Shame on me. I am not an expert on Netflix [1]. Nor did I really know Reed Hastings [2]. Ok. That surprises me not too much. People (including me) tend to think that they know everything. When everything they know is only what they know. The world is bigger. Wow. I must be a realy wise guy... ;)
Ok. Back to Netflix. Reed is one of the CEOs who went through his first company (Pure) that was successful, but became a bureaucratic monster. The company was finally bought, but it seemed to be quite an exhaustive time and Reed had to meditate 2 years how his next company should look like. He identified that big bureaucratic apparatus was the main weakness of his former company Pure. He called Pure a “when-does-the-day-end sausage factory”.
...Pure, like many other outfits, went from being a heat-filled, everybody-wants-to-be-here place to a dronish, when-does-the-day-end sausage factory. "We got more bureaucratic as we grew," says Hastings. [4]
So he had the idea for Netflix. Renting Videos via snail mail sending, srteaming videos on the net. Not that super new special idea. Highly competitive market, too. But the idea is not a key success criteria - execution is [3]. Therefore he shaped Netflix to excel all other companies.
Reed gave a nice interview in Businessweek. The interview is now some years old, but Netflix is still there. Therefore I guess his ideas are as valid now as they were 4 years ago:
Key insights:
- Recruitment: The goal of Reed is to increase (what he calls) the “talent density”. He is charismatic and recruits the best in class. Provides them with flexibility to do what they do best. Yet. It’s not a children’s playground. There are focused goals and an employee is expected to do the work of 3 or 4 people.
- Working hours / vacation time: You can take as much vacation time as you want. According to the article in Businessweek engineering manager Aroon Ramadoss took off at least five weeks uninterrupted 2006. Reed calls this approach “freedom and responsibility”.
- Pay: Is not tied to performance or anything else. It’s tied to the job market. "At most companies, average performers get an average raise," says Hastings. "At Netflix, they get a generous severance package." Why? Because Hastings believes that otherwise managers feel too guilty to let someone go [4].
[1] http://en.wikipedia.org/wiki/Netflix
[2] http://en.wikipedia.org/wiki/Reed_Hastings
[3] http://ars-machina.raphaelbauer.com/2011/04/on-ideas-and-execution.html
[4] http://www.businessweek.com/magazine/content/07_39/b4051059.htm