Netflix

Share stories that bring the world closer together

Entertain the world

Create values that you're willing to hire, reward, promote, and fire based on

• Judgment
  Make wise decisions despite ambiguity. Use data to inform your intuition and choices. Look beyond symptoms to identify systemic issues. Spend our members’ money wisely. Make decisions mostly based on their long term, rather than near term, impact.
• Selflessness
  Seek what is best for Netflix, not yourself or your team. Be humble and open-minded about others’ great ideas. Make time to help colleagues across Netflix succeed. Debate ideas openly, and help implement whatever decision is made even when you disagree.
• Courage
  Make tough decisions without agonizing or long delay. Take informed risks and are open to possible failure. Question colleagues’ actions inconsistent with these behaviors. Be willing to be vulnerable, in search of truth and connection. Give and take feedback to and from colleagues at any level
• Communication
  Listen well and seek to understand before responding. Remain calm in stressful situations. Keep writing and thinking concise and coherent. Adapt your communication style so you can work effectively with different people, including those who don’t share your native language or cultural norms.
• Inclusion
  Work well with people of different backgrounds, identities, values and cultures. Be excited to help build diverse teams where everyone feels welcomed and respected. Recognize we all have biases and work to counteract them. Take action if someone is marginalizing a colleague. Treat everyone with respect regardless of their position at Netflix.
• Integrity
  Exhibit and are known for candor and transparency. Only say things about colleagues that you are willing to share with them. Admit mistakes openly and share learnings widely. Always share relevant information internally, even when uncomfortable. Act with good intent and trust your colleagues to do the same.
• Passion
  Care deeply about Netflix‘s success. Inspire others with your drive for excellence. Be excited about your work. Be proud to entertain the world. Be tenacious and optimistic.
• Innovation
  Develop new ideas that prove impactful. Look for every opportunity to reduce complexity and keep things simple. Challenge prevailing assumptions, and suggest better approaches. Be flexible and thrive in a constantly evolving organization.
• Curiosity
  Learn rapidly and eagerly. Seek alternate perspectives to improve your ideas. See patterns and connections that other people miss. Seek to understand members’ changing tastes and desires.

Provide great content that is easy to discover and easy to access

Bold, informal, and entertaining

From their social media posts to cease-and-desist letters, Netflix crafts a tone that is meant to mirror the same emotions that their audience feels when watching TV: They're relaxed, not in a serious mood, and want to be entertained and surprised. Using natural language, they look to relate to their audience on a fan-to-fan level by following these guidelines:

• Don't promote, entertain.
• Stand out by taking risks.
• Don't just clip out the show, build out the world.

Netflix Cease & Desist Letter

Frictionless

From its inception, Netflix wanted to redefine the entertainment industry by making movies as easily accessible as possible. DVDs by mail removed the hassle of an in-store rental experience. Their subscription model removed the fear of late fees, while their website made it easy to find titles quickly. Now with the ability to stream and binge-watch anything at any time, Netflix has been able to create a frictionless experience where the consumer is in control.

Personalization

As Co-founder Reed Hastings describes it: “If the Starbucks secret is a smile when you get your latte, [Netflix’s secret] is that the website adapts to the individual’s taste.”

Through significant amounts of A/B testing, focus groups, usability sessions, and organizing their content into over 75,000 micro-genres, Netflix works to make it easy for 'movie lovers' to discover titles that are tailored to their individual preferences, not just what is currently popular.

Niche content

Netflix doesn't try to offer content geared to any one single audience; but they also don't try to reach mass audience appeal with just summer blockbusters. Instead, they divide their subscribers into dozens of different audiences with specific interests. This allows Netflix to have an expansive subscriber-base but still push the envelope with edgier more niche content targeted to these smaller segments.

Replace late fees with a subscription model

Blockbuster, at its peak in the late 90s, was earning $800 million each year in late fees alone. Netflix, however, felt that you couldn't build loyalty based on a business model that relied on making customers feel stupid. Instead Netflix chose a simple flat-fee subscription-based model allowing anyone to unsubscribe at anytime.

Sacrifice cross promotions and pay walls for a frictionless experience

Even though it might be profitable for others, Netflix is all about flat-fee commercial-free unlimited viewing. This means no cross-selling content before a show and no hiding content behind pay walls. This also removes any dangerous rabbit holes that kids might find themselves falling into on platforms like YouTube.

Limit your product selection to what you do best

Netflix makes it clear in their Investor Kit that they are not a "generic 'video' company that streams all types of video such as news, user-generated, live sports, porn, music video, and gaming."

