Reinventing HR: The Netflix Case – Episode 4

In the early days of Netflix, Reed Hastings (Co-Founder and CEO), asked Patty McCord (Chief Talent Officer) to help write out the company’s core values.

This led to, quoting Sheryl Sandburg (COO – Facebook), “one of the most important documents ever to come out of Silicon Valley”: the Netflix Culture Deck. 

In this interview series, we talk with Human Resources leaders about this document, and Netflix’s famously innovative HR practices.

In this, our fourth episode, we talk to Lisbeth Neilson to get her thoughts.

Episode 4: A discussion with Lisbeth Nielsen, Vice President Human Resources and Head of People Experience at Nokia. 

What do you think about Netflix´s unlimited vacation policy? 

In the current context, I think there is a high risk that people will take fewer vacation days than they should. Health, safety, and wellbeing are a priority for us at Nokia. It is important to take vacations to recharge and come back refreshed, energised, and with new ideas. I once talked to a senior coach who would not coach people unless they took a minimum of 3 weeks’ holiday in the summer. I like that idea.  

Rather than submit reports detailing money spent on mileage, meals, hotel rooms, and office supplies, employees are expected to spend money “acting in Netflix´s best interests”. What’s your take on this no limits travel and expense policy?  

Netflix’s deck was written in 2009 as a reaction to their bureaucracy. Since then, technology has helped us to make many processes effortless and, after COVID, we have all changed our thinking about what amount of business travel that is really needed. 2021 context is so different!  

Netflix pride themselves on hiring the best talent available in the market, offering top dollar payment.

I believe in hiring the right person for the job. Should employers compete on salary alone? This approach will hugely limit the talent they can attract and retain. For instance, there is a growing number of top talent who are attracted to ethically responsible companies committed to the environment and the local communities where they operate. 

Netflix decided not to pay performance bonuses and instead put that money in their employees’ base salary to retain talent. What do you think about that decision?

That´s an interesting idea. I don´t think there is a right or wrong here; it depends on what the company wants to drive towards. I am sure Nokia’s shareholders would find it strange if I, as a Vice President, did not have an incentive linked to the company’s performance.  

Netflix has something called the “keeper test,” which is a measure for management to fire or retain staff. It’s very simple; a manager is supposed to ask: “If one of the members of the team was thinking of leaving for another firm, would I try hard to keep them from leaving?” If the answer is “no”, that team member is out. 

I think psychological safety is key to build and nurture high-performing teams, and I doubt that this idea fosters that. Besides that, I don’t consider it a problem if an employee leaves to take on a good job internally or externally. That is a sign that you, as a line manager, have developed them well and it will attract other talents to your team. Of course, you don´t want unreasonable attrition. But maybe the person becomes a customer or comes back five years later, bringing a lot of external knowledge. So, you should let them go on a positive note. One person leaving gives space for another person’s growth.   

Netflix advocates getting rid of Performance Improvement Plans (PIPs) and instead taking that money they were going to invest in the PIP and giving it to the employee in the form of a generous severance package. Do you agree? 

I would put it a bit differently: if you have done your job as a line manager in time, then as soon as it is clear that an employee can´t perform, it should be natural to separate from this person. You should address things in a timely manner, call it a Performance Improvement Plan or something else, but you must address it at the point you see it going in the wrong direction. Most people really want to do a good job at work, and as a line manager you have the obligation to give them feedback also when it is not what they would prefer to hear. This is part of showing respect to the individual and making sure the company continues to perform.  

Netflix advocate 360 Feedback – employees giving feedback to the managers. What do you think about that? 

I believe the practice of employee feedback is healthy and useful for all leaders. Some of the best pieces of advice I have received over the years for my personal development came from employees. At Nokia, every quarter we have a conversation with each employee focusing on their development and performance. I always take the opportunity to ask them if they have some advice for me!  Another thing that works for me is to let my team discuss among themselves the feedback they want to give me. At the end of the discussion, I return and one of them voices the feedback on behalf of the team.

What is your take on full transparency and “opening the books” for employees?  

In general, I think you should be as transparent as you can. That allows people to understand why you are making your decisions and the more they know about what´s going on, the better decisions they will make for the business. In addition, transparency fosters a type of comfort that allows employees to freely communicate, helps employees feel valued, and encourages creativity.  

Summarising my reflections, the best part of Netflix’s deck is the spirit. In Patty McCord’s own words: “There´s no reason the HR team can´t be innovative too”. 

If you enjoyed reading this interview, feel free to have a look at our previous interviews from Episode 1, Episode 2 and Episode 3. 
If you have any questions about this article, or if you need support hiring or finding the right role for you, contact Alberto Villar or one of our other specialist HR consultants. 

References:• Reed Hastings & Erin Meyer – “No rules rules: Netflix and the culture of Reinvention” (2020)• Patty McCord – “How Netflix reinvented HR” – Harvard Business Review, January 2014