No Rules Rules

by Reed Hastings

  force others to develop ways to work around them, reducing efficiency,

  drive staff who seek excellence to quit, and

  show the team you accept mediocrity, thus multiplying the problem.

  For top performers, a great workplace isn’t about a lavish office, a beautiful gym, or a free sushi lunch. It’s about the joy of being surrounded by people who are both talented and collaborative. People who can help you be better. When every member is excellent, performance spirals upward as employees learn from and motivate one another.

  PERFORMANCE IS CONTAGIOUS

  From the 2001 layoffs, Reed learned that performance—both good and bad—is infectious. If you have adequate performers, it leads many who could be excellent to also perform adequately. And if you have a team consisting entirely of high performers, each pushes the others to achieve more.

  Professor Will Felps, of the University of New South Wales in Australia, conducted a fascinating study demonstrating contagious behavior in the work environment. He created several teams of four college students and asked each team to complete a management task in forty-five minutes. The teams who did the best work would receive a financial reward of one hundred dollars.

  Unbeknownst to the students, some teams included an actor, who played one of several roles: a “Slacker” who would disengage, put his feet up on the table, and send text messages; a “Jerk” who would speak sarcastically and say things like, “Are you kidding me?” and “Clearly, you’ve never taken a business class before”; or a “Depressive Pessimist” who would look like his cat had just died, complain the task was impossible, express doubt that the team could succeed, and sometimes put his head on the desk. The actor did so without tipping off the rest of the team that he was anything other than a regular student.

  Felps first found that, even when other team members were exceptionally talented and intelligent, one individual’s bad behavior brought down the effectiveness of the entire team. In dozens of trials, conducted over month-long periods, groups with one underperformer did worse than other teams by a whopping 30 to 40 percent.

  These findings flew in the face of research going back decades, which suggested that individual team members conform to group values and norms. The behavior of the one individual quickly spread to the other group members, even though the groups were together for only forty-five minutes. As Felps explains, “Eerily surprising was how the others on the team would start to take on his characteristics.” When the impostor was a slacker, the rest of the group lost interest in the project. Eventually someone else would announce that the task just wasn’t important. If the actor was a jerk, others in the group also started being jerks: insulting one another, speaking abrasively. When the actor was a depressed pessimist, the results were the starkest. Says Felps: “I remember watching this video of one of the groups. You start out all the members are sitting up straight, energized, and excited to take on this potentially challenging task. By the end they have their heads actually on the desk, sprawled out.”

  * * *

  • • •

  Felps demonstrated what Patty and I had already learned in 2001. If you have a group with a few merely adequate performers, that performance is likely to spread, bringing down the performance of the entire organization.

  Most of us can remember moments in our own lives when we have seen this principle of infectious behavior play out firsthand, as I did when I was twelve years old.

  I was born in 1960 in Massachusetts. I was a pretty average kid with no particular talent or standout ability. When I was in third grade, we moved to Washington, DC. Things would have been OK there, and I had a big group of friends, but on the sixth and seventh grade playground, there was one boy, Calvin, who began to organize fistfights. It wasn’t that he picked on or bullied any of us. But this one kid, otherwise unremarkable, created a pattern of behavior that impacted the way the rest of us behaved and responded to one another. I didn’t want to join in, but the shame of not fighting would have been worse than taking part. And it really mattered for the whole day who won or lost their fight. Without Calvin, our way of responding to one another and playing together would have been dramatically improved. When my father told us we were moving back to Massachusetts, I couldn’t wait to leave.

  After the 2001 layoffs, we realized that at Netflix we also had a handful of people who had created an undesirable work climate. Many weren’t great at their jobs in myriad little ways, which suggested to others that mediocre performance was acceptable, and brought down the performance of everyone in the office.

  In 2002, with a new understanding of what makes a great place to work, Patty and I made a commitment. Our number one goal, moving forward, would be to do everything we could to retain the post-layoff talent density and all the great things that came with it. We would hire the very best employees and pay at the top of the market. We would coach our managers to have the courage and discipline to get rid of any employees who were displaying undesirable behaviors or weren’t performing at exemplary levels. I became laser-focused on making sure Netflix was staffed, from the receptionist to the top executive team, with the highest-performing, most collaborative employees on the market.

  THE FIRST DOT

  This is the most critical dot for the foundation of the whole Netflix story.

  A fast and innovative workplace is made up of what we call “stunning colleagues”—highly talented people, of diverse backgrounds and perspectives, who are exceptionally creative, accomplish significant amounts of important work, and collaborate effectively. What’s more, none of the other principles can work unless you have ensured this first dot is in place.

  ▶ TAKEAWAYS FROM CHAPTER 1

  Your number one goal as a leader is to develop a work environment consisting exclusively of stunning colleagues.

  Stunning colleagues accomplish significant amounts of important work and are exceptionally creative and passionate.

  Jerks, slackers, sweet people with nonstellar performance, or pessimists left on the team will bring down the performance of everyone.

