Human Resources Management: the infallible Netflix formula
How many times have you heard of Netflix this year? Countless. But did you know that the company, which is revolutionizing the world of streaming, started out as a DVD rental company? In about 8 years it has been digitally converted into a multinational company that offers a smart service for viewing movies on demand in streaming.
But first and foremost, what makes Netflix a pioneer is its human resources management policy. In stark contrast to traditional HR management, the U.S. company has based its operations on 7 principles centered on individual freedom, responsibility and creativity:
- Values are what we value
- High performance
- Freedom & responsibility
- Context, not control
- Highly aligned, loosely coupled
- Pay top of market
- Promotion & development
VALUES ARE WHAT WE VALUE
For Netflix, being completely outstanding company entails employing only phenomenal, qualified people. People at ease in a disruptive working environment, but above all able to:
Make decisions in an uncertain situations and think strategically, knowing how to differentiate between what to do immediately and what can be done later
Listen without immediately reacting, writing and speaking in a concisely and articulated manner, well balanced in times of stress, respecting everyone regardless of their status
Consistently perform well, take action without analysis when that would be excessive and disruptive; be a reliable colleague and focus on great results rather than on the process
Learn quickly and over broad-spectrum, analyse all aspects of the organisation and the context in which it operates, and contribute to operations outside one’s area of specialization
Reconceptualize requirements to find practical solutions to problems, challenge prevailing assumptions and provide alternative approaches, bring new useful ideas, cope with complexity and simplify activities
Say what you think, even if it is controversial, know how to make decisions avoiding being in limbo (in brief: to take risks);
Inspire others with a passion to excel, be committed to the company’s success and celebrate its victories
When in disagreement be forthright, not politically correct, while at the same time quickly admitting one’ s mistakes
Search for what is best for the company rather than what is the best for oneself, ignore one’s ego while looking for the best ideas, find time to help others, share information openly and actively.
Staff who are thus able not only to be part of a working environment, but who play a great game – with the aim of winning it. For Netflix, hiring qualified staff means hiring employees who put the interests of the company first and, as a natural consequence, become high performers.
Through the ‘keeper test’, the Netflix HR Unit asks Managers which staff they would like to retain at all costs. Those who are not included are paid off. The reason? Hire the best or a “star” as they like to call it.
This method encourages employees to perform at their best.
FREEDOM & RESPONSIBILITY
On one hand such a culture of excellence does not however suit everyone and it does perhaps have a controversial ethical dimension. Without a doubt, those who prefer peace and security can’t work for Netflix. In theory, if you’re not a “phenomenon” the company will throw you out.
On the other hand this culture also implies the relinquishment of supervision, relying on staff loyalty and the accountability that comes with delegation.
Ideal people, for Netflix, are self-aware, self-reliant, disciplined, constantly improving and are leaders. They don’t want to be told: “Pick up the rubbish on the floor”. They thrive with their freedom and they are proud of it.
The company does not suppress freedom as the business grows, as often happens with the adoption of a “philosophy of the procedure “: an approach that limits autonomy and causes people not to think, restricting everyone with predefined rules and schemas. If, in the short term, procedures make processes efficient and reduces errors, in the long run it does not appeal to creative people. And when the target market changes, you are no longer able to change and adapt in turn.
CONTEXT, NOT CONTROL
So what is the way out that allows for growth but at the same time not having chaos remaining creative and flexible?
Focus on performance and not on rules, stay informal and address increasing complexity through self-discipline and self-assessment. Focus on the necessary rules, like ethical and legal rules and those that prevent major disasters.
This applies, for example, to expenses policies (there are no maximum limits) and the leave policy: if you do not quantify the hours spent at work (or overtime), why quantify the hours and days of leave?
Netflix has only one major policy:
“Act in the best interests of the company”
Company managers don’t focus on checking up on people, but on the way they work. What does that mean? Strategy, parameters, objectives, clarity of roles, transparency in decision-making.
For Netflix, Managers adhere to the company’s ideals and objectives, they assign clear priorities and set the correct parameters. He or she sets the context and inspires and ensures everyone contributes to the strategies. Supervision is important in specific situations: for example, if the employee is still being trained, if he or she is not right for that role, or in an emergency.
HIGHLY ALIGNED, LOOSELY COUPLED
Strong orientation to values and objectives, less alignment on tactics: in Netflix meetings between different departments are kept to a minimum and are almost always flexible. Strategies are agreed and shared among staff without any levels of approval. Big, fast and flexible is the goal, made possible by high performing people in the right context.
PAY TOP OF MARKET
Another reason why Netflix looks for exceptional people? They cost less. An exceptional employee produces more and costs less than two mediocre employees.
Three questions are asked to understand how much the employee is worth:
- how much could that person could earn at another company?
- how much would the company spend on replacing them?
- how much would the company pay to keep them if you got an offer elsewhere?
So you have to pay:
- more than all other companies;
- at least what it would cost to replace an employee;
- the amount that needs be paid to keep the employee (in case they were to leave).
For the best employees remuneration is reviewed every year by answering the above questions. In this way, remuneration varies between roles and can rise quickly or remain stable for longer period – and any employee who performs well is always at the top of the market.
Not everyone in Netflix gets to grow and stay in the company forever.
Do you want to be promoted?
It is essential that:
- your work is quite substantial in terms of volume;
- you’re a star in your role;
- you implement corporate culture and values.
PROMOTION & DEVELOPMENT
Netflix inspires exceptional people to improve, giving them the opportunity to develop in the company of exceptional colleagues, as well as offering them great challenges.
On the other hand, the company avoids the traditional standardised processes of growth: staff plan their career, not the organisation.
Periodic performance reviews have disappeared thanks to the introduction of “360 degree informal reviews”. What does that involve? Everyone is asked, “what should your colleagues stop, start and continue to do?”
Feedback and engagement with colleagues thus shape personal and team growth.
How, then, are the basic principles of Netflix’s HR model substantiated?
Scalable models, flexibility and dynamism. A company that believes in people and puts them at the heart of its development, constantly testing them – and valuing them accordingly.
by Matteo Sola, Talent Garden Innovation School’s Digital & Innovation Consultant
Matteo Sola has a degree in sociology and a further qualification in human resources. Over the years he has worked in human resource management in companies and consulting firms focusing on managerial training and digital training. In Talent Garden he is responsible for corporate training and designs and organizes training courses and cultural change programs focused on digital for large companies. He is an expert in Digital Transformation processes in the fields of HR and change management.