In the news recently we’ve heard constant talk of Netflix’s co-founder and current CEO, Reed Hastings’ insight on the future of streaming video and of his revenue growth plan going forward. Hastings recognizes HBO and Amazon as some of Netflix’s major competitors among other content streaming sites anticipation of apps dominating over channels in interviews. However, what has not received as much attention in the media is the effect that Netflix’s unusual management philosophy has had on its recent success. Why pay keen attention to the development of Netflix’s revised management strategy released in 2011?
Just recently Netflix became the Wall Street equivalent of a comeback kid from its wavering price behavior in the past years. Its shares rose as much as 25% on April 23, the day after it released quarterly earnings of 31 cents per share, far above the 19 cents per share Wall Street anticipated. In the past half year, with its vastly growing consumer base, Netflix stock nearly tripled. Shares are currently hovering around the $220 mark. The world has seen growth in Netflix’s customer base having reached 30 million users spanning 40 countries. All the while Hastings has held true to what was an entirely new management philosophy in 2011. The positive growth results of Netflix’s relatively new “Freedom and Responsibility” management motto could have the potential to change America’s workplace as we know it today. The new strategy is based upon seven aspects of Netflix’s culture: Values are what we Value, High Performance, Context not Control, Highly Aligned, Loosely Coupled, Pay Top of Market, and Promotions & Development. So how exactly is Hastings’ “Freedom and Responsibility” culture outlined that appears to be working so brilliantly for Netflix?
Over the past few years, Netflix has changed their trajectory from being a DVD rental service to providing online streaming of TV shows, movies and other content. Along with this change has come increased attention to Netflix’s leadership tactics. Netflix’s traditional hiring practices consist of strictly hiring "outstanding" employees. Hastings doesn’t believe in compromising when it comes to hiring talent for maximum innovation. If Netflix workers do not exhibit the following 9 characteristics of high performance, they will be let go with generous severance packages:
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Judgment
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Communication
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Impact
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Curiosity
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Innovation
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Courage
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Passion
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Honesty
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Selflessness
Netflix is known for hiring and promoting people who demonstrate these nine qualities. If not exceptional, they will be replaced by “A-player" talent. Also, according to its policy, Netflix does not tolerate “brilliant jerks." For Hastings, their “cost to effective teamwork is too high”. But perhaps the part which resonated the most in the management community was Hastings’ new no limit vacation policy. This does not mean that Netflix employees are not awarded any vacation days. Oh no, quite the opposite! There is no standing limit on paid vacation days for star employees who make the cut and follow through with their responsibilities. Facebook’s COO, Sheryl Sandberg, commended Reed Hastings on his management strategy saying, "It may well be the most important document ever to come out of the Valley.” True to its title, Freedom & Responsibility, Netflix’s management strategy certainly grants its employees substantial freedom as long as employees keep their noses to the grindstone.
Check out Business Insider’s article for the full presentation of Netflix’s newer logic as well as these other compelling articles on the topic:
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