Duunitori’s principal consultant Lauri Vaisto reviews book No Rules Rules: Netflix and the Culture of Reinvention written by Reed Hastings and Erin Meyer. Vaisto’s review points out what we can all learn from Netflix’s work culture – and why it caused such a stir when it first came out.
Remember the platitudes of the platform business meme that the world’s largest hotelier does not run a single hotel, the largest transport company does not own a single car, and so on? This is the story of a movie rental company that actually sent physical DVDs. Until one day it reinvented itself.
The Finnish business bubble was abuzz when HS Visio wrote on 3.11.2021 about the rules of the game (or lack thereof) of streaming service Netflix. The usual pattern was that not nearly everyone involved in the discussion had read the article itself – and even fewer had read the book behind it.
No Rules Rules: Netflix and the Culture of Reinvention is a dialogue between Reed Hastings, CEO of Netflix, and Erin Meyer, professor at Insead, on the management of an extremely creative business. Where success is measured by whose content stream keeps consumers hooked over and over again.
No Rules Rules presents the ideal of an organisation that stays together and progresses like a sports team: the shared goal is to win, but individual players are constantly making decisions based on their skills, based on their reading of the game. The rules guiding action are either removed altogether (taking a holiday or travelling for work does not require anyone’s approval) or presented as general, often ambiguous, principles (”Don’t try to please your boss”).
The book is structurally sound: Hastings tells the story of Netflix’s journey through hard times towards world domination, Meyer brings a much-needed critical voice with her investigative perspective and places the anecdotes of a single company in a broader context. Described as ”podcast-like”, No Rules Rules reportedly works well as an audiobook.
What does this have to do with leadership?
No Rules Rules as a whole is a book about management. But it can be read in at least two ways: as a case study of self / community driven leadership, and as a building guide for managers with a more hierarchical background.
Candor (directness or honesty of communication) and constant feedback are the cornerstones of Netflix culture. A leader’s role is not only to be direct, but also to expect it from others and to encourage all team members to provide feedback even when it is not explicitly requested.
The practice links interestingly with the themes of psychological safety: brutally honest feedback can be given in a community where you can trust that everything said will be said with good intentions.
Honesty requires trust
Brutally honest feedback can be given in a community where you can trust that everything said will be said with good intentions.
What kind of leadership does a culture of candor require? Leading by example, of course, when it is most difficult.
For example, dealing with conflict is part of a leader’s role, whether you are a self-directed expert or a link in a line organization. Conflicts cannot always be resolved by everyone leaving with a smile on their face.
The alternative is still worse: conflicts that are avoided tend to grow over time. A problem-avoiding leader teaches everyone around him or her to do the same.
What about the workplace culture?
Not only do I work with many growth companies, but I work in one myself. Just about everywhere, there is a concern about how to maintain the unique culture that is important to everyone, while growing fast.
I admit I loved Reed Hastings’ answer to a question in an interview:
”We are not trying to preserve our culture. We are trying to improve it.”
A culture that is too rigidly defined, shaped and codified can, over time, turn into its own enemy.
No Rules Rules also draws attention to a point that deserves more attention than it often gets: culture and working atmosphere can never be the sole responsibility of management. The kind of colleagues who are part of the community and how they behave play a major role.
Sometimes pure genius is not enough
Netflix’s idea of brilliant jerks refers to talented and productive people who work well as individuals, but who don’t know how to work together, help others succeed, or even hinder the work of others through their behaviour. Netflix hopes they will either learn to play in a team or take their genius to a job that suits them better.
It is at this point that perspective plays a crucial role in whether Netflix is seen as an extremely brutal or extremely humane culture.
The idea of being fired for ’cultural incompatibility’ is problematic and frightening in many ways, even if it comes with a hefty financial reward.
On the other hand, many people have had experiences of bullying bosses, of colleagues who talk behind their backs, or of colleagues who are lazy and blame others for their unfinished work. What if they were replaced by someone else? And would I be the kind of colleague others want to keep on their team?