Run your ideas through an innovation cycle

At Netflix, if an employee has an idea that they're passionate about, there is an innovation cycle process to bring it to life.

Step One: Farm for dissent or socialize the idea
Create a shared memo explaining your idea and invite colleagues to rate it on a scale from -10 to +10 with their explanation and comments; or set up multiple meetings to stress-test the idea.

Step Two: For a big idea, test it out
Nothing works better than a small, isolated test for proposals that involve a lot of time, work hours, and resources. Tests take place even when those in charge are dead set against the idea.

Step Three: As the informed captain, place your bet
This is not a democracy, consensus, or a vote. As the person in charge of the project, you take full responsibility. You do not need anyone's permission, agreement, or sign-off to move forward with an idea, no matter its cost or size.

Step Four: If it wins, celebrate it; if it fails, sunshine it
Successes are celebrated by all and especially by managers who expressed dissent early on publicly saying 'You were right, I was wrong.' Failures are not grounds for termination but learning opportunities on how to succeed better next time. Informed captains are required to write an open memo to the entire company explaining what happened and the lessons that were learned.

Stop doing test pilots

Unlike its competitors, Netflix doesn't believe in testing TV shows with just one episode before committing to a full season. Instead, they buy or commission a series from start to finish. Chief Content Officer Ted Sarandos describes the strategy like this: "In our research of more than 20 shows across 16 markets, we found that no one was ever hooked on the pilot. This gives us confidence that giving our members all episodes at once is more aligned with how fans are made." This approach also places more accountability on the show's project owner, who can't hide behind the excuse of 'it tested really well.'

Plan quarterly, not yearly

The future can't be predicted and any time Netflix tried, they were always wrong—especially when it came to budgeting. Instead, the time wasted on yearly planning is now spent doing quarterly planning and a rolling three-quarter budget. To Netflix, it's a horrible idea to hold off on growth opportunities because of budget constraints set months ago.

Create a culture of freedom and responsibility

The Netflix culture is not for everyone, and Netflix is okay with that. When creating their famous Netflix Culture Deck (PDF), the ideas behind it were simple: Choose people over process and strive for innovation, not error prevention.

By providing more freedom and less rules, staff took on more ownership and responsibility. Although The Deck has evolved into an online site, the core philosophy remains the same:

• Encourage independent decision-making by employees.
• Share information openly, broadly, and deliberately.
• Practice radical honesty with each other.
• Keep only high performers.
• Avoid rules at all cost.

Lead with context, not control

Netflix's structure resembles more of a tree, rather than a pyramid, with management at the foundation setting context and liberating their staff to make decisions on their own. In order to lead with context rather than control, teams are expected to:

• Stay highly aligned. Netflix management's focus is to give employees all the information they need to make informed decisions. That means everyone completely understands the company's vision, strategy, goals, P&L, and main obstacles.
• Stay loosely coupled. Netflix employees are responsible for coming up with problems to solve based on the context managers set. Then employees determine the best solution, set the budget, and approve multi-million dollar contracts without prior approval or buy-in from other teams. If employees aren't trust to make decisions, managers must either set more context or find new employees.
• Check in constantly. Managers hold ongoing one-on-one meetings to set more context and to align team members around the company's vision and strategy. CEO Reed Hastings spends 25% of his time on check-ins alone. 

Encourage your employees to interview elsewhere

The rule at Netflix is that when recruiters call, before saying 'No thanks!' ask, 'How much?' As Netflix leaders see it, the person that should know your market worth best is you, not HR. By encouraging employees to interview elsewhere, Netflix can know if they are truly paying top of market. Netflix even developed a database where employees can add their salary offers from recruiters and interviews.

As Reed Hastings put its: “It’s disloyal to sneak around and hide who you are speaking to, but openly interviewing and giving Netflix the salary data benefits all of us.”

Be transparent about your financials

Open up your books to all your employees. Teach them how to read your P&L. Share sensitive financial and strategic information with them.

At Netflix you can find information that competitors and investors would die for, everywhere: On bulletin boards, on the intranet, and in daily email updates. But it is always stressed that if anyone shares this information they can go to jail. In fact, the first slide of their Quarterly Business Review meeting reads: YOU GO TO JAIL IF YOU TRADE ON THIS...OR IF YOUR FRIEND DOES.

By setting their default to full transparency, Netflix employees don't feel like outsiders in their own company and can make better decisions without needing input from the top.

And yes, information has leaked but Netflix refuses to punish the majority for the poor behavior of a few.

