Countering the traps of complexity and growth by creativity and context: the Netflix model

Reed Hastings, the CEO of Netflix, has a presentation at Slideshare called Netflix Culture: Freedom and Responsibility. I am not going to recap it completely — although it does make for interesting reflection — but I do want to pull a few critical concepts from it, because I think that Netflix has adopted a great many characteristics of the new fast-and-loose form factor of work I have been writing about the past few years.

The presentation starts with a discussion of the sort of principles that form a cultural foundation for the business — perhaps I will revisit them in a later post — but I will extract just the concept of being responsible in a context that provides a great deal of autonomy.

from the presentation:

Responsible people thrive on freedom, and are worthy of freedom.

Our model is to increase employee freedom as we grow, rather than limit it, to continue to attract and nourish innovative people, so we have a better chance of sustained success.

Hastings makes the case that most companies curtail freedom as they get bigger, because with growth comes complexity. And one counter to complexity — that worked in the industrial, slow-and-tight business context of the 20th century — was to codify processes to stop the chaos that comes with complexity. The increase in process controls and the reduction of freedom drives the best performing employees out.

Screenshot 2013-10-15 06.53.58

 

Process-driven companies do well when efficiency is the fulcrum for competitiveness. But in times of fast change and a market full of innovators, that execution approach is all bad.

This turns out to be one of three bad options:

  1. Become process-bound.
  2. Stay creative by staying small, but therefore limit your impact and reach.
  3. Avoid rules, and suffer chaos.

But he says there is a fourth way:

Avoid chaos as you grow with ever more high performance people — not with rules:

  • The you can continue to mostly run informally with self-discipline, and avoid chaos
  • The ‘run informally’ part is what enables and attracts creativity

Screenshot 2013-10-15 06.55.31

I love the concept introduced here: increasing talent density faster than complexity is riding the wave and staying ahead of chaos. Both trend lines can be managed: at the top, finding and producing high performance, creative, responsible people, and below, intentionally taking steps to retard the rise of complexity.

In this latter case complexity can be held back: a company can opt to focus on a few big products instead of many small ones, or avoid ‘efficiencies’ that lead to rigidity (process-bound, gain). Or, as I discussed in several other posts, the firm can intentionally accept lower cross-communication and collaboration, which requires deep consensus building. Instead, a fast-and-loose independence is viewed as central to the freedoms demanded by high performance staff.

So Hastings believes that if you have the right people, you can remain loosely coupled and stay ahead of the chaos arising from complexities. Instead of control (processes again) directing people what to do, you need to set context:

Screenshot 2013-10-15 07.03.10

 

 

So it seems that Netflix has turned the corner into the fast-and-loose world of work, adopting a cooperative ethos in which the work of leadership is setting context, and working to remove the obstacles — like reducing complexity — so that the great people who thrive in a laissez-faire cultural milieu can accomplish great things. At Netflix a mistake made by a project team or an individual is more likely to be bad context setting by management than anything else. And — explicit in the principles that shape the company’s credo — is the notion that it is better to respond quickly to glitches arising from a mismatch between context and action than to create a culture in which people are not experimenting.

Bottom Line

There are some aspects of Netflix culture that I accept only grudgingly — like the companies apparent unwillingness to work explicitly on career planning — but given the fact that they have squeezed out all the chicken shit left over from the 20th century social, that is a lot easier to take. For example, Netflix has no vacation policy, meaning that people can take as much vacation as they need, so long as work is getting done and projects are moving along. And their expense policy is five words:

Act in Netflix’s best interest.

I intend to make a visit to Netflix, and hopefully talk to Hastings and others to get a better sense of how this all works in practice.

Relevant Analyst
Stowe Boyd

Stowe Boyd

researcher-at-large Stowe Boyd

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