No Rules Rules: Netflix and the Culture of ReinventionÂ is a book that many awaited. Since when, in 2009, Reed Hastings released theÂ Netflix Culture DeckÂ to the public, the distinct features of Netflix culture have been out for everybody to see. Many have since looked at some with suspect, if not a denial of their effectiveness. But the results of this company are out to show that something is working correctly.
This book is the result of a strong collaboration between Netflixâs CEO andÂ Erin Meyer, an Insead professor that is also the author of the famous bookÂ The Culture Map. And here comes the first essential element: this book does not add anything majorly disruptive versus the famous Culture Deck, except a chapter dedicated to the globalisation process of Netflix, and how its unique culture got adapted to the specific country cultures. Here, Hastings followed the concepts outlined in Meyerâs book and derives a fascinating case study on how Corporate Cultures can live in international contexts, provided there is a strong awareness of some cultural differences.
Meyerâs role in the book is precious. She approached the connection with Netflix culture somewhat critically. Still, through a consistent number of interviews, she has been able to translate those cultural principles into valid cases, explaining why they work at Netflix, and how they have been able to support the companyâs success.
Overall, the Netflix Culture Deck struck me as hypermasculine, excessively confrontational, and downright aggressiveâperhaps a reflection of the kind of company you might expect to be constructed by an engineer with a somewhat mechanistic, rationalist view of human nature.Erin Meyer, No Rules Rules, Page XVI
No Rules Rules is structured on nine main chapters, each one pointing on one of the âdotsâ that Hastings considers as part of the culture of Netflix. Connecting the dots becomes, therefore, the activity for the reader, well guided by the authors in a very structured way. Chapter 10, as mentioned, discusses the application of these principles as part of the international expansion of Netflix, and shows how necessary it is to be fully aware of cultural differences when internationalising a business.
In the introduction of the book, Reed Hastings shortly accounts too his experience before Netflix, and the errors he played. He especially looks at how merely accepting the status quo in organisation, our the application of traditional models without challenging these, is often the source of the problem.
With my next company, Netflix, I hoped to promote flexibility, employee freedom, and innovation, instead of error prevention and rule adherence. At the same time, I understood that as a company grows, if you donât manage it with policies or control processes, the organization is likely to descend into chaos.Reed Hastings, No Rules Rules, Page XVIII
No Rules Rules shows clearly how the Netflix Culture consolidated through gradual evolution, with many errors, often celebrated. At the end of the day, what Reeds suggest is to build a thriving culture by increasing two factors:Â Talent DensityÂ andÂ CandorÂ in the organisation. These make it possible toÂ reduce controls, which is what helps to frame the culture ofÂ Freedom and ResponsibilityÂ that Netflix possesses.
On this, it is then possible to build the âextraordinaryâ success for the company, as illustrated in the figure on the side.
One of the interesting advice in the book is that you âneed to encourage people to question how the dots are connectedâ. People tend to connect the dots always the same way, until somehow âcomes along and connects the dots in a different way, which leads to an entirely different understanding of the worldâ.
Whatâs more interesting is the fact that Reedâs plan was not to design a company with a unique ecosystem. He wanted to create more flexibility in his previous experience. Then a few things happened that led him to connect the dots of corporate culture differently. As these elements came together, he was able, âin hindsight onlyâ to understand what it was about the culture that helped drive Netflixâs success.Â
So the dots are presented in the chronological order that they have been âdiscoveredâ at Netflix. Today they offer a genuinely consistent framework, but it was not always like that. This was the result of a journey, which is a prime example of the connection between Emergent and Intentional design.
The first section of No Rules Rules (which consists of chapter 1-3) is about the first building blocks, already mentioned. The most exciting concept is aboutÂ creating talent density, and I believe it is one of the âdotsâ that many miss in the building of organisations. For many years we have theorised concepts around forced ranking of individuals, trying to identify âhigh potentialsâ, or the âbest fewâ. Hastings demonstrate that the idea works because, in the creative role, a high performing individual sometimes outperformed an adequate performing one by a magnitude of ten. There is, however, significant learning in this: to make it work, you need to have flexible roles and autonomy for the people. The concept of âcommand and controlâ applies to the adequate quality people, and disincentives the best few.Â
We learned that a company with really dense talent is a company everyone wants to work for. High performers especially thrive in environments where the overall talent density is high.Reed Hastings, No Rules Rules, Page 6
To achieve this, you need to unbuild the traditional office politics and make sure that candour becomes your points of strength. An element that we have seenÂ already playing a significant role at Pixar. An important aspect is that Netflix doesnât just promote candid feedback, but also frequent feedback. Erin Meyer accounts of her first interactions with the companyâs employees are very significant from this point of view because she tells of many cases where she got feedback almost as the first interaction, something weâre typically not used to. The key to making this work is by leading by example. Bosses are the one who demands more feedback, and as the culture is one that doesnât punish errors, this creates a feedback loop culture that is truly powerful. But one of the significant learning is that there needs to be much energy to accept candid feedback. Which is why a simple framework to receive and give feedback, based on 4As, was created.
