The 4 Netflix HR Practices That Took Us From Average to Awesome
Blog: The Process Street Blog
Netflix doesn’t do bonuses. They don’t do formal reviews and they don’t do staff training.
Instead, their HR practices involve heavily scrutinizing employees’ skills and capabilities, and ruthlessly firing them for being good, not great.
“Netflix and chill” it is not.
But, despite these seemingly harsh HR practices, 71% of Netflix employees would encourage their friends to become co-workers. They’re officially the best place in the world to work (even beating the likes of Google, Facebook, Amazon, and Apple). Their employee turnover is only 11% a year, which is below the 13% annual average for tech companies. They’ve maintained a voluntary attrition rate of 3-4% over the last two years, and they make around $2 million per employee.
“Netflix has not only captivated the attention of its customers around the world, but also continues to grow its reputation as an attractive, sought-after employer.” – Forbes, Incubating Culture: How Netflix Is Winning The War For Talent
So, why is Netflix the best place to work, how do they maintain such a productive workforce, and what lessons can we take from them?
Grab some popcorn and let’s find as we go through the following in this Process Street post:
- HR practices: How Netflix does things
- 4 HR practices that changed HR forever
- How Process Street embraces Netflix’s HR practices & why they work for us
- Are Netflix’s HR practices right for you?
Settle in for the story of the year (that you can’t stream)…
HR practices: How Netflix does things
Purple water features, heated toilet seats, popcorn dispensers (naturally), moisturizer and mouthwash on tap, proper coffee machines, taco bars, fridges filled with drinks, and a ‘snack of the month’. I mean, book me in for a week.
The Monday blues can’t possibly be a thing for the Netflix employees. Not if they’re walking into all that each day.
But free popcorn, fancy toilets, and fully stocked fridges – lovely as they are – will only keep employees engaged, happy, and motivated for so long.
So, how does Netflix maintain a higher than average eNPS, a lower than normal staff turnover rate, and a reputation as the ‘best place in the world’ to work?
In short, they value integrity and excellence above everything else. They put people before policies. They only keep highly effective people, and they avoid all rules.
To me, this sounds incredibly exhilarating and utterly terrifying at the same time! But it clearly works.
“A great culture that focuses on freedom & responsibility and tries to avoid the pitfalls of typical Hollywood. You work among the best and brightest. You’re treated like an adult in terms of how & when to do your work– as long as it gets done and is done well.” – Current Netflix employee, Glassdoor, What It’s Really Like to Work at Netflix
Their outlooks, values, and philosophies have cultivated a culture that is “flexible, fun, stimulating, creative, collaborative and successful” which is what keeps employees engaged, happy, productive, and present.
Why? I wonder…
The Netflix way vs the traditional HR way
You probably don’t need me to tell you that HR gets a bad rap in the workplace.
“HR managers focus too much on “administrivia” and lack vision and strategic insight…”
“HR is obsessed with policies and training and creates roadblocks rather than focusing on important things like culture and trust…”
“HR departments serve as little more than a mouthpiece for corporate interests…”
Not if you work in HR at Netflix.
At Netflix, the HR team has a place on the board. They’re respected by the entire organization, they’re seen as an instrumental part of Netflix’s success, and they’re intrinsic to the unique company culture.
How have they managed that?
The deck of slides that changed everything
That deck of slides, known as the “Netflix culture deck“, completely reinvented HR, created the distinctive Netflix culture we see today, and, according to Sheryl Sandberg (COO of Facebook), was “one of the most important documents ever to come out of Silicon Valley”.
So, what the heck was in that deck of slides?
It’s safe to say that the content in these infamous slides created a set of revolutionary HR practices that have since defined the way Netflix (and now countless other companies) attracts, retains, and manages talent.
HR practices such as:
- To improve productivity, think like a sports coach: “If someone is not extraordinary…let them go.”
- To engage staff, give them power: “If you want to build a ship, don’t drum up the people to gather wood, divide the work, and give orders. Instead, teach them to yearn for the vast and endless sea.”
- To get results, only hire the best: “Only hire people who will put the company’s interests first, who understand and support the desire for a high-performance workplace.”
- To motivate your workforce, tell the truth about performance: “If you talk simply and honestly about performance on a regular basis, you can get good results—probably better ones than a company that grades everyone on a five-point scale.”
Let’s dig deeper into these HR practices…
4 HR practices that changed HR forever
“Companies don’t exist to make you happy. You know that, right? The business doesn’t exist to serve you.” – Patty McCord, Fast Company, She Created Netflix’s Culture And It Ultimately Got Her Fired
The Netflix culture deck wasn’t created to cultivate a unique company culture as you might expect, given that it did.
