What can we learn from Netflix's culture

Hi Indie Hackers,

in my last newsletter, I'm listing 5 takeaways and learnings from the book "No Rules Rules" by Reed Hastings (Netflix CEO) and Erin Meyer. It's a great book that I recommend and a great resource for startups and companies that want to encourage innovation within their teams.

My newsletter Modern Makers is a weekly newsletter about no-code & productivity tools. You can read the full edition here: https://modernmakerseng.substack.com/p/modern-makers-32

Here are my 5 takeaways from this book:

1. Freedom & Responsibility - the formula that best sums up Netflix's corporate culture. One cannot be achieved without the other. The freedom given to employees is very high: unlimited holidays and total trust on company expenses (the only rule to follow: does this expense help Netflix or not?). Netflix expects its employees to be exemplary and behave like adults. The rules are very clear. If these rules are not followed, the company does not hesitate to fire employees and explain to the rest of the teams the reasons for the layoff. Something pretty unique for a public company: at Netflix, quarterly results are made available to all employees before they are released to Wall Street = total transparency on the company's finances. Once again, Netflix empowers its employees by making them understand the risks (in this case, jail) that they would incur if they make these financial results public

2. Increase talent density - In the early 2000s, Netflix had to lay off a third of its workforce, going from 120 to 80 people, keeping only the very best employees in the process. To Reed's surprise, the effects were extremely positive. By keeping only its best people, Netflix had increased the talent density within the company. "For top performers, a great workplace isn't about a lavish office, a beautiful gym, or a free sushi lunch. It's about the joy of being surrounded by people who are both talented and collaborative. People who can help you be better. When every member is excellent, performance spirals upward as employees learn from and motivate one another." Since then, Netflix prefers to hire a huge talent with a very high salary rather than two or three employees for the same overall budget. Moreover, the company does not offer any bonuses but fixed salaries above the market average. This helps to take the stress out of the teams so that they can focus on the most important thing: their day-to-day work. Several studies show that a team with one or two merely adequate performers brings down the performance of everyone on the team. Jerks, slackers, sweet people with non-stellar performance, or pessimists will bring down the performance of everyone. Netflix sees itself more as a sports team than as a family. Just like a sports team, only the best elements are kept so that the team gets the best possible results. However, unlike a sports team, there is no limit to the number of spots on the team, so there is no unhealthy competition between employees

3. Try to instill a culture of candor - To be effective, feedback must follow the 4A rule:

Aim to assist : feedback must be given with positive intent. You don’t give feedback to make you feel better or serve your own interests. Not giving feedback that could help a colleague is ultimately tantamount to not wanting to help Netflix.

Actionnable : your feedback should include concrete actions to be implemented. Be very specific in your recommendations so that your colleague has a real action plan and guidelines to follow

Appreciate : when you receive feedback from a colleague, you should first thank her and listen carefully to her recommendations. Since this feedback is in the general interest of Netflix, don't let your personal emotions get the better of you (after all, humans have a natural tendency to dislike personal criticism)

Accept or discard : It is up to the person receiving feedback to decide whether or not to implement these recommendations. It is very important that both people are aware of this. In order to encourage this feedback culture, Reed invites managers to always include a feedback item in their agenda for individual meetings with their team members (either at the very beginning or at the end of the meeting). As a manager, create a culture where your teams can give you feedback and help you improve. “Only say about someone what you will say to their face.”

4. Lead by context, not by control - nowadays, the risk for most companies is no longer to make mistakes. The real risk is not attracting the best talent, not inventing new products or not being able to change direction quickly if needed (to pivot). These objectives are impossible to achieve if your company has a culture of control aimed at avoiding mistakes. At Netflix, everything is done to ensure that everyone has access to the information (the different levels of context) they need to take a decision. The book presents several examples of employees being surprised to make decisions on multi-million dollar projects. And to sign these contracts themselves! In general, Netflix invites an employee to make his own decisions, even against the advice of his boss. "Don't seek to please your boss. Seek to do what is best for the company."

5. Sunshine your failed bets and your mistakes - The real risk for a company like Netflix is to stop innovating. Innovation means taking risks, which necessarily implies mistakes and failures. Reed uses the poker metaphor - every employee has a pile of chips to use. So he has to take bets on the projects he really believes in. Netflix expects its employees to use their entire stack of chips. An employee who doesn't take a risk and keeps their chips will probably get fired. The important thing is to learn from one's failures, to make sure one doesn't make the same mistake again, and most importantly, to take full responsibility for one's actions. The company as a whole must then be able to learn from the failures encountered by each employee. "When you sunshine your failed bets, everyone wins. You win because people learn they can trust you to tell the truth and to take responsibility for your actions. The team wins because it learns from the lessons that came out of the project. And the company wins because everyone sees clearly that failed bets are an inherent part of an innovative success wheel. We shouldn’t be afraid of our failures. We should embrace them. And sunshine mistakes even more!"