
How Netflix Reinvented HR (2014) - tim_sw
https://hbr.org/2014/01/how-netflix-reinvented-hr/ar/pr
======
Jun8
"Despite her work ethic, her track record, and the fact that we all really
liked her, her skills were no longer adequate."

I guess I'm too soft-hearted to be successful as a C-level manager, but I find
the pragmatic, calculating nature of this approach appalling, even though I
agree with many parts of the argument.

I had recently listened to the _Planet Money_ episode about her work
([http://www.npr.org/sections/money/2015/08/28/435583328/episo...](http://www.npr.org/sections/money/2015/08/28/435583328/episode-647-hard-
work-is-irrelevant)), at the end she was let go from Netflix abruptly, too,
probably using the practice she installed. Maybe I was biased with a
Robespierrean expectation of karma returning, but she sounded like that was
quite a blow to her, despite all her earlier rationalistic rhetoric. Now,
reading it again, brought to mind this:

    
    
      "It couldn't be called ungentle
      But how thoroughly departmental"
    

([http://allpoetry.com/Departmental](http://allpoetry.com/Departmental))

~~~
vinceguidry
The severance package was described as spectacular. A spectacular severance
can be life-changing. I understand, the details are important, and can't be
shared, but if it truly is as good as described, she's probably way way better
off than if she'd stayed at Netflix.

If all she did with that severance was go back to school and finish a four-
year degree, then she'd absolutely kill it in the job market with her track
record. Very possibly double her salary.

~~~
e12e
Reading the article, after browsing the comments, I assumed the article would
appear somehow employee-hostile. While, looking from Norway, the concept of
at-will work states like California seems crazy -- if you're _already_ in the
situation that you can fired for basically no reason -- this sounds like a
pretty good deal. At least if they make good on the idea of "spectacular
severance packages" and the honesty and communication goes two ways.

I do note that they don't trust their storage/stock workers as much, and she
kind of glosses over that bit.

I don't understand why people would expect any loyalty from California-based
tech companies, is there any precedence for that? I thought the entire
business was generally based on pretty predatory hiring and firing practices?
As if the colluding on salaries scandal wasn't enough of a hint?

~~~
blackguardx
It is not just California, the whole US. California has some of the best labor
laws here.

~~~
e12e
But not all states are at-will states? Some states you actually need a reason
to fire someone? Or so I thought?

~~~
ryanbrunner
It's not quite as simple as states being either "at-will" or "not at-will".
Every state in the U.S. is to at least some degree an "at-will employment"
state, although different states will have different exceptions.

At a bare minimum level, all states except 7 recognize public policy
exceptions to at-will employment (firing employees for doing something
compliant with public policy, like filing a disability claim).

At a "getting further away from pure at-will employment" level, 11 states
require employers to act in good faith when firing employees (which basically
excludes malicious firings)

~~~
dragonwriter
> At a bare minimum level, all states except 7 recognize public policy
> exceptions to at-will employment (firing employees for doing something
> compliant with public policy, like filing a disability claim).

And even if a state doesn't, the federal government does, so there are
_always_ public policy exceptions.

------
ninkendo
> _The best thing you can do for employees—a perk better than foosball or free
> sushi—is hire only “A” players to work alongside them. Excellent colleagues
> trump everything else._

> _Most companies spend endless time and money writing and enforcing HR
> policies to deal with problems the other 3% might cause. Instead, we tried
> really hard to not hire those people_

> _Netflix didn’t pay performance bonuses, because we believed that they’re
> unnecessary if you hire the right people._

Oh, so _that 's_ what you're supposed to do! Of course, you must mean you have
a foolproof system for finding "A" players in your candidate pipeline then,
and then it's just a matter of selecting only the best!

Sorry for the snark, but these things are practically truisms. Everybody wants
to hire the very best people. Everybody wishes they didn't need incentive
structures, because in an ideal world everybody is always incentivized to just
do great work all the time because they're such an "A" player.