Be a team, not a family

A family is about staying together regardless of performance. A professional team, however, is about making sure that the best player is in every single position. And to build a pro-championship team, Netflix continuously makes the difficult decision to swap and trade players as needed. As Co-Founder Reed Hastings has stated: "I find it motivating that I have to play for my position every quarter."

Maintain a high-talent density environment

Netflix is not a career-management company. Positions are reserved for top talent only, and are not opportunities for people to learn and grow as they go, and that is true for every role from the receptionist to the top executive team. But the agreement going into that position is that you will only stay on the team if you:

• Are the best player for the spot. Sweet people with nonstellar performance are quickly shown the door.
• Take risks. You have "metaphorical chips" that you are expected to use. One bad bet, even if that bet is Quickster, won't cost you your job.
• Show consistently good judgment. Those metaphorical chips do eventually run out.
• Speak up when you see something wrong. In fact, it is a firable offense to see a problem and not say anything because you weren't asked your opinion directly.
• Are smart enough to read the data but don't hide behind it when making judgment calls.
• Don't seek to please your boss but instead do what is right for the company. And yes, that includes taking risks that your boss doesn't approve of.
• Solve problems, not just find them. Problem finders are cheap.
• "Are not a brilliant jerk." Either you care about how your feedback will impact others or you are shown the door no matter how brilliant you are.

Provide candid feedback using the 4A guidelines

Netflix spends a lot of time coaching employees on how to give and take feedback effectively by using their 4A guidelines.

When giving feedback:

• Aim to assist: Give feedback with positive intent and never with the intention to hurt or embarrass someone. Don't say: “Picking your teeth in meetings with external partners is irritating." Instead say “If you stop picking your teeth in external partner meetings, the partners are more likely to see you as professional, and we’re more likely to build a strong relationship.”
• Actionable: Focus on what the person can do differently. Don't say "Your meetings aren't collaborative." Instead say, "During our meetings, you often talk more than half of the time. This is preventing other members from having the time they need to give their opinions.”

When receiving feedback:

• Appreciate: Fight the natural reaction to become defensive. Instead listen with an open mind and say "thank you" with sincerity.
• Accept or discard: Listen and consider all feedback but you decide whether to follow it or not.

Reward impact, not hard work

As CEO Reed Hastings says: "When it comes to how we judge performance at Netflix, hard work is irrelevant."

There are no rewards or promotions for attending the most meetings or being chained to your desk for 80 hours each week. All that matters at the end of the day is how much of an impact you have made.

Debate publicly and selflessly

At Netflix, debating publicly means that the entire company gathers in the Netflix theater to watch you debate key company decisions with another person. Sometimes you may even be told to argue the other side's point.

Selflessly means that you need to come genuinely prepared to lose and openly admit when you have.

Yes, it's scary and intimidating, but as Patty McCord, former Chief Talent Officer at Netflix, writes: "Over time everyone comes to appreciate that they always come out alive and usually the best decision gets made." Not only that but it is also a great learning opportunity for everyone watching.

Remove closed offices, assistants who act as guards, and locked spaces

Netflix removed all of these from their culture as they are all symbols of secrecy and signify a lack of trust in one another. Founder, Reed Hastings, doesn't even have an office or a cubicle with drawers that close. He has also gone so far as to remove locks from personal employee lockers because of the message it sends.

Take the keeper test, constantly

There are no rankings, bell curves, or rules to "cut the bottom 10% every year” at Netflix. Instead they have the keeper test used by everyone in the company, even the Board of Directors.

For managers or the Board, the test is somewhat simple:
If someone on your team quit tomorrow, would you try to change their mind or accept their resignation with a sense of relief? If you're not willing to fight for the person, it's time to say goodbye and look for a star performer.

For employees, it's still simple but a little scarier:
For your next one-on-one meeting with your manager, ask this: If I were looking to leave the company, how hard would you work to change my mind? The answer may be hard to hear, but at least you now know where you stand.

Avoid perks, they don't work

While perks can feel like a great sugar rush at first, they soon lead to a crash with mixed feelings of self-entitlement and greed. So don't bother looking for lavish offices, beautiful gyms, or sleep pods at Netflix, you won't find them. If you really want to retain your high performers, Netflix's advice is to just:

• Let them do the work they were hired to do.
• Treat them like adults by providing them with freedom and responsibility.
• Surround them with other high performers that they can collaborate with and learn from.

