When Reed Hastings wrote a presentation explaining how Netflix built a culture of excellence and motivated teams, he had no idea it would go viral.
The key points of the presentation are summarised below:
1. Adequate performance gets a generous severance package
Netflix’s metaphor is that they are a team not a family – which means that leaders need to hire, develop and cut smartly so that they have stars in every position. There is no room for adequate people because one outstanding employee gets more done and costs less than two adequate employees.
The way that Netflix leaders identify outstanding people is with the keeper manager test:
“Which of my people, if they told me they were leaving, would I fight hard to keep?”
Anyone in your team, who you cannot answer yes to this question should get a generous severance package so a star can be recruited to replace them.
2. A culture of freedom helps talented people get more done
There are few policies and red tape around expenses, travel, entertainment and clothing and instead all employees are expected to “Act in Netflix’s best interests”. Less process allows outstanding people more freedom to get more great work done.
An example of this is that there is no holiday tracking at Netflix, you take as much time off as you want so long as you get the job done. Netflix leaders then set a good example by taking holidays and coming back inspired with big ideas.
3. Paying the top of market salary is core to high performance
A big salary is the most efficient form of compensation – ignore perks, bonuses, options and instead roll all of these expenses into big salaries.
The goal is to keep re-baselining each person’s salary to the top of market by asking:
- What could this person get elsewhere?
- What would we pay for a replacement?
- What would we pay to keep this person if they had a better offer?
I would be interested to hear other people’s thoughts on how they go about creating a high performance culture. Share your thoughts in the comments section below.