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Lessons we can learn from Netflix

October 19, 2016

By Heather Nezich, courtesy of SBAM Approved Partner ASE

Netflix is well known for their innovative approach to talent and culture.  Their approach is very compelling and while it might not work for everyone, bits and pieces of it can be applied and lessons can be learned from this innovative point of view.  Below outlines five approaches they take that tear down typical corporate polices.

Hire, Reward, and Tolerate Only Fully Formed Adults
So many companies spend endless time and money writing and enforcing HR policies to deal with problems created by only 3% of employees.  Instead, Netflix avoids hiring those people in the first place, and if they do make a mistake, they let that person go with a generous severance package.  Netflix relies on common sense instead of formal policies and typically gets better results at a lower cost.  They hire people that always put the company’s best interest first and who thrive in a high performance workplace.

These trustworthy, “fully formed adults” are not given a set amount of vacation time per year.  Employees are told to take off whatever amount of time they feel is appropriate.  Hourly workers have a more structured plan.  Departments work it out amongst themselves to ensure adequate staffing and that project timelines are met.  Common sense plays a big role.  Finance team members know the end of the month is not an ideal time to take off.

They also do not have a formal travel and expense policy.  Their policy is simply stated in five words: “Act in Netflix’s best interest.”  Employees are asked to spend money as if it’s their own.  If some employees are eating at too extravagant of restaurants, they are spoken to and it’s handled on a one-off basis and resolved.  They have found that if they create clear expectations of responsible behavior, most employees comply.

Tell the Truth About Performance
They eliminated formal reviews.  Instead, they ask employees and managers to make conversation about performance a regular part of their work.  They found that having annual performance reviews with specific measurement rarely resulted in improved performance.  Instead they now use 360-degree reviews.  Employees are asked to identify things that colleagues should stop, start, or continue doing.  Anonymity is allowed, but they’ve reached a point where many employees sign their feedback or even have face to face meetings.  When asked from other HR professionals how they get away with no formal reviews in such a large organization, they state that “if you talk simply and honestly about performance on a regular basis, you can get good results—probably better ones than a company that grades everyone on a five-point scale.”

Managers Own the Job of Creating Great Teams
Managers at Netflix are continually told that building a great team is there single, most important task.  Managers are not measured on how great of a mentor they are or if their paperwork is in on time.  They are measured on the performance of their team.  They strive to hire only high performers.  Their theory goes back to this – if you hire employees who are “fully formed adults” who put the company first, an annual bonus won’t make them work any harder or smarter.  For this reason, they do not offer performance bonuses.  They simply pay fair, market rates.  And they keep an eye on market rates to make sure they continue to pay employees what they are worth.   They encourage employees to talk to recruiters to know their worth, and then share that information with their manager.  

Leaders Own the Job of Creating the Company Culture
As Patty McCord, former chief talent officer at Netflix, states, “As leaders build a company culture, they need to be aware of subcultures that might require different management.” An example of this is when a finance manager suggested forcing all employees to go to direct deposit for their paychecks.  But it had to be pointed out that there is a big difference between professional, salaried employees and hourly call center employees.  Many hourly employees don’t even have bank accounts.  It’s taking into consideration little things like this that can make a big difference in employee satisfaction.

Good Talent Managers Think Like Businesspeople and Innovators First, and Like HR People Last

So often talent teams are too focused on getting onto “Best Places to Work” lists, which are really just based on perks and benefits.  HR departments can throw team building events or give away t-shirts, but at the end of the day if business is failing or work conditions are poor, employees will still complain and be unhappy.  All the snacks and perks in the world can’t change that.  Netflix’s theory is that HR managers should not be company cheerleaders, but instead think of themselves as good businesspeople.  What’s good for the company?  How do we communicate that to employees?  A test for this could be asking employees if they know specifically what they should be doing right now to increase their bonus.  If they can’t answer that question, then the HR team needs to work with management to ensure better communication of the company and department goals.

While not every company can function in the ways Netflix does, perhaps they can inspire HR leaders to think innovatively and not always follow the norm.  Think of what will work the best in your organization and what will motivate and inspire employees in your company.  Don’t be afraid to try new things or “break the mold.” 

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