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  • Writer's pictureDominic Ellison

Hard Work – Not Relevant: Team Building Netflix-Style

Netflix have a single aim when recruiting, retaining and removing staff – to build a dream team. A dream team, Netflix states, is one in which all of your colleagues are extraordinary at what they do and are highly effective collaborators.

Netflix value the dream team highly, and this is most evident in their remuneration. Rather than focus on developing a landmark Silicon Valley suburban office park campus replete with town squares, pop-up restaurants, free gyms, free bars and and other coercions to keep staff on site for as many hours of the days as possible, Netflix invest in building a team of the highest performers in their discipline who, says founder Patty McCord, are in pursuit of ambitious common goals, for which we spend heavily.

‘Imagine if every person at Netflix is someone you respect and learn from’ is one of the invitations to all new team members in Netflix’s infamous orientation slide deck.

We’re a team, not a family.
We’re like a pro sports team, not a kid’s recreational team.
Netflix leaders hire, develop and cut smartly, so we have stars in every position.

A UK Premiership football team or American NBA Basketball team will not carry a team member who, on reaching the midpoint of the season has been on the bench for every game. That player will already know that he is on the transfer list.

Netflix asks its managers to regularly apply the Keeper Test in their thinking about their contributors – ‘Which of my people, if they told me they were leaving, for a similar job at a peer company, would I fight hard to keep at Netflix?’ and any contributor who fails to make the list in this thought experiment ‘should get a generous severance package now, so we can open a slot to try to find a star for that role’.

Netflix believe that what is special about their culture is how much they:

  1. encourage independent decision-making by employees

  2. share information openly, broadly, and deliberately

  3. are extraordinarily candid with each other

  4. keep only (their) highly effective people

  5. avoid rules

All of this is exemplified in the corporation’s infamous orientation slidedeck, which forms part of each new team member’s induction. It is their focus on high performance which gets most external notice and from which all systems thinkers should seek to learn.

An eye-catching slide in the deck is headlined:

Hard Work – Not Relevant

At Netflix ‘Sustained B-level performance, despite “A for effort”, generates a generous severance package, with respect’, whereas ‘Sustained A-level performance, despite minimal effort, is rewarded with more responsibility and great pay’.

We know that sustained A-Level performance is not entirely in hands of the worker and can often be thwarted by external factors or changes of pace within the business model. When the market shifts dramatically due to a new technology or a competitors business model, Netflix reacts swiftly and decisively, often with huge impacts for contributors.

In other words, if they don't need you anymore or the business changes or if things aren't working out, you will be cut.

Don't expect this to be a job for life.

Don't expect to stick around forever.

And Netflix is devout to this philosophy, even in really good times.

For example, Netflix was a step ahead of its industry when it started to stream content, as opposed to mailing DVDs to its subscribers. McCord employed a brilliant team of engineers who created a platform for this market innovation, which became the basis for what Netflix is today. The scaling this created was so vast that there was no infrastructure capable of meeting the new demand generated. Streaming online takes a huge amount of data, and Netflix (or indeed any media company) just wasn't equipped to meet demand if suddenly its entire customer base decided to start streaming. So McCord decided to cut the very engineering team whose expertise had taken Netflix to this point of explosive growth, and instead hired Amazon (who would later become Netflix' principal competitor) to solve this problem, bitterly disappointing people who came to Netflix and expected that they'd be able to stay as long as they worked hard and did good work.

McCord recounted to NPR's Planet Money a conversation with one product tester who was about to lose her job to automation:

So I called her up. I'm like, what's up with you? She's like, I can't believe you treated me this way, I mean, after all of this time. I'm like, get in here. So she comes. She sits down. I'm like, what part of this is a surprise? She said, well - I'm like, we've been talking about this as a strategy for years. You've been in every - I've been in - I've sat next to you (laughter). I mean, we've talked about this. And she goes, yeah, but I think you could find me another place in the company. I'm like, I can, but the same thing's going to happen. I mean, I really can't - I'd be making something up for you. And she said, well, you know, I've worked really hard. This is really unfair. I'm like, and you're crying. She's like, yeah. I'm like, you dry your tears and hold your head up and go be from Netflix. You're the - why do you think you're the last one here? Because you're the best. You're incredibly good at what you do. We just don't need you to do it anymore.

Many high performers are attracted to this culture at Netflix and are very well recompensed for their lack of job security and stability - Netflix offers unlimited annual leave and pays more than pretty much any other company in Silicon Valley. To thrive at Netflix is to view your job as potentially transient and to avoid feelings of bitterness when let go, because this is the right decision for the business. Generally, contributors leave having made a significant income, which a cautious person will have used to invest in order to protect against the transience of their employment. Usually they leave with a very generous golden handshake and always with the very marketable prestige of being able to introduce themselves ‘Jenny from Netflix’ to potential future employers.

As a leader of a charity, social enterprise or public sector department is it probable that you don’t have the resources to provide this level of financial protection to employees that will allow you to cut them at the behest of sudden changing business priority. As such, we tend to invest in team members for the long term. This has the potential to build strong genuine relationships with customers and partners, as well as excellent corporate memory - but also risks trading a high-achievement culture for one unable to adapt quickly to external market change and one in which system conditions and their consequential processes are slow to evolve, grinding an organisation painfully into irrelevance and losing the social impact ity once acheived.

Wherever we place ourselves on this spectrum, we cannot afford to ignore the principles that Netflix espouse in their slide deck:

1. encourage independent decision-making by employees

This is absolutely fundamental to becoming a systems thinking organisation. The means to make meaningful decisions need to be in the hands of those working on the frontline. Achieving this requires that we;

2. share information openly, broadly, and deliberately

All information, including meaningful and useful measures, must be in the hands of everyone who is in the work or who are supporting the system that enable those in the work to make decisions in the interests of their customers

3. are extraordinarily candid with each other

It is important that we create an environment of radical candour around an agreed set of attainable objectives and key results that we can hold each other to account to.

4. keep only our highly effective people

If we structure our assessment and appraisal systems around Deming's understanding that 95% of performance is governed by the system, we cut out the wasteful elements of managing people and focus instead on supporting our contributors with the systems that allow them to deliver the highest quality, we give the full opportunity for effectiveness. If people fail to thrive in these systems it demonstrates that they are not the best fit for an effective, purpose driven and results-orientated organisation

5. avoid rules

Whilst we remain rigid in our application of systems thinking principles, we are constantly challenging perceived wisdom, archaic market structures and importantly over-rigidly interpreted legislation in order that we deliver the most effective and efficient public services.

If you are in the enviable position of being able to pay way above the market rate for the best talent - to the extent that you can cut them from your values-driven organisation without real concern for their financial wellbeing then the Netflix model shows extremely strong results.

It is worth noting however, with perhaps only a hint of schadenfreude, that when Netflix's business model was to break from the control of the major studios, who held the rights to all of the content which Netflix trade in, by moving to Hollywood and creating its own content as a major production studio responsible for some of the most innovative and successful TV and cinema ever created, McCord was found to no longer have a skillset that matched the needs of the company, no background in entertainment, no experience of hiring directors or being at that end of production. And so she found herself in the position of her skills no longer being required and, in accordance with the principles she had established and so firmly adhered to, she was cut from Netflix - presumably with a generous severance package.

Despite the attitude shown to her contributors who felt hurt when they were cut, McCord said leaving was 'terrible and painful and sad' and she still does not like to talk about it in interviews.

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