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5 HR lessons Netflix can teach the federal government

Feb. 25, 2014 - 06:00AM   |  
By DAN CHENOK and JOHN KAMENSKY   |   Comments
Dan Chenok is the executive director of the IBM Center for The Business of Government. He has held multiple government positions, including service as OMB's SES Executive in charge of IT policy and budgeting.

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Silicon Valley is known for its technology innovations, not its management. But some of its management innovations are worth a second look. Netflix’s HR policies rank right up there because it threw out the standard playbook.

Former Netflix chief talent officer, Patty McCord, describes its key talent management tenets in a recent Harvard Business Review article. While Netflix’s approach may not be fit perfectly with the work of the public sector, the ideas are worth highlighting for no other reason than to spark some reflection and discussion.

McCord and Netflix CEO and founder, Reed Hastings, created a 126-page slide deck describing their approach to talent and culture at Netflix. This deck has been viewed more than 7 million times and has been highly influential (and controversial) in the corporate world. It is comprised of simple and unadorned bullet points for the most part, but McCord’s article highlights the five tenets that Netflix has developed to attract, retain, and reward talent:

1. Hire, reward, and tolerate only fully formed adults. In other words, hire people who you can trust to do the right thing, rather than having them follow a lot of process to ensure compliance so as to guard against a very small number of problems that can be identified via audits. McCord writes: “Over the years we learned that if we asked people to rely on logic and common sense instead of formal policies, most of the time we would get better results, and at lower costs.” If you hire carefully, 97 percent of your employees will do the right thing, but most companies spend endless time and money writing and enforcing HR polices to deal with problems the other 3 percent might cause.

2. Tell the truth about performance. Netflix eliminated formal individual performance reviews and asked managers and employees “to have conversations about performance as an organic part of their work.” They instituted 360-degree reviews under the theory that “people can handle anything as long as they are told the truth.” Netflix does not try to identify the top 10 percent or bottom 30 percent in their company; they look at the entire field of talent – inside or outside their company – and rate them in that context.

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3. Managers own the job of creating great teams. Netflix “continually told managers that building a great team was their most important task.” Teams were not measured based on getting paperwork done well and on time. Rather, “great teams accomplish great work, and recruiting the right team was the top priority.”

4. Leaders own the job of creating the company culture. Leaders need to live the values they espouse, or no one else will. Netflix encourages leaders to ask themselves if there is “a mismatch between the values you’re talking up and the behaviors you’re modeling and encouraging?” Their leaders also have to ensure the employees “understand the levers that drive the business” and provide context and transparency so they do. In addition, leaders need to understand the subcultures within an organization that might require different management approaches.

5. Good talent managers think like business people and innovators first, and like HR people last. McCord also offers insights to her peers in the HR profession, noting “Too many devote time to morale improvement initiatives.” She says: “Instead of cheerleading, people in my profession should think of themselves as businesspeople.” This means asking about what’s good for the organization, and how that information is communicated to employees so that every worker understands what high performance means.

As a private company, Netflix is able to implement policies that allow more freedom than would be the case for many Federal agencies, an issue that will become more acute as agencies deal with large-scale retirement of their workforce. For example, Netflix does not have a formal vacation policy; managers and employees work it out with each other. Similarly, Netflix’s expense policy is “Act in Netflix’s best interest” – there is no elaborate travel and expense guidance. The theory: “if you create a clear expectation of responsible behavior, most employees will comply.”

Netflix’s approach trades building a great team and trust for implementing complex HR policies. As the government looks to recruit and retain a top quality workforce, given the coming wave of retirements and departures and the resulting generational shift, understanding the leading practices of private sector companies can help set benchmarks, even if current HR rules make them more aspirational in nature. As public sector HR and program leaders look to enhance and reform their workplace cultures, pilots along the lines of Netflix provide some foundational ideas for how to incentivize high performance across their programs and agencies.

John Kamensky is a senior fellow at the Senior Fellow IBM Center for The Business of Government.

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