Netflix Reinvented HR, (And Success), With Just One PowerPoint Presentation!

One plain pictureless, animationlesspresentation – over nine million views and counting.That’s what this is all about. And this very presentation by Reed Hastings, McCord and several other bigwigs of Netflix changed the face of recruitment and HR management. We are talking aboutthe presentation that Facebook COO Sheryl Sandberg called “one of the most important documents ever to come out of Silicon Valley”.

Brewing Magic

When Hastings and McCord sat down to put together this presentation, they had no idea it would go viral. It motivated performance and shaped the work culture at Netflix – a company which is now no stranger to success. This TV and on-demand movie streaming company dominates almost one-third of all US internet bandwidth! Its stock more than tripled in 2013 alone, and its US subscriber base pumped up to more than 29 million, not to mention the three Emmy awards it won.So what is it about the bullet-point rich PowerPoint presentation that made it a world-wide influence on HR managers and drove the company’s success? The magic is in the ideas.

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The talent management ideas put down in the presentation were seen as crazy, but soon, companies started adopting them, advocating them. This blog lists out some of these ideas that McCord explained in his Harvard Business Review article, cutting across the bullet points to serve you the magic in short.

1. “Hire, Reward, and Tolerate Only Fully Formed Adults”

Explaining the presentation, Patty McCordwrote in the Harvard Business Review, “Hire, reward, and tolerate only fully formed adults”. According to him, “the best thing you can do for employees — a perk better than foosball or free sushi — is hire only ‘A’ players to work alongside them. Excellent colleagues trump everything else.”

Hiring only fully formed adults make sense.If people are asked to rely on common sense and logic rather than on formal policies, it is possible to achieve better results. Hiring people who understand the need for a high performance workplace and who put the company’s best interests first will make sure that 97% of your workforce will do the right thing.

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2. Lying About Performance – A Killer

Conventionally, reviews on corporate performance are influenced by fear of litigation because it is assumed that if an organization has to get rid of someone, it would need a “paper trail documenting a history of poor achievement”. Netflix held formal reviews earlier, but it soon realized that these just didn’t make sense. So, its managers and employees were asked to have performance-based conversations as an integral part of their work. McCord writes that building elaborate rituals and a bureaucracy around measuring performance does not really result in improvement. Netflix thus implemented a novel idea of informal 360-degree reviews. Employees were asked to identify things that their colleagues should start, stop or continue. These were done using an anonymous software system but subsequently, they initiated signed feedback and face-to-face discussions. Mano e Mano – sort it out like adults, huh?!

3. Hey Manager, It’s Your Job

McCord writes that it’s the job of a manager to create great teams. The magic tactic behind this is to first imagine a documentary of what the manager’s team will be accomplishing 6 months from now. Then, the manager will have to think about skills required to make the images in the envisioned documentary movie a reality. He should then assess how well his existing team matches those skill sets. The key here is to only keep those people in the team that match the skill-sets.

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4. Company Culture is the Leader’s Job

There are three issues about corporate culture. One is the casualness problem – as seen in startups – where casualness could be counterproductive. Many CEOs are often unprepared and rely on IQ, improvisation and charm, which employees easily notice. It affects their performance too.

The second issue is about making sure that employees understand what behaviors drive the company’s success and how the company makes money. For instance, employees at Netflix focused heavily on subscriber growth without being aware that their expenses ran ahead of it. Its workers had to learn that although revenue grew, managing expenses also was crucial.

The third issue is what McCord calls the “split personality start-up”. In tech-companies, this issue appears as a rift between the sales team and the engineers. At Netflix, sometimes the leaders had to remind employees that there are big differences between their hourly call-center workers and their salaried professional staff working at headquarters. For instance, when their finance team wanted to shift the entire company to direct-deposit paychecks, the leaders had to point out that some of their hourly workers didn’t even have bank accounts. While building a corporate culture, leaders need to be aware that subcultures exist and require different management.

5. Think like Businesspeople

Throughout his career, McCord observed that most human-resource executives devote too much time to morale improvement initiatives like throwing parties and handing out T-shirts, trying to get their organizations on the “Best Places to Work” lists. None of these initiatives succeed in improving employee morale when they know the company’s products aren’t successful or when they see the stock price falling. Rather than cheerleading, HR managers need to think of themselves as businesspeople. “What’s good for the company?  How do we communicate that to employees?  How can we help every worker understand what we mean by high performance?”

Here’s the influential PowerPoint, just in case you are curious!
Culture from Reed Hastings