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HOW NETFLIX REINVENTED HR PDF

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Sheryl Sandberg has called it one of the most important documents ever to come out of Silicon Valley. It's been viewed more than 5 million times on the web. Download Citation on ResearchGate | How Netflix Reinvented HR | When Netflix executives wrote a PowerPoint deck about the organization's talent. Harvard Business Review: How Netflix Reinvented HR. Sheryl Sandberg has called it one of the most important documents ever to come out of Silicon Valley.


How Netflix Reinvented Hr Pdf

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How Netflix Reinvented HR By Patty McCord. Presented by: Maryam Halimi. Find more PowerPoint templates on myavr.info! Background. In a recent article for the Harvard Business Review, McCord outlined how Netflix reinvented HR to create the viral 'Netflix Culture Deck' (NCD). How Netflix Reinvented HR - Download as PDF File .pdf), Text File .txt) or read online. hr case study.

Many of the ideas in it seem like common sense, but they go against traditional HR practices. Industrial firms thrive on reducing variation manufacturing errors ; creative firms thrive on increasing variation innovation. What reactions have you gotten from your peers to steps such as abolishing formal vacation and performance review policies?

In general, do you think other companies admire your HR innovations or look askance at them? My peers are mostly in the creative sector, and many of the ideas in our culture deck came from them. We are all learning from one another. Which idea in the culture deck was the hardest sell with employees? Have any of your talent management innovations been total flops?

Not so far. Patty talks about how leaders should model appropriate behaviors to help people adapt to an environment with fewer formal controls. With that in mind, how many days off did you take in ? But I did take three or four weeklong family trips over the past year, which were both stimulating and relaxing The first took place in late It became clear that we needed to put the IPO on hold and lay off a third of our employees.

It was brutal. Then, a bit unexpectedly, DVD players became the hot gift that Christmas. By early our DVD-by-mail subscription business was growing like crazy. I told John I hoped to hire some help for him soon.

His response surprised me. Excellent colleagues trump everything else. The second conversation took place in , a few months after our IPO. Laura, our bookkeeper, was bright, hardworking, and creative. Despite her work ethic, her track record, and the fact that we all really liked her, her skills were no longer adequate.

So I sat down with Laura and explained the situation—and said that in light of her spectacular service, we would give her a spectacular severance package.

Tell me again how Netix benets? Instead, lets just tell the truth: Technology has changed, the company has changed, and Marias skills no longer apply.

This wont be a surprise to her: Shes been in the trenches, watching the work around her shift. Give her a great severance packagewhich, when she signs the documents, will dramatically reduce if not eliminate the chance of a lawsuit. In my experience, people can handle anything as long as theyre told the truthand this proved to be the case with Maria. When we stopped doing formal performance reviews, we instituted informal degree reviews.

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We kept them fairly simple: People were asked to identify things that colleagues should stop, start, or continue. In the beginning we used an anonymous software system, but over time we shifted to signed feedback, and many teams held their s face-to-face.

HR people cant believe that a company the size of Netix doesnt hold annual reviews. Are you making this up just to upset us? Im not. If you talk simply and honestly about performance on a regular basis, you can get good resultsprobably better ones than a company that grades everyone on a ve-point scale. ManagersOwntheJobofCreatingGreatTeams Discussing the militarys performance during the Iraq War, Donald Rumsfeld, the former defense secretary, once famously said, You go to war with the army you have, not the army you might want or wish to have at a later time.

When I talk to managers about creating great teams, I tell them to approach the process in exactly the opposite way. In my consulting work, I ask managers to imagine a documentary about what their team is accomplishing six months from now. What specic results do they see?

How is the work dierent from what the team is doing today? Next I ask them to think about the skills needed to make the images in the movie become reality. Nowhere in the early stages of the process do I advise them to think about the team they actually have.

Only after theyve done the work of envisioning the ideal outcome and the skill set necessary to achieve it should they analyze how well their existing team matches what they need.

If youre in a fast-changing business environment, youre probably looking at a lot of mismatches. In that case, you need to have honest conversations about letting some team members nd a place where their skills are a better t. You also need to recruit people with the right skills. We faced the latter challenge at Netix in a fairly dramatic way as we began to shift from DVDs by mail to a streaming service. We had to store massive volumes of les in the cloud and gure out how huge numbers of people could reliably access them.

By some estimates, up to a third of peak residential internet trac in the U. So we needed to nd people deeply experienced with cloud services who worked for companies that operate on a giant scalecompanies like Amazon, eBay, Google, and Facebook, which arent the easiest places to hire someone away from. Our compensation philosophy helped a lot. Most of its principles stem from ideals described earlier: Be honest, and treat people like adults. For instance, during my tenure Netix didnt pay performance bonuses, because we believed that theyre unnecessary if you hire the right people.

