In ‘No Rules Rules: Netflix and the Culture of Reinvention’, Reed Hastings lays out the billion-dollar company’s blueprint to leadership success.
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Netflix started as a fledgling DVD-by-mail service in 1997. Now it’s a streaming juggernaut with nearly 200 million subscribers and monthly earnings of roughly $950 million a month.
Much of the company’s success can be attributed to the management philosophy of co-founder and CEO Reed Hastings, who deliberately focused the company culture on employee empowerment and independence. The popular phrase “Netflix and chill” could also be applied to the company’s attitude towards corporate red tape. Employees are often encouraged to take matters into their own hands.
But with great power also comes great responsibility.
In his new book, No Rules Rules: Netflix and the Culture of Reinvention, Hasting spells out how he built Netflix’s unique way of running a business.
1. Give employees a keeper test
Hasting believes that “a team with one or two merely adequate performers brings down the performance of everyone on team.” And this doesn’t cut it. “Adequate performance gets a generous severance package.” He encourages managers to seek out employees he calls “keepers” — those who make a significant and tangible contribution to Netflix’s success. According to the Netflix Culture manual, managers must ask themselves this fundamental question: “If one of the members of the team was thinking of leaving for another firm, would the manager try hard to keep them from leaving?” If an employee is not worth fight for, they are politely and generously shown the door.
2. Be transparent
Back in the ’90s, Hastings began couples therapy to save his marriage. He says the lessons he learned from that experience carried over into how he encourages Netflix employees to express themselves. “I began encouraging everyone to say exactly what they really thought, but with positive intent,” he writes. “For our employees, transparency has become the biggest symbol of how much we trust them to act responsibly. The trust we demonstrate in them, in turn, generates feelings of ownership, commitment and responsibility.” And that transparency extends to the whole company, not just the big dogs. “When you give low-level employees access to information that is generally reserved to high-level executives, they get more done on their own,” he writes.
3. Whisper wins and shout mistakes
Reed says it’s important for leaders to speak softly and be humble about their successes — or “let others mention it for you.” Why? “Humility is important in a leader and role model,” he writes. On the other hand, when you make a mistake, he encourages Netflix employees to let it be known loud and clear. “So that everyone can learn from your errors.”
4. Lead with context
It’s become a business cliche to teach employees to “think out of the box.” But how do you actually encourage original thoughts and ideas? Hastings believes the only way to do this is to give your employees context, not specific orders. “Don’t tell your employees what to do and make them checkboxes,” he writes. “Give them the context to dream big, the inspiration to think differently and the space to make mistakes along the way.”
5. Run your business like a team, not a family
Hastings says to leave all that, “We are family” talk to Sister Sledge, not to your company culture. For example, in a real family, a parent is unlikely to fire their child or hire someone because they’re the best fit for the job, not a close relation. Better to think of your company as a team trying to win a championship. “We want the best performer in every position,” Hastings writes. “Like any team competing at the highest level, we form deep relationships and care about each other.” Taking the family dynamic out of the equation also makes it less personal and more professional. “Don’t seek to please your boss,” he summarizes. “Seek to do what’s best for the company.”