Sales Savvy

In part one of this series, I talked about some key points in Netflix’s corporate culture that help them build a transparent, high performing and accountable culture. The corporate results are clear, they have enjoyed consistent revenue growth, a 26% increase in subscribers (Q2 09 vs. Q2 08) and a 21% growth in revenue (Q2 09 vs. Q2 08). In their corporate guide titled “Reference Guide on our Freedom & Responsibility Culture”, they frame the discussion with seven aspects of their culture which reinforces their desire to encourage a thinking corporate climate.

First of all, the seven aspects of their culture are:

• Values are what we value
• High performance
• Freedom and responsibility
• Context, not control
• Highly aligned, loosely coupled
• Pay top of market
• Promotions and Development

Under the Freedom and Responsibility section, Netflix contradicts corporate tendencies because they work to increase employee freedom as they grow rather than limit it. In creating such a work environment, they are able to attract creative and innovative people and reap the rewards with sustainable business results. I talked with someone today whose company transitioned from start up to high growth to publicly traded. Their goal was to maintain the entrepreneurial spirit despite their growth and they are also reaping the rewards of a culture that favors freedom, good judgment and calculated risk taking (“we’d rather you take a risk and make a mistake than do nothing at all…”). This particular company grew from $500M to $1.1B in five years so the formula clearly works for them.

What Netflix points out in its employee guide is that most companies tend to increase controls to reduce risk and errors as they grow. The increased constraints diminish innovation, risk taking and inside talent and they are less likely to quickly adapt or respond to fluid market conditions. Their point is that with the right people, the emphasis is less on new processes and more on the quality of talent pool. Is there any governance around this? Yes. Netflix has two rules: prevent irrecoverable disaster and adhere to moral, ethical and legal issues.

Since this guide was published the greatest amount of buzz concerns their vacation policy and tracking—they have none. They quoted an employee (from 2004) who said “There is no clothing policy at Netflix, but no one has come to work naked lately.” While I can appreciate the humor in the statement, the “no vacation policy” is a reinforcement of the culture they created. The message is: Netflix expects to hire the best, compensate accordingly and get results. They trust that you will use the same level of judgment and act in their best interest as well.

Here some other highlights (because there are about 50 more slides to go!):

• The best managers figure out how to get the best from people by establishing context, not controlling the people or outcomes
• When employees fail, managers should start by asking themselves what they could have done better to set the right context, insight and guidance
• “Highly aligned, loosely coupled” means group interactions are focused on strategy and goals. Groups will move faster to tactical development and execution in a climate of trust (to get the work done) vs. audit.
• Pay accordingly. Their “goal is to keep each employee at the top of market for that person”.
• It’s okay for employees to test the job market and validate their worth—with the caveat that you talk to your manager about what you find so a salary discussion is transparent, honest and fact based.
• You can move from “the minors to the majors” but you have to be a superstar. Opportunity, the competing pool of superstars and timing will play a role in advancement.
• Personal development is a personal responsibility not a corporate responsibility.

Can you install Netflix’s culture into your organization? Maybe not. I think what makes Netflix unique is the practical application of their culture–starting at the top and reinforced throughout the company. It is based on reciprocity and respect for strong individual talent and results. While you can’t remove corporate policy or tell employees to enjoy that year long vacation, the heart of their culture can be incorporated into your own leadership style quite effectively and easily.