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

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