But really, unless they back it up with any real evidence that they've
actually solved the hiring problem and found a reliable way to determine who
the good candidates are, I'm more apt to call the whole thing luck.

Or maybe, just maybe, all the things Netflix is doing (lax vacation policies,
no bonuses, easy to fire people) are just things companies should be doing
regardless of how supposedly good at hiring they are.

> _We also believed in market-based pay and would tell employees that it was
> smart to interview with competitors when they had the chance, in order to
> get a good sense of the market rate for their talent_

Oh god, so it _is_ true! We've had a few Netflix candidates interview, seem a
great fit for a position, made them an offer, and they just reject it and
never talk to us again. A rumor got around that Netflix candidates are all
just using the interviews as leverage instead of being actually interested in
the job. As a result, we no longer interview candidates who are currently
working at Netflix, because we can never believe that they're serious about
it.

It's a huge risk to your employees to do something like this, because once
word gets out about it, it becomes seriously difficult to explore other jobs
while you're still employed.

~~~
kylec

        We've had a few Netflix candidates interview, seem a great fit
        for a position, made them an offer, and they just reject it and
        never talk to us again. We started developing a theory that
        Netflix candidates are all just using the interviews as leverage
        instead of being actually interested in the job.
    

Have you considered that you're offering them less than Netflix is currently
paying them? Netflix pays a _lot_.

~~~
alexandercrohde
This seems plausible. This is why essentials (salary range, core hours) should
be discussed before or on a phone screen.

1\. Looks like netflix pays 200-300k
[http://h1bdata.info/index.php?em=netflix&job=&city=&year=All](http://h1bdata.info/index.php?em=netflix&job=&city=&year=All)

~~~
pfarnsworth
For senior software engineers, they pay ~$400k. Source: friend works there.

~~~
alexc05
That's a jaw dropping amount.

~~~
rayiner
It's not. Netflix has a revenue per employee figure in the $2m+ range. That's
investment bank levels of revenue, and $400k is about what you make at an
investment bank 5-7 years out.

~~~
marssaxman
It is. Software developers are not investment bankers. Software development
jobs offering $400K are... not normal.

~~~
rayiner
Software companies are making investment bank levels of money these days, so
why should it be surprising when software developers are getting paid like
investment bankers? What should be more surprising is software companies
making $1m+ per employee where developers aren't paid like that.

~~~
marssaxman
I'm not talking about ideals, I'm talking about typical practices.

------
AndrewKemendo
I know this is now a meme about how "We at globocorp only hire 'Rockstars' and
etc.. etc...", but this point to me is really salient:

 _The best thing you can do for employees—a perk better than foosball or free
sushi—is hire only “A” players to work alongside them. Excellent colleagues
trump everything else._

I firmly and wholeheartedly believe in that. Find the absolute best people for
the job, that play well with the team, pay them really well and treat them
like adults. It's a winning combo that has repeatedly worked.

Argue all you want about how there aren't enough of "the best people" which I
also agree with - but that's why it's worth working really hard to recruit
them.

~~~
zachrose
Wouldn't the practice of "A" players only hiring other "A" players imply a
certain monoculture to your team?

Do you hire junior "A" players who aren't really at the levels of skill or
professionalism as their senior counterparts, but who have the potential to be
and can still be given economically viable work to do? Do you call these
people "lowercase 'a' players" or something?

How do you count on your "A" players to recognize top talent in slightly
different domains or areas of expertise?

How do you account for people being creative and unique, like the person who
has a background in something else but who adds value by being able to bridge
cultures and bring new, unfamiliar ideas to your existing "A" players?

~~~
AndrewKemendo
_Wouldn 't the practice of "A" players only hiring other "A" players imply a
certain monoculture to your team?_

Yea, probably. If the goal is the dominate some sector, then having a mono-
culture is incredibly valuable. Singular focus, shared task, shared vision is
just staggering when it comes to effectiveness. All high functioning teams,
from sports, to military and especially in business share this. And yes it
looks like a cult from the outside - partly because it shares cult-like
aspects.

