INTERNAL ASSIGNMENT PROJECT FOR ORGANISATIONAL BEHAVIOR (OB) – MARKETING 1 (2019-2021)

ON

THE CASE STUDY OF NETFLIX HR POLICIES

Submitted in partial fulfilment of the Post Graduate Diploma in Management

(MARKETING)
BY
ARSH NANDAN PRASAD
Roll no-39
UNDER THE GUIDANCE OF
Dr. POOJA KHAN MISHRA

XAVIER INSTITUTE OF SOCIAL SERVICE

DR.CAMIL BULCKE PATH, RANCHI
Session-2019-21
 Case Study on Netflix’s HR Policies

Netflix’s new employee practices have grabbed attention, to put it mildly. In 2012,
a simple internal PowerPoint explaining them went viral and was viewed more than
5 million times on the Web. Sheryl Sandberg, chief operating officer of Facebook,
said it “may well be the most important document ever to come out of [Silicon]
Valley.” Dozens of bloggers and journalists scrambled to analyze its contents. And
Netflix is surely doing something right: In 2013, the company’s stock value tripled.
It reached a record 29 million subscribers and won three
Emmy Awards for its original show House of Cards.
What was revealed in that game-changing PowerPoint? It was simply a
“commonsense” approach, according to Patty McCord, then Netflix’s chief talent
officer and one of the presentation’s authors. Netflix treats the people it hires as
grownups. It grants them a great deal of freedom, and it expects them to use it
wisely.
Game Changers
Conventional human resources (HR) is full of structure and documentation.
Directors spend hours drafting standard operating procedures about time off,
performance appraisals, training, and more. Netflix has simplified the process by
doing away with many of these policies and focusing on results rather than
processes.
McCord realized that motivating employees to produce outstanding results had a
lot to do with trusting them with greater independence. That didn’t mean installing
an arcade or park, as other tech companies have done. Instead, Netflix started
doing away with formal procedures. Among the first to go was the leave procedure.
Gone were the standard 10days of vacation, 10 holidays, and handful of sick days.
The new policy? Take what you need when you need it. Giving employees the
leeway to take as much vacation time as they’d like might strike many HR
professionals as reckless. Wouldn’t people abuse such a liberal leave plan? McCord,
however, had shifted to a different philosophy. Written policies, she reasoned,
were mainly designed to eliminate problems created by a very small percentage of
employees. The vast majority of people, and particularly the type of person Netflix
tries to recruit, could be counted on to use common sense in their decision making.
This approach was extended to other areas. Travel and expense accounts are
generally kept under a watchful eye, policed by HR or accounting to ensure that
money is being spent in an acceptable manner, with plenty of documentation and
accountability. Netflix turned tradition on its head, creating what may be the
shortest expense policy any company has ever set: “Act in Netflix’s best interests.”
Employees are also allowed to book their own travel online rather than going
through a designated travel agent, allowing them to choose the best price.
Netflix compensates its employees very well, but there’s freedom there, too.
People can choose what portion of their pay they would like to receive in direct
compensation and what portion in stock options. This allows them to consider what
sort of risk level they’re comfortable with (the value of any company’s stock will
fluctuate over time) and what is best for them and their families. Netflix also
eliminated performance-based bonuses, preferring to pay people fairly and trust
them to do good work. There are no “golden handcuffs”—a form of retention plan
that does not allow employees to receive stock options or other incentives until
they’ve reached a certain number of years of service. Employees are also
encouraged to research and interview with competitor companies and then have
frank discussions with HR.
This helps both the department and the employee know what good salaries are for
various positions. The company also decided to forego conventional performance
reviews. It eliminated the performance metrics typical of many companies’
evaluations, like grading an employee on a five-point scale in a variety of different
tasks and expectations. Instead, a “360-degree review” is performed, which is an
open conversation between employees and their managers about feedback from
people inside (and occasionally outside) the company who have any contact with
the employee. The evaluation is largely centered on one question for the manager,
known as the “keeper test”: “Which of my people, if they told me they were leaving
in two months for a similar job at a peer company, would I fight hard to keep at
Netflix?” If someone’s skills and abilities are no longer a match for the company,
the person is given a generous severance package upon exit. As CEO Reed Hastings
told the Harvard Business
Review, paraphrasing a section of the now-famous PowerPoint: “‘Adequate
performance gets a generous severance package.’ It’s a pretty blunt statement of
our hunger for excellence.”
The document is “our version of Letters to a Young Poet for budding
entrepreneurs,” Reed continued. “It’s what we wish we had understood when we
started.” He goes on to argue that a relatively new industry—online, on-demand
entertainment—demands new paradigms. “As a society, we’ve had hundreds of
years to work on managing industrial firms, so a lot of accepted HR practices are
centered in that experience. We’re just beginning to learn how to run creative
firms, which is quite different. Industrial firms thrive on reducing variation
(manufacturing errors); creative firms thrive on increasing variation (innovation).”
The Payoffs Netflix’s overhaul of its HR policies has yielded positive results. Despite
the lack of carefully outlined procedures, the expectations are still clear: you have
the freedom to make decisions, but keep in mind what is best for the company. The
HR department at Netflix has realized that it isn’t necessary to beat its people over
the head with exactly how to make good decisions.
Freedom equals reduced stress, arguably. The level of flexibility and self-
management that
Netflix also offers creates more efficiency. Employees don’t have to worry about
whether they’ve racked up enough days off to take a trip or whether they’ve
worked long enough hours to impress the boss. They aren’t fretting over how the
big annual review will go, or whether they’ll get the score that will earn the bonus
they’ve been counting on. Eliminating these typical workplace stressors motivates
employees to stay focused on creating ideas and solutions for the business.
At Netflix, clear and honest communication thrives. Employees don’t fear
retribution for looking into openings with other companies; they can go to HR and
openly discuss other possibilities. Managers no longer have to spend time “in the
weeds” developing improvement plans and riding mediocre workers for results.
Likewise, employees are less likely to have to pick up slack for colleagues who are
not performing. While Netflix lets people go whose knowledge and skills are no
longer relevant, it’s candid about why. As McCord puts it, “People can handle
anything as long as they’re told the truth.”
Being straightforward has costs, but having direct conversations with and offering
a generous severance package to employees who are no longer a good fit has
resulted in zero lawsuits over termination to date. HR is also empowered to find
someone who fits the bill rather than continuing to invest in someone who cannot
do what’s needed while risking the morale and motivation of fellow coworkers.
By allowing its employees plenty of liberty to make decisions for themselves,
Netflix has reaped great rewards in employee motivation, efficiency, and
productivity. While the premise may have seemed risky, it proved to be a
commonsense solution for issues most HR departments face. Considering the way
it revolutionized and streamlined the movie rental process for changing times, it is
hardly surprising that Netflix seems to have done the same for employee
motivation.