“If someone wants to walk out your door and go to another company because it serves better craft beer, you should just say to that person, “Have fun! Oh, and let’s do happy hour at your place soon.”—Patty McCord, former Chief Talent Officer at Netflix

Pay top of market

Why hire 10 average engineers, when you can hire one "rock-star" who will make a bigger impact than all of the others combined. To hire and retain top talent, Netflix doesn't use a rigid compensation system with salary bands or merit increase budgets. Instead they:

• Pay top of market, in all cash. If you want stock, you can trade in some of your salary for discounted options.
• Adjust salaries only if the market changes. Some salaries may stay flat for years while others grow dramatically in a short time.
• Don't offer year-end bonuses, equity, refreshers, or other forms of compensation. Your salary is your salary.
• Fire adequate performers to afford top talent.
• Encourage staff to interview regularly to know how much they are worth.
• Make salaries public in the company to help employees know if they are fairly compensated.

Remove travel and expense policies

Netflix replaced all of their policies with five words: Act in Netflix's best interest.

Employees buy what they need (for supplies or travel), take a photo of the receipt, and submit it directly for reimbursement. But if they don't think they can justify the expense, they skip the purchase, check with their boss, or buy something cheaper.

Managers set context for what is considered good judgment and can check receipts on the backend. The finance department also audits 10% of receipts annually. If someone is caught abusing the system, they are immediately fired. Managers then openly speak about the abuse to the entire company, so that everyone understands the consequences of poor judgment.

And yes, some some expenses may increase with this freedom (travel expenses rose about 10%) but to Netflix, it doesn't outweigh the added benefits of increased trust, speed, flexilibilty, and reduced overhead.

Stop performance improvement plans (PIPs) and instead give adequate performance a generous severance

Netflix feels that PIPs are not only cruel, because they're really all about proving incompetence, but they are also expensive:

• You pay underperformers for several months.
• You spend a lot of time and resources documenting the process.
• The time spent training only gets adequate performance up to speed for what you need now, not six months from now.

To keep a high talent density, Netflix instead focuses its culture on proactively letting people go. Why keep a good employee when you need a great one? Adequate performance instead receives at least four months of severance, that is, only after they sign an agreement not to sue.

And if you're wondering, involuntary turnover rate is 8% (only 2% higher than the US average).

Don't have a bonus system tied to goals

Instead Netflix pays their employees top of market. This is what drives innovation for them, not bonuses. Here's why:

• Bonuses don't incentivize
  If your employees are true high performers, an annual bonus won't make them work harder or smarter.
• Bonuses reduce flexibility
  No one can predict the future and Netflix needs to be able to adapt quickly. So why tie an employee's salary to a goal that might become obsolete in a year? As a result, Netflix employees will speak up when a goal is sending the company in the wrong direction, rather than remain silent just to keep their bonuses.
• Bonuses reduce creativity
  People are most creative when they have a big enough salary to remove stress, not when they don't know if they'll get paid extra. The proof is in this study.
• Bonuses don't give you a hiring advantage
  Where would you rather work: A company that offers you $200,000 salary plus a 15 percent bonus or just offers you $230,000?

Don't offer signing bonuses

Signing bonuses sound great to employees in their first year—but come year two, their standard 3% raise will feel more like a pay reduction when it doesn't even match their year one salary with signing bonus. Instead Netflix chooses to just pay top of market and leave it at that.

Remove vacation policies

No approvals, no tracking, no limitations. Just a motto, 'Take Some!', and clear context set by individual managers, like:

• Never make it harder for others to achieve their goals;
• Only one team member out at a time; or
• Give at least three months' notice for one month out of the office.

To make sure it doesn't become a 'No Vacation' policy, executives and management lead by example. They take big vacations and talk about them a lot, even going so far as sending and sharing postcards.

And the result? People take roughly the same number of vacation days as they did when there was a policy, between 12 to 19.

Adapt your culture regionally

As Netflix expanded globally, regional offices struggled with Netflix's culture of candor, efficiency, and speed. To help build trust over the cultural differences, Netflix worked to create a culture map that compared different national cultures to one another on a set of behavioral scales.

Netflix would then adapt the way they introduced and implemented their own business culture in these areas in order to build the emotional bonds that are critical to building trust. In less candid countries, Netflix made sure that feedback opportunities were on meeting agendas. In more direct cultures, they made talking about cultural differences a priority so that feedback could be understood as intended.

Netflix's Culture Map

Netflix developed this culture map based on Erin Meyer's book The Culture Map: Breaking Through the Invisible Boundaries of Global Business. Listen to Erin Meyer speak about culture maps on the Entrepreneur Talks by STATION.

