Reed Hastings, the streaming giant's cofounder and executive chair, walked through five key elements of Netflix's corporate culture on the latest episode of "The Tim Ferriss Show."
The tech billionaire, who stepped down as Netflix's joint CEO early last year, discussed having sky-high standards, finding and removing merely adequate performers, chasing down references, and insisting people speak up.
Here are the five topics he tackled:
1. Team, not family
Netflix is run like a top-tier sports team that aims to fill each position with the best person who's also a team player, Hastings said.
Stacking its roster with exceptional performers maximizes Netflix's chance of success and also motivates, educates, and draws in even more talent.
It's "the energy driver because everyone around you is amazing, you learn so much, you attract other amazing people," Hastings said.
2. Goodbye gift
Netflix strives to root out mediocrity, but marries its Darwinian demand for excellence with some degree of humanity.
"The reward for adequate performance is a generous severance package," Hastings said.
"We want people to feel like, 'I'm trying really hard and I'm gonna give my all and if it doesn't work out, I've got a parachute.'"
Netflix offers a minimum of four months' severance in the US and above-average packages in other countries. The policy makes it less wrenching for bosses to cull so-so performers.
"The fact that there's a big severance package makes it easier for the manager to cut that person and try to find someone else who will be a rock star in that role," Hastings said.
3. Hunting down references
Netflix makes sure to recruit the best by not just calling the references they provide, but also finding other people who know the potential hire.
Hastings usually starts with a LinkedIn search for mutual connections who are closer to him than the prospective employee so they're more likely to be upfront with him. He likes to speak with them using video chat for one big reason.
"When someone's on Zoom they're much less likely to lie to me," he said. "I can ask a couple questions and they don't feel like it's being recorded and so it creates an appropriate intimacy but also a semi-anonymity."
4. Keeping or letting go
Netflix encourages its managers to take the "keeper test" once every quarter or so, Hastings said.
For each of their reports, managers ask themselves if the person was quitting to work somewhere else, would they try to change the individual's mind and fight to keep them, or be fine with them departing.
"If we wouldn't fight to keep someone, we should proactively give them a generous severance package and try to find someone that we might well fight to keep," Hastings said.
5. Open and honest
"To disagree silently is disloyal," Hastings said.
He explained that most people are brought up to be polite and agreeable, and mostly aim to please their manager and defer to their decisions.
But when a worker sees the company is doing something wrong, holding their tongue to avoid confrontation or angering the higher ups can lead to bigger, more entrenched problems and stall the forward progress of the business.
Netflix tries to avoid that issue by encouraging "radical candor" across its workforce, and pushing bosses to "farm for dissent" or seek out opposing views to their own.
"Sometimes if to help them grow I've got to be willing to argue with my manager, then that's okay," Hastings said.
FAQs
When Netflix began, it was a DVD-by-mail service. Reed Hastings had looked at emerging technologies and seen that DVDs were becoming popular, a fact that Blockbuster ignored. Additionally, he had seen the capability to burn a lot of movies on them, instead of just one movie per rental as Blockbuster was doing.
How did Reed Hastings think of Netflix? ›
When Netflix began, it was a DVD-by-mail service. Reed Hastings had looked at emerging technologies and seen that DVDs were becoming popular, a fact that Blockbuster ignored. Additionally, he had seen the capability to burn a lot of movies on them, instead of just one movie per rental as Blockbuster was doing.
What are the lessons of Reed Hastings? ›
This positive influence can inspire you, provide valuable insights, and motivate you to chase your dreams. Ultimately, Reed Hastings' message is about self-discovery and embracing the unknown. He encourages young people to explore their options, learn from their failures, and seek inspiration from their surroundings.
What was the most significant strategy did Netflix do to attain its success? ›
Pivot to Subscription Model
The turning point for Netflix came in 1999 when it introduced a subscription model. For a fixed monthly fee, subscribers could rent an unlimited number of DVDs with no due dates or late fees. This innovation addressed a major pain point for customers: the hassle of late fees.
