A cohesive culture is not for everyone

Netflix’s “No Rules Rules” — Part 1

Source: No Rules Rules

I recently finished “No Rules Rules” by Reed Hastings, Netflix’s founder and CEO, and Erin Meyer, a business professor at INSEAD. 

There’s a lot to extract from this book and I’m going to split that into a few blog posts with this rough game plan: 

  • Part 1: (this post) high-level review of the book. 
  • Part 2: review of specific Netflix processes and practices discussed in the book (may be split into more than one post). 
  • Part 3: the culture map. 

The book aims to provide a pretty deep dive into Netflix’s company culture: how it came to be, how it’s reinforced and what business benefits it unlocks. 

Hastings and Meyer tag-team the writing, with Hastings typically providing the history of how a certain element of the culture came to be, how it evolved over time, and why it’s important, and Meyer providing both scientific backings to the merits of the element/practice and detailed on-the-ground depiction on how it manifests in the day-to-day life of Netflix’s employees. 

In a nutshell, Netflix’s culture is described as three key elements that are deeply intertwined: high talent density (quality of employees), high level of candor, and high level of freedom (low levels of control). The latter two are the source of Netflix’s famous “Freedom & Responsibility” (F&R) motto. 

After a brief introduction, the book goes through three iterations across these elements, each time offering a more evolved and sophisticated way to implement the element and take it to the next level. It concludes with a chapter on taking the Netflix culture global, which will be the sole focus of Part 3 of this series. 

Source: No Rules Rules

Three things made this book a very worthwhile read: 

  • First, it shows how the three cultural elements are intertwined, and how “leveling up” one element unlocks the next level of the other elements. 
  • Second, some of the practices, like “sunshining” and in-person 360 feedback are finally described in a level of detail that makes them “safe enough to try” and opens the door to experimenting with them, at least in some contexts. Though the first point is an important caveat here: optimizing the part doesn’t necessarily optimize the whole. 
  • Third, this is not a “Kool-Aid” book. As a reader, I didn’t get the impression that it was written by a Netflix culture zealot. There were no claims that these structures will work well outside of Netflix. I appreciated the authors’ efforts to share the challenges with the trade-offs the culture implies, alongside its strengths. Kyle and Donna’s struggles with the vague vacation policy, Jaime’s struggles with the vague expense policy, and Russel and Han’s struggles with paying top-of-market salaries are just a few of many examples that are covered in detail and demonstrate that the Netflix way is not necessarily the easy way. 

It is easy to come away from reading a book like this one with the wrong conclusion that the Netflix way is the best way and that every company should follow its lead. This is the lesson that many CEOs have (hopefully) learned, often times the hard way, trying to imitate Steve Jobs’ leadership style. 

The deeper and more useful insight from this book, in my mind at least, is the power of a cohesive culture, where elements reinforce rather than contradict one another, and the iterative process by which it evolves and strengthens. 

And even with that, a healthy amount of skepticism is still merited. As Steven Sinofsky once observed: 

Like so many company processes, when a company is doing “well” then the processes are exactly the right ones and magical. When a company is not doing so “well” then every process is either a symptom or the cause of the situation.

An often under-appreciated aspect of cohesive cultures is that inherently, they would never be a good fit for everyone. This is something that often gets missed by some of the big exposés about the Netflix (and to some degree, the ones concerning Amazon) and more recent critiques of the book. The personal stories of the individuals for which the culture didn’t work, or the edge cases where the culture broke can sometimes distract us from the bigger picture. 

And again, Sinofsky says it better than I can: 

Like so many things in business, there is no right answer or perfect approach. If there was, then there would be one [approach] that everyone would use and it would work all the time. There is not.

As much as any system is maligned, having a system that is visible, has some framework, and a level of cross-organization consistency provides many benefits to the organization as a whole. These benefits accrue even with all the challenges that also exist.

In the same essay, he also points out that “the absence of a system is itself a system”. And that approach too is not without its challenges. 

A cohesive culture is not for everyone

Mind the (survey) gap

Doing employee research right

A 2013 study by the Engagement Institute found that over 80% of global organizations survey their employees regularly, with an increasing number administering regular pulse surveys throughout the year. 

