How to develop an organizational culture that breeds innovation and flexibility. Going to be looking at Netflix.
My overall learning was to recognize that the vast majority of organizations are operating with an industrial hangover.
The biggest risk is now not thinking freshly, not being agile enough so that our team or organization becomes irrelevant.
Netflix Culture slides
Many companies have nice values in lobby: Integrity, Communication, Respect, Excellence. Enron had these in their lobby.
As you are thinking about how to articulate your organization culture, avoid thinking in absolute positives.
Think about the tough dilemmas that employees face and use those scenarios.
Dilemma of transparency vs team stability.
Dilemma of innovation vs error prevention.
If you want to create an organizational culture that breeds innovation and flexibility, what are the dilemmas that you would focus on?
Pure Software – they created an employee handbook, but it had another effect.
They dummy proofed the system. When you dummy proof the system, only dummies want to work there.
When Reed Hastings closed Pure Software and opened Netflix, he had two ideas. Employee freedom breeds innovation. Process kills organizational flexibility.
Most control mechanisms are put in place to deal with average or below average employees.
Three steps to employee freedom: Increase Talent Density + Increase Candor – Remove Controls
For really great, top performing employees, a fabulous work environment is about being surrounded by stunning colleagues.
Professor Phelps study with Nick (an obnoxious actor): those with Nick on them performed nearly 40% worse even when other students were top of class. It didn’t take long for Nick’s behavior to bleed all over the team.
An individual performance problem is almost an individual problem; its a systemic problem that impacts the entire team.
“The best predictor of how a team performs is not how great the best performer is or what the average member is like. Most often it comes down to what the worst team member is like.” Poor performance is contagious.
The Keeper Test: 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?
Process Controls – KPIs, Management by Objective, Performance Improvement Plans
Decision Controls – decision making approvals, contract sign-offs, decision by committee
Netflix: Lead with context not control. Don’t seek to please your boss; seek to do what is best for the company.
Most companies lead with a pyramid structure. Now, its the decision making tree. The CEO is in the dirt at the roots. They are creating the culture, setting direction.
Young people want to work for trees, not pyramids. Trees are more flexible than a pyramid. A tree grows more quickly than a pyramid.
Reed Hastings: “freedom is not the opposite of accountability, as I had previously considered. Instead it is the path towards it. If you treat employees like adults, they will act like adults. If you give employees control over big decisions, they will become increasingly conscientious. Give freedom to get responsibility.”