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Transcript
I’ve been reading a book that’s about Netflix’s culture called No Rules Rules. And it’s written by one of the founders, Reed Hastings, and a lady named Erin Meyer. And it’s neat to see the process and how some of the things we’ve been talking about on this podcast align with what he’s talking about in the book.
And one of the things that really stuck out with me, and I liked the way he worded it and put it, he talked about giving context versus creating rules. He said in his old company that he was, I believe he was a CEO, he may have just been an executive, but he said in the old company, as the startup grew and they got more people, they did what a lot of companies do when they grow, which is they started creating a bunch of rules to help cut costs and basically to control people because there wasn’t trust.
They controlled people to make sure they spent money a certain way to save money. And what he said happened when he did that is it really frustrated people. Sometimes, you know, certain situations work with those rules, but sometimes they don’t.
The issues with rules
I’ve read about people who, there’s a policy for a hotel and, but they can’t get that, a hotel like that near where they’re supposed to be. So they have to go way far away and they end up spending more money with the travels and time and frustration than if they were just allowed to get a hotel that was by the place they were supposed to be. And so many things like that.
I actually remember there’s a Kevin Cruse’s book. It was Great Leaders Have No Rules. He’s another great book. He talks about a similar thing about the bureaucracy and rules and the trouble with them.
And he gave him this story that I can’t remember exactly, but it was about sticky notes. And I believe it was him who bought some sticky notes and somebody called him from the finance department about why he spent this money on sticky notes. And it was just kind of this ridiculous thing about sticky notes. And that’s what happens sometimes when you create these rules. Like he said, that Reed said, is you frustrate people and then you make people leave because of that frustrates.
You lose your good people because you’re restricting them. You hurt, in a sense, creativity because you’re binding them. You make all these approval processes, so it slows things down. You can’t just act because this needs to be done. You have to get all the approval.
Reed actually, Reed, Meyer, actually gave an example of a lady. I forget what company she was at, but she was trying to get some consultation service that they needed. She was on a limited time to be able to get it but she had like 20 signatures she had to get to be able to purchase it, to be able to get it.
And it wasn’t an easy process because she had to, it said that she had to start calling every day and started calling every hour. Like it was ridiculous what she had to do to get those signatures to get what they needed.
You can’t run a healthy company like that. You can’t innovate like that because if you want to innovate, and that’s one thing with Netflix is they want to keep innovating and keep moving forward. You can’t do that when you have all these restrictions.
The process Netflix went through
So what Reed said is what they did, he goes through kind of the process. I’m still in the book, so I haven’t finished it, but I’ve read part of it so far. And he starts off with hiring good people.
He said, you know, it’s something that talks about good to great. You know, you want to make sure you have good people in the right seat. You want to make sure they fit into your culture. They’re high performing. You have high expectations. You know, you expect people to do well.
And he talks about, he called it talent density. You hire great people and make sure you keep those great people. And he talks about, you know, paying them well and everything. But you start off with good people.
Then you have a culture of feedback kind of like we’ve talked about before on this podcast. Probably in a few episodes, we’ve talked about the culture of feedback that you want to have, and then he started talking about getting rid of rules.
Vacation policy
The first thing they did was get rid of vacation policy. And he talked about some of the things they struggled with that. You know, he feared, the fears he had of people just never taking vacations because they fear taking vacations because they didn’t want to seem like a team player.
So they were like zombie, his dream was like zombies on the floor of people just laid out because they never vacation. And then he had the other fear of people taking so much that the company can’t run or teams fail.
And what he ended up saying, and the thing that was a big part of the getting people to take vacation and being wise about it, is you set context of when to do it. First, you model it. He said the leaders have to model vacation. Like if you want people to take the vacation and have that balance because they want people to, then the leader has to do it and talk about it.
And they have to set that clear context of, I expect you to take time off so that you can rest and they talked about how when you’re time off, you get all these ideas and interestingly even have people who they’ll work super long hours for a couple of weeks and they’ll take a week off to go to some special place. But it’s interesting how their culture and the things work with that, but their culture or their trust, their guidelines and context allows them to do that.
When it comes to the context, there may be certain guidelines like one person or so many people can be out at one time, or you can’t put the team in the bind, or there may be certain things about how you have certain things set out. So when you take off, people aren’t hurting because you’re taking off. So there’s certain guidelines, the context of which you can take your time off, but they expect you to take it off.
Expense policies
When it came to the expenses and such, it was interesting because at first, they were deciding how to do that. And the first thing they said was, hey, let’s the policy be, or the main guideline, the main context would be, spend company money as if it were your own. That seemed like a great idea until they realized people’s perspective of how they would spend their own money were a lot different. Some people would take first class, business class everywhere. Some people would take coach. because that’s what they would normally do. They would be frugal.
So people’s mindsets were different. So that didn’t work. So they changed the main overarching guideline to this: Act in Netflix’s best interest.
That was the overall thing. So whatever you did, when how you spent money, how many sticky notes you bought, it was acting in Netflix’s best interest. And there were other guidelines they put with different teams or like, for example, some team leaders would explain, when it would make sense to do a business class, when it would make sense to go coach, things of that nature.
But the overall goal was to have the context, you’d act in Netflix’s best interest, but then they trusted you to make wise decisions. And they had checks in the back end, of course, to check and occasionally people would take advantage and then they’ll deal with those people. But they didn’t change all the rules or create new rules because of certain people, they dealt with those people.
Think about you as a leader
I want you to think about this in the context of wherever you lead, whether you’re a new leader, a team supervisor, a business owner, even an executive. What’s your mindset when it comes to your people? Do you feel like you have to create rules to control them because you can’t trust them? Or do you give context and the guidelines for them to operate in and then trust them to operate in those?
Doesn’t mean you can’t, there’s no back checks. Like I said, Netflix does. They do check different receipts. They do check things to make sure things are okay. But there’s this overall trust they show their people. They have good people. They have open feedback and they trust their people to make wise decisions within the context that they give them.
Sometimes things fail because we don’t give good context or give good clarity on the guidelines we expect people to follow. And then we start creating these rules because people didn’t do what they’re supposed to do, but there’s really on us for not creating those clear guidelines or clear context of what people are supposed to operate in.
So think about you and what your mentality, do you provide good context? Are you about controlling? Because it’s a difference, because when you’re about controlling, we go back to what we talked about in the beginning, is that people will want to leave.
It frustrates, it hurts ownership of, people have in the company. It slows things down, hurts innovation. But when you provide context and show that trust of people to act within the context and guidelines you give them, people take ownership.
Something to think about. See you next time.
