the times | Monday September 7 2020 1GT 3
times
works 50 weeks a year or 48 weeks
a year? That’s only a 4 per cent
variation. Patty McCord [head of
human resources] suggested we
remove the policy altogether:
“Let’s just say our vacation policy
is ‘Take Some!’ ”
Unlimited vacation helps attract
and retain top talent, especially
Gen Z-ers and millennials, who
resist punching clocks. Removing
the policy also reduces bureaucracy
and the administrative costs of
keeping track of who is out and
when. Most important, the
freedom signals to
employees that we
trust them to do the
right thing, which in
turn encourages them
to behave responsibly.Allow any travel
and expensesIn the early Netflix
days, we were like
any start-up. There
weren’t any written rules
outlining who could spend
what or which hotels to stay
in when you travelled. The
company was so small that
each important purchase
got noticed. Employees
were free to buy what they
needed, and if they went
overboard someone
would spot it and
correct the behaviour.
By 2004, however,
we had been a public
company for two years.
That’s about the time when
most businesses begin to put
a bunch of policies in place.
Our chief financial officer,
Barry McCarthy, sent me a
document outlining a proposalOn Netflix: Selling
Sunset, and the Duke
and Duchess of Sussex.
Below: Reed Hastingsfor a new expense and travel policy,
which would reflect the types of
rules most midsize to big companies
were using.
We’d recently removed the vacation
policy, and, in the aftermath, I was
dead set against putting any new
control processes in place. I suggested
we just ask people to spend money
frugally. Employees should think
carefully before they buy anything,
just like they would with their own
money. We wrote our first expense
guideline: spend company money
as if it were your own.
I felt great about that. I was frugal
with my own money and frugal with
company money and assumed others
would be like me. But as it turned
out, not everyone was as tightfisted,
and the dramatically diverging styles
of spending one’s own money
created problems.
We saw quickly that spend company
money as if it were your own was
not actually how we wanted our
employees to behave. One of the VPs,
a guy named Lars who was making a
substantial salary, used to joke that
because of his love for luxury he lived
paycheck to paycheck. The spending
that accompanied this type of lifestyle
is not what we were going for.
So we changed the spending
and travel guideline to something
even simpler. Today the entirety
of the travel and expense policy
still consists of these five simple
words: ACT IN NETFLIX’S
BEST INTEREST.
That works better. It is not in
Netflix’s best interest that the entire
content team fly business from LA
to Mexico. But if you have to take
the redeye from LA to New York
and give a presentation the next
morning it would likely be in Netflix’s
best interest that you fly business,so you don’t have bags under
your eyes and slurred speech when
the big moment arises.Reveal company secrets
If a manager doesn’t know how many
customers the company has signed on
in the past weeks and months, and
what strategy discussions are in the
works, how does he know how many
people he can afford to hire? He has to
ask his boss. If his boss doesn’t know
the details of the company’s growth,
she can’t make a good decision either,
so she has to go to her own boss.
The more employees at all levels
understand the strategy, financial
situation, and the day-to-day context
of what’s going on, the better they
become at making educated decisions
without involving those above them
in the hierarchy.
We are perhaps the only public
company that shares financial results
internally in the weeks before the
quarter is closed. We announce these
numbers at a quarterly business
review meeting with our top 700
or so managers. The financial
world sees this as reckless. But the
information has never been leaked.
When it does one day leak (I imagine
it will), we won’t overreact. We’ll just
deal with that one case and continue
with transparency.Admit your mistakes
Your people are not stupid. When you
try to spin them, they see it, and it
makes you look like a fraud. Speak
plainly, without trying to make bad
situations seem good, and your
employees will learn you tell the truth.
Earlier in my career, at Pure
Software, I was too insecure to talk
openly about mistakes with my staff,
and I learnt an important lesson. I was
making a lot of leadership mistakesfire them quickly: the Netflix rules
and it weighed on me heavily. I had
hired and fired five sales directors in
five years. The first two times, I could
blame the person I’d hired, but by the
fourth and fifth failures, it was clear
the problem was me.
Certain my own incompetence was
bad for the organisation, I went to the
board and, as if in the confessional,
detailed my inadequacies and offered
my resignation.
But the Pure board didn’t accept it.
Financially, the company was doing
well. They agreed that I’d made
mistakes with people management but
claimed that, if they hired someone
new, that person would make mistakes
also. Two fascinating things happened
during that meeting. One was that, as
expected, I felt immense relief because
I had told the truth and come clean
about my errors. The other was more
interesting: the board seemed to
believe in my leadership more after
I had opened up and made myself
vulnerable to them.
Since then, every time I feel I’ve
made a mistake, I talk about it fully,
publicly, and frequently. I quickly
came to see the biggest advantage
of sunshining a leader’s errors is to
encourage everyone to think of
making mistakes as normal. This in
turn encourages employees to take
risks when success is uncertain...
which leads to greater innovation
across the company.
When you succeed, speak about it
softly or let others mention it for you.
But when you make a mistake say it
clearly and loudly, so that everyone
can learn and profit from your errors.
In other words, “Whisper wins and
shout mistakes.”Don’t be afraid to fire staff
We encourage all managers to
consider each of their employees
regularly and make sure they’ve got
the best person in every spot. To help
managers on the judgment calls, we
talk about the Keeper Test:
IF A PERSON ON YOUR TEAM
WERE TO QUIT TOMORROW,
WOULD YOU TRY TO CHANGE
THEIR MIND? OR WOULD YOU
ACCEPT THEIR RESIGNATION,
PERHAPS WITH A LITTLE
RELIEF? IF THE LATTER, YOU
SHOULD GIVE THEM A
SEVERANCE PACKAGE NOW,
AND LOOK FOR A STAR,
SOMEONE YOU WOULD
FIGHT TO KEEP.
We try to apply the Keeper Test
to everyone, including ourselves.
Would the company be better off with
someone else in my role? The goal is
to remove any shame for anyone let
go from Netflix.
I tell my bosses, the board of
directors, that I should be treated
no differently. They shouldn’t have to
wait for me to fail to replace me. They
should replace me once they have a
potential CEO who is likely to be
more effective. I find it motivating
that I have to play for my position
every quarter, and I try to keep
improving myself to stay ahead.
Extracted from No Rules Rules:
Netflix and the Culture of
Reinvention by Reed Hastings and
Erin Meyer, published tomorrow
by Virgin, £KWAKU ALSTON; KARWAI TANG/GETTY IMAGES