The culture at Netflix

Netflix CEO Reed Hastings has a very interesting presentation, "Our Freedom & Responsibility Culture", with some thought-provoking ideas on how to run a company.

Some excerpts:

Imagine if every person [you worked with] is someone you respect and learn from ... In creative work, the best are x10 better than the average ... [A] great workplace [is made] of stunning colleagues.

Responsible people thrive on freedom and are worthy of freedom ... [They are] self-motivating, [pick] up the trash lying on the floor, [and behave] like an owner ... Our model is to increase employee freedom as we grow rather than limit it ... Avoid chaos as you grow with ever more high performance people, not with rules.

Pay at the top of the market is core to high performance culture. One outstanding employee gets more done and costs less than two adequate employees ... We pay at the top of the market ... Give people big salaries ... no bonuses ... no stock options ... [and a] great health plan ... [Everyone feels] they are getting paid well relative to their other options ... Nearly all ex-employees will take a step down in comp for their next job.

We try to get rid of rules when we can .... The Netflix vacation tracking policy [is that] there is no policy or tracking. There also is no clothing policy at Netflix, but no one has come to work naked lately ... Netflix policy for expensing ... [is] five words long ... "act in Netflix's best interest" ... You don't need detailed policies for everything.

Reed also makes a great point about how to organize large companies, saying he prefers to align groups on goals and strategies while minimizing meetings over tactics. He contrasts this with "tightly-coupled monoliths" where everything is inefficiently controlled (usually from the top down) and "independent silos" where groups (e.g. engineering and marketing) work so independently that "alienation and suspicion" creep in.

There are some suggestions I disagree with. First, I think Reed's claim that Netflix should fire with "generous severance" people who managers would not "fight hard to keep at Netflix" if they were to threaten to leave conflicts with Reed's later advice that managers should not blame someone who "does something dumb" but rather ask themselves what "context [the manager] failed to set." Personally, when someone I manage is not doing well, I blame myself, not them, and I think Reed should have emphasized finding people the right challenge rather than suggesting just giving them the boot.

Second, I think Reed's advice to push new software to the website every two weeks is not nearly frequent enough -- I prefer at least daily -- and I also see this as at odds with his later claim that he wants "rapid innovation", "excellent execution", and "to be big and fast and flexible".

But, overall, a great presentation with excellent food for thought. It is a must-read for anyone thinking about how to use organizational culture to help manage a company, from little startups to bloated corporate empires.

Please see also my old 2006 post, "Management and incentives at Google", that discusses Google's corporate culture.

[Netflix slides found via Ruben Ortega, TechCrunch, and Hacking Netflix]

Update: Scott Berkun has some good thoughts on the slide deck, including nice references to Zappos' "pay to quit" idea and the "Lefferts law of management".

Rapid innovation using online experiments

Erik Brynjolfsson and Michael Schrage at MIT Sloan Management Review have an interesting take on the value of A/B tests in their article, "The New, Faster Face of Innovation".

Some excerpts:

Technology is transforming innovation at its core, allowing companies to test new ideas at speeds -- and prices -- that were unimaginable even a decade ago. They can stick features on Web sites and tell within hours how customers respond. They can see results from in-store promotions, or efforts to boost process productivity, almost as quickly.

The result? Innovation initiatives that used to take months and megabucks to coordinate and launch can often be started in seconds for cents.

That makes innovation, the lifeblood of growth, more efficient and cheaper. Companies are able to get a much better idea of how their customers behave and what they want ... Companies will also be willing to try new things, because the price of failure is so much lower.

The article goes on to discuss Google, Wal-mart, and Amazon as examples and talk about the cultural changes necessary (such as switching to a bottom-up, data-driven organization and reducing management control) for rapid experimentation and innovation.

I am briefly quoted in the article, making the point that even failed experiments have value because failures teach us about what paths might lead to success.

Can we make make all advertising useful, relevant, and helpful?

I have a new post at blog@CACM titled, "Is advertising inherently deceptive?"

It discusses some of the moral and ethical qualms I have when working on personalized advertising. It attempts to start a discussion around the question of whether personalized advertising will be used for good.

An excerpt:

Let's say we build more personalization techniques and tools that allow advertisers and publishers to understand people's interests and individually target ads. How will our tools be used? Will they be used to provide better information to people about useful products and services? Or will they be used for deeper and trickier forms of deception?

Is advertising an industry fundamentally fueled by deception? Or is advertising better understood as a stream of information that, if well directed, can help people?

If you have thoughts on this topic, please contribute to the discussion, either here or over on the full post at blog@CACM.

Update: About one month later, in the October 12 issue of the New Yorker, Ken Auletta has an article, "Searching for Trouble", that describes a 2003 conflict between the COO of Viacom and the founders of Google on exactly this issue, deception in advertising. An excerpt:

[You want] salesmanship, emotion, and mystery. [Viacom COO Karmazin said], "You don't want to have people know what works. When you know what works or not, you tend to charge less money than when you have this aura and you're selling this mystique."

The Google executives thought Karmazin's method manipulated emotions and cheated advertisers.