No, it’s primary purpose was to reduce the HR teams administrative load.
And you can see how engaging employees through empowerment, only hiring the best, cutting out rigid policies, and removing deadwood could reduce admin and leave room for bigger, more important tasks. But, as we’ve already established, the culture deck did more than that.
These HR practices changed everything: The culture, company, and the entire reputation of HR.
Let’s look at how…
Netflix HR practice #1: Improve productivity by thinking like a sports coach, not an HR manager
We’ve all seen it. In basketball, football, or baseball when someone on the team isn’t performing, they either get moved to a different position or dropped.
Remember Chris Johnson, one of the best running backs in the NFL? He won Player of the Year, made the Pro Bowl three times, and clocked up 4,598 rushing yards with 34 touchdowns in only two seasons. But, when fame and fortune went to his head and his performance bombed, he was dramatically dropped from the Titans. And rightly so.
It’s in the best interests of the team and it’s a natural, inevitable part of sport. The coach knows it, the team knows it, and the player (reluctantly) knows it.
Businesses and sports teams are a lot alike. They both rely on building the strongest team of people possible and encouraging them to work together to achieve a common goal. But, if someone on the team isn’t performing and driving you forwards towards that goal, then something needs to change. They either need to go or they need to move. Regardless of who they are or how good they once were.
“Netflix focus on what people get done, not how may days they have worked, tapping into a deep understanding of how to maximise productivity, creativity and motivation. – Involve, What Netflix Can Teach Us About HR
Few cultural approaches are as effective at ensuring high performance than this up-or-out approach. It’s not about how hard people work, how long they‘ve been with the company, or the number of hours they devote to their job. It’s solely about what they can do for the company.
“If we wanted only “A” players on our team, we had to be willing to let go of people whose skills no longer fit, no matter how valuable their contributions had once been” – Patty McCord, Harvard Business Review, How Netflix Reinvented HR
To stay on the Netflix team, staff are expected to bring their A-game every day, and prove their worth by passing the infamous ‘keeper test‘.
The keeper test forces management to analyze, assess, and question their staff to determine if they still deserve a place at the table.
If they do, their A-level performance is rewarded with more responsibility and greater pay. If they don’t, their B-level performance is acknowledged with a generous severance package.
“The often-parodied Silicon Valley image of one big family, skateboards and free snacks does not fit Netflix. We’re more like a professional sports team….Satisfaction comes from the work, not from the cookies.” – Patty McCord, SHRM, Tough Love at Netflix
Try it yourself. Think about the people on your team and answer the following “keeper test” question:
“If someone tells you they’re leaving for a similar job at a different company, would you fight hard to keep them?”
If the answer is yes, then you should recognize and reward them with a promotion and a pay rise.
If the answer is no, then you should offer that person a sweet severance package to prevent a potential legal battle (Netflix pay-out a minimum of four months full pay), thank them for their time, respectfully show them the door, and promptly replace them with someone better.
“Netflix operates like a sports team. You join the company to compete. And every day you do your best to contribute to the success of the team.” – Forbes, Incubating Culture: How Netflix Is Winning The War For Talent
Netflix HR practice #2: Improve engagement by giving power to the people
What type of people do you want working at your organization?
People who take ownership? People who are accountable? People who are responsible? People who are innovative, smart, and engaged?
Yes, yes, yes, and yes?
If that’s what you’re looking for then, according to Netflix, you need to give your employees the freedom and responsibility to be all those things.
The underlying reason that most people feel disengaged, or ‘stuck in a rut’ at work is because they’re trapped in the ‘system’ and powerless over their own destiny.
The theory is that if you trust people enough to let them use their logic and common sense instead of forcing them to conform to some rigid, old, outdated policies, you’ll get a more motivated workforce.
Netflix gives power to the people by setting common goals, communicating them clearly, and then stepping back to let their teams figure it out for themselves.
They let people shape their own careers rather than shoe-horning them into structured career plans. Training and formal career planning are out, and personal, self-development is in.
And, they offer perks such as unlimited holidays, flexible working hours, and uncapped expense accounts to put the control firmly back into their employee’s hands.
Uncapped expenses?! Are they mad? How do they stop people from abusing this level of trust?
By hiring the right people…
Netflix HR practice #3: Improve performance by only hiring the best
Netflix’s hiring policy is centered around hiring only the best adults. That doesn’t just mean they have to be over 16, it means they’ll only hire adults who will ‘act in Netflix’s best interests’ and support the desire for a high-performance workplace.
They believe that if you hire adults, 97% of your employees will do the right thing.