It's worth defining what "A" players are, however because I think while there
is a pool of them, not all of them would work out for any team.

I think people get the wrong idea that mono culture means no diversity. That's
basically what your questions do.

I think back to the spy world and while everyone has the idea that all of the
best spies in the world look like James Bond, the reality of it is that the
best spy teams in the world look - well like a cross section of the planet.
Old people, young people, uber nerds, jocks, preppies etc...but they all have
a critical piece of a singular mission of collecting some critical piece of
information.

Here is how I define an "A" team: A team that for a defined macro-goal, there
is no better possible combination of persons on the planet to be filling the
individuals roles, which accomplish micro-goals in furtherance of the macro-
goal.

You compose that as needed. It doesn't "look" any way - but there are common
features among the individuals usually: Domain expertise, Flexibility,
Leadership Ability (which includes followership), Emotional Maturity etc...

------
SirensOfTitan
> Despite her work ethic, her track record, and the fact that we all really
> liked her, her skills were no longer adequate.

> If your employees are fully formed adults who put the company first, an
> annual bonus won’t make them work harder or smarter.

The contrast painted here is astounding. It demands so much loyalty from the
employee, and in return, offers no loyalty whatsoever from the employer.

~~~
greg7gkb
The 'demand' of loyalty isn't higher than at any other company. And in fact,
this point is specifically called out in the culture deck:
[http://www.slideshare.net/reed2001/culture-1798664/33-Loyalt...](http://www.slideshare.net/reed2001/culture-1798664/33-Loyalty_is_Good_Loyalty_is)

As for the annual bonus, Netflix assumes that everyone is functioning at a
high level and pays as if they were making the top-end of the bonus range at
other companies. Which is part of the rationale behind the high base
compensation.

~~~
inthewoods
"Pays as if they were making the top-end of the bonus range at other
companies"

To me, this is the problem - who determines this and what is their dataset? I
worked at a company in the past that claimed to do this, but to do this they
generally need some sort of data source. And the data sources for salary data
are tough to use in this way - positions/responsibilities vary, regions vary,
etc. Just tough to get this right - even with the best intentions.

~~~
Bahamut
Every person who interviews with them gets asked to disclose their salary.

Source: I have interviewed with them.

I have also not heard any stories about Netflix employees being underpaid,
except one being lured away by FB for over $1M.

~~~
pc86
"Except" implies that you're about to mention an example of a Netflix employee
being underpaid.

~~~
diab0lic
The market dictated that he was underpaid.

------
schwap
> the generous severance would let her regroup, retrain, and find a new career
> path.

Now I'm no executive, but is there a reason the blindingly obvious strategy of
investing the money they're clearly willing to expend in training so that this
individual's skills _did_ fill a need they had?

~~~
throwawaysocks
Getting a CPA would have been a very long road for a person with an
associates, and they likely needed to replace her with one or more CPAs _right
now_ , not in 2+X years.

That said, it's hard to imagine there wasn't _something_ she could have done,
_somewhere_ in the company.

~~~
hx87
That's why demotion, or reassignments that amount to demotion, needs to be
destigmatized and seen as a rational, practical realignment of skills and
requirements instead of as a black mark of shame. Have you promoted an
excellent worker past their level of competence? Simple-demote them! Everyone
leaves happy.

~~~
serge2k
> Simple-demote them! Everyone leaves happy

Except for the employee who has zero path forward at the company.

~~~
amyjess
You're assuming that everyone wants a path forward. Some of us value stability
and security.

If someone told me "if you come work for us, you'll be employed for life and
guaranteed at least a cost-of-living adjustment each year, but you'll never
see a promotion even once", I'd take it in a heartbeat.

