Tudum! The reinvention of HR at Netflix happened when a PowerPoint deck created by Netflix executives to outline their talent management strategies gained widespread attention and became a viral sensation, garnering over 5 million views online.
It had an opening line that got everyone curious before clicking on that article. “What gives Netflix the best chance of continuous success for generations of technology and people?”
Let’s find out what happened?
Netflix experienced its initial phase in late 2001 with a modest workforce of just 120 employees. However, when the tech bubble burst, the company had to confront the necessity of reducing its workforce, which proved to be a difficult and challenging process. The increasing popularity of DVD players led to a surge in demand for Netflix’s DVD-by-mail subscription service, which led to exponential growth in its business. Post this remarkable shift, what created the need to reinvent HR policies at Netflix? Two key incidents led to HR reinvention at the ultimate destination of Entertainment – Netflix.
The first incident involved one of their top engineers who, after experiencing layoffs, discovered a preference for working alone rather than with underperforming colleagues.
The second incident occurred when Netflix had to let go of an exceptional bookkeeper.
These events led the Netflix team to develop five strategies that gained overnight popularity.
- “Hire, reward, and tolerate only fully-formed adults.”
Netflix’s current vacation policy can be summarized as “take a vacation,” while their employee expense policy is condensed into 5 words: “Act in Netflix’s best interests.”
Previously, Netflix had a policy that granted 10 vacation days, 10 holidays, and a few sick days. However, when this policy was made public, auditors were required to implement an official attendance and leave tracking system. Instead of adopting a formal plan, Netflix employees took a different approach.
Salaried employees were then encouraged to take time off whenever necessary, understanding that managers and employees would communicate and coordinate accordingly.
- “Tell the truth about performance.”
Around ten years ago, Netflix made a significant change by eliminating formal performance reviews and embracing informal 360-degree performance reviews. According to McCord, Chief talent officer, the process was kept relatively straightforward. Employees were asked to provide feedback on what their co-workers should stop, start, or continue doing.
- “Leaders own the job of creating the company culture.”
McCord emphasizes three key issues that arise when leaders attempt to establish a company culture. She shares a personal anecdote about joining a new organization after leaving Netflix.
During a tour with the CEO of the new company, McCord inquired about their most important value. The CEO responded with “Efficiency.”
McCord then presents a hypothetical scenario where she, as an employee, is playing a game of pool at 2:58 pm and expects to finish in five minutes. However, there is a meeting scheduled for 3:00 pm. McCord asks if she should cut the game short or continue playing.
The CEO insists that she should finish the game.
McCord highlights that this contradicts the value of efficiency that the CEO emphasized and develops a sense of inconsistency between the promoted values and the behaviors being demonstrated and encouraged.
The second issue involves ensuring employees understand the “leaders drive the business.”
The third issue revolves around a “split personality start-up.” McCord cites an example from her experience at Netflix, where she had to remind individuals about the significant differences between the salaried employees at the headquarters and the hourly workers in the call centers. She emphasizes that as leaders shape company culture, they must be mindful of subcultures within the organization that may necessitate different management approaches.
- “Managers own the job of creating teams.”
A prominent aspect of how Netflix transformed HR was by encouraging managers to envision their team’s achievements six months into the future.
There were 2 questions were posed to the managers:
- What specific outcomes do they envision?
- How does the work differ from the team’s current activities?
In essence, managers were prompted to think about the concrete results they anticipated and how the work would evolve compared to the present state.
- “Good talent managers think like the innovators first – and like HR people last.”
McCord argues that many HR specialists allocate too much time to morale-boosting initiatives, a trend still prevalent today as teams strive to secure a spot on the “Best Places to Work” lists.
McCord suggests HR professionals should view themselves as business executives instead of solely focusing on cheerleading. They must consider what is best for the company and find effective ways to communicate that to the employees.
McCord proposes a straightforward test: approach any employee and ask, “Do you know specifically what you should be doing to increase your bonus?” If an employee cannot provide a clear answer, it indicates that the Netflix HR department needs to be more effectively conveying expectations.
This approach is a prime example of how Netflix reinvented HR.
