There are companies where people walk by trash on the floor in the office, leaving it for someone else to pick it up, and there are companies where people lean down to pick up the trash they see, as they would at home. We try hard to be the latter, a company where everyone feels a sense of responsibility to do the right thing to help the company at every juncture. Picking up the trash is the metaphor for taking care of problems, small and large, as you see them, and never thinking “that’s not my job.” We don’t have rules about picking up the real or metaphoric trash. We try to create the sense of ownership, responsibility and initiative so that this behavior comes naturally.
Our goal is to inspire people more than manage them. We trust our teams to do what they think is best for Netflix — giving them lots of freedom, power, and information in support of their decisions. In turn, this generates a sense of responsibility and self-discipline that drives us to do great work that benefits the company.
We believe that people thrive on being trusted, on freedom, and on being able to make a difference. So we foster freedom and empowerment wherever we can.
In many organizations, there is an unhealthy emphasis on process and not much freedom. These organizations didn’t start that way, but the python of process squeezed harder every time something went wrong. Specifically, many organizations have freedom and responsibility when they are small. Everyone knows each other, and everyone picks up the trash. As they grow, however, the business gets more complex, and sometimes the average talent and passion level goes down. As the informal, smooth-running organization starts to break down, pockets of chaos emerge, and the general outcry is to “grow up” and add traditional management and process to reduce the chaos. As rules and procedures proliferate, the value system evolves into rule following (i.e. that is how you get rewarded). If this standard management approach is done well, then the company becomes very efficient at its business model — the system is dummy-proofed, and creative thinkers are told to stop questioning the status quo. This kind of organization is very specialized and well adapted to its business model. Eventually, however, over 10 to 100 years, the business model inevitably has to change, and most of these companies are unable to adapt.
To avoid the rigidity of over-specialization, and avoid the chaos of growth, while retaining freedom, we work to have as simple a business as we can given our growth ambitions, and to keep employee excellence rising. We work to have a company of self-disciplined people who discover and fix issues without being told to do so.
We are dedicated to constantly increasing employee freedom to fight the python of process. Some examples of how we operate with unusual amounts of freedom are:
- We share documents internally broadly and systematically. Nearly every document is fully open for anyone to read and comment on, and everything is cross-linked. Memos on each title’s performance, on every strategy decision, on every competitor, and on every product feature test are open for all employees to read. Despite this huge access, we’ve had very few leaks, due to our ethos of self-discipline and responsibility.
- There are virtually no spending controls or contract signing controls. Each employee is expected to seek advice and perspective as appropriate. “Use good judgment” is our core precept.
- Our policy for travel, entertainment, gifts, and other expenses is 5 words long: “act in Netflix’s best interest.” We also avoid the compliance departments that most companies have to enforce their policies.
- Our vacation policy is “take vacation.” We don’t have any rules or forms around how many weeks per year. Frankly, we intermix work and personal time quite a bit, doing email at odd hours, taking off weekday afternoons for kids’ games, etc. Our leaders make sure they set good examples by taking vacations, often coming back with fresh ideas, and encourage the rest of the team to do the same.
- Our parental leave policy is: “take care of your baby and yourself.” New parents generally take 4-8 months.
- Each employee chooses each year how much of their compensation they want in salary versus stock options. You can choose all cash, all options, or whatever combination suits you4. You choose how much risk and upside you want. These 10-year stock options are fully-vested and you keep them even if you leave Netflix.
- There are no compensation handcuffs (vesting) requiring you to stay in order to get your money. People are free to leave at any time, without loss of money, and yet they overwhelmingly choose to stay. We want managers to create conditions where people love being here, for the great work and great pay.
You might think that such freedom would lead to chaos. But we also don’t have a clothing policy, yet no one has come to work naked. The lesson is you don’t need policies for everything. Most people understand the benefits of wearing clothes at work.
There are a few important exceptions to our anti-rules pro-freedom philosophy. We are strict about ethical issues and safety issues. Harassment of employees or trading on insider information are zero tolerance issues, for example. Some information security issues, such as keeping our members’ payment information safe, have strict controls around access. Transferring large amounts of cash from our company bank accounts has strict controls. But these are edge cases.
In general, freedom and rapid recovery is better than trying to prevent error. We are in a creative business, not a safety-critical business. Our big threat over time is lack of innovation, so we should be relatively error tolerant. Rapid recovery is possible if people have great judgment. The seduction is that error prevention just sounds so good, even if it is often ineffective. We are always on guard if too much error prevention hinders inventive, creative work.
On rare occasion, freedom is abused. We had one senior employee who organized kickbacks on IT contracts for several years before being caught. But those are the exceptions, and we avoid over-correcting. Just because a few people abuse freedom doesn’t mean that our employees are not worthy of great trust.
Some processes are about increased productivity, rather than error avoidance, and we like process that helps us get more done. One such process we do well at is effective scheduled meetings. We have a regular cadence of many types of meetings; we start and end on time, and have well-prepared agendas. We use these meetings to learn from each other and get more done, rather than to prevent errors or approve decisions.