Redefining Business Culture

For the past fifteen months, three things have had us preoccupied: COVID and our health, work-from-home, and Netflix. Without a doubt, the first two have taken up most of our thoughts and time; however, in the absence of any other form of entertainment, Netflix has been “great company” for people worldwide, through this time.

Netflix that started as a DVD rental company in the last decade of the twentieth century, has metamorphosed into the largest streaming company, with fifty percent subscribers worldwide. Remarkably, it is also now one of the most successful content creators in the industry and a winner of several Academy awards. The streaming business with Disney, HBO, and Viacom and the content producers, with the likes of stellar Hollywood studios, is a crowded space. So, to excel and surpass everyone is no mean feat! In the book, ‘No Rules Rules, Netflix and the Culture of Reinvention’, co-authored by Reed Hastings CEO of Netflix and Erin Meyer; he attributes the success of the Company to its unique business culture.

As per the book, in early 2000, Netflix took three standout decisions that pivoted the Company to where it is today. These were, to build up talent density, increase candour (say what you really think with positive intent) and reduce controls.

In an industry where talent in building content could be a game-changer, Netflix has relentlessly focused on increasing talent density by consistently hiring top talent and high performers with handsome compensation packages, higher than everyone else. For top performers, the joy of being surrounded by people who are both talented and collaborative; spirals performance upward as employees learn from and motivate one another. Admittedly, the practice of letting go of ‘great colleagues’ who did ‘adequate’ rather than ‘great’ work, ‘committed employees’ showing ‘uneven judgment’, and ‘exceptionally gifted and high performers’ who were ‘complainers and pessimists’, may seem unnerving.

The second aspect, the role of increasing candour to be assimilated in a fierce business environment, is unique. Setting the stage for candour, coaching employees to give and receive feedback effectively, and soliciting the same frequently ensured that high performers became outstanding performers.

But the third virtue, reducing controls such as removing travel and expense policies, no expense controls, doing away with purchase orders and procurement processes, would shock any management consultant or accountant. It is common knowledge that with the number of years in business and a growing headcount, a bloated controls environment is commonplace. Unsurprisingly, Netflix’s approach is one-eighty degrees in the opposite direction. The striking finding was that employees respond to their freedom by spending less than they would in a system with rules. The logic is that when you tell people that you trust them, they will show you how trustworthy they are.

In every service organisation performance is highly valued. While performance-related bonuses are almost universally used as an incentive, Netflix does not use this metric and includes the performance-led compensation in the base salary itself and finds that employees are most creative when they have a big enough salary. It is believed that this type of culture kicks in a virtuous cycle of performance. But these winning values may be challenging to implement in most organisations.

In the new world, where a talent-based economy is replacing an asset-based economy, it is astonishing to see how young companies invest significant efforts in defining a culture document or even speak about culture as central to the business strategy in the early stages itself, rather than developing it as the company grows. Alan, a health care start-up issues to every new employee, a 75-page handbook of the company’s leadership principles that defines Alan’s culture.

Conventionally, culture was the responsibility of the Human Resources team in a company. Now, with top CEOs taking a deep interest in building their company's culture, it is not unusual that this aspect of the business is often spoken about. Jeff Bezos, the celebrated founder, and ex-CEO of Amazon, communicates the values that make up culture and values, daily. The success of Amazon is made up of four elements; customer obsession, long-term thinking, eagerness to invent, and taking pride in operational excellence. Collectively, these are the ingredients that make up the secret sauce of Amazon’s success.

A top-down approach to building company culture is no longer a preferred option as COVID-19 has upended how we interact with each other. A new approach is already in place in organisations, one in which everyone in the organisation is responsible for it. This is a stark change from the positioning of culture where everyone influences but no one leads or is accountable for.

The ongoing pandemic is teaching us new lessons that will stay with us for our lifetime. The relevance of connecting the culture dots to form a new business reality that enables us to attract and retain great talent, spur innovation, and create an open society to foster new ideas will drive our future.