No Rules Rules

Key Concepts

Pillars of the Netflix approach

Build up talent density. 

“At most companies, policies and control processes are put in place to deal with employees who exhibit sloppy, unprofessional, or irresponsible behavior. But if you avoid or move out these people, you don’t need the rules. If you build an organization made up of high performers, you can eliminate most controls. The denser the talent, the greater the freedom you can offer.”

Increase candor. 

“Talented employees have an enormous amount to learn from one another. But the normal polite human protocols often prevent employees from providing the feedback necessary to take performance to another level. When talented staff members get into the feedback habit, they all get better at what they do while becoming implicitly accountable to one another, further reducing the need for traditional controls.”

Reduce controls.

“Start by ripping pages from the employee handbook. Travel policies, expense policies, vacation policies—these can all go. Later, as talent becomes increasingly denser and feedback more frequent and candid, you can remove approval processes throughout the organization, teaching your managers principles like, “‘Lead with context, not control,’ and coaching your employees using such guidelines as, ‘Don’t seek to please your boss.’” (p. xx)

“A GREAT WORKPLACE IS STUNNING COLLEAGUES”

“High performers especially thrive in environments where the overall talent density is high. Our employees were learning more from one another and teams were accomplishing more—faster. This was increasing individual motivation and satisfaction and leading the entire company to get more done. We found that being surrounded by the best catapulted already good work to a whole new level. Most important, working with really talented colleagues was exciting, inspiring, and a lot of fun—something that remains as true today with the company at seven thousand employees as it was back then at eighty.” (p. 7)

“In hindsight, I understood that a team with one or two merely adequate performers brings down the performance of everyone on the team. If you have a team of five stunning employees and two adequate ones, the adequate ones will sap managers’ energy, so they have less time for the top performers, reduce the quality of group discussions, lowering the team’s overall IQ, force others to develop ways to work around them, reducing efficiency, drive staff who seek excellence to quit, and show the team you accept mediocrity, thus multiplying the problem.” (p. 7)

“SAY WHAT YOU REALLY THINK (WITH POSITIVE INTENT)”

“That’s when we coined the expression ‘Only say about someone what you will say to their face.’ I modeled this behavior as best I could, and whenever someone came to me to complain about another employee, I would ask, ‘What did that person say when you spoke to him about this directly?’” (p. 15)

“At Netflix, it is tantamount to being disloyal to the company if you fail to speak up when you disagree with a colleague or have feedback that could be helpful. After all, you could help the business—but you are choosing not to.” (p. 18)

“You might think the first step for cultivating candor would be to begin with what’s easiest: having the boss give copious feedback to her staff. I recommend instead focusing first on something much more difficult: getting employees to give candid feedback to the boss. “ (p. 23)

“The first technique our managers use to get their employees to give them honest feedback is regularly putting feedback on the agenda of their one-on-one meetings with their staff.” (p. 23)

“Your behavior while you’re getting the feedback is a critical factor. You must show the employee that it’s safe to give feedback by responding to all criticism with gratitude and, above all, by providing ‘belonging cues.’” (p. 24)

“A belonging cue might be a small gesture, like using an appreciative tone of voice, moving physically closer to the speaker, or looking positively into that person’s eyes. Or it might be larger, like thanking that person for their courage and speaking about that courage in front of the larger team. Coyle explains that the function of a belonging cue ‘is to answer the ancient ever-present question glowing in our brains: Are we safe here? What’s our future with these people? Are there dangers lurking?’” (p. 24)

Feedback: use the 5As

Giving Feedback

“AIM TO ASSIST: Feedback must be given with positive intent.” (p. 30)

“ACTIONABLE: Your feedback must focus on what the recipient can do differently.” (p. 30)

Receiving Feedback

“APPRECIATE: Natural human inclination is to provide a defense or excuse when receiving criticism; we all reflexively seek to protect our egos and reputation. When you receive feedback, you need to fight this natural reaction and instead ask yourself, ‘How can I show appreciation for this feedback by listening carefully, considering the message with an open mind, and becoming neither defensive nor angry?’” (p. 31)

