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Below the Surface Netflix Reinvents HR

When Netflix CEO Reed Hastings and HR leader Patty McCord released a 127-slide PowerPoint deck describing the Netflix culture and HR policies, it went viral. In early 2014 the deck had been viewed more than five million times, and it continues to be widely shared. Why the interest in an HR PowerPoint? Because the HR policies were so radically different from those of other companies. They reflect common sense rather than formal policies.

Here are a few:

• Hire, Reward, and Tolerate Only Fully Formed Adults
• Tell the Truth About Performance
• Leaders Own the Job of Creating the Company Culture
• Managers Own the Job of Creating Great Teams

• Managers at Netflix are continuously reminded that building a great team was their most important responsibility. They weren't measured on coaching, mentoring, or getting paperwork done on time. Teams were evaluated on accomplishments and creating great results. When McCord coached managers on creating great teams, she would tell them to approach team building in the same manner as former defense secretary Donald Rumsfeld, who said, "You go to war with the army you have, not the army you might want or wish to have at a later time." What she meant was that if a team operates in a fast-changing business environment and the skills of certain team members are no long needed, it's expected that managers will have honest conversations with them so they can find a role better suited to their skills, and they are expected to hire people with the skills they do need.

• McCord learned this lesson when she was talking with an engineer who had lost three employees during layoffs following 9/11 and the dotcom bust. When she told him that she knew he was putting in long hours and would hire people soon to help him, he said, "There's no rush- happier now. Learned that rather work than with subpar performers." This conversation with the engineer came to describe the most basic element of the Netflix philosophy: "The best thing you can do for employees-a perk better than foosball or free sushi-is hire only "A" players to work alongside them. Excellent colleagues trump everything else."

Questions

Problem 1: If you were a manager at Netflix and rewarded only on the results that your team produced and nothing else, would you embrace this policy or be uncomfortable with it?

Problem 2: If you are uncomfortable with the policy, what specific actions could you take to feel confident that you and your team could fulfill expectations and deliver results? Two of the policies under the principle "Hire, Reward, and Tolerate Only Fully Formed Adults" are (1) the expense policy, which states "Act in Netflix's best interests" and (2) There is no set vacation policy for salaried employees. This means employees can take whatever time off they feel is appropriate. Bosses and employees just need to work it out with one another.

Problem 3: As a manager, how much time do you think you might take off during a year? Explain your rationale.

Problem 4: As a manager, you have an employee who wants to take off 25 days in a row (more than 30 days requires a meeting with HR) and then the same employee says he would like to take another two-week vacation six months later. How would you respond to him? How would you respond to other team members who say they will have issues covering for him during that time?