AUTHOR ERIN MEYER ON THE NETFLIX 'NO RULES' CULTURE

The company seeks to build a talent-dense organization that encourages feedback, eliminates rules, and fosters innovation.

KERRY LYNCH | DECEMBER 2020

Author Erin Meyer highlighted the importance of building a talent-dense organization that encourages feedback, eliminates rules, and fosters flexibility during a keynote speech at the National Business Aviation Association's recent virtual convention.

Meyer, a professor at the international business school INSEAD in Paris, discussed with NBAA president and CEO Ed Bolen these and other lessons learned as she coauthored the New York Times bestseller No Rules Rules: Netflix and the Culture of Reinvention.  She had been approached by Netflix cofounder, CEO, and chairman Reed Hastings to collaborate with him on the book, which traces the culture that has guided the company from being a video distributor to a streaming service, and now a studio operator.

Bolen opened the session by noting, “It's really difficult to imagine a more perfectly timed book,” since Netflix has become more popular than ever before during the COVID-19 crisis. He also pointed out how innovation and flexibility—two of the book's themes—have become of significant value, particularly during the pandemic.

Meyer agreed. She noted that many corporate cultures operate with an “industrial era hangover” and a focus on reducing error, creating efficiency, and increasing replicability. This was a necessary approach to manufacturing at the time, she said.

“But today where more organizations are looking to be more flexible and more innovative, it's no longer error-reduction replicability that we're going for," Meyer continued. "It's…how can we get our employees to think more freshly and how can we be more flexible? And that's where we really need to think about a whole new set of principles.”

She outlined three primary approaches that Netflix has taken to achieve those goals: building a “talent dense” organization that involves only high performers; establishing a culture of candid feedback; and eliminating rules.

Meyer conceded that having a talent-dense organization could lead to difficult decisions regarding employees but she pointed to studies showing that low performers are apt to drag an entire team down.

Regarding feedback, an open environment where candor is encouraged creates mutual accountability, Meyer said. She cited as an example a practice at Netflix where teams gather annually at dinner and go around the table sharing thoughts on how each attendee could improve. When Meyer learned of this practice, her initial thought was that it would be difficult to drag out everyone’s weaknesses in front of their colleagues. But instead, she discovered that the colleagues found those dinners to be important growth moments.

As for rules, she noted that most of them are designed for low performers and that Netflix eliminates them in several areas. Regarding vacation time, for example, the company's policy is simply: take it. She said the concern was that the organization would end up with two results: people who went on permanent vacations and others who never did. But instead, “soft” rules guided the approach, and people tended to follow the examples of those around them. Hastings himself tries to take about six weeks a year to set an example that vacation can and should be taken.

Another set of rules that Netflix eliminated concerns decision making. She likened top-level managers at Netflix to the roots of a tree that provide a strong base and said lower-level managers have the freedom to make even expensive decisions if they think it's in the best interest of the organization. These approaches have fostered an environment of flexibility and innovation, she said. 

Meyer acknowledged that in a safety culture, “critical goals, rules, and process are our friends…If you're operating an airplane, being safe is more important than innovation,” but she added, “Even in an industry such as yours, you can think about what are the errors, what are the areas of the company or the organization where we're going for error prevention, what are the areas where we need that replicability [and where we need to make sure that we] guarantee no mistakes, and what are the areas that we're going for innovation and flexibility. And then you can really separate those two and have different ways of operating—one with process and one with freedom.”