Map Your Team’s Cultural Differences

Build a recruiting culture

Finding resumés and candidates that are high-talent is a Netflix manager's number one priority. At any time, managers should have an idea of who they would hire if their top talent left. So they recruit and interview constantly, even for positions that are already filled. In fact, at Netflix every manager makes each plane ride and every kids' soccer game an opportunity to recruit.

Create an interview process that emphasizes culture fit and talent

Step 1: Hold a pre-screen interview with a recruiter to review the Netflix Culture Deck (30 minutes).

Step 2: Set up a phone interview with a hiring manager (45-60 minutes).

Step 3: Give a take home project where candidates will need to show their work on how they arrived at a solution (6-8 hours).

Step 4-10: Hold one day of seven interviews (6-8 hours). This includes four technical interviews with whiteboard challenges and problem solving exercises, an HR interview, and two conversations with directors that will focus on culture fit.

Step 11: Hiring managers make the final decision and extend an offer. Candidates that are not chosen have to wait 6-12 months to reapply.

Ask interview questions designed to understand a candidate's thought process

Netflix interview questions range from culture fit to technical questions, with even some brain teasers thrown in to better understand a candidates thought process.

• How many cans of paint would you need to paint one wing of a 747?
• How would you determine if the price of a Netflix subscription is truly the deciding factor for a consumer?
• What would you tell someone that is calling to talk about how Blockbuster is better than Netflix?
• Who do you think is Netflix’s competitor and why?
• What would you do if you were the CEO?
• Tell me about a time you screwed up at your previous job.
• How do you stay organized? How do you handle competing tasks or projects?
• How did you handle a task where you had a deadline that you couldn’t meet?

Give feedback all year round using stop, start, continue

At Netflix, gone are the days of a manager reviewing employees once a year on a scale of 1 to 5. Let's face it, how good can you be at giving feedback if you only do it once a year? Instead, at Netflix, anyone at anytime can provide feedback to anyone else (managers, executives, and colleagues) in the form of start, stop, continue.

It works like this. Each person tells a colleague:

• One thing they should start doing,
• One thing they should stop doing, and;
• One thing they're doing really well and should keep doing.

Generally, each employee provides feedback to thirty to forty people each year. Netflix even holds in-person speed-feedback sessions with groups of 8 to 60 people. They also have feedback dinners once a year where each person receives feedback from everyone else at the table.

Have executives educate new staff

It started with CEO Reed Hastings and Chief Talent Officer Patty McCord sitting in a room with ten new hires at a time reviewing the culture, financials, and strategy of Netflix. They soon developed it into a 'New Employee College' where for one full day each quarter, every executive spends the day with new employees giving them an inside look into the past, present, and future of Netflix.

Broaden perspectives by evoking feelings of empathy and joy

As Greg Peters, Netflix COO said: "Storytelling is an important part of what it means to be human" and when people are transported into another world, they "build empathy, understanding, proximity, and reduce prejudice." But all that only happens if the content you provide is:

• Accessible: Streaming breaks down traditional barriers so that people are not just exposed to what is popular but also what speaks to them indivdually.
• Authentic: Stories have a look and feel that you only get when they actually come from around the world.
• High-quality: The quality should be high enough to be considered top-notch by the most discerning nations in the world in order to not break the spell.

Personalize everything

From the rows on the homepage, to the titles in those rows, to the galleries shown and cover art displayed, everything you see on Netflix is designed by complex algorithms to be just for you. Let's say you are keen on romantic comedies, Netflix will show a couple of lovebirds on the cover art rather than a lone bearded Robin Williams. Each of your clicks and views are then run through a complex rating system to weed out "clickbait" and only show you what will keep you engaged.

See an example.

Artwork Personalization at Netflix

As the Netflix Technology Blog writes: "Let us consider trying to personalize the image we use to depict the movie Good Will Hunting. Here we might personalize this decision based on how much a member prefers different genres and themes. Someone who has watched many romantic movies may be interested in Good Will Hunting if we show the artwork containing Matt Damon and Minnie Driver, whereas, a member who has watched many comedies might be drawn to the movie if we use the artwork containing Robin Williams, a well-known comedian."

Artwork Personalization at Netflix

See what's next (2015)

Gretel, a branding, strategy, and design studio created Netflix's first tagline, which was meant to inspire feelings of exploration, innovation, anticipation, and curiosity.

One story away (2021)

Name your brand by combining two obvious words

By combining the words, internet and flicks, it's almost as if they knew streaming was coming from the very beginning. And it's also much better than it's placeholder name: Kibble.