~~~
serge2k
They accepted the promotion.

------
siliconc0w
I'm not sure about 'reinvented'. The jury is still out on 'unlimited vacation'
\- i'd much prefer a generous but structured policy. In the case of "Maria"
the QA Engineer I think it's better to give her a plan to grow her skill-set
if she is smart and hardworking instead of firing her. Simple policies like
how much to spend on a meal aren't expensive to implement and make things
clear and understood. Whether you codify it or not there is, eventually, going
to be an informal policy - might as well write that shit down instead of
leaving it ambiguous.

~~~
zyxley
> I'd much prefer a generous but structured policy.

Same here. If I have X weeks of paid vacation, I know I can take X weeks of
vacation.

If I have 'unlimited vacation', I know I can take... some amount, I guess...
but I have to constantly vigilant to the whims of HR and management to keep
from taking 'too much'.

~~~
lmm
I like having unpaid holiday as an option, I think that's something a lot more
companies should be doing. That way the company's interests are a lot more
aligned with mine regarding how much holiday I take.

------
abpavel
> We had no vesting period—the options could be cashed in immediately. Most
> tech companies have a four-year vesting schedule and try to use options as
> “golden handcuffs” to aid retention, but we never thought that made sense.

That's only possible when equity is a direct substitute for the income,
similar to when an employee would buy the stock/options through their broker
for the money out of their paycheck. Imagine hiring your 5th employee for 1.5%
of the company and they leave the next day.

~~~
cwilkes
They probably have some sort of fast / monthly vesting schedule instead of
some (what I think is truly bizarre but common) yearly vesting cycle.

If a person wants to leave 18 months into it let them go with 18/(4 _12)
percent instead of having them wait around another 6 months to get 50% instead
of 25%.

For the 1 day employee that could work out to 1/(4_365) * 1.5%. But there
should be a cliff as having them jump that early can be disruptive.

------
hardwaresofton
Just a heads up if you've never thought about it this way: HR exists to
protect the company from employees. From a purely business-minded standpoint,
I gather that they're taking a risk basically dealing with people unprotected
(with "common sense"), and at the level of pay/performance, people are so
happy/willing to buy-in/comply (or get fired when they're not) it hasn't
bitten them in the rear.

If I were to over-simplify what they've actually done, it seems more like they
changed the culture closer to survival-of-the-fittest (which seems quite
optimal), and put more actual power in the hands of managers (which could be
good, if you have a good manager).

~~~
robbiemitchell
This sounds similar to how investment banking works.

~~~
hardwaresofton
Yup, and I think it may have similar repercussions.

Generally though, investment banking is generally pretty successful at making
people rich (whichever side they're on) -- maybe a similar effect will be
observed on Netflix's software.

------
lsiebert
It seems like companies like Netflix don't want to train loyal capable
employees in new skills.

------
eeeeeeeeeeeee
I am so tired of hearing about "unlimited" vacation as if this is some
revolutionary idea for improving employee morale. This intentionally blurs
expectations and puts the burden on the employee to try to figure out the
hidden acceptable number of days they can take before being viewed as simply
"adequate."

And it could all be avoided if the company would simply define a number so
expectations are crystal clear. Simple. Instead, what happens, is it becomes
an internal competition to see how few days you can take and creates a very
toxic atmosphere where people are judged based on the days they take.

Companies should be setting a static number of days/hours and encouraging
their employees to take ALL of those days off, or at the very least, pay them
out or roll them over if they don't use them.

~~~
GnomeChomsky
I think I prefer a "minimum vacation days" policy—e.g. each employee has to
take 20 days, but you're free to take more as needed.

~~~
JamesSwift
I've heard that floated before and I think I'd really like it. I think it
would probably devolve into "each employee takes EXACTLY 20 days" however, due
to the same psychological stresses present in the other schemes. So the best
suggestion I think is to have the minimum be generous in itself. Say, 30 days.

