No Rules Rules: Netflix and the Culture of Reinvention

Book by Reed Hastings

Often, books about corporate culture (specifically from the tech industry) present new bold approaches to leadership that may work in specific contexts, and fail to offers empirical evidence of the efficiency of the proposed approach. In No Rules Rules, co-authors Reed Hastings (Netflix founder) and Erin Meyer (author of The Culture Map, and INSEAD professor) offer a balanced between Practice, in the Netflix context, and Theory, from an academic point-of-view.

Even if I don't agree with all of Hastings' ideas, this book is an important read for business leaders that are looking to increase innovation in their organization. Three core topics are explored:

Build Talent Density

The first step in Hasting's model in to build, and increase, talent density (how many great colleagues you have, versus good ones). According to the authors:

  1. Talent attract talent. "A players" want to work with other "A players", but "B players" will often try to surround themselves with "C players". Here, I totally agree.

  2. In creative industry, a top contributor can easily have 10 times the impact of its peers. Here, I don't agree. I know that for a while now, the whole tech industry has been looking for those mythical 10x developers. But, at the end, for me, software development, or creativity in general, is a team sport. I realize that, for now, I am probably not super convincing; I will stop here for now re: the 10x developers. That could be an interesting topic for a future post :)

At the end, I do believe that organization should build, and always increase talent density. But not by throwing money at the problem. In the book, the authors explain that, to build density, organizations have to optimize the talent acquisition process to attract, and hire, only the best talent. And paying top salaries is a critical part of Netflix's approach. This is not always (read: often) possible for smaller organizations to pay top salaries, and I don't think they should. Instead, they should offer competitive global compensation packages (a good balance of salary, equity, development opportunities, lifestyle, etc.).

Thought the book, the authors also discuss how important it is to fire people that are not delivering up to expectations (impact and attitude). I was surprised to learn how quickly someone could get fire at Netflix (ie: one invalid expense report flagged by the finance department). That is the price to pay for all the freedom offers to the employee. This, of course, is directly in contradiction with a lot of research on Psychological Safety.

I do believe that it's impossible for an organization to always be 100% right with hiring decisions, so it's normal to have to let some people go from time to time. I also understand that people, and their aspiration, change over time and that, sometime, the fit is not there anymore. But at the end, I believe in a model where we value Psychological Safety, and long term employee relationship over short term impact.

Increase Candor

Creating a culture of feedback is the next step of Hasting's approach: Implementing proper feedback loops is one of the most efficient way to increase performance and innovation. Here, we are talking about honest, and direct feedback as often as possible. In Hasting's words: "Say what you think, with positive intent". To help employees learn this behaviors, the authors suggest to adopt the 4A Feedback Guidance:

  • On giving feedback

    • Aim to Assist: Always share what you think with positive intent in order to help the individual or the company, not yourself;

    • Actionable: The feedback needs to focus on what could be done differently;

  • On receiving feedback

    • Appreciate: This, in my experience, is one of the most important step of the model, specifically with people in leadership positive. It's important to show appreciation of the feedback, to be open minded and not defensive. Your colleague offering feedback is taking a risk, and it is everybody's job to create a safe space where feedback can flow as much as possible.

    • Accept or Discard: It is important to listen and consider the feedback being shared. And, at the end, the receiver is the one that should decide to take action, or not.

Remove Controls

The authors present two management approaches: Managing with Control, and Managing with Context. Controls work best when the biggest risk of the organisation is errors (ie: you are managing a nuclear reactor or an hospital). On the other hand, Context works best when the biggest risk is the lack of innovation (ie: ecommerce retailer or media business). In reality, most of us Manage with control (with OKRs, top/down vision deck, etc) and are afraid of errors. Here, the authors argue that by removing as many controls as possible, and by providing as much context as possible, people will be able to make there own decisions. Sometime, they will make mistakes; and overall, the organisation will be more successful and more innovative. The book presents a phased approach to removing control, starting with Vacation Policy (easier to remove), Travel Policies up to Decision making policy (if we hire you, we should trust you enough to make your own decision without any boundaries).

Overall, I really enjoyed No Rules Rules. It was nice to read, it gave actionable insights on how to improve corporate culture and offers interesting stories about some of my favourite TV show! This book was a recommendation from Philippe Lamarre: thank you Phil!