  Toward a Culture of Freedom and Responsibility

  Once you have high talent density in place and have eliminated less-than-great performers, you are ready to introduce a culture of candor.

  This brings us to chapter 2.

  THEN INCREASE CANDOR . . .

  2

  SAY WHAT YOU REALLY THINK (WITH POSITIVE INTENT)

  In my first few years as CEO at Pure Software, I managed the technology well. But I was still pretty miserable at the people part of leadership. I was conflict-avoidant. People would become upset if I addressed them directly with a problem, so I would try to work around issues when they arose.

  I trace this personality trait back to my childhood. When I was a kid, my parents were supportive, but we didn’t talk about emotions in our house. I didn’t want to upset anyone, so I avoided any difficult topics. I didn’t have many role models for constructive candor, and it took me a long time to get comfortable with it.

  Without much thought, I carried this attitude over into my work. At Pure Software, for example, we had a very thoughtful senior leader called Aki, who was, I felt, taking too long developing a product. I got frustrated and upset. But instead of talking with Aki, I went outside the company and struck a deal with another set of engineers to get the project going. When Aki learned what I’d done, he was furious. He came to me and said, “You’re upset with me, but you go around my back instead of just telling me how you feel?”

  Aki was dead right—the way I’d handled the problem was terrible. But I didn’t know how to talk openly about my fears.

  The same problem affected my personal life. By the time Pure went public in 1995, my wife and I had been married for four years and we had one young daughter. It was the pinnacle of my professional life, but I didn’t know how to be
a good spouse. The next year when Pure acquired another company three thousand miles away, it got harder. I spent half of each week away, but when my wife expressed her frustration, I would defend myself, saying that everything I did was for the good of the family. When friends would ask her, “Aren’t you excited about Reed’s success?” she wanted to cry. She was distant from me, and I was resentful of her.

  The problem turned around when we started going to a marriage counselor. He got each of us to talk about our resentments. I began to see our relationship through my wife’s eyes. She didn’t care about money. She’d met me, in 1986, at a party for returned Peace Corps volunteers and had fallen in love with the guy who’d just spent two years teaching in Swaziland. Now she found herself hitched to a guy obsessed with business success. What was there for her to be excited about?

  Giving and receiving transparent feedback helped us so much. I saw I’d been lying to her. While I was saying things like, “Family is the most important thing to me,” I’d been missing dinners at home and working all hours of the night. I see now that my words were worse than platitudes. They had been lies. We both learned what we could do to be better partners, and our marriage came back to life. (We’ve now been married twenty-nine years and have two grown kids!)

  Afterward, I tried to take this same commitment to being honest back to the office. I began encouraging everyone to say exactly what they really thought, but with positive intent—not to attack or injure anyone, but to get feelings, opinions, and feedback out onto the table, where they could be dealt with.

  As we began giving increasing amounts of candid feedback to one another, I saw that getting feedback had an added benefit. It pushed the performance in the office to new levels.

  An early example involved our chief financial officer, Barry McCarthy. Barry was the first Netflix CFO, serving from 1999 to 2010. He was a great leader with vision, integrity, and an incredible ability to help everyone deeply understand our finances. But he was also a little moody. When the head of marketing, Leslie Kilgore, mentioned Barry’s moodiness to me, I encouraged her to speak to him herself. “Tell him exactly what you’ve said to me,” I suggested, inspired by my marriage counseling experiences.

  Leslie was chief marketing officer from 2000 to 2012 and is currently on our board of directors. Her external persona is no-nonsense, but she has a dry, often surprising, sense of humor. Leslie spoke to Barry the next day and did a much better job than I ever could. She found a way to calculate how much money his moodiness was costing the business. She spoke to him in his own financial language, adding a shot of her infectious humor to the communication, and Barry was moved. He went back to his team, told them about the feedback he’d received, and asked them to call him out when his mood was influencing their actions.

  The results were remarkable. In the subsequent weeks and months, many on the finance team spoke to me and Patty about the positive change in Barry’s leadership. That wasn’t the only benefit.

  After Leslie gave constructive feedback to Barry, Barry gave constructive feedback to Patty and later to me. Seeing how well he had responded to Leslie’s feedback, Barry’s team dared to tell him, with a bit of humor, when his moodiness was slipping back in and started giving more feedback to one another. We hadn’t hired any new talent or raised anyone’s salaries, but day-by-day candor was increasing talent density in the office.

  I saw that openly voicing opinions and feedback, instead of whispering behind one another’s backs, reduced the backstabbing and politics and allowed us to be faster. The more people heard what they could do better, the better everyone got at their jobs, the better we performed as a company.

  That’s when we coined the expression “Only say about someone what you will say to their face.” I modeled this behavior as best I could, and whenever someone came to me to complain about another employee, I would ask, “What did that person say when you spoke to him about this directly?” This is pretty radical. In most situations, both social and professional, people who consistently say what they really think are quickly isolated, even banished. But at Netflix, we embrace them. We work hard to get people to give each other constructive feedback—up, down, and across the organization—on a continual basis.

