“I should be nice to him because it is a really ridiculous idea”

This was what Patty McCord thought when she met Reed Hastings in a parking lot in 1997 and he described what he was going to do with Netflix. Reed had at the time started experimenting with sending DVD’s through the mail and to his delight he discovered that they did not break being sent through the US Post. Reed offered Patty to join his new company as head of talent. Patty and Reed had met in his former company, a software company called Pure Software, developing products for troubleshooting and debugging other software. Probably many have already forgotten that Netflix was a successful DVD mail order business with a revolutionary model that allowed you to keep three DVDs at any given time for a monthly subscription fee. This was before turning on a streaming business that would turn it into the giant we know today.

However, the more interesting thing about Netflix is not the drama and content that millions of users are gorging on every day, it is the culture that Reed and Patty has instilled. In short it is called “Freedom and Responsibility”. Netflix is known for paying higher salaries that are typical, employees can choose how much cash vs stock compensation they want, they are also known for giving generous severance packages to average performers they want to let go so managers don’t have to feel bad. Most shockingly, they have also eliminated sick and vacation time, you choose how much annual leave you take. It is up to you!!! Many of these radical ideas have been collected in the Netflix culture manifesto that has been viewed more than 19 mio times. You can download a version here: https://www.slideshare.net/reed2001/culture-1798664 . For what it is worth Sheryl Sandberg has called it “probably the most important document ever to come out of the valley”.

If you haven’t already reviewed the deck it is absolutely worth a read. What they did at Netflix was turning conventions on their head; as your company grows you need to find ways to avoid “process overload” and instead push yourself to hire even better people, preferably better than yourself, force the company out of the temptation to increase control, avoid “rule creep”, and rather manage by values and results.

However, the practises at Netflix were not new, many similar practices had already been deployed in Brazil by Ricardo Semler. Ricardo inherited a diverse family business from his father at the tender age of 21 years. At the age of 31 he was named Brazilian business man of the year and led the company successfully through the hyper inflation of Brazil in 1990.

Ricardo experimented heavily in the beginning of his tenure and developed a culture focused on happiness, a high degree of freedom together with a high degree of profit sharing as well as the ability to set your own working hours!!! He wrote two books about his experience, “The Seven day weekend” and “Maverick” and was also invited to a Ted talk that you can watch here : https://www.ted.com/talks/ricardo_semler_how_to_run_a_company_with_almost_no_rules?language=en

Ricardo even went on to found K-12 schools where children set their own rules and create their curriculum around interest driven exercises and answering questions such as “Why are we here?”.

Many of you arebusy hiring, negotiating, building, selling etc. etc., but how often do you stop and discuss how and why we are building the organisations we are building? How do we avoid burdening our teams with well intentioned processes, controls, checks and balances that in the short term may be effective but in the long term stifles our ability to respond to market changes, competitors or unforeseen events? Or do we all need as Tom Peters has proposed a CDO (Chief Destruction Officer)? Somebody whose sole mission it is to do away with unnecessary things that we do just because some time ago we instituted them with good intentions.

So as Patty McCord thought when she met Reed Hastings in 1997, let us be nice to the folks that have the courage to come up with the “ridiculous idea”. Even encourage it. We may find a lot of greatness in there!!!