Responsibility over freedom: how Netflix’s culture has changed
Netflix has long been a company known for its secrets: no Nielsen ratings, little feedback on why shows get canceled, no box office numbers for the rare films that actually hit theaters.
But for a place defined by its opaque approach to the outside world, the streaming giant has long been aggressively transparent internally. The company’s philosophy was immortalized in 2009 when Reed Hastings, the company’s co-founder and CEO, first explained the company ethos in a 125-slide presentation that introduced new, vibrant phrases such as ‘amazing colleagues’, ‘the goalkeeper test’ and ‘always honesty’.
The presentation, with its emphasis on unwavering, unfiltered candor, felt both brazen and refreshingly at odds with the usual Hollywood way of doing business. To the frustration of former employees and current competitors, it may be the blueprint that has allowed Netflix to thrive while its rivals have stumbled.
Over the years, three more culture memos followed. Before they are released, they are studied and analyzed for months by top executives. At the same time, any employee can go to the Google Doc where the memo is composed to leave a thought or comment.
The latest version of the document, which was released internally on May 8 and will be made public soon, underwent eight months of review and received 1,500 comments from employees, according to Sergio Ezama, Netflix’s chief talent officer. It is five pages long (half the length of Mr Hastings’ last memo in 2022), and some core principles have been changed, albeit slightly.
When Mr. Hastings titled his 2009 presentation “Netflix Culture,” he subtitled it “Freedom and Responsibility.” The idea was that Netflix trusted its employees to act in the best interests of the company. If you want to take a vacation, take a vacation. If you have a baby and need to go on leave, take a leave. Documents were shared widely within the company without fear of leaks.
While these principles remain in practice, the new memo first emphasizes Netflix’s philosophy of “People Over Process”: “We hire unusually responsible people who thrive on this openness and freedom.”
The goalkeeper test — which is defined as: “if X wanted to leave, would I fight to keep him?” — now includes this disclaimer: “The goalkeeper test can sound scary. In reality, we encourage everyone to have regular conversations with their managers about what’s going well and what’s not.”
The latest memo contains a sentence that reads: ‘Not all opinions are equal’, because now that the organization has grown to over 13,000 employees, it is no longer feasible for everyone to weigh in on every decision. “It doesn’t scale,” said Elizabeth Stone, the company’s chief technology officer.
The company has never shied away from reorganizing itself — something critics say happens too often, and has left many employees worried they could one day be fired. Mr. Hastings has risen to the role of executive chairman. Ted Sarandos and Greg Peters are the co-chief executives, and change is always afoot. Yet the latest culture memo is far more about how the streamer expects its employees to behave than a treatise on what it wants to be.
“The key to the Netflix culture is that we really try to think systematically about what drives excellence in the long term,” said Mr. Hastings in a video interview from his home in Santa Cruz, California. “Certainly a lot of creativity, a lot of freedom, a lot of focus on innovation and trying to attract and develop people who are self-responsible.”
Talk to the employees who work at Netflix and the sense is that its cultural tenets have infiltrated their lives in ways they didn’t expect. Many were skeptical, assuming that the memo itself was a PR effort to get the company noticed. Yet some of those people now describe it as 80 to 90 percent accurate.
Ms. Stone, who married months after joining Netflix in 2020, said she and her husband “use certain language now, like, ‘Do you have any feedback for me?’ He would be the first to say at a cocktail party that he’s really good at taking feedback, and he’s still working on giving feedback.”
The document is intended to appear ambitious and there is always room for improvement.
“Are we always completely direct with each other? No. Are we completely devoid of politics? No,” said Spencer Wang, the vice president of finance and investor relations, who has been with Netflix for nine and a half years. The company is not “perfect in all these dimensions, but I would say it is a remarkably accurate description of what we want to be and how we operate overall,” he said.
Reflecting on the first presentation, Mr Hastings admitted that “leading with freedom was attractive” and added: “It was good bait.”
But as the company grew, the concept of freedom and responsibility, which many reduced to “FNR,” was weaponized by some employees as a justification for doing whatever they wanted. According to a company official, an assistant cost $30,000 for a year because there was no rule saying it wasn’t allowed.
“We care about freedom if it generates excellence, not for the sake of freedom itself,” said Mr. Hastings. “In retrospect, this is the design I would have wanted 15 years ago.”
From the beginning, Netflix was never a place where most people would stay for their entire careers. Employment contracts do not exist and an employee, regardless of rank, can be fired at any time.
While few leave voluntarily (voluntary resignations have ranged from 2.1 percent to 3.1 percent over the past two years), about 9 percent are asked to leave each year. That may come as a relief to those who describe the pace as all-consuming and find the company’s core principle of being “uncomfortably exciting” untenable. The company warns in the memo that the concept could lead “many people” to choose other places “that are more stable or less risky.”
While some employees, including the two co-CEOs, have been with Netflix for more than 15 years, many consider it a significant achievement that they’ve stuck it out for five years.
Still, some find the pressure refreshing. Brandon Riegg, the company’s vice president of nonfiction and sports, said he often felt cramped while working at traditional entertainment studios. He calls the culture at Netflix “a lifeline” that has allowed him to make an impact that wouldn’t have been possible at a traditional studio. Five years ago, he convinced his bosses to batch-release episodes of the reality show “Rhythm + Flow” for the first time. That practice has been repeated with other reality shows like “Love Is Blind” and scripted programming like “Bridgerton” and “Stranger Things.”
He said that while the strategy was contrary to what Netflix had done in the past, executives were willing to try it.
Their approach, Mr. Riegg said, was that “we hired you, and if you think this is best, and you’ve advocated for dissent, and you’ve incorporated all the feedback, and this is where you ended up, let’s give it a try.”
Mr. Hastings looked relaxed during the video interview, and that may be because he’s gotten rid of the jet lag and “crazy” schedule that used to exhaust him as CEO. (His new life of philanthropy and own a ski area (may also help.)
Or maybe it’s because he no longer gets the consistent feedback the company is known for. That’s something that many employees find shocking when entering the Netflix world, especially if they come from outside Silicon Valley.
Mr. Wang said that receiving candid feedback was fine, but that as an Asian American he initially found it difficult to provide it because “it aligned with my cultural background.” He was recently told he was “too direct,” so he is now working on being more sensitive.
Ms. Stone, the chief technology officer, recently recounted being at a happy hour event in New York City where an engineer introduced himself and then said, “I’m the engineer who wrote the bug in the code that crashed the service twice.” flattened. weeks ago.”
“He knew that introducing himself to me this way would spark a good conversation about the culture around improvement,” she said. “It wasn’t like, ‘Why is this person still here?’ This person should be fired. ”
As for Mr. Hastings, he may not have to accept feedback anymore, but he can still give it. He said he appreciated that Mr. Sarandos and Mr. Peters waited a year after he left to reword the culture memo as their own.
“It’s 10 percent better,” he said. “It’s not radically better, but it’s as good as any improvement I’ve ever made. So that’s a compliment.”
