Hire, reward, and tolerate only fully formed adults

You may think this comes with the territory, working at a serious-minded law firm, but the Netflix credo is driving at something different than maturity defined in geriatric terms. They’re talking about people with sound firm-spirited judgment.

97% of your employees will do the right thing. Most companies spend endless time and money writing and enforcing HR policies to deal with problems the other 3% might cause. Instead, we tried really hard to not hire those people, and we let them go if it turned out we’d made a hiring mistake.

I like to call managing for the 3% “managing for failiure.” And the concept isn’t limited to personnel decisions, believe me. Do not, please, manage for failure.

A very specific example at Netflix is their vacation/time-off policy. They launched with 10 vacation days, 10 holidays, and some sick days, based on the honor system. But after Sarbanes-Oxley kicked in (Netflix was now public, recall), they were required to account for time off. Rather than comply with formalities, they decided to tell salaried employees to take whatever time off they felt appropriate, just work it out with your colleagues.

Same thing with T&E reporting: Netflix’s entire expense policy is five words:

Act in Netflix’s best interest.

Can it be abused? Sure; and you’ll catch it in a heartbeat. Don’t manage for failure.

Tell the truth about performance

Formal reviews are ritualistic and perfunctory Kabuki dances. Kill them.

And don’t worry about creating a paper trail to avoid litigation, documenting poor performance; if somebody isn’t cutting it, they know it and you know it.

I know, I know, you’re objecting with every litigator’s bone in your body, so here’s the story of one manager who thought what you’re thinking and wanted to get rid of “Maria” with a series of increasingly harsh performance reviews for the record:

I replied, “Why bother? We know how this will play out. You’ll write up objectives and deliverables for her to achieve, which she can’t, because she lacks the skills. Every Wednesday you’ll take time away from your real work to discuss (and document) her shortcomings. You won’t sleep on Tuesday nights, because you’ll know it will be an awful meeting, and the same will be true for her. After a few weeks there will be tears. This will go on for three months. The entire team will know. And at the end you’ll fire her. None of this will make any sense to her, because for five years she’s been consistently rewarded for being great at her job—a job that basically doesn’t exist anymore. Tell me again how Netflix benefits?

“Instead, let’s just tell the truth: Technology has changed, the company has changed, and Maria’s skills no longer apply. This won’t be a surprise to her: She’s been in the trenches, watching the work around her shift. Give her a great severance package—which, when she signs the documents, will dramatically reduce (if not eliminate) the chance of a lawsuit.” In my experience, people can handle anything as long as they’re told the truth—and this proved to be the case with Maria.

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