QUESTIONS AND ANSWERS

1. How does Netflix use intrinsic motivation to support its HR practices?

ANS. Intrinsic motivation refers to behavior that is driven by internal rewards. In

other words, the motivation to engage in a behavior arises from within the
individual because it is naturally satisfying to you. Netflix feels that by giving their
employees freedom it will reduce stress and create more work efficiency so that
they don't feel like their time is wasted or so that they're not constantly worrying
about their job performance. The main motive here is to create an environment
which does not create a work pressure in the minds of its employees and everyone
loves their work and preforms better. The authorities are now wanting to trust their
employees with greater independence so that they can create and research upon
new content and projects. The unique procedure for taking leaves in NETFLIX is also
a strong motivation for the employees. According to the rules and regulations the
employees are free to take leaves when they want and the duration of the leaves
are also decided by the employees only. TAKE WHAT YOU NEED AND WHEN YOU
NEED is what defines the mantra of the authorities.
The board has now stopped intervening with a lot of policies like the policies and
rules related to employees taking some time off from work, performance
appraisals and trainings etc. As far as travel expenses are concerned NETFLIX has
turned the tables and now allows the employees to choose the travel plans which
are the best in prices and are according to their convenience. As far as
compensation policies go the company has also changed the rules of the game
here. Now the employees get to choose what portion what portion of their pay
they would like to receive in direct compensation and what portion in stock
options. This allows them to consider what sort of risk level they’re comfortable
with and what is best for them and their families. There are no golden handcuffs -
a form of retention plan that does not allow employees to receive stock options
or other incentives until they’ve reached a certain number of years of service.
The company also decided to bring down conventional performance reviews.
They stopped the use of evaluation systems on their employees and now are
practicing 360® review of their employees which take into consideration all the
aspects.

2. Outline why would a creative firm choose to use intrinsic motivation where
an industrial firm would probably choose to use extrinsic rewards?

