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Netflix: Reference Guide on our Freedom & Responsibility Culture

August 30, 2009

Netflix recently passed around internally their Reference Guide on our Freedom & Responsibility Culture document which was subsequently leaked and has been making its way around the web recently.?? It doesn't contain any particularly damaging text; although one page is marked confidential, it doesn't appear to be a highly critical secret.?? At any rate, there are some really great management ideas in here; ideas that everyone knows are ideal but seem impossible to maintain at any company that has experienced growth beyond the startup phase.?? It's rather long at 128 pages, but a relatively quick read (I certainly know some people that could also gain some "simplicity is good" training in slide creation from this one…)?? Some of my favorite gems:

Great Workplace is Stunning Colleagues–Great workplace is not day-care, espresso, health benefits, sushi lunches, nice offices, or big compensation, and we only do those that are efficient at attracting stunning colleagues.

Freedom is not absolute. Like ???free speech??? there are some limited exceptions to ???freedom at work.??? Two types of necessary rules:

Prevent irrevocable disaster

E.g. Financials produced are wrong
E.g. Hackers steal our customers??? credit card info

Moral, ethical, legal issues

E.g. Dishonesty, harassment are intolerable

Mostly, though, Rapid Recovery is the right model:
Just fix problems quickly. High performers make very few errors.
We???re in a creative-inventive market, not a safety-critical market like medicine or nuclear power. You may have heard preventing error is cheaper than fixing it: Yes, in manufacturing or medicine, but not so in creative environments

Salary is determined by answering three questions:

What could person get elsewhere?
What would we pay for replacement?
What would we pay to keep person, if they had a bigger offer elsewhere?

The result is that "nearly all ex-employees will take a step down in comp for their next job. We will rarely counter with higher comp when someone is voluntarily leaving because we have already moved comp to our max for that person. Employees will feel they are getting paid well relative to their other options in the market."

Similarly for promotions, two questions:

Job has to be big enough

We might have an incredible manager of something, but we don???t need a director of it because job isn???t big enough
If the incredible manager left, we would replace with manager, not with director

Person has to be a superstar in current role

Could get the next level job here if applying from outside and we knew their talents well
Could get the next level job at peer firm that knew their talents well

If manager would promote employee to keep them if employee were thinking of leaving, manager should promote now, and not wait, but both tests still have to be passed:

Job big enough
Superstar in current role



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