If your employees are fully formed adults who put the company rst, an annual bonus wont make them work harder or smarter. We also believed in market-based pay and would tell employees that it was smart to interview with competitors when they had the chance, in order to get a good sense of the market rate for their talent.

Many HR people dislike it when employees talk to recruiters, but I always told employees to take the call, ask how much, and send me the numberits valuable information.

In addition, we used equity compensation much dierently from the way most companies do. Instead of larding stock options on top of a competitive salary, we let employees choose how much if any of their compensation would be in the form of equity.

If employees wanted stock options, we reduced their salaries accordingly. We believed that they were sophisticated enough to understand the trade-os, judge their personal tolerance for risk, and decide what was best for them and their families. We distributed options every month, at a slight discount from the market price. We had no vesting periodthe options could be cashed in immediately.

Most tech companies have a four-year vesting schedule and try to use options as golden handcus to aid retention, but we never thought that made sense. If you see a better opportunity elsewhere, you should be allowed to take what youve earned and leave. If you no longer want to work with us, we dont want to hold you hostage. We continually told managers that building a great team was their most important task. We didnt 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. It had 60 employees in an open loft-style oce with a foosball table, two pool tables, and a kitchen, where a chef cooked lunch for the entire sta. As the CEO showed me around, he talked about creating a fun atmosphere. At one point I asked him what the most important value for his company was. So we asked managers and employees to have conversations about performance as an organic part of their work.

As companies develop better analytics to measure performance, this becomes even truer. Traditional corporate performance reviews are driven largely by fear of litigation.

The theory is that if you want to get rid of someone, you need a paper trail documenting a history of poor achievement. They never accomplish what their name implies.

One Netflix manager requested a PIP for a quality assurance engineer named Maria, who had been hired to help develop our streaming service. The technology was new, and it was evolving very quickly.

Crafting a Culture of Excellence

She was fast, intuitive, and hardworking. But in time we figured out how to automate the QA tests. Her new boss brought in to create a world-class automation tools team told me he wanted to start a PIP with her.

We know how this will play out. After a few weeks there will be tears. This will go on for three months. The entire team will know.

Tell me again how Netflix benefits? Give her a great severance package—which, when she signs the documents, will dramatically reduce if not eliminate the chance of a lawsuit. When we stopped doing formal performance reviews, we instituted informal degree reviews.

We kept them fairly simple: People were asked to identify things that colleagues should stop, start, or continue. In the beginning we used an anonymous software system, but over time we shifted to signed feedback, and many teams held their s face-to-face. If you talk simply and honestly about performance on a regular basis, you can get good results—probably better ones than a company that grades everyone on a five-point scale.

In my consulting work, I ask managers to imagine a documentary about what their team is accomplishing six months from now.

What specific results do they see? How is the work different from what the team is doing today?

Next I ask them to think about the skills needed to make the images in the movie become reality. Nowhere in the early stages of the process do I advise them to think about the team they actually have. In that case, you need to have honest conversations about letting some team members find a place where their skills are a better fit. You also need to recruit people with the right skills.

We faced the latter challenge at Netflix in a fairly dramatic way as we began to shift from DVDs by mail to a streaming service. We had to store massive volumes of files in the cloud and figure out how huge numbers of people could reliably access them. By some estimates, up to a third of peak residential internet traffic in the U. Our compensation philosophy helped a lot.

Most of its principles stem from ideals described earlier: Be honest, and treat people like adults.

We also believed in market-based pay and would tell employees that it was smart to interview with competitors when they had the chance, in order to get a good sense of the market rate for their talent. In addition, we used equity compensation much differently from the way most companies do. Instead of larding stock options on top of a competitive salary, we let employees choose how much if any of their compensation would be in the form of equity.

If employees wanted stock options, we reduced their salaries accordingly. We believed that they were sophisticated enough to understand the trade-offs, judge their personal tolerance for risk, and decide what was best for them and their families. We distributed options every month, at a slight discount from the market price. We had no vesting period—the options could be cashed in immediately. We continually told managers that building a great team was their most important task.

Great teams accomplish great work, and recruiting the right team was the top priority. It had 60 employees in an open loft-style office with a foosball table, two pool tables, and a kitchen, where a chef cooked lunch for the entire staff. As the CEO showed me around, he talked about creating a fun atmosphere.

Harvard Business Review: How Netflix Reinvented HR

At one point I asked him what the most important value for his company was. I estimate that I can finish the game in five minutes. We have a meeting at 3: Should I stay and win the game or cut it short for the meeting? When I advise leaders about molding a corporate culture, I tend to see three issues that need attention.

Patty McCord

This type of mismatch is one.If you see a better opportunity elsewhere. Managers must build great teams. That company performance is not dependent on the number of employees, but by the performance of the individual employees.

OK, I said. But overall we found that expense accounts are another area where if you create a clear expectation of responsible behavior, most employees will comply. Tell the truth about performance.

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