Company Culture, The Netflix Way

Forward progress is always borne of innovation. This holds true on every level, from individual personal growth to large-scale, global development, and success in business is no exception. I have posted before on the importance of fostering a company culture that is grounded in the spirit of creative exploration, expression, and expansion. But creativity does not exist in a vacuum, and innovation is rarely the product of any stringent, linear procedure. Moreover, every individual finds their creative muse in different ways, at different places, and at different times. Thus, the only way to truly establish a culture that allows and encourages employees to work up to their full creative potential is to give them the freedom to do so. “Freedom in the workplacecan be the ability to keep non-traditional hours, work from home, take unlimited vacation days, exercise creativity in how to approach immediate job goals, or otherwise.”

Leading the trend of embracing employee freedom is subscription video-streaming company Netflix. What began as a humble mail-order movie rental business has seen astounding growth and success since its inception in 1997. “During 2013 alone its stock more than tripled, it won three Emmy awards, and its U.S. subscriber base grew to nearly 29 million.”

Such success has been due in no small part to Netflix’s radically unique company culture, the groundwork for which was laid by cofounder Reed Hastings and then-chief talent officer Patty McCord. They summed up their approach to company culture in two words: “freedom” and “responsibility.” To give just a few examples, salaried employees at Netflix are not subject to traditional annual performance reviews; they are allowed an unlimited number of vacation days; and they aren’t required to get expenses approved by management. While many managers and business leaders may cringe at the thought of relinquishing so much control, the idea is to bestow on employees “great amounts of freedom so they can take risks and innovate without being bogged down by process.”

On the other hand, though, how does Netflix manage to sacrifice so much upper-level control without turning into a proverbial circus? It’s simple: by treating its employees like grown-ups.  Like all grown-ups, this applies both in terms of freedom and in terms of responsibility and performance. From the get-go, the company aims to hire only “fully-formed adults.” “[CEO] Reed [Hastings] hired the right people by throwing out the rule book on hiring. He didn’t hire the brightest people, or the most experienced, or the most ambitious as most other companies do. Those simply weren’t the traits he was looking for. Instead, he hired people according to the quality of their decision making. Simply, could they make great decisions (again and again with regularity) despite uncertainty and without oversight.” If the company does make a mistake and hire someone who consistently underperforms or fails to conduct themselves as a “fully formed adult,” the employee is simply let go. McCord admits that this type of high-performance/high-pressure atmosphere can be intense, but “[a]lthough it may seem harsh, former Netflix managers say its an effective way to build a winning team.”

While Netflix’s exact company culture may tend toward the extreme, its 124-page “Culture Deck” (authored in large part by Hastings and McCord) can be extremely helpful as a starting guide or templates for those seeking to establish a company culture that is truly committed to encouraging creativity and innovation.