Year of Books 2021: No Rules Rules: Netflix and the Culture of Reinvention by Reed Hastings and Erin Meyer

(credit: Education Details Online, October 31, 2017)

All views, opinions and statements are my own.

Greetings, Romulo here! 👋

Welcome to the second post of my Year of Books 2021 series 📚. Find here my first post with the introduction to the project and key takeaways from the book High Output Management by Andrew Grove.

As I mentioned there:

This year, I’m trying something new and bringing you value along the way. For each book I read (excludes fiction), I’ll publish a Medium post with my takeaways. While I hope this will spark your interest and help you succeed, this will also help me, since IMO there’s no better way to learn than receiving and digesting new information, processing and summarizing it, and explaining it to someone else (hopefully in an understandable way!) .

Before we start, if you want to learn more about the Netflix Culture, consider this website — let's call it Netflix Culture Manifesto — one of the most well-known company culture documents in the history of Tech.

If you have some time to invest in reading the book, but not the entire thing, go ahead and read the Intro chapter. It does a fantastic work of summarizing the main themes discussed throughout the book.

Let's get started!

Overview (description provided by Amazon)

Reference: No Rules Rules: Netflix and the Culture of Reinvention (link here)

Netflix cofounder Reed Hastings reveals for the first time the unorthodox culture behind one of the world’s most innovative, imaginative, and successful companies

There has never before been a company like Netflix. It has led nothing short of a revolution in the entertainment industries, generating billions of dollars in annual revenue while capturing the imaginations of hundreds of millions of people in over 190 countries. But to reach these great heights, Netflix, which launched in 1998 as an online DVD rental service, has had to reinvent itself over and over again. This type of unprecedented flexibility would have been impossible without the counterintuitive and radical management principles that cofounder Reed Hastings established from the very beginning. Hastings rejected the conventional wisdom under which other companies operate and defied tradition to instead build a culture focused on freedom and responsibility, one that has allowed Netflix to adapt and innovate as the needs of its members and the world have simultaneously transformed.

Hastings set new standards, valuing people over process, emphasizing innovation over efficiency, and giving employees context, not controls. At Netflix, there are no vacation or expense policies. At Netflix, adequate performance gets a generous severance, and hard work is irrel­evant. At Netflix, you don’t try to please your boss, you give candid feedback instead. At Netflix, employees don’t need approval, and the company pays top of market. When Hastings and his team first devised these unorthodox principles, the implications were unknown and untested. But in just a short period, their methods led to unparalleled speed and boldness, as Netflix quickly became one of the most loved brands in the world.

Here for the first time, Hastings and Erin Meyer, bestselling author of The Culture Map and one of the world’s most influential business thinkers, dive deep into the controversial ideologies at the heart of the Netflix psyche, which have generated results that are the envy of the business world. Drawing on hundreds of interviews with current and past Netflix employees from around the globe and never-before-told stories of trial and error from Hastings’s own career, No Rules Rules is the fascinating and untold account of the philosophy behind one of the world’s most innovative, imaginative, and successful companies.

Key Takeaways (TL;DR)

1. Hire and keep the right (rock star) people on the bus i.e. boost “talent density.”
2. Foster a culture that models and invites frequent, candid, full of positive intent, and actionable feedback.
3. Vacation: be intentional about it! Lead by example, act on the company’s and coworkers’ best interest, enjoy life, and oh…make people aware of it (1% bragging, 99% modeling the way).
4. Want to truly empower and build lasting trust? Set, share, communicate context, context, and…you guessed it, context.
5. Innovation flywheel: Set a bold agenda (to solve an interesting problem!), hire top-notch talent, optimize for rapid experimentation and learning, and give people freedom to use their well-compensated judgment and creativity…of course, don’t forget about that feedback loop.
6. It's not Netflix if we don't talk about the Keeper Test. Here's the short version: If a person on your team were to quit tomorrow, would you fight to change his/her mind?

Key Takeaways (One-click down)

#1 Hire and keep the right (rock star) people on the bus i.e. boost "talent density"

As a leader, your #1 goal is to create a work environment consisting of great talent. They are the ones who accomplish significant amount of important work and bring creativity and passion to the team.

Anything different than that impacts performance and drags the team down (yes, even if it's just that one person). To get there, increase talent density by hiring top-notch talent and rewarding less-than-great performance with a generous severance package and the EXIT sign.

