How Netflix Reinvented

HR
By Patty McCord
Presented by: Maryam Halimi

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 Background
1997 oe 2006 2007 2011 2013 2014 2017

Founded in 1997 by Reed Hastings and Marc

Rudolph as a way to rent movies online

NETFLIX
 Background
1997 1999 2006 2007 2011 2013 2014 2017

¢ Netflix introduces subscription service.

¢ Unlimited movie rentals, for one monthly
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 Background

¢ Netflix announces an open competition to create a

new algorithm for filtering and online browsing.

¢ “Netflix Prize” of $1M is awarded to team of7.

NETFLIX
 Background
1997 | 2006 2007 2011 2013 2014 2017

Netflix begins online streaming service.

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 Background
1997 ee 2006 2007 2013 2017

¢ Netflix announcesplans to split streaming and DVD rentals.

* Announcment of Qwikster (DVD by mail) causes a sharp declinein

subscriptions.

¢ The idea is quickly abandoned by Netflix due to customer complaints.

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 Background
1997 ee 2006 2007 2011 2014 2017

¢ Netflix invests $100M in 2 seasons of “House of Cards”

¢ Resulted in an increase in Netflix’s exposure.

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 Background
1997 ee 2006 2007 2011 2013 2017

¢ Netflix has more than 50M subscribers.

¢ Stock price: $400/share (10x more than in 2009)

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 Background
1997 | 2006 2007 2011 2013 2014

¢ Netflix nears 100M subscribers mark

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 Company Culture: Freedom and Responsibility
How did it start?
¢ 2001 - Sealab! forced to layoff one-third of employees due to the
dot com bubble burst and the 9/11 tragedy. IPO was put on hold.
¢ Rise in DVD popularity increased subscriptions for DVD-by-mail
service.
¢ Workload increased greatly, with 30% less staff to shoulder the increase.
¢« Managementresponse:
¢ Employees that were laid off were not critical to operations.
¢ The laid off employees actually caused more work.

¢ Lesson: “The best thing you can do for employees...is hire only “A”
players to work alongside them.”

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 The Five Tenants of Netflix’s Talent Acquisition and
Management

. Hire, Reward, and Tolerate Only Fully Formed Adults

Tell the Truth About Performance

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Managers Own the Job of Creating Great Teams

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Leaders Own the Job of Creating the Company Culture

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Good Talent Managers Think Like Businesspeople and Innovators

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First, and Like HR People Last.

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 Hire, Reward, and Tolerate Only Fully
Formed Adults
¢ Treat your workerslike adults.
¢ Instead of developing long-winded companypolicies, ask
employees to act in the best interest of the company.
¢ Will work 97% of the time if you hire the right people.
¢ Have strict hiring criteria, and take action quickly if hiring
mistakes are made.
¢ Create a company culture of honest and clear communication.
¢ For example:
¢ Vacation Policy: Take whatever time you feel is appropriate.
¢ Expense Policy: “Act in Netflix’s best interests.”

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 Tell the Truth About Performance
¢ Eliminated formal reviews: “too ritualistic and infrequent”
¢ No PIP’s: Performance Improvement Plans
¢ Not effective
¢ Lead to the same ending most of the time
¢ Encouraged employees to have informal and honest
conversations frequently with one another (initiated by both
managers and subordinates).

NETFLIX
 Managers Own the Job of Creating
Great Teams
¢ Managers should start by imagining their ideal team:
¢ What accomplishments do you see the team achieving in 6 months?
¢ Whatskills are required to reach this goal?
¢ Does your current team meet these skill requirements?

¢ Recruit people with the right skills.

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 Leaders Own the Job of Creating the
Company Culture
¢ Three areas that need attention:
Pam u\aareleetn
¢ Company ideals not matching behaviors of management.
2. Making employees aware of whatis driving the business towards
SUCCESS
¢ Letting employees know whatexactly it take for the company to succeed.
« Example: Taking expenses into considering, not just revenue.
3. Split-Personality
¢ Being aware of the differences between different departments and sectors of
an organization.
¢ Example: Difference between Sales and Finance.

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 Good Talent Managers Think Like
Businesspeople and Innovators First, and
Like HR People Last.
¢ What’s good for the company?
¢ How do we communicate that to employees?
¢ How can wehelp every worker understand what we mean by
high performance?

¢ Lesson: Expectations should be clear, for both management,

and employees.

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 =ALCay-Ws
¢ Netflix strongly emphasizes:

¢ Working towards the benefit of Netflix.

¢ Creating ideal teams with “A” workers.
¢ Correcting hiring mistakes quickly.
¢ Treating employeeslike adults.
¢ Think like businesspeople, not HR people.

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 Conclusion

Whenyou hire the right employees, you can treat them like
adults and expect them to use commonsense 97% of the time.

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 Quiz
1. What is Netflix’s Expense Policy?

2. What realization did Netflix have in 2002, after it’s initial

layoff?

3. What is Netflix’s key approach towards management of

employees?

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