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8 ‘Golden’ HR Strategy Lessons From Netflix

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Published:
June 23, 2022
Reading Time:
10 minutes
Leo
Experienced copywriter who spends a lot of money at restaurants and regrets it later.

Who on Earth would have thought that one day, people will have access to hundreds of movies and TV shows for only $15 a month.

The founders of Netflix didn’t just create a company, they created history, they created a household name, they created a revolution.

It’s true that the entrepreneurs who brought Netflix into existence were highly ambitious and talented, but the rest of the staff that helped the company become a worldwide sensation should not be ignored.

In this article, we will discuss the HR strategies that Netflix used to hire and retain top talent, and how their outside-the-box talent management techniques took the company to new heights.

Lesson #1: Hire People With a Higher Skill Set as the Company Grows

Patty McCord, the chief talent officer at Netflix from 1998 to 2012, once mentioned how she had to lay off a very old employee in 2002, just a few months after their IPO. This employee, Laura, was a bookkeeper who worked really hard to help the company during its initial stage. Back when Netflix was a DVD rental business, Laura created systems to efficiently track movie rentals and pay royalties.

However, as the company grew, its customers also grew. Consequently, according to Patty McCord, Laura wasn’t qualified to handle such a large financial operation anymore. So, McCord explained her painful decision to Laura and hired highly qualified certified public accountants to handle the growing books. Netflix values its old employees. Still, if their skills are no longer relevant, the company looks for the person with the right skills.



Lesson #2: Employ Only the Best of the Best, Because That’s What the Best Employees Prefer

Netflix’s talent philosophy is: The best thing you can do for employees is to hire only “A” players to work alongside them. McCord describes a conversation she had with a very talented engineer who was working with Netflix. After a huge layoff, that engineer was a one-man department working long hours. McCord assured him that more engineers will be hired soon to divide the workload. However, the engineer surprisingly said that he was happier working alone. This is because the previous members of his team were average, and he was a highly talented and intelligent individual. And instead of supervising mediocre engineers and fixing their mistakes, he preferred working alone. This way he would get more work done and get it done right.

KEY TAKEAWAYS

  • One of the key Netflix values concerning human resources is treating all employees like mature adults.
  • When it comes to employee expenditure, one encourages employees to act as if they’re spending their own money and not Netflix’s money.
  • Instead of emotionally draining PIPs, Netflix prefers attractive severance packages in order to save time and energy and to avoid spoiling relationships with employees.
  • They do not encourage rigid performance reviews and HR policies. Rather, one expects employees to use common sense and act like adults.
  • Netflix encourages talent managers to think like businesspeople instead of using generic tactics to raise morale.

Lesson #3: Instead of Writing Complex HR Policies, Just Hire Adults Who Act Like Adults

This should be the HR strategy in any company, not just Netflix. HR professionals and talent managers spend weeks writing and refining best practices for attracting and retaining talent. However, if you just hire qualified adults who have common sense, you’ll realize that all those complex HR policies only need to be used for reference purposes and not as a standard procedure. For instance, if a company doesn’t have a maximum number of days you can take off. In this case, the staff should know, out of common sense, that they still have to show up for work every day if there is no specific reason not to.



Lesson #4: Don’t Force Employees to Work

Netflix offers its salaried employees as much paid time off as they wish. Meaning that if someone’s child is sick all of a sudden, they don’t have to go through a formal process to apply for a leave. They can simply take a day off. The same applies to other situations, such as attending one’s cousin’s wedding, taking a Friday off to enjoy a 3-day trekking adventure, or having a mental health break.

There are, however, some guidelines to ensure the business runs smoothly. For instance, Netflix requests accountants to not take days off during the beginning and end of a quarter. This is because from an accounting perspective, these are busy periods. Still, Netflix’s HR strategy is to not force employees to work when they’re not in a position to give their 100%.



Lesson #5: Trust Employees to Handle the Company’s Money

Many companies have a military-like expenditure policy. Employees have to report and explain all expenses. But not at Netflix. The company discontinued the use of its formal policy to enforce judicious expenditure. Netflix’s HR strategy with employee expenses is simple: “Act in Netflix’s best interests.”

This means that when Netflix employees spend the company’s money, e.g., to buy expensive champagne for an important client, they’re expected to spend it like it’s their own money. Again, the company’s HR strategy to let adults act like adults comes into play here.

Lesson #6: Ditch the ‘PIP’ and Go for an Attractive Severance Package

PIP stands for Performance Improvement Plan and, in a lot of cases, it has actually nothing to do with performance. In fact, HR departments around the world have been using PIPs as a tool to get rid of employees they don’t like. Many times it goes like this: A record of the employee’s supposed underperformance is created, then a PIP is set up, and unrealistic expectations are put. Afterwards, the employee is fired if he doesn’t meet those expectations.

HR strategy, 8 ‘Golden’ HR Strategy Lessons From Netflix

McCord mentions an instance in which a quality assurance engineer at Netflix was about to undergo PIP. But instead of beating around the bush and setting high expectations that the engineer was not going to meet, McCord offered the employee an attractive severance package which gave them the time and opportunity to find a new job.



Lesson #7: Build a Vision First, and Then Build a Team

Talent managers often hire employees first, and then explain the vision to the team. Netflix does the exact opposite. Their HR strategy is to build a vision first and then hire team members who can help them achieve that vision.

When the company went from being just a DVD rental business to a worldwide online streaming sensation, the company needed more helping hands than ever. DVDs are tangible objects that can be delivered by mail. However, creating an online streaming platform requires hundreds of thousands of terabytes of video content to be uploaded to Netflix. The company has a vision of “becoming the best global entertainment distribution service,” as they say. To achieve this vision, they require the top cloud services experts from around the world. By having a clear vision, the company managed to hire the right people instead of spending weeks and months training existing employees.



Lesson #8: Talent Managers Should Think Like Businesspeople

According to McCord, talent managers should not focus on improving employee morale by throwing parties or giving out free items. Instead, talent managers should think like someone who is running a business. So, what’s truly important in business? It is for sure essential to know how the company makes money and communicate this to employees so that they act accordingly. For example, a talent manager could ask an employee: “I’ll give you a $10,000 bonus, guess what you have to do to earn it.” An ideal employee would say something like “increase subscriptions by 20% in 6 months” or “reduce churn rate from 5% to 3%”.

If an employee doesn’t know what “good performance” means in the company and how the company makes money, nothing will improve morale. However, if employees perform well, the company will perform well. Thus, if the company performs well, then morale will be high anyway.

Final Thoughts

If you’re an independent HR consultant or anyone who is working in the HR field or running a business, you should try these techniques in your own workplace. Netflix is not just a company after all, but a revolution. And this revolution was only successful because of the people who worked for Netflix and took the company to great heights. So, applying at least some of these lessons to your business or a client’s business will most likely bring the much-needed results. All the best.

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