How to Implement a Culture of Freedom and Responsibility
In 2009, a 127-slide deck on Netflix’s company culture was published on the web. It went quickly viral and remains startup lore to this day. Facebook COO, Sheryl Sandberg would say it “may well be the most important document ever to come out of the Valley.” Just over a decade later, Netflix co-founder and current co-CEO Reid Hastings (along with culture expert Erin Myers) have turned deck into book.
No Rules Rules is a 9 step guide to building an organisational culture of Freedom & Responsibility. These are those steps.
Step 1: Build Talent Density
The foundation for a culture of Freedom & Responsibility is talent density. As Reid puts it, “at most companies, policies and control processes are put in place to deal with employees who exhibit sloppy, unprofessional, or irresponsible behaviour”. Whether that’s true or not, it’s logical that this entire strategy only works if you start with a base of high achievers. Those who yearn for freedom and responsibility.
Talent density means optimising for talent per employee. So what does this look like in practice? It means faced with the choice of hiring the best software engineer in a particular field vs. hiring all of the second, third and fourth best engineers in that same field — you always take the one.
Step 2: Increase Candour
Once you have talent density, you need to normalise a culture of candid feedback. Every employee should feel comfortable giving constructive (see: critical) feedback to any other employee, anywhere, anytime. Whether in private or public. Getting to this level of candid, live feedback is a real challenge — you’re pushing people well out of their comfort zone and how they’ve been conditioned to handle feedback (eg. praise in public, criticise in private).
To keep the process constructive all feedbackers must strictly adhere to the 4A Framework:
- Aim to assist — giver must have positive intent (not emotion/frustration)
- Actionable — giver must focus on what the recipient can do differently
- Appreciate — receiver must appreciate the feedback, not be defensive
- Accept or discard — it is the receiver’s choice whether to react to the feedback
Step 3: Remove First Rules
Now that you have a talent dense team and a culture of candour — you can ditch the first rules! The first to go are:
- Vacation Policy — no more tracking or limiting vacations. Removing the vacation policy means leaders must model big vacation-taking. Take vacations. And talk about them. If senior managers do not set this example, research shows removing the policy will result in employees taking less vacation. The goal here is to give people the freedom to go on vacation and come back revitalised and ready to create. Not be scared to take a long weekend.
- Travel and Expense Policies — how do you prevent employees booking first class for a one hour flight with no travel or expense policy? Set the context that employees should always act in the company’s best interest. Accept that some people will take advantage. But know that the gains of the freedom you are giving your people outweigh the losses.
Step 4: Fortify Talent Density
To keep attracting and retaining top talent you will need to compensate accordingly. Do this by paying top of personal market. This means knowing exactly what each individual is worth in the market at all times, and exceeding that. Encourage employees to know their own worth in the market (i.e. speak to recruiters!) and to speak up if it’s more than their current pay. This is called the rock-star principle.
Pay should not be contingent on performance. In a fast moving, creative business it’s not in the company’s best interest to set future performance-based goals. You need your employees to be agile in the metrics they go after. No bonuses. No vesting. Just cold hard cash.
Step 5: Pump up Candour
To level up Freedom & Responsibility you need to give your managers the context they require to place big bets. You want your people to make, and own, big decisions. To do this they need to know the company’s strategy inside and out. This means opening the books. Sharing sensitive information. Absolute transparency up and down the workforce. Netflix pins up a 4-page “Strategy Bets” document in its lunch room. It is full of the company’s trade secrets and big ideas. By empowering your people with the most important information you will build ownership mentality at every level.
Netflix famously releases its financial results to all staff internally before the quarter is closed and results are announced in the market. This is highly unusual given the severity of the consequences if any employee was to divulge or act on the info.
Step 6: Remove More Rules
Now we can take away decision-making approvals. Netflix talks about the Informed Captain — the owner of an idea or project. They are responsible for making the call on whether to place the bet or not. Not their boss, or their boss’s boss. This doesn’t mean not talking to your boss about an idea. In fact, Informed Captains should always follow the innovation cycle:
- Farm an idea for dissent / socialise with peers
- For a big idea, test it out
- As the Informed Captain, make your bet
- If it succeeds, celebrate. If it fails, sunshine it.
Step 7: Max up Talent Density
Adequate performance gets a generous severance package. This is a focal point of the Netflix Culture Deck. Maxxing up talent density means getting rid of adequate performers. How do you framework this? Via the Keeper Test. Each manager should ask for each of their reports: if this person told me they were leaving tomorrow, would I fight to make them stay? If the answer is no, the manager should give them a generous severance package and search for a superstar they would fight to keep. Sounds brutal? It is. And in some jurisdictions (like mine) it isn’t completely legal. Reid preaches that Netflix is a team, not a family. A high performing team works to have the best athlete in each position.
Step 8: Max up Candour
To max out company candour, implement Live 360s. You have heard of 360 feedback — i.e. giving feedback upwards as well as downwards. It is usually written, and in many workplaces, anonymised. Live 360s involve a group of colleagues gathering — it works best over a meal — and every person giving and receiving live, constructive feedback to every other person. Take a second to imagine your own team at work carrying this out. It’s quite intense. It has to be built up to. And requires an experienced, strong facilitator to run the session and implement the 4A Framework at all times.
Step 9: Eliminate Most Rules
Once your have achieved black hole-level talent density and Pinocchio’s nose-level candour, you can eliminate pretty much the rest of the rules. There are two principals to shoot for here:
- Highly aligned, loosely coupled — this means the entire organisation is aligned in strategic objectives and the company’s north star. But loosely coupled in the sense that decision-making is completely decentralised.
- Lead with context, not control — this means providing decision makers with absolute context, but letting them make their own decisions.
If you want to build a ship, don’t drum up the people to gather wood, divide the work, and give orders. Instead, teach them to yearn for the vast and endless sea — Antoine De Saint-Exupery
The story goes that if you can clock these steps and implement a culture of Freedom & Responsibility — you kick start a virtuous cycle. The culture attracts top talent. The denser talent allows for destruction of more rules. And so on into an oblivion of organisational success.
For us mortals who aren’t (yet) building global tech companies, this might all seem nice to know, but not very useful. But there are pearls of wisdom throughout the book that can be implemented in any organisation in pursuit of a more open workplace that strives for higher performace. One such gem I liked is the practice of senior managers telling the rest of their team about the constructive criticism they have received. Leaders speaking openly about what they need to work on is an effective way to make it okay for junior members of the team to give upwards feedback.
