It’s been viewed online nearly 7 million times. Sheryl Sandberg calls it one of the most important documents ever to come out of Silicon Valley. And it was created by the company whose stock increased in 2013 more than any other’s in the S&P 500—up nearly 350%.
“It” is a 126-slide PowerPoint called “Netflix Culture: Freedom & Responsibility,” and it outlines Netflix’s approach to just that—culture—although it has primarily been interpreted as a “reinvention” of HR, as this Harvard Business Review article puts it.
Going through the entire PowerPoint (I have) is valuable in and of itself; if nothing else, you’ll see how very well done PowerPoints can be, for a change. But the HBR article, written by the former head of HR at Netflix itself, distills their approach to talent into five tenets based on two key insights into how people actually feel about performing their jobs.
The first insight came nearly a dozen years ago when Netflix had been planning an IPO but after 9/11 not only put it on hold but laid off about one-third of their 120 employees; a “brutal” time, as the former HR head describes it. The insight came from a conversation with a head of engineering who’d lost all three employees who used to report to him, and who was now a one-man band working very long hours. The HR head said she hoped to have some more help for him soon and he replied that there was no rush: “I’m happier now.”
What? Turns out the laid-off employees weren’t great and they were more of a burden to manage than they were worth: Between arbitrating personality conflicts and redoing subpar work, it wasn’t worth it.
Lesson #1: Hire only A team people.
The second insight took place a year later, a few months after the delayed IPO. Netflix’s bookkeeper had been very important to the firm’s early growth, “bright, hardworking, and creative [but] now as a public company we needed CPAs and other fully credentialed, deeply experienced accounting professionals—and [she] had only an associate’s degree from a community college.” And here comes the brutal news, folks: Rather than trying to jury-rig a new role for her, they let her go. The saving grace, if you can call it that, was “in light of her spectacular service, we would give her a spectacular severance package.” The lesson a la Netflix? “If we wanted only “A” players on our team, we had to be willing to let go of people whose skills no longer fit, no matter how valuable their contributions had once been.”
Lesson #2: Cull to keep only the A team.
So here are the five tenets I promised:
This approach to talent management will no doubt produce great results in the short term, but I wonder if it will really improve a firm’s talent pool for the long term.
The premise of this approach is that technology is ever changing, and the company should not be bashful about moving people in and out in order to keep humming at the highest level as the process of change takes place. So new employees come in ready to use the latest tech and contribute at a high level right away, and they leave as soon as they are no longer able to contribute.
But does a law firm work that way? Do your associates come in ready to contribute at a high level right away? Clearly not! Do they reach a point where they can’t contribute anymore because the substance of their work has changed and they can’t keep up? Some yes, but this is rarely the case when speaking of associates – often firms lose talented associates who can still contribute, but they are asked to leave for other reasons (i.e. they are not on the partner track, and probably because the partnership has not made an effort to get them onto it). If you’re talking about partners, then of course this happens, but they are the ones making the personnel decisions and are highly unlikely to choose the exit for themselves.
Reducing useless bureaucracy will assist any organization (especially those that have implemented it in order to avoid facing the hard realities that it does such a good job of obscuring). But I have zero confidence that managing partners will take that message away. Odds are, they will read an article like this and respond by (a) increasing bureaucracy in order to “measure performance” better (has there ever been a more futile refuge for the ineffective?) and (b) wringing ever more hours out of their already overworked associates while reducing what little job security is left for them (after all, aren’t they supposed to “cull to keep only the A Team?”).
If you want to reinvent HR, you have to start by knowing what you want to achieve with your talent. Do you want to build a lasting business by putting in the hard work to train the next generation, or do you want to pick the last bits of meat off the bone before you retire? Make sure your talent management matches what you’re trying to achieve.
A friend I’ve known for years but who prefers anonymity writes from Europe:
Thanks, David! I know who you are….