I’ve never liked rules, most seem arbitrary to me. But I have to admit that every time I started a company I didn’t give second thought to two major types of rules: those governing personal leave (vacation days, sick days, personal days, etc.) and recording and submission of travel expenses. Yet at the same time I was doing my best – and I largely succeeded – to hire great people for my companies. Thus the Inc. article by Justin Bariso, Netflix Avoids Rules Like the Plague. Here’s What It Does Instead, subtitled One reason for Netflix’s success: It throws the rulebook out the window. was a real eye opener for me.
The embedded assumption in having rules in a company is rules are needed to manage behavior, with a goal toward ensuring quality and consistency of performance. Yet in Netflix’s culture deck they made clear their belief that though there may be short term benefits to rules, in the long term companies that become enmeshed in rules and processes get sclerotic due to bureaucracy.
Netflix focuses on two things: hiring high performance employees and building a culture that rewards high performers and weeds out unimproved low performers. Netflix is one of the companies in the book Great Leaders Have No Rulesby Kevin Kruse. Here is the major takeaway from the section on Netflix:
“Netflix leaders believe that responsible people–the people every company wants to hire–are not only worthy of freedom, they thrive on it,” Kruse continues. “Creating an environment where these individuals are not inhibited by myriad rules allows them to become the best version of themselves.”
There’s another way of expressing this which I had heard before, but never operationalized: get your employees to act like owners! Two great examples of this at Netflix are unlimited vacation days and no formal travel and expense (T & E) policy. Netflix doesn’t bother with the unwelcome overhead of tracking employee vacation days – salaried employees can take as much as they want within certain guidelines. Similarly, with regard to T & E expenses employees are expected to spend money as if it’s their own–and look for opportunities to save when possible. The company’s expense policy is very simple: “Act in Netflix’s best interests.”
Kruse considers rules another way to micromanage. Rather than burden employees with a nest of rules the Netflix culture ensures that they feel ownership and accountability for their decisions.
“Most companies spend endless time and money writing and enforcing HR policies to deal with problems the other 3% might cause,” former Netflix chief talent officer Patty McCord wrote in a piece for HBR. “Instead, we tried really hard to not hire those people, and we let them go if it turned out we’d made a hiring mistake.”
So Kruse recommends founders follow the Netflix model:
- Focus on hiring the best.
- Set guidelines, not rules.
- Reward great performance.
Do this right, and you’re no longer managing your people. You’re inspiring them. Leaders inspire, managers manage. If you can turn everyone into a leader you will harness the, creativity, and talent of your workforce.