Chances are you've heard about Netflix's much hyped and dubiously titled 'culture document'. With over five million hits, it's been described by Sheryl Sandberg as one of the most important documents to come out of Silicon Valley - ever. Those are fighting words. Or at least they would be, if anyone disagreed.
Here's why. They're not afraid to tell employees to take as much holiday time as they want, spend Netflix's money as if it were their own, and expect to be packaged out (generously) for anything less than excellent performance. In fact, it seems they're not afraid, full stop. And now we get to the interesting bit: in their willingness - eagerness, even - to break the rules, they found that there weren't many there to be broken. Just old conventions, such as holiday time, that few companies were willing to look at, never mind challenge. Netflix did both.
Though much of the industry may have balked at the time, Reed Hastings, CEO, clearly knows what he's doing. He founded Netflix, is director of the board of Facebook, and served on the board of Microsoft. In an interview with Harvard Business Review, Hastings states that when innovation is the goal, traditional HR practices have to go, leaving companies with no choice but to embrace change. For this change to take off however, he stresses the importance of bringing employees along for the ride.
A report by McKinsey & Company supports this notion. (Admittedly the report is older than my eldest, but innovation doesn't mean throwing out what we've learned in the past - it means learning from it.) Its authors state that leaders need to realistically define the change required within their company and how it will be implemented for this change to be effective.
Leaders need to realistically define the change required within their company and how it will be implemented for this change to be effective.
Which brings me to another expert who knows a thing or two about rule-breaking leadership. The co-author of international business bestseller Built to Last: Successful Habits of Visionary Companies shared his thoughts with me about the single largest shake up to the business world in the past twenty years - the mass adoption of the internet.
"The internet impacts the way businesses operate - and more often than not - for the good," said Jerry Porras. "But if I had to put my finger on one dimension in the business world today that I think is very unhealthy over a longer term, it is the lack of commitment that exists between the company and the people that are employed within those companies."
Netflix flat out refuses to be one of those companies, which is why they work hard to put their employees first. That said, no one should confuse their approach with being anything other than self-serving. Fortunately, though certainly not accidentally, the extensive benefits they offer to their employees benefits the company as well. And here's why:
1. Companies run better with smart people
As a leader, you need to recognise the best talent and not settle for anything less. "The best thing you can do for employees—a perk better than foosball or free sushi—is hire only “A” players to work alongside them. Excellent colleagues trump everything else," said Hastings.
2. Smart people make smart decisions
If you can't trust your employees, don't employ them. "If you’re careful to hire people who will put the company’s interests first, 97% of your employees will do the right thing," said Hastings. That's why Netflix employees can determine their own holiday time. The same attitude extends to expenses, with employees asked to spend company money as frugally as if it were their own. In both respects, the company’s: 'Act in Netflix’s best interests' mantra has applied - and worked.
3. Smart people should be rewarded accordingly
"Many HR people dislike it when employees talk to recruiters, but I always told employees to take the call, ask how much, and send me the number - it's valuable information," said Hastings, who avoids annual reviews, five year goal setting, and bonuses based on performance. He believes feedback should be ongoing, career plans lived out day to day, and motivation (and ongoing employment) should come from the innate desire to do your best.
Since the very nature of change means it is constant, I can't help but wonder what comes next for Netflix. But no matter what the future holds, by overcoming the fear of doing things differently, they've found the courage to develop their business in a way that works for them. Sure, other industries may not be able to break quite as many rules, and certainly not so easily, but we can all challenge conventions in order to make a meaningful difference over the long term.
"Your job as a leader is to build something that is really great, enduringly great. You have a responsibility to your employees, your stock holders and your community to contribute something of substance and importance," said Porras. "Building a company that makes a difference is the most important thing you can do. You might not get as rich but you will get rewarded today, tomorrow and a hundred years from now."