Reference no: EM132702186

How Netflix Aims to Make Communication Radically Honest

1. What benefits do you think Reed Hastings and Patty McCord obtained from putting their vision for Netflix in writing in the culture deck? How effective do you think this medium was for this message?

2. What pros and cons do you see in managers following Netflix's practice of being radically honest about their employees' performance?

3. Would you want to work for an organization that practices radical honesty in communication as Netflix does? Why or why not?

When Netflix CEO Reed Hastings hired Patty McCord as chief talent officer to build a company based on the then-innovative idea of renting DVDs by mail, his vision was to create the kind of company they both dreamed of working for. As they met to discuss what that company would be like, McCord pointed out that a list of corporate values would not be what achieved their vision; they needed to ensure that the values were practiced on a daily basis. So they focused instead on the kinds of behavior they wanted to see, and they began recording those on PowerPoint slides. After months of writing and discussing the ideas with Netflix managers, they had a big document that became known as Netflix's "culture deck."

Culture deck values include freedom coupled with responsibility, meaning employees have wide latitude for how they carry out their work, as long as they meet their performance objectives. For example, employees take paid time off at their own discretion, but they are expected to perform at a high level. Employees also are entrusted with types of information that many companies would keep confidential. They can look up measures of company performance, and managers can look up the salaries of all employees. Company announcements related to staffing give reasons for employees leaving, though more often they tell about hiring and promoting people within the organization.

In the early years of Netflix, when it was still a small company, Hastings and McCord would use the culture deck as a tool for orientation of new employees. The two of them would gather 10 recent hires, show the slides, and lead a discussion of the behaviors and values they are meant to promote. Then Hastings learned of a service for posting presentations online, and he independently decided to post the Netflix culture deck for public viewing. Public access changed the purpose of the information. Tech workers would read the deck before they interviewed for a job. The result was that the interviewers and candidates were better able to identify who would embrace Netflix's culture of freedom and responsibility, versus who would better thrive at an organization with more structure. In this way, information sharing improved the company's recruitment and hiring results.

Sharing the culture deck supports a Netflix practice related to communication: radical honesty. The intent of radical honesty is to empower employees by giving them factual information about the company, including data about its performance, objectives, and desired behaviors and outcomes. In a radically honest environment, employees know what is expected of them, and they can tell whether they are succeeding. They also have input into performance appraisal, contributing to 360-degree feedback about managers' and coworkers' performance. Furthermore, they can choose which colleagues to review-even the CEO. And they are expected to speak up when they see a problem or have an idea.

Hastings and McCord (who has since left the company and started a consulting practice) consider radical honesty to be a strength of Netflix's high-performance culture. The company continues to grow rapidly, adding 2,000 employees in a recent year to reach more than 6,000. It has survived the technological changes sweeping the entertainment industry and taken the leap into producing original content. Netflix recently reported an employee turnover rate of 11%, better than the 13% annual turnover among technology companies overall.

A major challenge of radical honesty is that some messages are bound to be disappointing or critical, so they are hard to receive. In particular, people tend to feel threatened by criticism, even if it is true and relevant. In practice, efforts to deliver radical honesty in performance feedback have sometimes come across as harsh. Other approaches to honest and open communication make a point to consider employees' emotions, while Netflix's culture and leaders have focused mainly on delivering accurate data. Consequently, employees whose manner of thinking is highly objective and fact driven are satisfied with this approach, while those who are more relationship-oriented risk feeling betrayed when a manager or coworker says their performance falls short. Ideally, employees are receiving ongoing and complete feedback, so they should not be surprised by page 445 such a message. In practice, however, some managers struggle to meet this standard for delivering feedback. As part of providing employees with full information, these situations, including firings, typically are - disclosed to the whole team or workforce. Some employees respect the aim of openness, but it has the potential to shame those in the spotlight.