Week 44, 2022—Issue #227
No Rules Rules: Build Talent Density, Increase Candor, and Loosen Controls
Each week I share three ideas to help you build better organizations. This week, those ideas attempt to summarize No Rules Rules—Netflix and the Culture of Reinvention. Note: this article was originally published in the WorkMatters newsletter on Nov 4, 2022.
Reed Hastings and Erin Meyer’s book No Rules Rules provides a 3-step process for building a culture of freedom and accountability.
Let’s explore:
1. Build Talent Density
Talent density is a term used to denote the amount of talent held by your organization. The more superstars you have, the higher your talent density is said to be. It’s a fuzzy metric and not clearly defined. But the authors make clear that you need a high talent density for a culture of freedom and accountability — Netflix calls it “F&A” — to take root. To build it up, the authors suggest doing what Netflix does: pay top dollar for top talent. That means you should figure out what the going rate is for each specific role and then pay a bit more than that. Another (more controversial) suggestion is implementing the so-called Keeper Test: a regular practice that encourages individuals and managers to ask themselves how hard the company should fight to keep individual employees before leaving. If the answer is anything but “very hard”, the practice suggests the person should is a severance package on their way out the door.
2. Increase Candor
Candor is the quality of being unreserved, honest, and sincere in expression. Like talent density, it too is a prerequisite for a culture of F&A. Writes Hastings: “When [people] get into the feedback habit, they all get better at what they do while becoming implicitly accountable to one another”. Step one is therefore to encourage feedback at each and every turn. Hastings continues: “Informal spontaneous feedback is unlikely to happen much, but you can get many benefits from selfless candor by putting feedback on the agenda”. To do so, Netflix uses the 4A’s for Feedback to facilitate spontaneous feedback and written 360, as well as something they call “live 360s” — regular group meetings where candid feedback is given live and in-person in front of peers. The authors stress that feedback should have positive intent. People that are unable to give feedback with positive intent should…you guessed it… get a severance package on their way out the door.
3. Loosen Controls
Most organizations use policies and procedures to add stability and reduce errors. Such controls are usually well-intentioned, but they do curtail freedom and creativity. The authors suggest you start by “ripping pages from the employee handbook”, adding that “[t]ravel policies, expense policies, and vacation policies — these all can go.” Hastings and Meyer do not use the term, but what they are arguing for is enabling as opposed to governing constraints. Netflix’s expense policy is a case in point. Rather than setting specific expense budgets etcetera, Netflix asks employees to “act in the company’s best interest”. The company estimates that this practice has led to 10% higher travel costs, a fact that Hastings suggests is “a small price to pay for the significant gains that come with it.” But buyer beware: this stuff might not work out of the box! You must first “lead with context, not control” to enable people to make their own decisions.
Two things.
- First, be careful where you implement these ideas. As Hastings and Meyer make clear, cultures of F&A are great at maximizing speed and innovation. If that is not your goal (and it might not be), F&A might not be the best match for you.
- Second, you’ll want to do all this step-by-step. Removing all controls overnight is a recipe for disaster. You do need to build up talent density and increase candor before you reduce controls. It’s at least a 3-step process:
Overall I must say I enjoyed this book. It’s practical and an easy enough read. I also enjoyed the back-and-forth between Hastings and Meyer in which Hastings makes a statement in terms of how things should be, with Meyer fact-checking how things are through interviews with employees past and present.
Recommended.
That’s all for this week.
Until next time: Make it matter.
How can we build better organizations? That’s the question I’ve been trying to answer for the past 10 years. Each week, I share some of what I’ve learned in a weekly newsletter called WorkMatters. Subscription is free. Back-issues are published to Medium after three months.
