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Tuesday, July 5, 2016

Personnel Policy--Netflix Style

On Sunday, June 19, 2016, THE NEW YORK TIMES MAGAZINE had a cover story entitled, “Netflix Destroyed The Way We Watch TV.” Like many of us, I devoured the very well written piece by journalist Joe Nocera.

When people asked my opinion I generally referred them to my blog post of 1/28/16, Media Realism--”Netflix Concerns.” The post outlined some of the issues that critics, particularly securities analysts, said about Netflix in Nocera’s story.

What fascinated me about the Times piece was something else. It was with the remarkable candor that Netflix employees talked about their personnel policies. Nocera interviewed Patty McCord who served as something of a personnel director for Netflix for many years. Her advice to Reed Hastings, Netflix founder and CEO was “that he should ask himself a few times a year whether he would hire the same person in the same job if it opened that day.” If the answer were no, Hastings often wrote a large severance check. The article stressed how the company worked hard on letting people go humanely.

Eventually, Hastings approached Patty McCord and let her go as well after working with him for nearly 20 years including his pre-Netflix days. The article goes to a describe a slide show presented to all employees. A key line is, “We’re a team, not a family.” And “Netflix leaders hire, develop and cut smartly so we have stars in every position.” A number of companies talk about this kind of approach but few do it in practice. Apparently, Netflix does.

I approached some panel members who are active CEO’s, referred them to the Times article, and asked for comments. Here are a few of them:

--“This type of Darwinian approach might work well in tech where the average age of staffers is under 30 and no one expects to have a career with you. In more mainstream businesses, it does not work.”

--“I have a core group with me that has become an extended family. Some stayed with me through hard times and we all pulled together. Now, a few do not contribute much new. Some have retired but a few hang on. Should I cut them loose? Yes, but it is not simple.”

--“Years ago, someone told me to run my shop like a ball club. When they no longer were star performers, let them go. I have not always done it and it has come back to bite me. It makes the whole company weaker and the younger talent resent it and move on.”

--Someone whom I admire very much asked me, “Don, how does this approach build loyalty? Does each employee see themselves as a hired gun who will work anywhere?”

--“As staffers are less effective, I adjust compensation. We have a conventional media director and a digital media leader. Each year, the conventional person gets less to spend. I pay the person the same but cut the bonus. When I get push-back, I tell him the truth. You are not far from retirement so your salary will stay flat. You still have to perform. This does not play well but deep down, he knows the score.”

--“There are certain team members that I consider family. If we were about to go under, I would let them go. The odds are, though, that they will be here to help me turn off the lights. Am I too weak as a leader? Maybe. But this is not all about money.”

For years, virtually any company that I have known well has always said something to the effect that, when someone leaves or is terminated, you replace them with a better employee and the whole firm gets stronger. Yet, few have addressed the issue of employees who are not growing, or more frequently, not growing fast enough.

I once worked at a firm with a great deal of apparent deadwood in senior management. They were to me, the FOMOT group--Fat Old Men on Tenure. It seemed that they did not work hard, were not on top of industry changes, yet they pulled down serious money and even owned part of the firm. Later I learned that some had contacts that helped with new business and were joined at the hip with certain key clients.

Many people, however, were just there and simply hanging on.

How do you handle it? Could you honestly embrace the Netflix pure “grow or go” philosophy? I would love to hear from you.

If you would like to contact Don Cole directly, you may e-mail him at doncolemedia@gmail.com or post a message on the blog.

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