No Rules Rules, by Reed Hastings and Erin Meyer

Why I read it:

Aside from my Netflix addiction (closing in on 10 years now, reader), I’ve been fascinated by the platform’s business model and inner workings. Directors and producers have often commented on the freedom they have to create high-quality content with Netflix, who aren’t chasing traditional ‘ratings’ but are looking to innovate and provide their users with a fantastic experience. I’ve been amazed over the years at how often I watch something that’s not usually ‘my thing’ on Netflix, only to be dumbfounded by the creativity and quality. I had to know what went into this melting pot of global proportions.

I knew of Erin Meyer, too, as her book The Culture Map is in my Amazon Wishlist (I promise I’ll read it soon!), and was intrigued at how an ‘outsider’ would work with CEO Reed Hastings to write a book about the company.

In summary:

Reed Hastings takes the reader on a journey that begins with his sale of Pure Software, to the creation of Netflix, originally a DVD rental service via post, and then progresses through the company’s progress to present day.

The book centres around three pillars of the Netflix model: talent density (high quality staff), candour (honest feedback culture) and reducing controls (fewer policies, more creativity). 

Hastings is open about their successes and failures. I was often remarking aloud regarding the level of candour he embraces, from admitting his own mistakes, to publishing some of his less than positive 360 comments from Netflix staff. Meyer is a vital partner in this exploration; having interviewed hundreds of staff to see what their experiences were like, she is in a perfect position to respond to Hastings’ assertions, offering insights into what the staff think, and adding her own perspectives and drawing upon research and other anecdotal evidence.

This book is a detailed, practical, and specific guide to how Netflix created, tweaked, and maintained the culture and success it has today. I found it refreshing, energising, and candid throughout, as if Hastings and Meyer had let us join them while they discussed the real way that Netflix operates.

Key takeaways:

1. Performance is contagious – when Netflix laid off staff at the early stage of their journey, Hastings learnt a lot. The best staff performed even better once the average staff had left.Netflix committed to then only hiring the most talented (and paying top market price for them) in order to drive their performance forward. Meyer quotes the Dr Felps study in which groups who were asked to do a task, had an actor planted in the groups, taking on a different role, e.g. slacker, dissenter, etc. The most talented groups would perform much less effectively with just one member not pulling in the same direction.

2.  Candour and feedback – Netflix has a very clear view about feedback: ‘say what you really think’, in summary. The idea is that staff will offer feedback to each other without taking offence; it’s part of the company culture, and this includes staff feeding back to more senior members of the team.Much to Erin Meyer’s surprise, she was receiving feedback on her own performance, while interviewing and speaking to Netflix employees, such is the normality of this practice. They have a simple guide for giving and receiving feedback called 4A. When giving feedback it must: Aim to Assist, and be Actionable. And for Receiving, you must Appreciate the feedback, and then Accept or Discard. This chapter is brilliant and really made me consider how we can embrace, and lead, cultures of open feedback for all staff.

3. Leadership modelling – Netflix attempts to run a global company with as few arbitrary policies as possible. For example, there is no holiday (vacation) policy. You take it when you want it; no one counts the days.  There are nuances, of course, but Hastings and other leaders must model the expectation so that it doesn’t become a ‘No holiday’ policy! Reading about the way leaders at Netflix model the behaviours they accept in others was a welcome reminder about how leaders must not just set policies, but walk the walk.

4. Innovation cycle

Netflix prides itself on creativity and innovation – staff are encouraged above all else to produce stunning, original work. In brief, their innovation cycle comprises: 1) Farm for dissent, or socialise the idea, to get feedback from others about its viability. 2) Test out the idea. 3) As the informed captain, or leader, make the bet – will you pursue it? 4) If it succeeds, celebrate, if it fails, sunshine it. For the latter, there is an excellent process to follow to reflect upon and discuss (‘sunshine it’ – discuss as publicly as possible) why an idea might not have worked. There are plenty of good examples and anecdotes about innovation processes in this chapter.

Favourite quote:

‘Culture isn’t something you can build up and then ignore. At Netflix, we are constantly debating our culture and expecting it will continually evolve. To build a team that is innovative, fast, and flexible, keep things a little bit loose. Welcome constant change. Operate a little closer toward the edge of chaos.’

Favourite moment:

Hastings admits to a decision that almost cost Netflix everything in 2007, when they were looking to offer streaming and DVD rentals. He decided to create Qwikster, a new platform solely for DVD rentals, and to position Netflix as streaming only, thus making customers who wanted both services to subscribe and pay twice. The move cost them millions of subscribers and was a disaster. Afterwards, plenty of staff came to tell Reed that they thought it was a terrible idea from the start. He was upset that they never felt able to correct him beforehand, in a similar vein to the famous studies behind co-pilots or nurses feeling unable to correct the impending mistakes of pilots or surgeons, respectively.

Out of the ashes of this defeat (I’m not just revelling in the crisis), came a determination to foster candour and feedback for any staff member. One method they used to ensure that feedback culture wasn’t in name only, was to create an idea proposal policy, whereby staff create a live, shared memo for their ideas and receive feedback from other staff.

There are other fascinating moments about learning from feedback, for example when they considered adding ‘Downloads’ to Netflix, as well as when kids’ content was being considered for investment.

Question and reflect:

  • We can’t all pay the big bucks for the ‘best’ staff, but the ‘performance is contagious’ ideas and studies are a reminder to us that we must invest all we can in staff, and staff development, to ensure that teams are filled with purpose and expertise.
  • Some of us like to think we give and receive feedback well, but have we really fostered this culture in our organisation? How much time and inefficiency could we save if we were a little more open to shared, constructive feedback? This seems to be modelled well at Netflix.
  • Which ‘policies’ and ‘rules’ can we let go of, to create the right balance of organisation and creativity…consistency and innovation?

Read this if:

You are interested in how a small company turned into a global phenomenon, with step-by-step events and reflections

You are interested in how to build and maintain a distinguishable and purposeful work culture

You want to read about a ‘warts and all’ approach to running an organisation.

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