Reed Hastings, No Rules Rules, Page 30
Only based on the above two principles, it is possible to start removing controls. Removing the Vacation Policy and the Expense policy are the two examples that the book illustrates. Each of us has been struggling with both these policies in our working life, so it feels almost revolutionary to think of an environment without. Netflix experience shows that when there is no policy, most people will look around their department to understand the âsoft limitsâ of whatâs acceptable. This reduced the work to manage exceptions. And it leas to the concept fo âLead with Context, not controlâ, which is a great way to enable autonomy truly. But it also requires a strong willingness to be severe when people abuse the system (at Netflix is immediate termination).Â
Section two covers the fascinating compensation philosophy that Netflix developed, which again shows how important it is toÂ design all elements intentionally. To achieve the High Talent Density mentioned above, you need to be willing to pay top of the market. A big learning point that is well illustrated.Â
Netflix is also famous for giving full visibility on financial and strategic information even ahead of market deadlines, a behaviour that many considers risky as it creates the possibility for insider trading accusation. But again, you need to beÂ deliberate in reinforcing cultural valuesÂ such as candor.Â
The most exciting chapter is about the decision making process. Netflix has created a trulyÂ dispersed decision-makingÂ model, by each individual genuinely take responsibility for their actions and decisions. This works only because of the high talent density and the increased transparency but is a critical element of the capability of Netflix to attract and retain top talents. At Netflix, Bosses are notÂ decision approvers; they give context and leave the decision to the person that has the skills to take it. A principle that seems easy to explain, but how many companies would have the courage to do so?
In recent years, the great debate of human-centric models of organisation, has tried to solve the conundrum of hierarchical decision-making by suggesting that more actors can share decisions. Many recent models advocate, therefore for consensus or democratic based models. Reed Hastings is firm,Â at Netflix decision are individual. And they use this principle of personal responsibility to push for innovation.
They also consider the fact that complete autonomy can lead to inconsistency. For this, they teach a model of socialisation and learning, that amplified shows howÂ the right Strategy of Netflix isÂ learning.Â
If you have an idea youâre passionate about, do the following:
Reed Hastings, No Rules Rules, Page 140
Section three (chapter 7-9) illustrates the famousÂ Keeper TestÂ and the policy thatÂ Adequate Performance deserves a Good Severance. It also shows how feedback culture needs to be nurtured, and the experience with theÂ Circle of Feedback, which is a âliveâ 360 model developed through internal learning. Finally, the concept ofÂ Lead with Context, not controlÂ is further explored.
I believe this to be the more precious concept of the book, with a clear explanation of what it means toÂ Lead with Context. âMany leaders frequently use control processes to give the employee some freedom to approach a task as he chooses, while still allowing the boss an opportunity to control what gets done and whenâ. This is a traditional approach to Leading with Control. Autonomy doesnât exist: what exists isÂ delegationÂ andÂ empowerment, both given by somebody.Â
Leading with context is different. âYou provide all of the information you can use so that your team members make great decisions and accomplish their work without oversight or process controlling their actions.â The benefit is that the person builds the decision-making muscle to make better independent decisions.Â
This model does not apply to all situations. Where safety comes first, or in cases where repeatability is necessary, a system of control might be more adequate. Hastings himself illustrates that there are some areas at Netflix (Health and Safety, Harassment, Data Protection, for example) where clear guidelines, policies, and control are in place.
Leadership with context requires two elements to be successful. The first is a continuous alignment on objectives. The second is a system that is âloosely coupledâ. The concept is borrowed from software design and indicates a scenario where a change to a part does not have repercussions on the rest. Netflix has built a loosely coupled system thanks to itsÂ Informed Captainmodel. But it is also true that it acts in the industry and has a business model that allows this to happen.
No Rules RulesÂ is a great read. Besides the success story, what is truly interesting about this book is precisely that it makes all perfect sense in hindsight, but that it also clarifies from the beginning the fact that building a thriving corporate culture is a long process, made up of many mistakes and lots of pain. The candour by which Hastings elaborates on his learnings, and the capability of Erin Meyer to connect the dots with the outside perspective, gives a tremendous spin on the value of this book, despite being based on concepts that were already out in the open.
I have so far left out a comment to the last chapter. As mentioned, it talks about the application of Netflixâs cultural principles in its global expansion, and also explain the reason for the collaboration with Erin Meyer. TheÂ Culture MapÂ model is presented and used to show when local adaptation was needed. The significant learning here is in the awareness required to become a global company and the flexibility necessary when such an influential culture meets local habits, which confirms a significantly important aspect, again, of Intentional Design and its relations with awareness.
Another book that I will add to theÂ Rebelâs list. In many ways, Netflix has done a particular path. There are no references in this book about an organisation model that is substantially different from a traditional hierarchy. Yet the success is out there to testify that building a culture of innovation pays off the moment that this is consistently and deliberately pursued.
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