Do No Rules Rule? What Netflix's counter-intuitive culture can teach us
No Rules Rules is a fascinating, highly counter-intuitive book. At several moments, I had to put down the book because what it was telling me was so different from what I’d learned was the corporate norm.
Here’s what it taught me about Netflix’s controversial culture and what other companies can learn about it:
1) Lead with context not with control: Netflix doesn’t have a typical approval matrix or decision-making hierarchy. The idea is that the management tells the employees what the goals and vision of the company is, and they go out and execute. Lower level employees commonly make multi-million-dollar deals without needing their bosses’ signature.
Takeaway: Given most companies require VP approvals for even $2 expenses, yet Netflix has been so successful, will companies adapt?
2) No travel, expense policies or vacation days: Netflix gives its employees total independence and discretion. The only expectation is that they will act in the company’s best interests. A random audit of 10% of all expense claims is conducted and any employee who claims personal expenses or indulges in unethical practices is let go.
Takeaway: Millions of dollars are spent each year on tracking and policing expenses, can we increase trust and lower controls?
3) Pay higher than market salaries (but no bonuses): Netflix pays above market fixed salaries and does not give performance bonuses. Netflix found that , giving highly motivated employees doing creative tasks, performance bonuses doesn’t improve their performance, it lowers it.
Takeaway: For me, this was the most counter-intuitive statement in the book, it got me thinking: are people really not motivated by money? Of course they are! But the wrong incentives created by “bonus-chasing” or “performance gaming” either a) do not persuade them to take risks or b) make them take highly unnecessary risks with a low reward threshold.
4) Building a team of high performers: A workplace is not a family, but rather think of it like a Sports Team. You want the best people on your team and if they aren’t performing, let them go. Usually, Letting go of employees who are performing “adequately” is not an accepted practice. You really have to screw up to get fired. But Netflix has changed the paradigm . Why? Netflix found that the average performers on a team tend to drag down the performance of even the top performers.
Takeaway: It might seem cruel to fire someone, but Netflix gives them a substantial severance package and in the long run it’s beneficial for the company as well as the employee (who is free to pursue what he or she is good at). Will this idea scale across different cultures where firing is considered a sin?
Would love to spark a debate: Are these elements of Netflix’s culture which totally crazy or can they be widely adapted?