What about the employer brand?
If there are any iconic concepts in employer branding, Netflix’s The Keeper Test could be on its way to becoming one. In short, it’s a question for a front-line employee: if employee X announced his intention to move to a similar role with another employer, how hard would you try to persuade him to stay?
The aim of the thought experiment is to help define and maintain the level of ambition that will, in practice, lead to a ”best people only” workplace.
Indeed, talent density is one of the key concepts in the book: the idea that surrounding talented and motivated employees with other talented and motivated employees creates a dynamic that leads to totally superior innovation and performance. I think it achieves much more than that.
The opportunity to learn from the best is an extremely attractive employer proposition
Anyone involved in strategic recruitment will tell you that the key objective is not to maximise the number of applications coming in, but to optimise the quality of those applications.
At its most successful, the employer brand does just that: it attracts the right people for the job and alienates those whose skills are better served elsewhere. (Remember when Helsingin Sanomat scandalised Wall Street’s 80-100 hour working weeks? Goldman Sachs has enough newcomers despite that – or even because of it.)
The chance to be part of a community where you can actually learn from the best in the business is an extremely attractive employer value proposition. However, it’s the pot luck of working life: it’s not worth wasting your time or the recruiter’s time without bringing your own value to the table.
Buzz Trap: Underperformers get the boot
When the debate about Netflix’s culture was at its height, much of the attention was focused on the company’s policy of getting rid of its least skilled or cooperative employees (an idea born in 2001, when a company in financial duress was forced to lay off a third of its workforce). This central practice in itself has led many to see Netflix as an extremely harsh and cruel place to work.
What has been less noticed is that, in the US workplace context, the idea is actually not terribly radical. Netflix also pays not only the highest wages in the industry, but also relatively generous severance pay for those who are made redundant.
The book also directly states that Netflix, which operates under local law, does not implement the model in all its European offices, for example. Nor are the redundancies self-inflicted, and Netflix’s overall staff turnover is no different from the industry average. (As an afterthought, the easing of the pandemic has put the company’s redundancies repeatedly in the news in 2022.)
Worth the Buzz: Leading with context
Reading past the book-selling provocation, No Rules Rules essentially represents a view of humanity in which people and their judgment can be trusted. A smart worker does not need detailed instructions for his daily work. They can put on their clothes at work, even when not specifically asked to do so.
Instead, a smart worker needs a good understanding of the broader context of their work: current situation, strategy, objectives, options, etc. This will not happen without a very high level of transparency on the part of the employer: in the extreme world of Netflix, this means, for example, sharing the insider information of a listed company with the entire staff.
Netflix as a workplace is not for everyone, and its example is not intended to be copied directly anywhere. Meyer says the model is well-suited to driving innovation, but not so well when the key objective is to avoid mistakes (e.g. in healthcare).
However, Netflix’s way of working can provide useful inspiration. I would argue that many workplaces would benefit from greater transparency. Or at least by not wasting management resources on rationing secrets.
What is Worth the Buzz?
Worth the Buzz? is a project by Nordic Business Forum’s resident reader Lauri Vaisto. Vaisto gets to know the NBForum speakers by reading their books – and sharing the insights with the public. This text was written in 2022 when Vaisto focused specifically on three themes: management and leadership, workplace culture and employer brand.
The works in the 2022 project include:
- Yuval Noah Harari: Homo Deus: A Brief History of Tomorrow
- Rutger Bregman: Humankind: A hopeful History
- Jitske Kramer: The Corporate Tribe: Organizational Lessons From Anthropology
- Petter A. Stordalen: Thank God, it’s Monday!
- Amy Edmondson: The Fearless Organization
- Reed Hastings & Erin Meyer: No Rules Rules: Netflix and the Culture of Reinvention
- Zoe Chance: Influence is Your Superpower
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