No Rules Rules: Netflix and the Culture of Reinvention review:

 

Before starting with the review, I would like to narrate a real-time incident that happened in my place. 

I ordered food through Zomato and was expecting the delivery. Suddenly, the delivery person called and told me that the security personnel of my apartment did not allow him inside. I was requested to come outside and collect the parcel. (Yes, he also apologized as if it was his fault). 

I saw no reason why he should not be allowed inside. I inquired about this with my apartment's caretaker. He grudgingly replied that people in my apartment were uncomfortable with "strangers". They complained that these strangers could endanger the security, and their presence could lead to many incidents of thefts. 

I asked if there was any history of theft in the apartment, for which the reply was negative. I can clearly understand the emphasis on preventive measures. But I cannot understand the lack of attention to the ease of living. 

This incident made me realize that people look for short fixes in the name of "rules" than live with their unintended consequences. 

We all should approach reading No Rules Rules through this philosophy. The company has a single mantra to guide its employees: Act in Netflix's best interest. 

Reed Hastings complains that companies of the modern era still follow the 17th-century industrial revolution management practices. If the desired output of the company is to be creative and adapt to the ever-changing world, the old notions of controlling the activities of employees do not work anymore.

Instead, what works is giving more autonomy to the employees in the decision making. To do this, Netflix has set up a framework. It allows the employees to be more productive and the organization to be more resilient. 

The Approach is:

• Netflix is highly committed and uncompromising in building a high talent density.
• Then Netflix pumps in the culture of transparency. They do this by being hyper-focused on feedback mechanisms. 
• They slowly remove the controls like vacation policies, reimbursement policies, etc., which promote risk-taking appetite among employees. 
• They increase the talent density by "Keeper Tests" - A manager would ask himself if the subordinate is worth retaining and a star performer. If this keeper test fails, the employee quits with a generous severance package.
• Encouraging the manager to provide more context rather than control his team.
• Finally, encourage even more candour by having live 360-degree feedback sessions. 

Of course, there are many themes like sharing the data on the company's performances like Quarterly Business Reviews with all managers (not restricting it with only the senior management team). But the most fascinating yet controversial parts are:

Adequate Performance gets generous severance package: 

Netflix says it is uncompromising on talent pooling. It asserts that a star performer is 10x better than an adequate performer in creative environments. We don't know how Netflix came up with this thumb rule, but it frequently cites its crisis during 2001, where it had to lay off several average performing employees. Hasting says the company found a mad infusion of energy and creativity once the average performers left. 

So far, so good. But the problem is the book never tells us what defines a star performer. We know that they have to be team players (because it also does not want brilliant jerks as the cost to teamwork is very high). Other than that, we never get an idea of a good performer. 

I have seen people who seem a bit slow in learning. But as time passes, their learning curve accelerates, so does their productivity curve. So, if a manager performs a keeper test, will he see the employee for immediate short term outputs or invest in him that he may turn out to be a great leader tomorrow? The book does not provide any insights into this.

Feedback Mechanisms are good, but what about mental health?

Netflix is clear about hiring only "adults". Since this point is made clear, I do not particularly worry about persistent feedback culture. But what I do worry about is its long term and spillover effects on the extended families of employees. Netflix does give a hint by saying that its attrition rate is comparatively lesser than other silicon valley companies. 

But when you aspire to be perfect, you put your employees under constant stress. You could argue that a self-confident employee may not care about all these things and is more focused on bringing great ideas to the table. I would have accepted this explanation if humans were consistent in their characters. But they seldom are!

If feedbacks are considered the only way to bring the best out of the employees, the company lacks imagination. I have seen some Indian startups training their employees with crossword puzzles and Su-Do-Ku to amplify the logical rigour of their brains. There are also many ways to optimize employees' performances by nudging. 

Nevertheless, the book is a collection of genius, counter-intuitive ideas which will surprise and sweep the reader away from the floor in the first instance. But with examples and explanations, the authors manage to persuade the readers with their ideas. 

What amazes me personally is that the company recognizes you as an adult and TOLERATES MISTAKES. It empowers you to make decisions. Many of us are risk-averse because of fear of failure. But how do we learn if we are constantly in analysis-paralysis mode? That is why Netflix expects its employees to exhibit a bias towards action. 

Netflix believes that if there are too many processes to control employee behaviour in a creative environment, he might lose the conviction to carry on with the task. It floods the workplace with the currency called trust. Netflix also accepts that rules rule when your workplace is safety-critical.

Its policies on vacation and reimbursements are imaginative. We are often inclined to assume the worst of outcomes, thinking that the employee may misuse the freedom given to them. But freedom is often the gateway to responsible behaviour. 

Overall, Netflix's emphasis on people over process has made the company reach great heights. In my opinion, this book should be a part of the B-school syllabi.