While employee survey research is one of the most common methods for conducting employee research, it is also the ONLY one widely used, leaving many organizations with significant blind spots and missed opportunities in improving their organizational health. Those challenges stem from both flawed execution and structural limitations of the employee survey methodology. 

A recent paper by Lewis Gerrard and Patrick Hyland offers a critical review of both theory and practice of employee survey research:

Employee Survey Research: A Critical Review of Theory and Practice

The origins of employee survey research can be traced all the way back to the 1920s. Today, well-designed organizational survey projects are characterized by three main activities: 

  • Careful measurement with the clear aim of measuring personal perceptions objectively. 
  • Robust data analysis, seeking to generate insight from survey responses. 
  • Collective feedback & action planning, recognizing the importance of involving employees, managers, and leaders in the process of interpreting results, recognizing areas for change, and developing plans for improvement. 

While this simple bar is not always met by many employee survey projects, the paper focuses on deeper issues. 

At the theoretical level, employee survey research is based on several incomplete or outdated philosophies about the nature of organizations. For example, the design and analysis of surveys assume a clear and consistent cause-and-effect relationship between various organizational phenomena. However, complex adaptive systems theory, suggests that this view is overly simplistic and does account for chaotic, disruptive and emergent organizational dynamics that make predictable causal links unlikely. 

The paper offers a few additional examples of organizational theories/philosophies that underlie employee survey research and recent developments and discoveries have proven to be either incorrect or incomplete. 

At the practical level, the paper highlights three methodological challenges and three analytical mistakes that often get in the way of drawing accurate insights out of employee survey research. 

Methodological challenges 

  • Overlooking the limitations of cross-sectional design: survey data is collected anonymously and analyzed at the aggregate level (department/organization) ignoring changes in employee population such as new hires, departures, and cross-departmental transfers between survey administrations. 
  • Ignoring common method bias & the necessary conditions for claiming causality: causality analysis is conducted within a single survey resulting first, in an inability to measure and control for systematic measurement error — variance introduced by the measurement method itself. And second, in limiting the credibility of any causal relationships uncovered between survey items/dimensions since they were only explored at a single point in time. 
  • Surveying only the evaluating and remembering self: since surveys often ask employees to make global evaluations about work based on retrospective reflections, they only capture people’s after-the-fact, reflected evaluations of events, which was shown to be different than their moment-to-moment assessment of the same events as they were happening. 

These methodological challenges are not without solutions: 

  • Longitudinal survey design, tracking attitudes at the individual level and making comparisons based only on employees who completed all surveys over a given time period can address cross-sectional design limitations. 
  • Creating temporal separation between measuring predictor variables and criterion variables — conducting statistical analysis across surveys rather than within surveys can address the “single point in time” challenges. 
  • Experience sampling techniques like The Day Reconstruction Method can complement the standard reflective method ensuring that data from both the “experiencing self” and the “remembering self” are captured. 

Analytical mistakes 

1. Assuming more is better: consistently positive survey results have three potential drawbacks: 

  • Strongly favorable attitudes may prevent organizational leaders from engaging in the critical process of reflection and change, increases the challenge of breaking out of the status quo. 
  • Employees in some roles may actually benefit from a sense of dissatisfaction at work, where a sense of frustration is an important driver of action.
  • In some cases, a stronger endorsement of an item is not predictive of increased outcomes. Some attitudes and employee states may be more beneficial if they fluctuate rather than maintained at a consistently high level. 

2. Overemphasizing contextual factors: the focus on measuring climate factors and shared employee experiences has led to a lack of practical integration between the psychology of individual differences and perceptions of workplace experience. A 2018 meta-analysis established that around 50% of the variance in an employee’s work engagement is predicted by personality and character variables. Therefore, variables like engagement are heavily influenced by the nature of the people selected into the organization. 

3. Assuming survey results will lead to change: while employee survey research has been a staple organizational practice for several decades, over a recent 18 year period (2000–2018), on average 30% of employees have been engaged at work, with a maximum variation of 4% in each direction. A principal assumption of the employee survey process is that leaders have the capacity and willingness to use employee feedback to create change. Yet this assumption has not always held true. Furthermore, studies demonstrated that factors like CEO personality play a key role in culture development, suggesting that a significant change in culture may only be possible with a significant change in leadership. A change that many organizations are often reluctant to make. 

