How Netflix reinvented HR, bit by bit. PART TWO.
You can catch up on PART ONE and read the beginning of this article. I believe it’s worth it.
Vocabulary to investigate before reading (links with meaning and pronunciation):
- To rely on
- Instead of
- To hire
- High-performance workplace
- To deal with
- To let go
- To talk openly
- Time off
- To handle something
- To work something out
- A day off
- To let somebody know about something
- Best interests
- To forgo
- To enforce
- To keep an eye on something/ someone
- To comply
- Would you consider this to be a reasonable policy to put forth in your company?
- Have you heard of any other company doing this?
With these two overarching principles in mind, we shaped our approach to talent using the five tenets below.
Hire, Reward, and Tolerate Only Fully Formed Adults
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. If you’re careful to hire people who will put the company’s interests first, who understand and support the desire for a high-performance workplace, 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.
Adultlike behaviour means talking openly about issues with your boss, your colleagues, and your subordinates. It means recognizing that even in companies with reams of HR policies, those policies are frequently skirted as managers and their reports work out what makes sense on a case-by-case basis.
Let me offer two examples.
When Netflix launched, we had a standard paid-time-off policy: People got 10 vacation days, 10 holidays, and a few sick days. We used an honour system—employees kept track of the days they took off and let their managers know when they’d be out. After we went public, our auditors freaked. They said Sarbanes-Oxley mandated that we account for time off. We considered instituting a formal tracking system. But then Reed asked, “Are companies required to give time off? If not, can’t we just handle it informally and skip the accounting rigmarole?” I did some research and found that, indeed, no California law governed vacation time.
So instead of shifting to a formal system, we went in the opposite direction: Salaried employees were told to take whatever time they felt was appropriate. Bosses and employees were asked to work it out with one another. (Hourly workers in call centres and warehouses were given a more structured policy.) We did provide some guidance. If you worked in accounting or finance, you shouldn’t plan to be out during the beginning or the end of a quarter, because those were busy times. If you wanted 30 days off in a row, you needed to meet with HR. Senior leaders were urged to take vacations and to let people know about them—they were role models for the policy. (Most were happy to comply.) Some people worried about whether the system would be inconsistent—whether some bosses would allow tons of time off while others would be stingy. In general, I worried more about fairness than consistency, because the reality is that in any organization, the highest-performing and most valuable employees get more leeway.
The company’s expense policy is five words long: “Act in Netflix’s best interests.”
We also departed from a formal travel and expense policy and decided to simply require adultlike behaviour there, too. The company’s expense policy is five words long: “Act in Netflix’s best interests.” In talking that through with employees, we said we expected them to spend company money frugally, as if it were their own. Eliminating a formal policy and forgoing expense account police shifted responsibility to frontline managers, where it belongs. It also reduced costs: Many large companies still use travel agents (and pay their fees) to book trips, as a way to enforce travel policies. They could save money by letting employees book their own trips online. Like most Netflix managers, I had to have conversations periodically with employees who ate at lavish restaurants (meals that would have been fine for sales or recruiting, but not for eating alone or with a Netflix colleague). We kept an eye on our IT guys, who were prone to buying a lot of gadgets. But overall we found that expense accounts are another area where if you create a clear expectation of responsible behaviour, most employees will comply.