No Rules Rules: Netflix and the Culture of Reinvention

Physical Copy:


By: Reed Hastings and Erin Meyer

Rating: A-

I am sure you have heard of Netflix. You know the little DVD-by-mail service that put Blockbuster out of business. Ya know, one of the most valuable and innovative companies on the planet? Yea, that one.

Netflix has mastered a culture of innovation and pivots to stay at the head of the pack in an ever changing industry.

This book was a deep dive into Netflix’s 127 slide Culture Deck.

“Netflix’s Culture Deck is perhaps the single most important document to come out of Silicon Valley.” – Sheryl Sandberg, COO of Facebook

1. Netflix has been successful because of its unique company culture.

Netflix’s culture values people, prioritizes innovation, and has few control mechanisms.

They have navigated 4 seismic industry shifts.

DVD-by-Mail subscription service to streaming to licensing original content produced by other studios to producing its own in-house movies and TV shows.

2. High talent density encourages employees to perform at their very best.

In 2001, the first internet bubble burst. Netflix was crushed and was forced to lay off a third of the workforce. 

Oddly, Netflix’s performance improved. They were getting the same amount of work done better with fewer people. 

The realization. A company with really dense talent is one everyone wants to work for because high performers thrive in an environment with other high performers. It holds people to a higher standard, and is more fun. 

How do you attract and retain these rock-stars? Simple, pay rock-star salaries.

3. Radical candor helps Netflix employees improve, even if it can be difficult to hear.

At Netflix, if you don’t speak up when you disagree with someone or something, it is as if you are purposely being disloyal to the company. You could help the business be better, but you are choosing not to.

Employees are encouraged to give feedback at all times, not just once a year as a performance review. Employees are encouraged to give feedback to their bosses not just the other way around.

There are rules about candor though.

  1. Give feedback with the aim of helping.
  2. Your feedback should be actionable.
  3. When receiving feedback, you should appreciate the effort and bravery of your colleague speaking up.
  4. You should think carefully about whether or not to accept it.

4. Getting rid of useless policies made Netflix employees more accountable.

Netflix famously has a no vacation policy. They don’t keep track of vacation days. If you want to go on vacation, you do it.

BUT you can’t just remove controls and expect everyone to behave as you expect.

Leaders have to set CONTEXT for the controls and MODEL good behavior.

Hastings had 2 fears in removing the vacation policy.

  1. Everyone would try to take less vacation than the others to impress the boss and eventually burn out.

So Hastings modeled vacation taking. He took elaborate vacations and showed pictures 

to his team.

  1. He feared that in the Summer, he would have an empty office and nothing would get done.

He asked his team to provide context to the different positions. I.e. accountants aren’t 

allowed to take time off in January when the annual books are due.

They have removed other policies all over the business from approval for expenses to travel. Netflix can do this because of context and modeling.

One of my favorite parts of the book is that Hastings went into great detail on how he uses Jack Stack’s Great Game of Business to provide context to his team. Everyone understands the financials and how their decisions affect the bottom line and the other departments. THAT IS IMPORTANT!

Giving your employees freedom promotes accountability and shows that you trust them.

5. Maintaining a talent-dense team requires a lot of intense effort.

To keep up the talent density, you have to do something extremely unpleasant: fire people who are merely adequate.

Netflix’s talent-dense team is not a family.

Jobs aren’t something you have for life regardless of performance. A job is something you do for a period of time when you are the best person for the job and the job is the best position for you.

Instead of a family, Netflix employees think of themselves as a pro sports team aiming for a championship.

Job loss does not only affect someone’s career, it also affects their finances and morale. So Netflix offers generous severance packages. An individual contributor gets 4 months pay and a VP gets 9 months pay.

Does internal competitiveness get in the way? No. Netflix wants high talent density and strong collaboration. So, there are no fixed number of positions. Employees aren’t fighting each other for one position. They all want to grow the pie together.

6. At talent-dense organizations, dispersed decision-making is most efficient.

At most companies, the boss makes the decisions on employee ideas. That’s a great way to limit innovation and slow down growth.

Netflix leads with context and lets employees make their own decisions based on what they feel is best for the company. This allows the leaders more time to tackle other problems.

If an employee does something stupid, they spend their time understanding why the employee thought that was the best decision and then they figure out how to improve that. Get out of there with your micromanaging!

This type of leading only works if you have a talent dense team that you trust to make smart decisions. 

Next Actions:

Implement the Great Game of Business ASAP!

How can we lean into talent density? How can we begin courting elite talent for our future needs?

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