That’s why Netflix doesn’t offer bonuses, a classic perk that makes organizations desirable to many, but do offer unlimited holidays.
Talent managers at Netflix don’t waste time poring over resumes and job application forms. They go out of their way to find adults who live and breathe the Netflix values and they bypass superstars with big egos, bad attitudes, and poor work ethics.
“During the hiring process, look for soft skills such as empathy and emotional intelligence, and try to envisage how the candidates will slot into the team you’re placing them with.” – Peakon, Netflix Company Culture Focuses on “People over Process”
They interview and observe candidates carefully and ask thoughtful questions that reveal more about behavior and judgment than well-rehearsed answers to textbook questions do.
Why do they go to such great lengths to find the best?
The benefits of hiring the best people in the game are obvious: Great people achieve great things.
But there’s more to it than that.
The best people inspire, motivate, and push others to do better. Amazon, who have followed in Netflix’s hiring footsteps, believe that the best breeds the best and that securing the right talent has a multiplier effect: “High standards are contagious.”
Not only that, but the best only want to work with the best. They want to debate ideas with like-minded people, they want to learn from their heroes, and, as elitist as it sounds, they want to talk to people that are up there, in their world. They get frustrated with slower, uninspiring people that don’t bring anything to the table.
Excellent colleagues are a better perk than free sushi and foosball. They trump everything else.
Netflix HR practice #4: Improve motivation by telling the truth
When someone’s underperforming, tell the truth. When your team is failing to hit targets, tell the truth. When the company changes direction, tell the truth.
Don’t sugar coat feedback, stop with the shit sandwiches, and just tell it like it is.
Think of it this way. How do you feel when someone blatantly lies to you? When they try to cover something up or pull the wool over your eyes? You feel like they’re making a fool out of you, don’t you?
The trust goes, you lose respect, you feel betrayed, and you make a quick exit, right?
That’s exactly how employees feel when an organization hides the truth from them.
Netflix makes a point of being completely transparent with its employees. They believe that if they can be as open and honest as possible, it makes their staff feel respected and trusted – which is a massive motivator.
There are no secrets at Netflix. No whispers, no back-stabbing, and no nasty surprises.
What you see is what you get at Netflix and employees know this. So, instead of wasting time worrying about, questioning, or second-guessing what the truth may or may not be, they focus on doing their job and being the best.
I think that says it all, don’t you?
Ok, so all this sounds great in theory, but how does it work in the real world? For ‘normal’ companies that don’t swim in the same sea as the Netflix, Amazon, and Google giants?
How Process Street embraces Netflix’s HR practices & why they work for us
Namely its HR practices.
To explain what I mean, I’ll revisit the Netflix HR practices outlined above, and show you how the Process Street HR team uses them to improve employee engagement, retention, satisfaction, and productivity.
HR practice #1: Boost productivity by thinking like a sports coach
This document outlined precisely how he liked to work, what he valued in team members, what he expected from us, and what his high-level goals were. Like any good sports coach, he told us straight-up what his expectations were and what his game plan was.
“I care about results [and] your direct contribution to driving business goals, the quality of your work deliverables, the way you’re perceived by stakeholders, and the degree to which you achieve your own development goals.” – Bryan Sise, User Manual for Bryan Sise
I for one appreciated this direct approach. He made it clear from the start that the results we were delivering were more important to him than the number of hours we were working or the long list of tasks we had to complete. I knew exactly what he wanted, where he was coming from, and what he cared about. This level of clarity about his drive to achieve results gave us direction and focus and every single member of the team has stepped things up several notches since he came on-board.
Watch this space is all I can say…
HR practice #2: Improve engagement by giving power to the people
Like Netflix, Process Street gives its employees unlimited holidays, flexible working hours, and most importantly, trust.
“We treat employees like grown-ups. We know that the best way to grow is to hire talented people, and then get out of their way.” – Ashley Chain, Process Street’s People & Operations Manager
Instead of limiting our holiday allowance to a set number of days, we’re trusted to take as much holiday as we feel we need.
Rather than scrutinizing our expenses, those in charge of budgets are simply expected to “act in Process Street’s best interests”.
And, one of our core values is “act like an owner” which encourages us to take responsibility and accountability for our own work, success, and career progression.
I’m responsible for, and in control of, my own work. This is incredibly motivating. It’s up to me what I do and when I do it, as long as it gets done.
If anything, this approach makes me want to work harder. I’m not on a slow-moving conveyor belt, going through the motions, attending the obligatory training, ticking all the boxes, and waiting for someone to leave before I get moved into a position that’s not right for me. My career progression and direction is in my own hands.
