Netflix’s Culture Memo: A Blueprint for Success and a System Under Scrutiny
Netflix, the streaming giant known for its opaque approach to public releases, has long been renowned for its transparent and demanding internal culture. This "culture memo," originally formulated in 2009 by co-founder and former CEO Reed Hastings, has undergone several iterations, with the latest version released in May 2023 after undergoing eight months of scrutiny and receiving over 1,500 comments from employees. While the core principles of freedom and responsibility remain, the new memo emphasizes a shift in focus to “People Over Process,” a philosophy that has both fueled Netflix’s success and drawn criticism.
Key Takeaways:
- A Shift in Focus: The latest memo emphasizes “People Over Process,” prioritizing the hiring and development of highly responsible individuals who thrive in an open and autonomous environment.
- The "Keeper Test" Evolves: While the "Keeper Test" (asking, "If X wanted to leave, would I fight to keep them?") remains a cornerstone, the new memo clarifies its role, acknowledging its potential for intimidation while encouraging frequent communication between employees and managers.
- Not All Opinions are Created Equal: As Netflix has grown to over 13,000 employees, the memo acknowledges that it’s no longer feasible for every voice to contribute to every decision, acknowledging the limitations of scaling a highly collaborative environment.
- Freedom with Boundaries: The memo recognizes that the initial focus on "Freedom and Responsibility" (FNR) has, in some cases, been weaponized by employees, leading to instances of excessive spending and misuse of freedom. The new emphasis is on freedom that generates "long-term excellence."
- A Culture of Constant Change: Netflix’s culture encourages a rapid pace of innovation and continuous improvement. While some employees find this invigorating, others describe it as all-consuming and potentially unsustainable.
- High Performance, High Turnover: While few employees leave willingly, the company actively maintains a high turnover rate, with about 9% of employees asked to leave annually. This reflects the company’s "uncomfortably exciting" environment, which is not for everyone.
- Open Feedback, Open Criticism: Employees are encouraged to provide candid feedback, even about their own mistakes. This creates a transparent and often challenging environment, requiring both resilience and open-mindedness.
A Deeper Dive:
The 2009 "Netflix Culture" presentation, with its bold pronouncements on freedom and responsibility, was a stark departure from the traditional Hollywood playbook. It championed a culture of transparency, candor, and continuous feedback, with the belief that employees are inherently responsible and will make decisions aligned with the company’s best interests.
While the new memo maintains these principles, it acknowledges the complexities of managing a rapidly growing organization. The emphasis now shifts towards prioritizing the hiring of individuals who are self-motivated, accountable, and can thrive in an environment that prioritizes individual performance and contribution. The company’s focus on "Keeper Test" is not about eliminating employees, but about investing in and retaining those who demonstrate exceptional potential and commitment.
Netflix’s approach to culture has both fueled its success and generated controversy. Critics argue that the company’s emphasis on rapid change and high performance creates a stressful and unsustainable environment. The high turnover rate suggests that many employees find the culture challenging and are ultimately unable to stay long-term.
However, proponents point to the company’s unparalleled success in the streaming market, attributed in part to its ability to attract and retain high-performing talent who are willing to operate within a demanding and fast-paced environment. The "uncomfortably exciting" culture, while challenging, provides an environment where talented individuals can make a significant impact and experience rapid career growth.
The 2023 culture memo represents a nuanced approach to Netflix’s internal philosophy. It acknowledges the challenges of sustaining a high-performance culture alongside rapid growth while reaffirming the core values of individual freedom, transparency, and continuous improvement. It remains to be seen whether this latest iteration will solidify its impact on the company’s success and whether it will provide a blueprint for other companies hoping to replicate Netflix’s cultural formula.
