Netflix had one thing that other companies (like Blockbuster) didn't: a culture that put people above procedures, more focus on innovation than on efficiency, and little control mechanisms.
The road to "no rules rules" like Netflix goes via two steps, leading to a third one:
- Building talent density
- Create more openness
- Reduce control (only possible after the previous two)
Chapter 1: Super colleagues
In order to increase talent density, Netflix fired those people with medior talent, keeping only those people who were highly talented. This meant that the average talent per person increased; the talent density increased. This creates "super colleagues".
Note: this sounds like something you should be careful about. It seems like a small step from "super colleagues" to "Übermensch". Netflix - of course - will not see it in this way, but a little historical knowledge could tie the two together.
Chapter 2: Say what you think
"Honesty is the best policy". Say what you think will get you the furthest. Keep positivity in mind, though: say what you think with a positive mindset. This sounds like Radical honesty.
"Only say to people whatever you would say to their face as well."
A "feedback loop" is one of the most effective tools to improve performance. So, we should make giving and receiving feedback a standard part of a collaboration.
A tool to give feedback: the 4A-schema (first two are about giving feedback, second two about receiving feedback):
- Assistance: give feedback with a positive intention, to help someone.
- Action-oriented: give feedback about what someone can do differently.
- Appreciate: accept feedback, say "thank you".
- Accept or Ignore: accept feedback, or choose to ignore it. But appreciate it (see above).
Chapter 3a: No holiday policy
Netflix has no holiday policy. Journalist Ryan Blitstein researched this in 2007 and found that the number of days Netflix employee were on holiday did not differ from companies that did have a holiday policy. People were not taking more (or less) holidays.
Chapter 3b: No declaration policy
The main point: "real life is too complicated to put into policies". So, just use common sense.
Note: "no rules" just means "no written rules". Rules exist in every company, whether they're written down or not. They form a company's culture.
The book contains an example of a junior engineer who decided to buy a new 4K TV when he found out that the previous 4K TV was accidentally thrown away. Netflix likes to think that its culture allowed this employee to make this decision. It also shows: "it's easier to ask forgiveness than to beg for permission".
Chapter 4: Pay the highest salary
Netflix does not hire a group of mediocre people, but one outstanding person who they pay the highest salary in the market. This person is expected to do the same amount of work as the group of mediocre people.
Note: the question is if this leads to burn-out in the long-term. Another question is: does this matter to Netflix? They will just hire someone else in that case. It's not really ethical.
A bonus system lets people focus on a certain (maybe outdated) goal, instead of deciding what's best for the company at any given moment.
Netflix pays the highest salary in the market, and then some more. They also generally give a raise before people proactively ask about it. The main idea here is that it will cost more to lose people and take time to educate new people than to keep the people you already have.
People at Netflix are allowed to talk to other companies, as long as they do it openly. This allows Netflix to know about changing salary in the market, so they can offer people more as well.
Note: this could be invading for privacy. Why should you be so open about talking to other companies? That's your own business if you want, and not something your current employer necessarily needs to know if you so choose.
Chapter 5: Open the books
How open should you be about people's actions? Netflix chooses to be as open as possible, especially for work-related incidents. If it's a personal incident, the person should be able to decide for him-/herself to be open or not.
"Whisper about your successes and scream about your errors."
"Fulnerability of others points to courage, fulnerability of yourself points to incompetence". This is true in general, but would be better if fulnerability always shows courage, for anyone, from any perspective.
Chapter 6: No need for approval
"A good CEO is not busy." Because a good CEO trusts his employees to make the right decisions and thus doesn't need to give approval for everything.
"Don't try to please your boss, try to do what's best for the company."
The Netflix innovation cycle can be used when you have an idea or something you are enthusiastic about:
- Share the idea.
- Test the idea if it's something big.
- Take an educated guess.
- Celebrate success, learn from failure.
In addition to the fourth point, do the following in case of a failure:
- Ask what someone learned from it.
- Don't make a drama.
- Ask to reflect on the failure.
Chapter 7: The keeper test
A professional sports team is a good metaphor for high talent density. Professional athletes:
- expect excellency and expect all positions are filled with the best player.
- train to win and expect honest feedback from each other.
- know that your best is not enough, the result is what counts.
The keeper test says: "If someone from your team would decide to leave tomorrow, would you try to prevent this? Or would you accept it? In the latter case, part ways and start looking for a new star."
Chapter 8: The feedback circle
Two feedback procedures:
- written 360-feedback
- live 360-feedback
Chapter 9: Lead by context, not control
Lead by giving people enough context and information so that they can make their own (informed) decisions. This also counts for raising children: instead of using rules (and control), give information (context) and let them make decisions of their own.
Note: mostly applicable to older children.
Lead by context allows decisions to be made on any level, not only the highest level. This leads to faster decisions.