If you do it right:

• You will have a team of rock stars (by the way, there’s no place for brilliant jerks!). No secret here, it's "that easy." In order to hire and keep rock stars, pay top of the market, have other rock stars around , and have interesting problems to be solved with a whole lot of creativity, freedom (instead of micromanagement), and innovation (hypothesis, experiment, insights, and decision…repeat).
• Chances are your company will do well and it will grow, which increases the risk of establishing new processes to "deal with the madness and complexity of large organizations." There's nothing wrong with that, except that it may create a highly efficient organization that has little-to-no room for creativity. That's the trap to avoid and what keeps 99% of leaders awake at night…the other 1% have that sorted out!

#2 Foster a culture that models and invites frequent, candid, full of positive intent, and actionable feedback

Candid feedback, shared frequently across all levels (top-down and bottom-up) and driven by positive intent exponentially magnifies the speed and effectiveness of a team.

Giving/receiving feedback is not the most comfortable practice in the corporate world, so build feedback moments into existing routines and make it a natural thing.

If you are giving feedback, lead with positive intent and make it actionable, including examples.

If you are receiving feedback, pay attention, show (legitimate!) appreciation, and decide what to do with it. Maybe more important than the feedback itself is how you react to the feedback received. I'll make a parallel with a tweet shared by Shaan Puri:

My #1 hack for figuring out if someone is great to work with. Point out something they are wrong about:

a) get defensive → no go.
b) shutdown/get quiet → no go.
c) quickly recognize truth (“oh sh**, yea good point”) = they’re a keeper

Another great reference on "all things feedback" is Radical Candor by Kim Scott.

With an around-the-clock feedback season, you would expect a different kind of (dreaded) annual performance review. The book clearly states that there’s no such process at Netflix, well, at least the one you have in mind.

Netflix leverages an Open 360 feedback process, where people leave their name and comments on what a person should start, stop, and continue doing. As expected, most managers share those comments with their team, with the goal of leading by example and of course, giving people the context they need to call their manager out in the months to follow.

Another tool is the Live 360, with smaller groups (say 6-8 people) meeting for a couple of hours — imagine everyone standing up and forming a circle —and going around giving direct feedback (a gift with positive intent). It's less of "I really like working with you" and more of developmental like the example above on starting, stoping, and continuing.

#3 Vacation: be intentional about it! Lead by example, act on the company’s and coworkers’ best interest, enjoy life, and oh…make people aware of it (1% bragging, 99% modeling the way)

Vacation policies resemble the old days of humans operating machines and working long hours straight on repetitive tasks. It's 2021 and if you are reading this, it's very likely that you are a knowledge worker, so there might be a better way.

Being intentional about things like vacation policies is as important as leading by example. It's less effective (to say the least) if you preach work-life balance, time with family, and vacation time when you work 100 hours per week, live in the office (or Zoom), and can't even remember the last time you had a quality vacation.

It's completely fine to work very long hours for a couple of weeks straight, and if you are doing it for the things you really care about, it may not even feel like work, but you should try to balance that with a few slow weeks between those peak periods.

I learned from the book that Reed Hastings (co-founder, chairman, and co-CEO of Netflix) takes ~6 weeks of vacation every year. If he can do it, you can do it: enjoy life (take vacation!), make people aware of it (bit of bragging and lots of modeling the way), and of course act on the company’s and coworkers' best interest e.g. don't disappear on people 2 days prior to a big event like a product launch or Strategy season. You can and should plan ahead by taking into consideration your team's shared calendar.

#4 Want to truly empower and build lasting trust? Set, share, communicate context, context, and…you guessed it, context.

As I mentioned on my first post of the Year of Books: 2021 series, a great manager should over-communicate context. When done well across all levels, context sharing creates a well-oiled highly aligned (shared north star and objectives), and loosely coupled organization (people don't need to be micromanaged to perform their best work).

How would you expect someone to do the right work and drive the right results without clarity on the context influencing the vision, strategy, latest pivot, or gosh…that one urgent request that has just ruined your plan for the day? Context, context, and context.

It's important to underline the "over-communicate" piece. As a leader, you need to bring your A-game when it comes to setting and communicating context. As I usually say, when you get the feeling that people are tired of hearing about one particular piece of context, it means you're doing "OK" in context sharing. The corporate couldn’t be more complex, particularly when you hit the 100-500 (-ish) employee mark and/or have a growing fully remote workforce. There are so many reasons why the message (I) doesn't get communicated, (II) "morphs," as it's shared across all levels, and (III) drives the wrong type of work and results.

Guess what helps? Transparency, straightforwardness, storytelling, reference documents, and leading with the Why. On storytelling, read more here “Ninja Move 3. Tell and sell that story to the world.”