  An employee on our legal team, Doug, gave this example of candor in action. He joined the company in 2016, and not long after he went on a business trip to India with a senior colleague named Jordan. As he explained, “Jordan is the kind of colleague who brings Rice Krispy treats for people on their birthdays. But he is also hard-driving and impatient.” Although Jordan had emphasized the need to be relationship oriented and focus on building personal connections, when they arrived in India, his behavior didn’t match his advice:

  We were having dinner with a Netflix supplier named Sapna at a restaurant on a hill with a view over Mumbai. Sapna has a big personality and a bigger laugh. We were having a great time but every time the topic veered off work, Jordan seemed irritated. Sapna and I were giggling about how her baby was already walking at ten months, while my seventeen-month-old nephew had developed a scooting technique, so it was unnecessary to use his legs to do anything. It was a great moment of camaraderie, the type of connection that was certain to improve business. But Jordan was radiating frustration. He pulled his chair back from the table and kept glancing nervously at his cell phone as if that would make the coffees come faster. I knew his behavior was hurting our efforts.

  In any of his previous jobs, Doug would have said nothing, silenced by attitudes about protocol, hierarchy, and niceness. And he hadn’t adapted to the Netflix culture fully enough to risk openly calling out his new colleague’s behavior. Not until a week after they’d returned home did he manage to screw up his courage. “Let me be Netflix about it,” Doug told himself. He added “Feedback from India trip” to the agenda for his next meeting with Jordan.

  The morning of the meeting, Doug’s stomach was churning when he stepped into the meeting room. Feedback was the first item on the agenda. Doug asked Jordan if he had any feedback for him, and Jordan provided some. That made it easier. Then Doug said, “Jordan, I don’t like to give feedback. But I did see something while in India that I think could be helpful to you.” Jordan remembers the rest like this:

  Let me be clear. I think of myself as a relationship-building king. Every time I go to India, I lecture everyone on the team about building emotional bonds. That’s why Doug’s feedback hit me so hard. Because I was stressed, I acted like a robot, sabotaging my own objectives, without even noticing my behavior. I go to India every single month. Now I don’t lecture others before going. Instead I start the trip by telling my colleagues, “Hey, this is my weakness! If I start glancing at my watch while Nitin is giving us a tour of the city, give me a big kick in the shin! I’ll thank you for it later.”

  When giving and receiving feedback is common, people learn faster and are more effective at work. The only unfortunate part was that Doug didn’t pull Jordan aside and give him that feedback during that very dinner in India, so that he could have potentially saved the meal.

  HIGH PERFORMANCE + SELFLESS CANDOR = EXTREMELY HIGH PERFORMANCE

  Imagine attending a nine o’clock Monday-morning meeting with a group of work colleagues. You’re sipping a cup of coffee and listening to your boss ramble on about his plans for an upcoming retreat, when the voice in your head starts shouting furiously in disagreement with what he’s saying. The agenda your boss is outlining sounds like one that’s guaranteed to fail—and you’re sure the program you thought up while watching Grey’s Anatomy reruns last night would be more effective. You wonder, Should I say something? But you hesitate, and the moment soon passes.

  Ten minutes later, one of your colleagues who is often long-winded and repetitive—but contagiously upbeat (and, as everyone knows, very sensitive)—begins updating the team on her latest project. The voice in your head sighs at the pointlessness of her presentation and the under
lying inanity of the project itself. Again you wonder, Should I speak up? But again, your lips stay sealed.

  You’ve probably experienced moments like these. You may not always remain silent. But often you do—and when you do, it’s likely to be because of one of the following reasons:

  You think your viewpoint won’t be supported.

  You don’t want to be viewed as “difficult.”

  You don’t want to get into an unpleasant argument.

  You don’t want to risk upsetting or angering your colleagues.

  You’re wary of being called “not a team player.”

  But if you work for Netflix, you probably do speak up. During the morning meeting, you tell your boss his plan for the retreat won’t work and that you have another idea you think will be better. After the meeting, you tell your colleague why you believe she should rethink the project she described. And for good measure, after stopping at the coffee machine, you visit with another colleague to mention that he came across as defensive when he was asked to explain a recent decision of his in the all-hands meeting last week.

  At Netflix, it is tantamount to being disloyal to the company if you fail to speak up when you disagree with a colleague or have feedback that could be helpful. After all, you could help the business—but you are choosing not to.

  When I first heard about the candor at Netflix, I was skeptical. Netflix promotes not just candid feedback but also frequent feedback, which, in my experience, just increases the chances that you will hear something hurtful. Most people have trouble un-hearing harsh remarks, which can lead to a negative spiral of thought. The idea of a policy that encourages people to voice their honest feedback frequently sounded not just unpleasant but very risky. But almost as soon as I began to collaborate with Netflix employees, I saw the benefits.