Application Case Netflix Breaks the Rules 109 or four people," as one report put it. And Netflix doesn't have the "frat party" free-wheeling atmosphere that many dot-coms do. It's an Written and copyrighted by Gary Dessler, PhD. adult environment Netflix does not coddle underperformers, Yearly Why did Netflix survive as a start-up when the dot-com bubble burst 360-degree performance reviews provide "direct and honest feed- in the late 199057 Probably because, from the day he started Netflix, back. " Those that aren't cutting it are quickly let go, but (whenever founder Reed Hastings believed in breaking the rules. His direct-to possible) amicably. Rather than the sorts of litigiousness that often consumer mail and video streaming business model certainly helped characterize dismissals in other firms (having to prove the person Netflix to survive. But the firm's unorthodox human resource manage- was incompetent, for instance), Netflix writes a check. The company ment practices helped the company to attract and keep the high pro- believes that a handsome severance payment helps maintain the ducers who design the products that are the firm's lifeblood. Hastings person's dignity, makes it easier for supervisors to make tough calls knew that top Silicon Valley workers could choose where they worked, with underperformers, and, of course, minimizes blowback from and high pay is pretty much standard throughout the Valley's industries. those it dismisses. It's more like a "no-fault divorce, " as one observer How to set oneself apart? Hastings and his start-up colleagues believed put it that a culture that balanced a flexible work environment with few con- straints and high responsibility was the answer. They called the policy Questions "Freedom and Responsibility." In many respects, the Netflix HR strategy seems like a dream come Just how unorthodox are the Netflix HR practices? Consider this: true for small businesses. You don't need a pay plan; instead, you just As a Netflix professional you get unlimited vacations. One engineer update each person's pay every few months based on market surveys, takes 5-week vacations to Europe, because he likes (as he says) to You offer no training and development. And you don't track vacation take his time off in big chunks. (An HR officer must approve time off in time, more or less. If someone's not doing well, you just pay him or her excess of 30 days annually.) As a Netflix employee, your pay isn't tied to leave, with no hassles. Netflix seems to have hit upon its own version to performance appraisals, or even to a compensation plan. Frequent of "Netflix High-Performance Work Practices." Given that, answer the market salary surveys and pay hikes keep everyone's pay aligned following questions (please be specific). with Silicon Valley competitors'. Each employee decides whether to 18-9. What (if anything) is it about Netflix that makes its HR practices take his or her pay in cash or in Netflix stock. Options vest immedia work for it? ately. Netflix doesn't recruit much at college job fairs, instead hiring 18-10. Would you suggest using similar practices in other businesses, mostly highly experienced professionals. There's no training, profes- such as, say, a new restaurant? Why? sional development, or career planning at Netflix (except for legally 18-11. List the criteria you would use for deciding whether another required training, such as diversity training). You're in charge of your company is right for Netflix-type HR practices. own career. 18-12. What argument would you make in response to the following: But with freedom like that comes responsibilities. The company "Netflix just lucked out, they'd have done even better with expects its salaried employees to work hard-to "do the jobs of three conventional HR practices "