One of Harvard Business Review’s most talked about articles in recent times is “How Netflix Reinvented HR.” It’s a relatively detailed 6-page spread written by Patty McCord, former Talent Director at Netflix (the on-demand movie and TV streaming company that gobbles up nearly one-third of all American internet bandwidth).
The article by McCord reflects on the “viral” influence (that is, over 5 million views) of a PowerPoint presentation called "Netflix Culture: Freedom & Responsibility." Facebook COO Sheryl Sandberg supposedly called it one of the most important documents to ever come out of Silicon Valley.
The 127 slides were put together by Netflix’s CEO Reed Hastings, McCord, and other colleagues in 2009.
It's an absorbing read — both the article and the PowerPoint — as much about specific HR practices as it is about corporate culture in general and how challenging the status quo of traditional management attitudes can drive innovation and performance, and eliminate nuisance problems.
McCord, now running her own consulting practice, writes about how Netflix broke a lot of rules over the years when it came to HR. For instance, one of the more unusual aspects of working at Netflix is that they don’t track holidays… ever. Time-off is based on an honour system: employees take whatever holidays they think is appropriate, working out the details with their bosses. The goal is to shift responsibility back to the managers, instead of being controlled from an HR standpoint. McCord writes:
“Over the years we learned that if we asked people to rely on logic and common sense instead of on formal policies, most of the time we would get better results, and at lower cost … 97% of your employees will do the right thing. Most companies spend endless time and money writing and enforcing HR policies to deal with problems the other 3% might cause. Instead, we tried really hard to not hire those people, and we let them go if it turned out we’d made a hiring mistake.”
Performance appraisals are another thing that Netflix approaches from a different angle to many of their publicly listed peers. They eliminated formal reviews in favour of encouraging employees to have conversations about performance as a typical part of their work:
“Traditional corporate performance reviews are driven largely by fear of litigation. The theory is that if you want to get rid of someone, you need a paper trail documenting a history of poor achievement. At many companies, low performers are placed on “Performance Improvement Plans.” I detest PIPs. I think they’re fundamentally dishonest: They never accomplish what their name implies.”
The basic premise of the Netflix philosophy is treating people like adults and expecting them in return to be accountable for their actions.