Books Business Technology

No Rules Rules

Author: Reed Hastings and Erin Meyer

My Rating: 5/5

Summary: A book that examines the revolutionary management philosophy of Netflix. It shows how the company’s culture of radical honesty, freedom and responsibility has been the key to success in the digital age.

My Takeaways

Netflix has a culture of people over process, emphases innovation over efficiency and had very few controls. 

Honesty always. 

Reed’s policies he put in put in place became stifling as the company grew, which lead to people leaving and people getting promoted who colored within the lines.

Reed wanted to promote innovation, flexibility and freedom. Not rule adherence. 

If you give employees freedom instead of more processes, to prevent them from exercising their own judgement, they will make better decisions. 

Increase the rate to density and candor (honest feedback habit) in order to remove policies and controls.

Don’t seek to plead your boss. 

Reed realized that culture is what shaped the company’s success. He wanted to build a culture where people connect the dots differently

Increase talent density. Talented people make one another more effective. High performers thrive with other high performers. (Steve Jobs a players attracted A players}

Performance is contagious. (Actor experiment)

Number one goal as a leader is to develop a workplace of stunning colleagues – highly talented people with diverse backgrounds and perspectives who are creative and can collaborate effectively. 

Say what you really think and give candid honest feedback, but with positive intent. 

At Netflix, it is tantamount to being disloyal to the company if you fail to speak up when you disagree with a colleague or have feedback to give. You could be helping the business but are choosing not too. 

People don’t like negative feedback in groups because it naturally triggers a fight or flight primal reaction in the brain that there is danger. 

Positive feedback releases oxytocin a feel good hormone that makes a mother happy when she nurses her baby.

Feedback loops are the most effective way to improve performance. 

Put feedback as an agenda item for 1:1 meetings if you’re the boss. 

Feedback must be given properly – aim to assist with positive intent. Clearly explain how a behavior change will change the individual or company not you. It also needs to be actionable. 

When receiving feedback. Appreciate it and accept or discard. 

Don’t confuse candor with being a jerk. 

Taking time off allows employees to see their work in new light. New innovations at Netflix came when people went on vacation, such as how content is suggested to users. 

Leaders at Netflix need to know that they are the models of behavior for their teams, and need to set the example of taking long vacations so their teams do. Avoid burnout. 

Leaders must set the context in which they should take vacation for the rest of the team

Netflix gives employees lots of freedom like removing expense approvals and travel polueces. The argument is that it’s worth it to pay a little more on that if it means that employees can work faster. The key is to clearly set context and reiterate that you must act in Netflix’s best interest. (Samsung 4K Tv example)

As companies grow from startup to more mature businesses, departments are created to monitors employeees and create policies that slow down innovation and creativity. 

“Rockstar principal” 1 great software engineer is better then 20 average software engineers. Netflix will pay top dollar to hire 1 great software engineer because they are 10x more impactful than multiple average engineers. 

Applying the rockstar principal to creative job rather than operation jobs (ice cream scooper) will yield 1Kx the results for Netflix. 

Operational roles give a cap to how much they can yield. Creative roles (like the majority at Netflix do not.}

Netflix does not pay bonuses because that method of compensation assumed that you can reliably predict the future and set an objective at any moment that will continue to be important down the road. 

Bonuses incentivize employees to focus on a target instead of supports what is best for the company in the present moment. 

Creative work requires that your mind require a level of freedom. People are more creative when not stressing about bonuses. Big salaries, not merit bonuses are good for innovation. 

Netflix openly encourages employees to know their worth by talking to recruiters and interviewing with other companies. This allows Netflix to collect the latest salary data and give the company a chance to match or raise an employees salary before they leave. It should be a choice to stay at Netflix. 

Reed doesn’t have an office and goes to where the work is of his employees. 

Sharing company information such as P&L statements empowers employees with a sense of ownership and removes the need for them to ask question which results in faster work. 

Netflix is transparent about why people get fired if the incident happened at work. If it’s personal, then they leave it up to the individual to decide how much to share. 

Reed talks about sharing his mistakes more than his wins. The Pratfall effect. 

A leader who has demonstrated competence and is liked by her team will build trust and prompt risk taking when they widely sunshine their own mistakes. 

“ Don’t seek to please your boss. Seek to do what’s best for the company”

Netflix has a dispersed decision making model that is not top down. This sense of ownership empowers Netflix employees to motivate them to do their best work. 

Netflix is not in a safety critical market like medicine but rather in a creative one. So the biggest threat is innovation and failing to come up with new ideas. 

Netflix employees think of the jobs as bets. You don’t get fired for taking the wrong bets, but rather not taking bets that will move the business forward or consistently displaying poor judgment over the long term. 

Employees don’t seek approval from their boss

For improving the outcome of your bets, Netflix employees follow the “Netflix Innovation Cycle”

  1. “Farm for dissent” or ”Socislize the idea”
  2. For a big idea, test it out
  3. As the informed captain, make your bet 
  4. If it succeeds, celebrate. If it fails, sunshine it. 

The Quickster debacle made Reed realize that by withholding your opinion, you are implicitly choosing to not help the company. 

When farming for dissent about big ideas, Reed writes a memo (Google Doc) and asks everyone to add feedback and rate from -10 to 10. 

If a bet fails, follow this approach after

  1. Ask what learning came from the project
  2. Don’t make a big deal about it
  3. Ask to “Sunshine” the failure. 

Yearly meeting to review bets that went well, bets that failed and open bets. This excersize encourages employees to implement bold ideas and be comfortable with bets that don’t pay off. 

Netflix is a team, not a family. 

Netflix implements the keeper test. 

Netflix does not stack rank employees because it reduces collaboration and enables employees to focus on competing against each other instead of the competition.

The keeper test examples don’t make Netflix look like a fun place to work at all. This book is written by the CEO and doesn’t shed (“sunshine”) the best light. Talking about the strengths and weaknesses of  person that was fired to his team when he’s not there seems cruel and adds insult to injury. 

Live 360 dinners are an effective way for Netflix employees to give honest actionable feedback to peers and bosses. Use the start stop continue method with 25% positive and 75% developmental. 

Lead with context. Not control. 

  1. Know the talent density of your staff and whether they have displayed good decisions in the past. (Teenage drinking example for parents)
  2. Know what industry you are in and whether to lead with error prevention or innovation. 
  3. Know whether your company is loosely or rightly coupled. Loosely coupled systems don’t affect the entire system if a change needs to be made. This manifests itself in decentralized decision making. 
  4. Know that everyone’s aim for the organization needs to be highly aligned. “Highly aligned, loosely coupled”. (Build a plan that pays for flexibility in the future, not error prevention)

Manage the org like a tree not a pyramid. 

With less direct cultures, Netflix sets ups formal feedback moments. 

Put formal feedback on the agenda. 

The 4 ‘A’s of feedback.

  1. Aim to assist
  2. Actionable
  3. Appreciate 
  4. Accept or decline 
  5. Adapt (your delivery and reaction to the culture)

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