Business Management Corporate Culture

No Rules Rules: Netflix and the Culture of Reinvention (Summary)

by Reed Hastings & Erin Meyer

Imagine your boss constantly asking one question to decide if you keep your job: 'If this person told me they were leaving for a similar job at a peer company, would I fight to keep them?' At Netflix, this isn't a scary hypothetical. It's the 'Keeper Test,' a core management practice that forces the company to maintain a team composed exclusively of 'stunning colleagues,' even if it means firing a perfectly adequate employee to make room for a superstar.

Talent Density is the Bedrock of Freedom

The entire 'no rules' philosophy only works when every single employee is a high-performer. One or two mediocre employees can drain manager energy and drag down team performance, forcing the introduction of rules to manage them. High talent density is the foundation upon which everything else is built.

Early in Netflix's history, after the dot-com bubble burst, they had to lay off a third of their staff. To their surprise, with only the most effective people remaining, the office was suddenly buzzing with energy, passion, and great ideas. This taught Hastings that performance is contagious and that the best perk you can offer an employee is a team of other stunning colleagues.

Candor is an Obligation, Not an Option

To foster rapid improvement and avoid office politics, feedback must be open, honest, and continuous. At Netflix, it's considered disloyal to the company to see something wrong and not say it. This applies up, down, and across the hierarchy.

A junior employee in Brazil sent a memo to his boss and his boss's boss, detailing why he thought their new presentation strategy was misguided and would fail. Instead of being punished for overstepping, he was praised for his candor. The strategy was debated openly and eventually adjusted, preventing a costly mistake.

Remove Controls, Don't Add Them

Once you have high talent density and a culture of candor, you can begin removing policies that treat employees like children. By removing controls, you give high-performers the freedom they need to excel and innovate.

Netflix famously has no vacation policy and no travel and expense policy. Instead of a thick rulebook, the entire guideline is five words: 'Act in Netflix's best interest.' This trusts that a superstar employee who can build a billion-dollar streaming service can also figure out whether to fly business class or book a fancy hotel.

Lead with Context, Not Control

Instead of a top-down command-and-control structure where bosses approve decisions, leaders should focus on providing their teams with all the strategic context they need to make great decisions on their own. The goal is a loosely coupled, highly aligned organization.

When deciding whether to greenlight a risky, expensive show, a creative executive doesn't need to get Reed Hastings's approval. Instead, Hastings and the leadership team have spent months, through memos and meetings, sharing the company's strategic goals, financial position, and risk tolerance. The executive is then empowered to make the multi-million dollar decision herself, because she has the context.

Go deeper into these insights in the full book:
Buy on Amazon
Listen to the full audio book with an Audible Free Trial.
As an Amazon Associate, qualifying purchases help support this site.