Monthly Archives: April 2013

Technology Culture: The Famous (Infamous?) Netflix Culture Deck

Sheryl Sandberg called the Netflix Culture Deck possibly “the most important document ever to come out of the Valley.” For my part, I dig it, and I think it’s a powerful draw to potential employees. So when Adrian Cockroft was tweeting about #netflixculture with gems from the deck, I sent him a tongue-in-cheek DM saying “Hey! If you keep doing that you’ll make it impossible for the rest of us to hire good people!” His sensible reply was, “If it’s good, why aren’t more people copying?” This is an excellent question, and I’ve been trying to formulate a good concise answer. That’s been really hard, so I’m going to start with what like about it.

There’s a lot to digest in the deck, so here’s my summary:

  • Field the best team that you can
  • Give the people on that team the freedom (and responsibility) to get shit done

The second bullet really resonates with me. My philosophy on management can be summed up in one word: “empowerment.” The Netflix formula is essentially the same as mine: give people the context they need to understand the problems that need to be solved, give them the resources to solve those problems, and then get out of their way. This is not a new or revolutionary idea. I developed a lot of my ideas from reading the literature on self-directed or high-performing work teams that was popular in the 80s. Netflix is applying a lot of these same essential ideas.

So let’s get back to Adrian’s question. Why don’t more people do this?

Freedom and Responsibility

Here’s my summary of these ideas from their deck:

  • Focus on results
  • Fix errors quickly, rather than preventing them
  • Avoid rules and policies

Focus on Results

I think a lot of people actually do do this. This is the basis of the self-directed work teams I mentioned earlier. In the olden days this was referred to as “management by objectives.” More recently people are referring to this as a Results Only Work Environment (ROWE). I try to set my teams up this way, by using metrics like “deliver projects on time” and “have less than X minutes of downtime per quarter” rather than “generate Y lines of code per month” or “process Z tickets per week.” Of course, not everyone does this. Why not? The first and most obvious reason is that it’s harder to manage. Measuring the quantity of work done (or time spent) is easy. How many hours does someone work? How many tickets do they handle? How many times do they break the rules? It’s very easy to generate reports showing these numbers. Judging by real business-relevant results is much harder, both in definition and measurement. Another reason organizations don’t do this is that it requires competent people who already know how to get results. In this way, it aligns nicely with Netflix’ culture of hiring and keeping only the best performers, but not every organization can hire and keep the best performers (more on this later). Focusing on results also requires effective communication from the top down: about the vision, goals, and strategy – as well as transparent communication about the actual results obtained. This communication introduces overhead and has a cost in efficiency – there’s a reason the Marines don’t operate as a democracy. And finally, Focus on Results requires trust in both directions (up and down) as well.

Back to the question at hand: why aren’t more people copying the ‘Focus on Results’ aspect of Netflix culture? In this specific area, I think the answer is that many people are. I think Netflix has advantages here though, where other parts of their culture (compensation, performance management, investment in communication) reinforce and enable a Focus on Results strategy that’s more holistic and more effective than at many other companies.

Fix Errors Quickly Rather than Preventing Them

Everyone in software development knows that it’s far better to find and fix bugs earlier in the cycle than later. Finding a bug after release to production has very high costs, both in impact to the business and in resources to fix (the person fixing the bug will have to context switch back to the code they wrote in most cases a long time in the past, and then the fix will have to go through the full lifecycle of integration/test/deployment). Finding the same bug during the QA phase reduces these costs, and finding it during development largely avoids them. Ergo, the more bugs you can prevent from getting out of the development phase, the better.

Like other things that everyone knows, you periodically need to re-evaluate this assumption and make sure it’s still true and applicable. The Netflix philosophy says that this is not true, at least not universally and definitely not in their specific case. I agree. I believe that techniques like continuous deployment and automated testing have reduced both of the costs mentioned above (the context switching, and the cost of the lifecycle) to the point where this assumption doesn’t apply in many cases.

So why aren’t more people doing this? I think this realization (that the landscape around the cost of fixing bugs is changing) is starting to percolate through the industry, but like anything else that everybody knows, it will take a long time for this to happen – and probably a generational turnover that we’re only now beginning. And it will never be universally applicable because bugs in different industries have very different impacts – the cost of a bug that interrupts people’s ability to watch “She-Ra” on their Xbox is not at all comparable to the cost of a bug that causes a laser scalpel to cut the wrong artery during brain surgery.

