Netflix’s 5 Tenets of HR

Silicon Valley is known for its technology, not its management, innovations. But some of its management innovations are worth looking at. Netflix’s human resources policies rank right up there, since the company threw out the standard playbook.

Former Netflix chief talent officer, Patty McCord, describes the company’s key talent management tenets in a recent Harvard Business Review article. While Netflix’s approach may not be suited to other companies or the work of the public sector, they are worth highlighting for no other reason than to spark reflection and discussion.

McCord and Netflix CEO and founder, Reed Hastings, created a 126-page slide deck describing the approach to talent and culture at Netflix. This deck has been viewed more than 7 million times and has been highly influential (and controversial) in the corporate world. It comprises simple and unadorned bullet points for the most part, but McCord’s article highlights the five tenets that Netflix has developed to attract, retain and reward talent:

1. Hire, reward and tolerate only fully formed adults. “Over the years we learned that if we asked people to rely on logic and common sense instead of formal policies, most of the time we would get better results, and at lower costs,” McCord writes. If you hire carefully, she says, 97 percent of your employees will do the right thing, but “most companies spend endless time and money writing and enforcing HR policies to deal with problems the other 3 percent might cause.” McCord says, “We tried hard to not hire those people, and we let them go if it turned out we’d made a hiring mistake.”

2. Tell the truth about performance. Netflix eliminated formal individual performance reviews and asked managers and employees “to have conversations about performance as an organic part of their work,” McCord writes. They instituted 360-degree reviews under the theory that “people can handle anything as long as they are told the truth,” she says. Netflix does not try to identify the top 10 percent or bottom 30 percent in their company; they look at the entire field of talent—inside and outside their company—and rate them in that context.

3. Managers own the job of creating great teams. “We continually told managers that building a great team was their most important task,” McCord says. “We didn’t measure them on whether they were excellent coaches or mentors or got their paperwork done on time. Great teams accomplish great work, and recruiting the right team was the top priority.”

4. Leaders own the job of creating the company culture. Leaders need to live the values they espouse, or no one else will. McCord encourages leaders to ask themselves whether there is “a mismatch between the values you’re talking up and the behaviors you’re modeling and encouraging.” She also says leaders have to ensure that employees “understand the levers that drive the business” and provide context and transparency so that can happen. In addition, she says, leaders need to understand the subcultures within an organization that might require different management approaches.

5. Good talent managers think like business people and innovators first and like HR people last. McCord also offers insights to her peers in the HR profession, noting that too many devote time to morale improvement initiatives. “Instead of cheerleading, people in my profession should think of themselves as businesspeople,” she says. “What’s good for the company? How do we communicate that to employees? How can we help every worker understand what we mean by high performance?”

With tenets like this in place, Netflix’s operating policies tell salaried employees to take whatever time off they feel is appropriate. They have no vacation policy; employees and bosses are asked to work it out with each other. Similarly, Nexflix’s expense policy is “Act in Netflix’s best interest”—there is no elaborate travel and expense guidance. The theory is “if you create a clear expectation of responsible behavior, most employees will comply,” McCord says.

While this approach of setting clear expectations and trust may not work well broadly in a public sector context, it clearly provides some foundational ideas for how innovative leaders on the front line of their agencies can frame how they approach their job of leading and encouraging high performance.