Guess what doesn’t help? Secret meetings, partial information shared, long emails, and micromanagement ("mandate" task execution vs allow people to digest context and think about the best possible way to do the task). We all have been guilty of many of those throughout our careers, even when we're full of positive intent. Hear me when I say that office politics, poor planning, and daily fire drills end up pushing us in that direction, so let’s keep an eye out for those and do something about it.

#5 Innovation flywheel: Set a bold agenda (to solve an interesting problem!), hire top-notch talent, optimize for rapid experimentation and learning, and give people freedom to use their well-compensated judgment and creativity…of course, don’t forget about that feedback loop

People who work with me have already heard me say two things on this topic:

• It’s sub-optimal to declare that one should innovate every other Thursday at 3PM for approximately 45 minutes. There’s nothing wrong in setting a recurring heads-down time for you to pause, zoom out, and reflect on the state of the world, your company, and your product (or service), but it shouldn’t be expected that by the end of that time, you will have a new million-dollar idea. Too much pressure and "timed innovation" usually results in tunnel vision and incremental results.
• You can be the most brilliant person I have ever met, but don’t hate me when I say that the first release of your product will be “worst state of your product.” That’s because once you ship something (and "shipping" can even be a napkin-stage prototype, no code required), it starts a virtuous cycle of “hypothesis, experimentation, insights, and decision…repeat” that will only make your product better, including evolving into something different if you end up learning that there’s no product-market fit and/or viable path to scale. More on this here “#AlwaysBeBuilding — The meaning behind the hashtag” and here "9 of the biggest pivots in tech history, from Nintendo to Instagram."

So, what to do about it? Magic will happen if and when you:

• Have an interesting problem to be solved,
• Set a bold an aggressive agenda,
• Hire and keep the best people,
• Instill a culture of experimentation and learning,
• Give people the context they need and freedom they love for them to use their best judgement and get the creative juice flowing, and
• Create an environment that legitimately values frequent and candid feedback.

"Ok, this is still too high level, can you tell me how Netflix does it?" How about 4 steps?

• Step 1: "Farm from dissent." Socialize the idea early, let's call it mini-pitch, using something like a Google Doc for people to be able to comment or rate the idea from -10 to +10 and provide commentary (e.g. dissent, support). You don't need to agree with everything your hear and/or let people decide on your behalf (this is not consensus building!), but I usually learn a lot from the "collective brain," when I go through this type of exercise. If nothing else, you may change 1–2 things if you choose to continue with your idea.
• Step 2: Chances are your new idea is big and ideally, it has a 10x potential. Side note: if you like the 10x piece, you can read more here Creativity and Innovation in Organizations — How to innovate in an execution driven organization. Break it apart and find ways to test it out and gain insights that will allow you to move to the next test (and the next one, and the next one — you got the gist).
• Step 3: As an "Informed Captain," you are smart, have freedom to operate, have gathered feedback from people, and maybe have already run a few tests here and there, so…make your bet and plan the path forward.
• Step 4: If it succeeds, celebrate and go all in. If it fails, learn what you have to learn and sunset the idea…those learnings are priceless, so please document them, report out, and make sure everyone knows you are absolutely proud of your big failu…whoops, learning.

#6 It’s not Netflix if we don’t talk about the Keeper Test. Here’s the short version: If a person on your team were to quit tomorrow, would you fight to change his/her mind?

Read this one again: #1 Hire and keep the right (rock star) people on the bus i.e. boost “talent density.” Now keep in mind the core principle that "great people pick great people, who then pick great people…got it?"

Now, a reality check. An environment with high talent diversity is NOT a family — i.e. stays together regardless of the individual performance of that distant third-degree cousin — so don't call the company or your team a family. It's more like a pro sports team:

• Demand excellence from the owners, managers, and players
• Every position is filled with the best player
• Train to win
• Candid and continuous feedback (no…verbal harassment is not allowed!)
• A for effort and B for performance is not acceptable
• Establish deep relationships and care for each other

Lastly, even if you are not a big fan of the Keeper Test and what you just read on "family vs sports team," you can leverage the main question "if a person on your team were to quit tomorrow, would you fight to change his/her mind?" to reflect on your own performance. Would you re-hire yourself for the job? What kind of person is best suited to do what you are doing now? How would the job description of your own job look like if you were to only accept star players? Hopefully, many answers will lead back to you, but if not, well, it's yours to decide what's best to do next.

Thank you again for your support. I can’t wait to hear your feedback. It only takes one minute to complete this survey and it will definitely help me along the way.

Cheers, Romulo