With loose coupling, on the other hand, the risk of misalignment is high. Who’s to say one department won’t put low cost ahead of protecting the environment or workers in sweatshops and pull the entire organization off course? If the head of the department has a fantastic vision for contributing to the new strategy, but each team member decides for himself what projects to take on, everyone may run off in his own direction. Good luck making that departmental vision a reality anytime soon.
This brings us to the fourth and final precondition for leading with context.
IS YOUR ORGANIZATION HIGHLY ALIGNED?
If loose coupling is to work effectively, with big decisions made at the individual level, then the boss and the employees must be in lockstep agreement on their destination. Loose coupling works only if there is a clear, shared context between the boss and the team. That alignment of context drives employees to make decisions that support the mission and strategy of the overall organization. This is why the mantra at Netflix is
HIGHLY ALIGNED, LOOSELY COUPLED
To understand what this involves, let’s return to Downton Abbey, where your family members are waiting for their dinner. If you have spent enough time ensuring you and your cook are aligned on exactly what types of foods will make the family happy, who eats what and why, the portions she should make, and which types of foods should be cooked rare, medium, or well, your high-performing chef will be ready to select and cook her meals without oversight.
However, if you hire a high-performing chef and give her free range to cook what she wants, but you haven’t shared that your family hates salt and that any salad dressing with sugar will be rejected by all, it’s likely your household of fusspots won’t like the meal delivered to their plates. In this case, it’s not your chef’s fault. It’s yours. You hired the right person, but you didn’t provide enough context. You gave your cook freedom, but you and your chef were not aligned.
Of course in a company, it’s not about one chef cooking for one family. Instead there are layers of leadership, which makes creating alignment more complex.
In the following pages we will look at how context gets set effectively across the organization when all leaders are focused on building alignment. The CEO provides the first level of context, building an initial foundation of alignment across the company, so we’ll start there with Reed.
ALIGNING ON A NORTH STAR
I use a handful of methods for setting context across the company, but my primary platforms are our E-staff (Executive Staff) and our Quarterly Business Review (QBR) meetings. A few times a year we bring together all the leaders (top 10 to 15 percent of people) of the company from around the world. It starts with a long meeting or dinner with my half dozen direct reports—people like Ted and Greg Peters and our head of HR Jessica Neal. Then I spend a day with E-Staff (all VPs and above) and then we have two days of presentations, sharing, and debates at QBR (all directors and above—about 10 percent of the entire workforce).
The number one goal for these meetings is to make sure that all leaders across the company are highly aligned on what I call our North Star: the general direction we are running in. We don’t need to be aligned on how each department is going to get where they are going—that we leave to the individual areas—but we do need to make sure we are all moving in the same direction.
Before and after QBR, we make available many dozens of pages of Google Docs memos to every employee, explaining all the context and content we shared at QBR. This information is read not just by QBR participants but also by people at all levels of the company, including administrative assistants, marketing coordinators, you name it.
Between QBRs, I hold ongoing one-on-one meetings to get a feel for how aligned we actually are and where context is lacking. I have one thirty-minute meeting with each director once a year. That makes about 250 hours of meetings with people who are three to five levels below me in the org chart. In addition, I meet with each vice president (two to three levels below me) for one hour every quarter. This results in another 500 hours of meetings annually. When Netflix was smaller, I met with each person more frequently, but I still spend about 25 percent of my annual time on all these meetings.
These one-on-one meetings help me to better understand the context in which our employees are working, and alert me to areas where our leadership is not aligned so that I can revisit key points at the next round of QBR meetings.
Here’s an example from March 2018, when I visited our Singapore office. During a thirty-minute one-on-one with a director in the product development department, he casually mentioned that his team was developing, per request, a five-year head count plan. I was surprised. A five-year plan may sound like a natural endeavor for a company to be working on, but in our dynamic industry it’s absurd. It’s impossible to know where a business like ours will be five years from now. Trying to guess and plan around those guesses is sure to tie the company down and keep us from adapting quickly.
I looked into the issue and discovered that one of our facilities executives was asking people in several of our offices to submit predicted head count numbers for 2023. When I spoke with him he explained that, in some of our locations around the world, we’d grown out of our office space far faster than expected and that had meant financial waste. “If I had a five-year hiring plan, I could get the best space for the cheapest price and not make the same mistake we made last time. That’s why I asked each of the various departments to develop one,” he explained.
I felt like saying, “You bozo! Don’t prioritize error prevention over flexibility! That is a total waste of time. There is no way we can have any accuracy with a plan like that. Call off this project right away.” But that would be leading with control.
Instead I reminded myself of what I often tell leaders throughout Netflix:
WHEN ONE OF YOUR PEOPLE DOES SOMETHING DUMB DON’T BLAME THEM. INSTEAD ASK YOURSELF WHAT CONTEXT YOU FAILED TO SET. ARE YOU ARTICULATE AND INSPIRING ENOUGH IN EXPRESSING YOUR GOALS AND STRATEGY? HAVE YOU CLEARLY EXPLAINED ALL THE ASSUMPTIONS AND RISKS THAT WILL HELP YOUR TEAM TO MAKE GOOD DECISIONS? ARE YOU AND YOUR EMPLOYEES HIGHLY ALIGNED ON VISION AND OBJECTIVES?