ANS. Employee motivation develops in one of two ways. Intrinsic motivation comes
from within, driving you to succeed based on inner goals and ambition. Extrinsic
motivation comes from external sources, motivating you with incentives to push
your performance. Both intrinsic and extrinsic motivation carry distinct advantages,
and different employees display different motivational characteristics. Knowing
which employees are motivated more intrinsically or extrinsically can improve your
skills as a manager.
Labor Cost - Employees with high levels of intrinsic motivation can reduce total
labor costs. Since managers spend less of their time working to motivate
intrinsically motivated employees, each manager has more time to focus on more
productive tasks. This can allow a small business to operate with fewer managers
in the hierarchy, keeping the company lean and reducing labor costs .Intrinsically
motivated employees are also more likely to try to solve problems on their own
rather than requiring managerial assistance for any issues that arise. Intrinsically
motivated employees are more likely to take on new projects on their own, as well,
rather than being guided by supervisors on what to do when work tasks are
complete.
Operational Control - Using extrinsic motivation in the workplace can allow for a
greater degree of control over operational processes. Extrinsically motivated
employees require closer supervision to keep their performance high, allowing
managers to closely watch and guide employees while they work.
While close supervision may be intolerable to some, other employees thrive in
situations where they have constant guidance and encouragement from
supervisors.
Innovation - Using extrinsic motivation in the workplace can allow for a greater
degree of control over operational processes. Extrinsically motivated employees
require closer supervision to keep their performance high, allowing managers to
closely watch and guide employees while they work. While close supervision may
be intolerable to some, other employees thrive in situations where they have
constant guidance and encouragement from supervisors.
Personal Limits - Extrinsic motivation can come in the form of financial incentives
rather than encouragement. Using incentives can boost all employees'
motivation, pushing them to break personal performance records and reach new
levels of productivity. Incentives have an advantage in that they can be equally
attractive to both extrinsically and intrinsically motivated employees. For
extrinsically motivated employees, incentives can provide a “carrot” to entice them
to push their performance. For intrinsically motivated workers, incentives can allow
them to set measurable, attainable goals.
3. Analyze the appeal of nontraditional work schedules and how Netflix has
chosen to implement them.

ANS. Netflix has transformed itself from a DVD-by-mail company into the
world’s largest subscription streaming video service, with more than 54 million
paid subscribers in about 50 countries. It plans to expand to 200 countries by the
end of next year. Netflix quickly recovered from some major missteps in 2011,
when it raised its price by 60 percent and then, just a few months later, said it
would spin off its DVD-by-mail service into a separate company. Consumers
revolted. Netflix abandoned the plan to split in two, but still lost 800,000
members. Its stock tanked. Since then, the stock has recovered and is now high.

“They’ve always been very good at thinking about what’s coming up ahead and
being able to adapt and to change,” Jasper B. Sorensen, a professor of
organizational behavior at Stanford University, said of the company. “I think kind
of the content of their culture has probably benefited them in that respect.”
The success of “House of Cards,” which has won Golden Globes and Emmys,
among other awards, may be partly due to the company’s “freedom and
responsibility” DNA. Netflix, along with Media Rights Capital, the studio behind
the hit, ordered two full seasons of the show without seeing a pilot. Netflix gave
"House of Cards" creators the freedom to tell the story the way they wanted to,
Kevin Spacey, who plays Frank Underwood on the show, said in 2012, according
to the Hollywood Reporter.
Netflix is fond of saying it hires only “fully formed adults,” and the company treats
them as such -- bestowing on them great amounts of freedom so they can take
risks and innovate without being bogged down by process. The flip side of all this
power is that people are expected to work at a super-high level or be quickly
shown the door.

The main points being –

 Move flexibility in their work; allowing employees to start late and finish
late or start early and finish early.

 Work and family balance ; impact of the duration of stay in the organization

 Factors influencing the retention in quality of alternatives.

 DECLARATION

THIS IS TO DECLARE THAT I ARSH NANDAN PRASAD STUDENT OF XAVIER

INSTITUTE OF SOCIAL SERVICE RANCHI, (JHARKHAND), PGDM BATCH 2019-2021
HAS GIVEN ORIGINAL DATA AND INFORMATION TO THE BEST OF MY
KNOWLEDGE IN THE PROJECT REPORT TITLED “NETFLIX HR POLICIES “IS A
RECORD OF INDEPENDENT WORK CARRIED OUT BY ME UNDER THE GUIDANCE
OF DR.POOJA KHAN MISHRA TOWARDS THE PARTIAL FULFILLMENT OF
REQUIREMENT FOR THE PGDM COURSE.

I ALSO AGREE IN PRINCIPAL NOT TO SHARE THE VITAL INFORMATION WITH ANY
OTHER PERSON OUTSIDE THE ORGANISATION AND THAT I HAVE NOT
SUBMITTED IT FOR ANY AWARD OR TITLE.

DATE – 20.08.2019
PLACE – RANCHI, JHARKHAND
NAME – ARSH NANDAN PRASAD
ROLL NO – 39
MARKETING MANAGEMENT
 ACKNOWLEDGEMENT

It has been a great honor and privilege to make this project. I have been
able to complete this project only due to the support and guidance of many
individuals. However, it would be wrong on my part to not express my sincere
thanks to all of them.

I would like to take the opportunity to express my humble gratitude to my

teacher DR.POOJA KHAN MISHRA who has helped me to execute this
project. His constant guidance and willingness to share his vast knowledge made
me understand this project and its manifestations in great depth. I am highly
obliged to him without whose support this work would not have been
accomplished. His invaluable guidance helped me understand the project better.