For some, this level of trust might seem like a fantastic opportunity to sit back and relax. But I can tell you, hand-on-heart, that no one at Process Street thinks like that.
And that’s because Process Street has hired, well I don’t wish to blow my own trumpet, but…
“We go to great lengths to hire the right people. We only hire people we know for sure will thrive in this type of environment, because it isn’t for everyone.” – Ashley Chain, Process Street’s People & Operations Manager
HR practice #3: Support performance by only hiring the best
Now, I’m not suggesting for one second that I’m ‘the best’ but…
Process Street, like Netflix, goes to ‘great lengths’ to find the right people for the job. Being a fully distributed company, we take extra care and have to be doubly certain that the people we hire will live by our core values and act like owners, default to action, practice prioritization, focus on the process, pay attention to detail, and over-communicate everything, twice.
For example, I had to go through four interviews, submit a 2,000-word blog post, and provide three glowing references before I was offered this job.
“We always get candidates to interview with several different people from within the company so they get a feel for who they’ll be working with and we get a feel for how they’ll fit in. And, we always ask them to complete some sort of test so they can see what working at Process Street would be like, and we can see what their skill-sets and capabilities are. It’s important that both parties get a 360-degree view on what they’re potentially walking into.” – Ashley Chain, Process Street’s People & Operations Manager
But I love that. It means they don’t just hire any old person for the role. It’s a well-thought-out decision which makes it all the more meaningful when you get offered the position. Infact, I turned down a similar job (that was offering me more money and more benefits) in favor of Process Street because I felt I was a carefully considered hire and not a quick fix or stop-gap.
Not only that, but this approach means we know for sure that every new person that joins the team is going to be knock-the-ball-out-of-the park amazing.
“We don’t hire any old person. Although we want to hire people as quickly as possible, finding the best person will always take priority over filling a gap in resources.” – Ashley Chain, Process Street’s People & Operations Manager
HR practice #4: Increase motivation by telling the truth
Transparency is big at Process Street.
For instance, we have a company meeting each month where the Executive team runs through what we’re doing, why we’re doing it, and how we’re doing it. Giving us this type of context enables us, as employees, to understand where the business is going and what we need to do to help it get there. It gives us direction, motivation, and focus.
“The Executive team breaks things down for us so we can see how what we’re doing affects the bigger picture and end-goal.’” – Ashley Chain, Process Street’s People & Operations Manager
Nothing is hidden. Our OKRs are made visible for the entire organization to see so we all know what we’re all working towards.
We don’t have yearly make-or-break performance reviews or rigid career plans. We have weekly 121’s and open and honest conversations about how we’re progressing and what we’re struggling with.
We’re encouraged to give each other frank feedback to improve our work and we have a retrospective each month that allows us to look back at what we’ve done and talk about how we can improve in an honest, open way.
Like Netflix, we also feel that:
But, effective as they may seem, these HR practices aren’t necessarily the right approach for everyone.
Are Netflix’s HR practices right for you?
Surprisingly, the biggest parallel I’ve drawn between Netflix’s HR practices and Process Street’s is the focus on people.
“At Process Street, it really is all about the employees. The team comes first, not the company. And as far as I’m concerned, it’s the best way to approach hiring and firing decisions.” – Ashley Chain, Process Street’s People & Operations Manager
Despite its fend-for-yourself, dog-eat-dog reputation, Netflix is all about the people. “People come before policies”, and all the decisions they make are focused around their employees and the team they carefully nurture. Even seemingly harsh redundancies are made to improve team morale.
But is their blunt, laissez-faire approach to HR practices right for you and your organization?
Well, if your business depends on creativity, like for example an advertising agency or a cutting-edge tech company (like Process Street), then this level of freedom and flexibility is a key driver of success.
But, if you’re a more traditional company where success is measured by efficiency, like Boeing or NASA for example, then a more formal structure with stricter policies and procedures might work better.
Having said that, there are plenty of companies today that combine a structured approach with a little freedom. For example, flexible working hours are becoming the norm for organizations where previously that wouldn’t have been conceivable.
Regardless of whether the Netflix way is the right way, you can still take a lot of wisdom from them and their groundbreaking culture deck.
Hiring the best people, trusting your employees to do the right thing, thinking strategically, and telling the truth are all applicable HR practices that you can introduce into your culture.
“Comfort is found in complacency. Pushing boundaries breeds discomfort…But Netflix never promised comfort, it only guarantees adventure.” – Forbes, The Netflix Pressure-Cooker: A Culture That Drives Performance
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What do you think about Netflix’s culture deck and its outlandish HR practices? Let us know in the comments below! Who knows? You may even get featured in an upcoming article!
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