Best-in-class employee research programs 

In addition to performing the activities required for well-designed organizational projects, addressing the methodological challenges and avoiding the analytical mistakes of employee survey research, the authors offer the following recommendations for creating best-in-class employee research programs: 

  • Learn to use multiple methodologies — complement employee survey research with additional methodologies that make up for its blind spots and shortcomings. 
  • Assess organizational phenomena at multiple levels — team effectiveness, for example, should be explored by assessing individual team member personalities, group-level behavior, and organizational-level culture. 
  • Integrate multiple datasets — rather than analyzing attitudinal data in isolation, link it with effectiveness, performance and productivity datasets to generate more valid organizational insights.
  • Engage multiple stakeholders — employee research programs aim to create insight, energy and direction for organization members, from front-line employees to c-suite members. Ongoing dialogue with that diverse group of stakeholders will help ensure that this objective is indeed achieved. 
Mind the (survey) gap

Achieving career growth: opportunities, skills & sponsors

Career ladders are not a prerequisite 

Photo by yang miao on Unsplash

For many of us, the opportunity to continue to grow our skills and impact is a significant decision-making factor in choosing career opportunities. Considering this through the lens of Self-Determination Theory, for example, makes it abundantly clear why: building our skills both improves our competence, and in an organizational setting, helps us build the credibility that enables us to operate more autonomously.

Career ladders are a common organizational construct that, among other important uses, can act as a useful roadmap for driving our growth, by outlining what the next level of performance looks like in the areas of competence that the organization deemed to be particularly important. 

However, career ladders highlight the destination (next level of competence) but not the path for getting there. And in some organizations, career ladders don’t exist or are not heavily utilized. Which begs the question: is growth still possible in situations? 

The answer is a resounding “yes”. 

Damian Schenkelman did a phenomenal job describing a system for growth that can be utilized without a dependency on ladders. 

He starts off by defining some key terms: 

  • Skills: what you can do, including knowledge required to do it.
  • Opportunity: a possibility for improving and/or displaying your skills. They might be accompanied by financial rewards, recognition, etc.
  • Growth: access to more challenging and/or new opportunities. Growth is multidimensional.
  • Sponsors: People that are aware of available opportunities and can grant them to you.

And putting them together in a system diagram: 

Source: https://yenkel.dev/

Your skills improve depending on how fast you learn from your opportunities and the rate by which opportunities are granted to you. That rate depends on your sponsors who are, in turn, impacted by the rate by which you display your skills. 

Skill alone doesn’t matter. If no one but yourself knows about your skills, you won’t get any opportunities.

That insight leads to a two-pronged growth strategy: maximizing available opportunities, and maximizing sponsors.

Maximizing available opportunities

Opportunities can be on-the-job/unstructured (working on a new problem set, leading a new initiative), semi-structured (being mentored by an expert craftsman, speaking at a conference), or structured (attending a workshop). 

Tactics to maximize available opportunities: 

  • Picking opportunities based on your growth goals 
  • Favoring opportunities that require less investment to get them — a conference that requires 2 hrs of prep vs. 14 hrs of prep, an organic opportunity within your existing team vs. one with a different team/org. 
  • Proactively create your own opportunities by proposing them to sponsors. 

Maximizing sponsors

Tactics to maximizing sponsors: 

  • Finding the right sponsors by understanding the informal organization and how it relates to the opportunities you are interested in. 
  • Making your skills visible to them through 1:1s, content generation, and sharing your accomplishments. 
  • Fine-tuning your self-awareness of your skills so you can focus your energy and attention on opportunities that are attainable. 

Lastly, Demian reminds us that we can always “sponsor ourselves” — decide to invest our time (and sometimes our $$$s) in building a skill even when either a sponsor or an opportunity is available. 

If you’re dissatisfied with your current growth rate, or just think that you’re not growing as quickly as you could — Damian’s post is a must-read. 

Achieving career growth: opportunities, skills & sponsors