No Rules Rules: Netflix and the Culture of Reinvention

by Reed Hastings

They gave me more money to match the Paramount deal and bought my Phoenix house.

I’ve been underpaid for years because I viewed it as an act of disloyalty to have the conversation about making sure I was paid what I was worth.”

“George was right to go interview at a competitor to find out what his worth is—and we would be stupid not to pay him his top-of-market value, now that we know also. In addition, if there are other people on Neil’s team who Google would offer that same job to, we should up their salaries to the same level. That’s their current market value.”

want all my employees to make an active choice to stay. I don’t want them to stay because they lack options.

Then we told all our employees they should start taking those calls from recruiters and tell us what they learned.

When an excellent new employee decides to go and just check out a job at the company down the road, you risk losing your entire investment. If during the interview, she finds the new position is so much more exciting than what she’s doing now, you’ll

And if you’re not sure that you’re being paid top of market, you should take those calls and find out what those jobs are paying.

To retain your top employees, it’s always better to give them the raise before they get the offers.

order to fortify the talent density in your workforce, for all creative roles hire one exceptional employee instead of ten or more

My silence, I learned later, made it difficult for Peter to trust me in those early days.

Peter, on the other hand, would talk frankly about his emotions, fears, and mistakes, and I was blown away by his comfort with bringing everything out in the open.

That’s a lot of confidential content to be keeping in your closet, and it takes a psychological toll: stress, anxiety, depression, loneliness, low self-esteem. Secrets also take up a lot of space in our brains. One study showed people spend twice as much time thinking about their secrets as they do actively concealing them.

There is no better way to build trust quickly than to shine a light directly on a would-be secret.

Jack teaches his workforce, from the top engineer to the lowest worker on the shop floor, to read the company’s financial reports.

Since then all financial results, as well as just about any information that Netflix competitors would love to get their hands on, has been available to all of our employees.

When you give low-level employees access to information that is generally reserved for high-level executives, they get more done on their own.

Although just about all companies talk about empowering staff, in the vast majority of organizations, real empowerment is a pipe dream because employees aren’t given enough information to take ownership of anything.

The most crippling problem in business is sheer ignorance about how business works. What we see is a whole mess of people going to a baseball game and nobody telling them what the rules are. That game is business. People try to steal from first base to second base, but they don’t even know how that fits into the big picture.

You know what, we’re going to do the opposite. Every year we are going to work to be bolder, and share even more information than before.”

The financial world sees this as reckless. But the information has never been leaked. When it does one day leak (I imagine it will), we won’t overreact. We’ll just deal with that one case and continue with transparency.

“Any employee can sign up for it. It’s open to everyone in the company who’s interested.”

In March 2014, a director of content acquisitions downloaded reams of confidential data and took it with him when he left to work for a competitor.

But when one employee abuses your trust, deal with the individual case and double your commitment to continue transparency with the others. Do not punish the majority for the poor behavior of a few.

Mostly what people do when creating policies

This was just one more top management secret that made me feel like a stranger in my own company.

Netflix treats employees like adults who can handle difficult information and I love that.

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.

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

They provided examples of times they gave him frank feedback and he retaliated in backhanded or hurtful ways.

cultural differences in different world markets when figuring out how much to disclose.

Human Resources insisted that he should have the right to choose what he shared about his personal challenges. In this case, I agreed with HR. When it comes to personal struggles, an individual’s right to privacy trumps an organization’s desire for transparency.

Generally, I believed that if the dilemma is linked to an incident at work, everyone should be informed. But if the dilemma is linked to an employee’s personal situation, it’s up to that person to share details if he chooses.

The other was more interesting: the board seemed to believe in my leadership more after I had opened up and made myself vulnerable to them.

And I realized: oh, it’s just normal human behavior to feel more trusting of someone who is open about mistakes.

Humility is important in a leader and role model. 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

The pratfall effect is the tendency for someone’s appeal to increase or decrease after making a mistake, depending on his or her perceived ability to perform well in general.

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.

“Ted, your job is not to try to make me happy or to make the decision you think I’d most approve of. It’s to do what’s right for the business. You are not allowed to let me drive this company off a cliff!”

The legend of Steve Jobs was that his micromanagement made the iPhone a great product.

and we pride ourselves on how few decisions senior management makes.

Afterward, when Sheryl and I debriefed, she said, “The amazing thing was to sit with you all day long and see that you didn’t make one decision!”

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

“Italians—who love Mafia shows—were going to love it. Over dozens of wakeful evenings pacing in my flat, I developed a plan for how to get all of Italy hooked. It was so clear to me I could taste it. It would be expensive, and I’d need to use all of the Italy marketing budget.”

Telling employees what to do is so old-fashioned, it leads to screams of “micromanager!” “dictator!” and “autocrat!”

Ask yourself these four questions: 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?

We work all day long in the world of Google, we buy stuff from Amazon, listen to music from Spotify, take Uber rides to Airbnb apartments, and spend our evenings watching Netflix. But we can’t figure out how these Silicon Valley companies move so fast and innovate so quickly.”

Netflix does not operate in a safety-critical market, like medicine or nuclear power.

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.

listened carefully to Jack’s concerns and decided to work with local influencers and vendors instead of film festivals,

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.

class at Yale outlining the idea for an overnight delivery service.