In the case of the facilities executive, I said very little in the moment. This guy is the informed captain when it comes to selecting office space, not me.
But the conversation notified me that I needed to set better context across our organization. If one person is misaligned with our strategy, there must be fifty others who are in the same boat. I added this topic to an upcoming QBR meeting. There I spoke with all of our leaders about why at Netflix we almost always prefer to pay more for the option that gives us greater flexibility, knowing that we can’t—and shouldn’t—try to foresee what our business will look like down the road.
Of course, each situation is different and in every business we need to think somewhat ahead. During that QBR we discussed to what lengths we should go to in order to remain flexible. I provided some pre-reading that showed how bad we had been at predicting our growth in the past and how the best opportunities often can’t be predicted. We had breakout discussions looking at past cases where we could have paid more for an option that increased future choice or less for an option that reduced flexibility. We debated just how much flexibility we needed in our business and how much we should be ready to pay for it.
Those conversations didn’t lead to a clear conclusion or rule, but through the debates all our leaders became clearly aligned on the idea that preventing errors or saving money with long-term plans is not our primary objective. Our North Star is building a company that is able to adapt quickly as unforeseen opportunities arise and business conditions change.
Of course, the CEO in any organization only provides the first layer of context setting. At Netflix just about every manager, at every level, has to learn how to lead with context on entering the company. Melissa Cobb, on Ted’s team, provided an example that demons
trates how context setting works across the entire organization.
ALIGNMENT IS A TREE, NOT A PYRAMID
Melissa Cobb, vice president of original animation, worked for Fox, Disney, VH1, and DreamWorks before she joined Netflix in September 2017. At DreamWorks she was the producer of the Oscar-nominated Kung Fu Panda trilogy. After twenty-four years in leadership positions, she uses two metaphors—the pyramid and the tree—to help the managers who join her team to understand the difference between a traditional leadership role and leading with context at Netflix. She explains it like this:
Decision making at every organization I’d worked at before Netflix was structured like a pyramid. Since I worked for networks I’ve been in the business of making movies and television shows. At the bottom of our pyramids we had a bunch—maybe forty-five or fifty—of what we call creative executives. Each of these executives would have one or more shows they were responsible for. For example, while I was at Disney, we produced Man of the House starring Chevy Chase and the creative executive responsible for that show was on the set each day, approving the pages, the costumes, and all the little details. Many little details of each show would be taken care of at the bottom of the pyramid.
But if something important came up, like maybe someone wanted to change a sensitive piece of dialogue at the introduction of the show, that would need to be addressed at a higher level in the pyramid. The creative exec would say, “Oh, I’m not sure what my boss will think—let me give her a call.”
The exec would call her manager, one of about fifteen directors at the next pyramid level. “What do you think boss? Can we make this dialogue change?” For most issues the director would endorse the change or sometimes refuse it.
But if the change was something bigger than just swapping a little dialogue, like maybe someone wanted to cut out an entire scene, then the director might say, “Well, I’m not sure what MY boss will say. I need to check with him.” The issue would then be pushed up to the next level in the pyramid where we’d have half a dozen vice presidents. The director would call up his manager and say, “What do you think, boss? Can we cut out this scene?” That VP would then approve or decline the change.
Now if something even bigger happened—like one of the actors dropped out or the whole script had to be rewritten—that would need to go up to one of the few senior vice presidents at the next level. And for something really big—like the writer gets sick and a new writer needs to be approved posthaste—that might go all the way up to the CEO sitting in the tiny triangle at the top of the pyramid.
The pyramid decision-making structure Melissa experienced at her previous company is easily recognizable in the majority of organizations, regardless of industry or location. Either the boss makes the decision and pushes it down the pyramid for implementation, or those at lower levels make the smaller decisions but refer the bigger issues to the higher-ups.
But at Netflix, as we’ve discussed, the informed captain is the decision maker, not the boss. The boss’s job is to set the context that leads the team to make the best decisions for the organization. If we follow this leadership system from the CEO all the way to the informed captain, we see that it works not so much like a pyramid but more like a tree, with the CEO sitting all the way down at the roots and the informed captain up at the top branches making decisions.
Melissa provided an in-depth example of how context setting works from the roots of the tree all the way out to the highest branches. In her tree exhibit on the previous page, you can see the various levels of context being set from Reed, through Ted Sarandos, Melissa herself, Dominque Bazay (a director working for Melissa), and how all this context finally impacts the decision made by informed captain Aram Yacoubian. Let’s look now at how the context setting at each point created alignment up and down the organization.