“ACCEPT OR DISCARD: You will receive lots of feedback from lots of people while at Netflix. You are required to listen and consider all feedback provided. You are not required to follow it. Say “thank you” with sincerity. But both you and the provider must understand that the decision to react to the feedback is entirely up to the recipient”. (p. 31)

“But when giving feedback around the world, add a 5th A: Adapt—your delivery and your reaction to the culture you’re working with to get the results that you need.” (p. 264)

Freedom & Responsibility are reinforcing

“Giving employees more freedom led them to take more ownership and behave more responsibly. That’s when Patty and I coined the term ‘Freedom and Responsibility.’ It’s not just that you need to have them both; it’s that one leads to the other. It began to dawn on me. Freedom is not the opposite of accountability, as I’d previously considered. Instead, it is a path toward it.” (p. 52)

“Today the entirety of the travel and expense policy still consists of these five simple words: ACT IN NETFLIX’S BEST INTEREST” (p. 58)

Pay base high salaries for top talent. Don’t rely on bonuses

“I learned from that exchange with Leslie that the entire bonus system is based on the premise that you can reliably predict the future, and that you can set an objective at any given moment that will continue to be important down the road. But at Netflix, where we have to be able to adapt direction quickly in response to rapid changes, the last thing we want is our employees rewarded in December for attaining some goal fixed the previous January.” (p. 82)

“I love this quote from former chief executive of Deutsche Bank John Cryan: ‘I have no idea why I was offered a contract with a bonus in it because I promise you I will not work any harder or any less hard in any year, in any day because someone is going to pay me more or less.’” (p. 82)

Be transparent with employees

“That’s why I don’t have my own office or even a cubicle with drawers that close. During the day, I might grab a conference room for some discussions, but my assistant knows to book most of my meetings in other people’s work spaces. I always try to go to the work spot of the person I’m seeing, instead of making them come to me. One of my preferences is to hold walking meetings, where I often come across other employees meeting out in the open. It’s not just about offices. Any locked area is symbolic of hidden things, and signifies we don’t trust one another.” (p. 104)

“However, opening company secrets to employees had another outcome: it made our workforce smarter. When you give low-level employees access to information that is generally reserved for high-level executives, they get more done on their own. They work faster without stopping to ask for information and approval. They make better decisions without needing input from the top.” (p. 108)

“Spinning the truth is one of the most common ways leaders erode trust. I can’t say this clearly enough: don’t do this. Your people are not stupid. When you try to spin them, they see it, and it makes you look like a fraud. Speak plainly, without trying to make bad situations seem good, and your employees will learn you tell the truth.” (p. 118)

Push decision-making out to the Informed Captain to enable innovation

“At most companies, the boss is there to approve or block the decisions of employees. This is a surefire way to limit innovation and slow down growth. At Netflix, we emphasize that it’s fine to disagree with your manager and to implement an idea she dislikes. We don’t want people putting aside a great idea because the manager doesn’t see how great it is. That’s why we say at Netflix: DON’T SEEK TO PLEASE YOUR BOSS. SEEK TO DO WHAT IS BEST FOR THE COMPANY.” (p. 130)

“We don’t emulate these top-down models, because we believe we are fastest and most innovative when employees throughout the company make and own decisions. At Netflix, we strive to develop good decision-making muscles everywhere in our company—and we pride ourselves on how few decisions senior management makes.” (p. 130)

“If your employees are excellent and you give them freedom to implement the bright ideas they believe in, innovation will happen. Netflix does not operate in a safety-critical market, like medicine or nuclear power. In some industries, preventing error is essential. We are in a creative market. Our big threat in the long run is not making a mistake, it’s lack of innovation. Our risk is failing to come up with creative ideas for how to entertain our customers, and therefore becoming irrelevant.” (p. 136)

The Netflix Innovation Cycle

• “‘Farm for dissent,’ or ‘socialize’ the idea. 

• “For a big idea, test it out. 

• “As the informed captain, make your bet.