How did Hastings's Big Five model of personality leadership traits change from Pure Software to Netflix? ›
At Software Hastings was an autocratic leader. He was very stubborn and only worried about doing his ideas and not acknowledging any employee ideas. At Netflix, his leadership style changed to participative. He actively sought ideas and advice from his employees instead of doing things his own way.
How did Reed Hastings transform Netflix? ›
Reed Hastings' leadership and adaptability transformed Netflix from a DVD rental service into a global streaming giant. By embracing new technology and pivoting the business model, Hastings revolutionized how people consume media.
What inspired Reed Hastings to create Netflix? ›
The Founding Story of Netflix
Reed Hastings, one of Netflix's co-founders, reportedly conceived the idea after facing a hefty late fee for a rented copy of "Apollo 13." This incident led him to envision a business model where customers could rent movies for a fixed price and without having to worry about late fees.
What is Reed Hastings theory of leadership? ›
Freedom and Responsibility: Reed Hastings believed that leaders must empower their employees with freedom and responsibility, giving them the trust and autonomy to make their own decisions and pursue their own goals.
What problems did Reed Hastings face? ›
The company's growth proved challenging for Hastings, as he lacked managerial experience. He stated he had trouble managing with a rapid headcount growth. His engineering background didn't prepare him for the challenges of being a CEO, and he asked his board to replace him, stating he was losing confidence.
What is Reed Hastings' legacy? ›
A Legacy of Innovation and Impact
Reed Hastings' legacy is one of innovation and impact. His vision and leadership at Netflix transformed the entertainment industry, making streaming an integral part of our lives.
Netflix efficiently uses machine learning in order to help their algorithms learn. This machine learning enables the platform to automate millions of decisions as per the user activities. Without this recommendation engine, people would spend great time for searching their desired movies and TV shows.
What is Netflix's biggest success? ›
Series
| # | Title | Hours watched (millions) |
|---|
| 1 | Squid Game | 1,650.45 |
| 2 | Stranger Things | 1,352.09 |
| 3 | Wednesday | 1,237.15 |
| 4 | Dahmer – Monster: The Jeffrey Dahmer Story | 856.22 |
13 more rowsChurn Rate - The percentage of subscribers who end their subscriptions within a given time frame is measured by this metric. A lower churn rate indicates higher customer retention and reflects the effectiveness of Netflix's efforts in keeping users engaged and satisfied with the service.
How did Hastings change his use of feedback from Pure Software to Netflix? ›
Reed Hastings changed his use of communications in sending and receiving messages from pure software to Netflix by shifting from using traditional email to using a more dynamic and collaborative platform based on cloud-based tools and social networking, which helped to improve communication and facilitate faster ...
Which conflict management style did Hastings tend to use at Pure and Netflix? ›
For urgency, Hastings level of dominance decreased as he went from an autocratic style at Pure to using a participative style at Netflix.
What is the main idea behind the Big 5 model of personality? ›
Definition of Big Five Personality Traits:
The Five Factor Model breaks personality down into five components: Agreeableness, Conscientiousness, Extraversion, Openness, and Stress Tolerance.
Is Reed Hastings still tied to Netflix? ›
Reed Hastings Steps Down As Netflix Co-CEO After Rocky Year For Streaming Service. Netflix cofounder Reed Hastings stepped down as co-CEO after 25 years at the company's helm, Netflix announced Thursday in its fourth quarter earnings report.
Did Blockbuster refuse to buy Netflix? ›
John Antioco is an American businessman, known for being the former CEO of the now bankrupt Blockbuster Video who missed an opportunity to purchase Netflix before it became a multi-billion dollar streaming platform.
Which movie inspired the founding of Netflix? ›
Hastings is often quoted saying that he decided to start Netflix after being fined $40 at a Blockbuster store for being late to return a copy of Apollo 13. Hastings invested $2.5 million into Netflix from the sale of Pure Atria.
How old was Reed Hastings when he started Netflix? ›
In 1997, 36-year-old Reed Hastings founded Netflix out of frustration—Blockbuster had charged him an obscene $40 fee for returning his Apollo 13 DVD late. At his company, subscribers could order DVDs online (no more than three a month), get them in the mail, and keep them for as long as they like without any late fees.
