss before they make decisions. But we do know that good decisions require a solid grasp of the context, feedback from people with different perspectives, and awareness of all the options.”

We now say that it is disloyal to Netflix when you disagree with an idea and do not express that disagreement.

I can’t make the best decisions unless I have input from a lot of people.

The more you actively farm for dissent, and the more you encourage a culture of expressing disagreement openly, the better the decisions that will be made in your company.

For each important decision there is always a clear informed captain. That person has full decision-making freedom.

The person who is living and breathing the contract needs to be the person who owns and signs the contract, not a head of a function or a VP.

Often talented people find it liberating to be the informed captain

The one thing you must do is show, ideally in public, that you are pleased she went ahead despite your doubts and offer a clear “You were right! I was wrong!” to show all employees it’s okay to buck the opinion of the boss.

If you make a big deal about a bet that didn’t work out, you’ll shut down all future risk-taking. People will learn that you preach but don’t practice dispersed decision-making.

First, if you take a bet and it fails, Reed will ask you what you learned. Second, if you try out something big and it doesn’t work out, nobody will scream—and you won’t lose your job.

When you sunshine your failed bets, everyone wins. You win because people learn they can trust you to tell the truth and to take responsibility for your actions. The team wins because it learns from the lessons that came out of the project. And the company wins because everyone sees clearly that failed bets are an inherent part of an innovative success wheel. We shouldn’t be afraid of our failures.

If you have high talent density and organizational transparency firmly in place, a faster, more innovative decision-making process is possible. Your employees can dream big, test their ideas, and implement bets they believe in, even when in opposition to those hierarchically above them.

With our dispersed decision-making model, if you pick the very best people and they pick the very best people (and so on down the line) great things will happen.

If you’re serious about talent density, 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.

a high-talent-density work environment is not a family.

A job should be something you do for that magical period of time when you are the best person for that job and that job is the best position for you. Once you stop learning or stop excelling, that’s the moment for you to pass that spot onto someone who is better fitted for it and to move on to a better role for you.

On a high-performing team, collaboration and trust work well because all the members are exceptionally skilled both at what they do and at working well with others.

For an individual to be deemed excellent she can’t just be amazing at the game; she has to be selfless and put the team before her own ego. She has to know when to pass the ball, how to help her teammates thrive, and recognize that the only way to win is for the team to win together.

If we are going to be a championship team, then we want the best performer possible in every position.

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.

So the Keeper Test is real and all our managers at all levels in the company use it consistently. I tell my bosses, the board of directors, that I should be treated no differently. They shouldn’t have to wait for me to fail to replace me. They should replace me once they have a potential CEO who is likely to be more effective. I find it motivating that I have to play for my position every quarter, and I try to keep improving myself to stay ahead.

One employee doesn’t have to lose for the other to win. On the contrary, the more excellence we have on the team, the more we accomplish. The more we accomplish, the more we grow. The more we grow, the more positions we add to our roster. The more positions we add, the more space there is for high-performing talent.

Experts have found that if you stare at what you are desperate to avoid, you are actually more likely to paddle into it.

During your next one-to-one with your boss ask the following question: “IF I WERE THINKING OF LEAVING, HOW HARD WOULD YOU WORK TO CHANGE MY MIND?” When you get the answer, you’ll know exactly where you stand.

“Only say about someone what you will say to their face.”

Saying that the company values candor is one thing. Maintaining it while the organization grows, new people join, and relationships become more numerous is more challenging.

We’ve been against performance reviews from the beginning. The first problem is that the feedback goes only one way—downward. The second difficulty is that with a performance review you get feedback from only one person—your boss.

Live 360s work because of our high talent density and “no brilliant jerks” policy. If your employees are immature, have bad attitudes, or lack the self-confidence to show public vulnerability, you might not be ready to run these events.

If someone moves out of the 4A feedback guidelines to speak in a way that is sarcastic, aggressive, or generally unhelpful during the live 360, the leader needs to step in and correct the comment in real time.

“Lead with context, not control.”

The choice you make will most likely depend on your son. If he’s shown poor judgment in the past and you don’t trust him, you might choose to parent with control. But if you know him to be sensible and dependable, you can set the context and count on him to behave safely. In doing so, you prepare him to make not just good decisions on Saturday nights but also responsible decisions in the myriad of seductive or peer-influenced situations he will face in the coming years.

If your employees are struggling, you’ll need to monitor and check their work to ensure they are making the right decisions. If you’ve got a group of high performers, they’ll most likely crave freedom and thrive if you lead with context.