REED AT THE ROOTS—GROW GLOBAL
In October 2017 Melissa attended her first QBR, where Reed presented information about the future global expansion of Netflix. She remembers it like this:
I had been at Netflix for under a month. The second week of October we had my first QBR at the Langham Huntington Hotel in Pasadena. I had been trying to get a handle on how Netflix worked and everyone kept telling me that at QBR the pieces would come together. So I was listening carefully when Reed took the stage.
During his fifteen-minute talk Reed explained, “In the past quarter, eighty percent of our growth came from outside of the US, and that is exactly where we should be focusing our energy. Over half our customers are now coming from other countries, and every year this number will increase. This is where the big growth lies. International growth is our priority.”
Reed went on to detail which countries Netflix leaders should be focusing the most heavily on (including India, Brazil, Korea, Japan) and why (reasons to follow below). That message anchored much of Melissa’s thinking on how to develop the strategy for her own department. Reed is not Melissa’s direct boss, though. She works for Ted Sarandos. Shortly after the QBR, she had a one-on-one with Ted, where he added his own context to Reed’s message.
TED SARANDOS AT THE TRUNK—RISK BIG, LEARN BIG
Before their one-on-one, Ted had already spoken with Melissa about some of the major international growth opportunities. India is a huge Netflix growth market. Japan and Korea have ecosystems that are particularly rich for content development. Brazil has only a very small Netflix office but over ten million viewers. But when Ted and Melissa sat down in late October 2017, Ted spoke not about what people at Netflix knew but about all the things they didn’t know yet:
Look, Melissa, we are at a turning point for Netflix. We have forty-four million members in the US. The big growth will be international and we have a lot to learn. We don’t know if Saudi Arabians watch more or less TV during Ramadan. We don’t know if Italians prefer documentaries or comedies. We don’t know if Indonesians are more likely to watch movies alone in their bedrooms or around their family televisions. If we are going to succeed, we need to become an international learning machine.
Melissa was already familiar with the language of bet-taking used at Netflix and the implication that some bets will succeed and others will fail. What the gambling analogy didn’t capture was the critical aspect of learning from all that failing. This brings us to the context set by Ted:
As your team purchases and creates content around the world, we need to be laser-focused on learning. We should be ready to take bigger risks in high-growth-potential countries like India or Brazil so that we learn more about those markets. Let’s have some wins. But let’s also have some big messy losses where we learn how to succeed better the next time. We should always be asking, “If we purchase this show and it bombs, what will we learn from that?” If there is something big to learn, let’s go ahead and take the bet.
Reed and Ted’s context collectively helped Melissa to develop the context she set with her own Kids and Family content team at their next weekly meeting.
MELISSA COBB ON A BIG BRANCH—BRING ICE CABINS AND MUD HUTS TO BANGKOK
Melissa’s past employers like Disney and DreamWorks are known globally, and they deliver content watched everywhere on the planet. Yet Melissa believed that Netflix had a chance to differentiate itself, not just as a global brand, but as a truly global platform:
Around the world most kids watch either content from their own country or shows and movies that originated in the US. But I felt that to be as international as Reed had outlined at QBR we could do better.
I wanted the kids’ slate of shows on Netflix to be like a global village. When ten-year-old Kulap, who lives in a Bangkok high-rise, wakes up on Saturday morning and turns on Netflix, I wanted her to see not just characters from Thailand (those are already on her local television channels) or from the US (those are on the Disney cable station) but a variety of TV and movie friends from around the world. She should be able to choose from sho
ws based in ice-covered cabins in Sweden and others set in rural Kenya. The stories shouldn’t just be about children from a wide array of countries. Disney can do that. They should have the look and feel that you only get when these shows actually come from around the world.
We had a lot of debates on my team about whether this strategy would work. Would children want to watch characters that were so dramatically different than they were? We didn’t know.
That’s where the context Ted set came in. As he had stressed, these were the questions we would seek to answer and we should be prepared for our bets to fail, provided they resulted in clear learning. We all came to an agreement. We would give it a try and learn along the way.
During this meeting Melissa found alignment with her six direct reports. Dominique Bazay, the director whose team acquires preschool content, was one of them.
DOMINIQUE BAZAY ON A MIDDLE-SIZE BRANCH— WITH ANIMATION AIM HIGH
After that meeting with Melissa, Dominique thought a lot about how to make Melissa’s “global village” dream come true. To encourage Kulap to watch TV created in Sweden and Kenya, what types of shows should Netflix be offering? Dominique felt that animation was the best answer to this question. That led to the context she set with her own team:
Cartoon Peppa Pig speaks Spanish like a Spaniard, Turkish like a Turk, and absolutely perfect Japanese. Animation provides an opportunity for international programming that live-action can’t. When actress Bella Ramsey’s Worst Witch is shown in a new country, the viewer has to watch it dubbed or subtitled. Kids hate subtitles and Bella looks funny speaking Portuguese or German. The voices don’t match the image and that impacts the quality of the viewing experience. But cartoon Peppa, like all animated characters, always speaks the language of the viewers. The Korean child and the Dutch child feel equally connected to Peppa.
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