Avoid Rules and Policies

This one seems to get the most attention. For example, there is no vacation policy at Netflix. The expense policy is 5 words, vs the 25 pages I’ve seen at other companies. The idea here seems to be twofold. The first is that rules and policies can be confining and in some cases get in the way of getting things done, so when you get rid of them you give people more freedom. The second is that it specifically frees up managers’ time. At other companies, they spend part of their days dealing with PTO requests, approving expense reports, and enforcing compliance with policies. Getting rid of those policies frees up managers to spend their time on leadership, which is a far more leveraged way to spend their time. While this has caught the most eyes and generated the most discussion, I think in terms of real impact this is the least important. Symbolically, of course, it is very important.

Why aren’t more people doing this? People are starting to adopt the no-vacation policy, which I think is the easiest to adopt and probably a good marker for companies that will be implementing more of Netflix culture over time. I imagine there’s more reluctance on the expense policy – there’s a lot of emphasis these days on financial reporting and there’s been a lot of high-profile expense abuse in the news. I also think there’s a generational thing here though, and it’s related to the “fix errors rather than preventing them” idea above. My favorite quote from _Rework_ is that policies are “organizational scar tissue,” kind of like the old adage that behind every FAA regulation is a plane crash. When something goes wrong and people say “we can’t let this happen again!” the answer is generally some new rule or policy. That’s how it’s been done for a long long time, and getting away from that will be very difficult for a lot of folks. And just like the difference between showing videos and brain surgery, there are industries where a no-vacation policy doesn’t make sense – for example in a bank or financial institution where corruption/graft are significant risks, forced vacations are used as a risk mitigation, because such schemes often can’t be sustained when the primary agent is away from their position for a week or two. Finally, for this to really work you have to have what the deck calls “responsible people.” Not every company can hire exclusively responsible people – in this case, as above, other elements of Netflix culture enable them to have the right workforce to support this element of their culture.

Field the Best Team You Can

Complementing the freedom and responsibility side of their culture, the other key element is having a workplace filled with nothing but “stunning colleagues.” They make a very useful analogy to a professional sports team, where the objective is to always have a superstar at every position. This leads to specific strategies and techniques:

  • Pay top of market
  • Don’t settle for adequate performance

Pay Top of Market

Netflix’ philosophy is to pay more than anyone else would. The yardsticks used are how much that person would be paid somewhere else, how much Netflix would pay someone else to come in and do the same job, and how much Netflix would be willing to pay to prevent someone from leaving. It’s the manager’s job at Netflix to make sure that each employee is compensated at the level that meets the above criteria, proactively. This simply short circuits a lot of problems that managers need to deal with at other companies around recruiting, retention, and incentivization. This is largely based on a belief that the best employees (in creative/inventive positions) contribute significantly more value (like 2x-10x) than the average employee – so that paying them more is in reality a bargain.

Why don’t more people do this? Well, obviously not everyone can pay top of market, because then it wouldn’t be top of market anymore. But plenty of companies have explicit polices to pay at mid-market, or at the 75th percentile, etc. I think a big part of the answer here is that there’d be a lot of disagreement that the best employees can be 10x more valuable than the average employee. This is actually something I would love to see more data on – the culture deck simply states this as a fact without supporting citations. In my experience, I think this is a reasonable statement – I’m really curious what other people have to think (please tell me in the comments!)

Don’t Settle For Adequate Performance

I believe this generates the most controversy from the culture deck. Basically at Netflix, if you do an OK job, you are given a nice severance package and shown the door so that a superstar can be brought in to do a better job. At most companies, you are expected to do an OK job, and you’re only shown the door if you’re not doing an OK job. Think of the sports team analogy – if your first baseman is batting .270 with 50 RBIs, he’s doing OK, but if you have the opportunity to bring in a first baseman who bats .320 with 95 RBIs – wouldn’t you do it?

Why don’t more people do this? You can only do this if you are convinced you can bring in a superstar to replace the person leaving, and that assumption requires some of the other Netflix culture charactersitics: namely paying at top of market and having a workplace that’s already filled with “stunning colleagues.” So this is something you can really only do if you’ve already adopted most of the rest of #netflixculture.

Conclusions

What really jumped out at me from writing this post is that a lot of the components of #netflixculture leverage and reinforce each other. For example, paying top of market lets you fill your company with responsible, awesome people, which lets you grow without adding tons of rules and policies. The real question is how much of what Netflix has done is unique to their position in their industry, and how much is generalizable to other companies? I’m looking forward to seeing other companies adopt this culture and seeing how it turns out for them. If your company is doing so, let me know!

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