The Netflix Culture

If you have never viewed this presentation about the Netflix culture, you are in for a treat.  Check it out by clicking here.   I would point you to a few things, in particular, that I find insightful and refreshing.  

1. "Great workplace is stunning colleagues.  Great workplace is not day-care, espresso, health benefits, sushi lunches, nice offices, or big compensation, and we only do those that are efficient at attracting stunning colleagues."  How terrific!  People love to work with other highly talented, reliable, and kind people.    They do not like free riders, jerks, and people who don't invest time needed for self-improvement.  Think about when you went to college.  What made it a good experience?   The best courses were not simply taught by a talented professor.  They were courses in which the fellow students were intelligent, curious, reliable, and hard-working.

2.  Netflix chooses to focus on rapid recovery rather than avoidance of failure.  The firm argues that, in some environments, such as health care, we want to be highly reliable, i.e. avoid failure.  However, in creative environments, we should focus instead on rapid recovery.  

3.  The explanation of the nine behaviors and skills that the firm values in its employees is different than most "competency" models developed by company human resource departments.  The Netflix behaviors and skills are much less generic.  They describe specific behaviors, and they fit together to form a consistent whole.

4.  I like the "Keeper Test" a lot.  Here it is:  "Which of my people, if they told me they were leaving in two months for a similar job at a peer company, would I fight hard to keep at Netflix?"  The document states that you should let go of those who do not meet this test.  Make room instead for someone who will have the potential to meet this test.  It's tough medicine, but it really does make you think about whether you are keeping under-performers around too long. 

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Defining Your Company's "Critical Behaviors"

Many companies outline a set of values by which they wish to operate, and they define the financial goals they wish to achieve.   Senior leaders often spend time describing those values and goals at various company events.  Company newsletters, posters, and wallet cards list the organizational values too.  However, many firms do not take the extra step to define clearly the individual and team behaviors necessary to live those values AND for the firm to achieve financial success.  Great companies take great care to outline the crucial behaviors required for success on both fronts (financial and values).   Moreover, they connect those behaviors to the personal development plans and merit assessments of each employee.  Goals-Values-Behaviors: Every firm should make sure they have addressed each leg of the stool.  

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IBM's Palmisano: Charisma vs. Leadership and the Role of Culture

IBM CEO Sam Palmisano gave a speech recently at the Computer History Museum in Silicon Valley.    He offered his view on how companies can achieve enduring success:

 "We have learned not to confuse charisma with leadership. IBM has faced this challenge (of following a charismatic leaders in founder Thomas Watson Sr. and his son, Thomas Watson Jr.) Many historians believe that Watson Sr.'s most enduring contribution to business was his intentional creation of something that would outlast him -- a shared corporate culture. He showed that how the basic beliefs and values of an organization could be perpetuated -- how they could become its guiding constant through time.  This is why we have focused too much attention over the years on building talent. Betting it all on one person, or a small cadre of stars, is the opposite of building for the long term."



I agree wholeheartedly with Palmisano's remarks.   I found these comments particularly interesting though because of the challenges that IBM endured in the late 1980s and early 1990s.  Many would say that corporate culture served as one of the causes of IBM's struggles during that time.  The culture had become a barrier to high performance and to necessary change.  Fortunately, IBM has transformed its corporate culture during the tenures of Gerstner and Palmisano.   The firm didn't throw out its old corporate culture entirely.  However, it embraced new ways of working. 

In his book, Gerstner wrote, "I came to see, in my time at IBM, that culture isn't just one aspect of the game - it is the game."   He extolled the three basic beliefs or values that Thomas Watson, Sr. had established as the foundation of the company's culture: 1. Excellence in everything we do. 2. Superior customer service.  3. Respect for the individual.  However, Gerstner noted that, "What the Beliefs had come to mean - or at least, the way they were being used - was very different in 1993 than in 1962, when Tom Watson introduced them."  In short, the culture had become rigid, while the world changed dramatically around them.   Gerstner and Palmisano didn't throw out these core values... they brought them to life again, but in a way that fit the new context in which IBM competed.  

To his credit, Palmisano didn't just maintain the culture and the organization that Gerstner put in place.  He has continued to evolve the culture during his tenure, enabling IBM to thrive in a very dynamic industry while many younger, allegedly more agile firms have floundered.  


If you are interested in IBM's history and culture, you might take a look at the book the firm put together for its 100th anniversary.  The book is titled, "Making the world better: The ideas that shaped a century and a company." 

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Changing the Culture at Ford

I watched a CNBC special last night about the transformation taking place at Ford under Alan Mullaly. I found one story particularly interesting. Ford had a culture in which managers feared disclosing problems or admitting problems in front of senior executives. During the early months of Mullaly's tenure, EVP Mark Fields spoke about a planned new product launch. He disclosed a problem with the vehicle and recommended a launch delay. As Mullaly tells it, many people looked around the room wondering what would happen next. Putting a problem out in the open like that did not happen usually at Ford. If it did occur, the consequences were not typically positive. Mullaly did something rather remarkable. He started applauding right there in the meeting! He celebrated Fields' openness and willingness to confront the problem head-on. He told team that he didn't want managers keeping bad news from him. What a terrific leadership moment!

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Traveling Interationally vs. Living Overseas

Many universities now urge or even require their students to travel internationally as part of their education.  In some instances, students go on very short trips abroad with faculty and other advisers.  For others, their global experience involves a semester or more of study abroad.   Some companies also require high potential employees to take an international assignment as part of their career plan.  Other firms don't require it, but managers travel extensively abroad as part of key assignments. 

I think it's important to consider the difference between traveling and living abroad.  As I write this blog, I'm in Tokyo teaching an executive education program.  It's my eighth year doing so.  Each summer, I spend a week or so here teaching senior managers from a variety of Japanese firms.  I began to contrast my experience here with the trips I've taken going all the way back to my childhood to visit family in Italy.  Here in Japan, I stay at a very nice hotel and eat at restaurants each day.  When I go to Italy, I stay with family members in their homes and on their farms.  I help out as much as they will let me around the house.  I go to the grocery store, gas station, and the park with them.   When I was a kid, I went for a whole month several times.  The experience differs dramatically.  Traveling overseas certainly exposes you to a culture, but it is not nearly as informative as living and breathing the culture day to day.  When you stay for longer, and live in a community, you experience the routines and the frustrations of daily life in a way that you do not when traveling for a short time in another nation.

Thus, I think students benefit greatly when they go abroad for a whole semester, and executives benefit when they take an overseas assignment.  Neither of these is always possible, and so, travel overseas certainly isn't a negative thing.  However, to gain a true understanding of what customers need and want in different regions and cultures, living in that environment can't be beat. 

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The Paradox of Excellence

Tom and Sara DeLong have an interesting new article in Harvard Business Review.   They examine why many capable and intelligent professionals are not as productive or satisfied as they could be.  The authors argue:

"They're reluctant to ask important questions or try new approaches that push them outside their comfort zones. For high achievers, looking stupid or incompetent is anathema. So they stick to the tasks they're good at, even while the rest of the organization may be passing them by. In short, they'd rather do the wrong thing well than do the right thing poorly."

The authors go on to argue that the fault here doesn't only rest with the individuals.  It also rests with leaders who have created a climate that may not encourage people to move outside their comfort zone. Certain climates simply make people very hesitant to experiment.  Beyond that, though, I would argue that our education system, at times, contributes to this problem.  We don't always push our students outside of their comfort zone enough, and we allow students to "ride their strengths" much of the time...rather than making it safe for them to on challenges for which the risk of failure is high. 

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