• “If it succeeds, celebrate. If it fails, sunshine it. (p. 140)

Use the Keeper Test to maximize talent density

“So we ask the manager: Would the company be better off if you let go of Samuel and looked for someone more effective? If they say “yes,” that’s a clear sign that it’s time to look for another player.” (p. 170)

“IF A PERSON ON YOUR TEAM WERE TO QUIT TOMORROW, WOULD YOU TRY TO CHANGE THEIR MIND? OR WOULD YOU ACCEPT THEIR RESIGNATION, PERHAPS WITH A LITTLE RELIEF? IF THE LATTER, YOU SHOULD GIVE THEM A SEVERANCE PACKAGE NOW, AND LOOK FOR A STAR, SOMEONE YOU WOULD FIGHT TO KEEP.” (p. 171)

“We encourage our managers to apply the Keeper Test regularly. But we are very careful to not have any firing quotas or ranking system. Rank-and-yank or “you must let go of X percent of your people” is just the type of rule-based process that we try to avoid. More important, these methods get managers to let go of mediocre employees, but they kill teamwork at the same time. I want our high-performing employees to compete against Netflix’s competitors, not one another.” (p. 178)

Lead with context, not control

“Many leaders frequently use control processes to give the employee some freedom to approach a task as he chooses, while still allowing the boss an opportunity to control what gets done and when. For example, the boss might put in place a process like Management by Objectives, when she works with the employee to set Key Performance Indicators (KPIs); then she monitors the progress at regular intervals, judging the individual’s final performance based on whether he achieves the predetermined goals on time and within budget.” (p. 209)

“Leading with context, on the other hand, is more difficult, but gives considerably more freedom to employees. You provide all of the information you can so that your team members make great decisions and accomplish their work without oversight or process controlling their actions. The benefit is that the person builds the decision-making muscle to make better independent decisions in the future.” (p. 209)

“Leading with context won’t work unless you have the right conditions in place. And the first prerequisite is high talent density.” (p. 210)

“When considering whether to lead with context or control, the second key question to ask is whether your goal is error prevention or innovation.” (p. 214)

For a decentralized approach to work, everyone must be aligned

“If loose coupling is to work effectively, with big decisions made at the individual level, then the boss and the employees must be in lockstep agreement on their destination. Loose coupling works only if there is a clear, shared context between the boss and the team. That alignment of context drives employees to make decisions that support the mission and strategy of the overall organization. This is why the mantra at Netflix is HIGHLY ALIGNED, LOOSELY COUPLED” (p. 217)

“WHEN ONE OF YOUR PEOPLE DOES SOMETHING DUMB DON’T BLAME THEM. INSTEAD ASK YOURSELF WHAT CONTEXT YOU FAILED TO SET. ARE YOU ARTICULATE AND INSPIRING ENOUGH IN EXPRESSING YOUR GOALS AND STRATEGY? HAVE YOU CLEARLY EXPLAINED ALL THE ASSUMPTIONS AND RISKS THAT WILL HELP YOUR TEAM TO MAKE GOOD DECISIONS? ARE YOU AND YOUR EMPLOYEES HIGHLY ALIGNED ON VISION AND OBJECTIVES?” (p. 220)

Quotables

“If you are promoting a culture of candor on your team, you have to get rid of the jerks. Many may think, ‘This guy is so brilliant, we can’t afford to lose him.’ But it doesn’t matter how brilliant your jerk is, if you keep him on the team you can’t benefit from candor.” (p. 34)

“In the absence of a policy, the amount of vacation people take largely reflects what they see their boss and colleagues taking. Which is why, if you want to remove your vacation policy, start by getting all leaders to take significant amounts of vacation and talk a lot about it.” (p. 43)

“The overarching lesson we’ve learned is that—no matter where you come from—when it comes to working across cultural differences, talk, talk, talk.” (p. 261)

“As with all the dimensions of culture, when it comes to giving feedback internationally everything is relative. The Japanese find the Singaporeans unnecessarily direct. The Americans find the Singaporeans opaque and lacking transparency. The Singaporeans who join Netflix are shocked at their American colleagues’ bluntness. To many a Dutch person, the Americans at Netflix don’t feel particularly direct at all.” (p. 261)

“In today’s information age, in many companies and on many teams, the objective is no longer error prevention and replicability. On the contrary, it’s creativity, speed, and agility. In the industrial era, the goal was to minimize variation. But in creative companies today, maximizing variation is more essential. In these situations, the biggest risk isn’t making a mistake or losing consistency; it’s failing to attract top talent, to invent new products, or to change direction quickly when the environment shifts.” (p. 271)