No Rules Rules: Netflix and the Culture of Reinvention

by Reed Hastings

If your focus is on eliminating mistakes, then control is best.

your goal is innovation, making a mistake is not the primary risk. The big risk is becoming irrelevant because your employees aren’t coming up with great ideas to reinvent the business.

Organizations are constructed a bit like computer programs. When a company is tightly coupled, big decisions get made by the big boss and pushed down to the departments, often creating interdependencies between the various areas of the business. If a problem occurs at the departmental level, it has to go back to the boss who oversees all of the departments. Meanwhile, in a loosely coupled company, an individual manager or employee is free to make decisions or solve problems, safe in the knowledge that the consequences will not ricochet through other departments.

Loose coupling works only if there is a clear, shared context between the boss and the team. That alignment of context drives employees to make decisions that support the mission and strategy of the overall organization.

if you hire a high-performing chef and give her free range to cook what she wants, but you haven’t shared that your family hates salt and that any salad dressing with sugar will be rejected by all, it’s likely your household of fusspots won’t like the meal delivered to their plates. In this case, it’s not your chef’s fault. It’s yours. You hired the right person, but you didn’t provide enough context. You gave your cook freedom, but you and your chef were not aligned.

Either the boss makes the decision and pushes it down the pyramid for implementation, or those at lower levels make the smaller decisions but refer the bigger issues to the higher-ups.

Pyramid Decision making system.

In a loosely coupled organization, where talent density is high and innovation is the primary goal, a traditional, control-oriented approach is not the most effective choice. Instead of seeking to minimize error through oversight or process, focus on setting clear context, building alignment of the North Star between boss and team, and giving the informed captain the freedom to decide.

Erin’s book, The Culture Map.

Book To read

At Netflix, our emphasis had always been on watching the clock. The vast majority of meetings are thirty minutes long and we generally believe that most topics, even important ones, can be settled in a half-hour time frame.

Conveying an unpleasant message indirectly allows the feedback giver to preserve a harmonious relationship with the feedback receiver. In Japanese culture, explicit constructive feedback is rarely voiced—and certainly not to someone further up the hierarchy.

when it comes to giving negative feedback, Americans are more direct than many cultures but considerably less direct than the Dutch culture.

That’s what frustrates me about my American colleagues. As often as they give feedback and as eager as they are to hear it, if you don’t start by saying something positive they think the entire thing was a disaster. As soon as a Dutch person jumps in with the negative first, the American kills the critique by thinking the whole thing has gone to hell.

A lot of little mistakes, while sometimes painful, help the organization learn quickly and are a critical part of the innovation cycle. In these situations, rules and process are no longer the best answer.

Culture isn’t something you can build up and then ignore. At Netflix, we are constantly debating our culture and expecting it will continually evolve. To build a team that is innovative, fast, and flexible, keep things a little bit loose.