By Justin D'Onofrio
Netflix revolutionized the way the world watches TV forever. As of Q3 2017, the streaming giant acquired nearly 110 million subscribers worldwide and has surpassed all major U.S. cable television providers.
Much of Netflix’s success can be attributed to their unique corporate culture. Netflix has set itself apart with the intent of only hiring “fully formed adults” and has created a corporate culture which reflects that ideal.
Freedom is at the core of Netflix’s corporate culture. The company allows unlimited vacation days, limited approval of corporate expenses and a completely flexible work schedule. After successfully breaking the mold of how companies in the entertainment industry operate, Netflix is taking the same approach when it comes to managing its employees. Through the elimination of the bureaucracy and restrictive corporate culture leftover from the industrial age, it is reinventing HR. While increased freedom and trust in employees has been a trend in HR management for years, what truly sets Netflix’s policy apart is its approach to talent retention.
Netflix has created a culture in which it is only interested in retaining and promoting its “superstar” employees and systematically letting go of good or adequate workers. As such, at Netflix, being “good-enough” has become a fireable offence. Looking to create a company run by “dream teams”, Netflix clearly lays out, via their culture page, that by working with them, you are not joining a family, but a team.
“A family is about unconditional love, despite your siblings’ unusual behavior. A dream team is about pushing yourself to be the best teammate you can be, caring intensely about your teammates, and knowing that you may not be on the team forever”
The honesty about the level of work Netflix expects from its employees is unique. Many managers like to refer to their company as a family, fostering a sense of belonging and forming a base for the relationships built within the organization. Netflix, however, makes it clear that the possibility of being cut from the “dream team” is always looming. This policy is run by what is known internally as the “Keeper Test”. Netflix CEO, Reed Hastings has described this test to managers in the form of a question:
“Which of my people, if they told me they were leaving for a similar job at a peer company, would I fight hard to keep at Netflix? The other people should get a generous severance now so we can open a slot to try to find a star for that role.”
In other words, if you are not worth fighting for, you are let go and offered a minimum 4 months of full pay as a severance package.
The dream team strategy has been cited as a contributing factor to Netflix’s ranking as one of the fastest growing companies in the U.S., with a three-year revenue growth of 87.8% as of 2016. However, many ex-employees have criticized this strategy, claiming it has created an environment that is detrimental to their mental and professional development. According to Glassdoor, a website that allows current and former employees to review companies, many ex-employees feel that the “dream team” strategy has created a culture of fear at Netflix. Nurturing an intense and extremely competitive environment, one in which “work-life balance is non existent at all levels of employment”, only 65% of employees would recommend working for Netflix.
While their strategy may seem harsh to many, Netflix, as a private company, is free to have a firing strategy consistent with the corporate culture they have created. The company is extremely transparent about its “dream team” approach and employees must be able to fit in with that culture. If not, Netflix offers a four month full pay severance package which will typically ease their transition. Netflix’s intent to create an environment of self-sufficient employees with a high level of performance is the ultimate compromise in exchange for independence, creative freedom and a high salary.
Patty McCord, the woman credited with creating this culture at Netflix put it best when she, too, was fired as a result of this culture, by saying “companies don’t exist to make you happy [...] The business doesn’t exist to serve you. The business exists to serve [its] customers”.
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