STRATEGIC HUMAN

RESOURCE MANAGEMENT
REPORT ON SHRM PRACTICES AT NETFLIX

“NETFLIX: A HIGH-PERFORMANCE CULTURE”

GROUP 9

Bhumika Grover 19PGDMHR11

Dalima Gupta 19PGDMHR13

Devika R 19PGDMHR14

Savani Tandon 19PGDMHR47

Shubham Tiwari 19PGDMHR50

Vedika Arya 19PGDMHR62

 ACKNOWLEDGEMENT
No assignment can be carried out and completed without the help and guidance of certain people, who
deserve our greatest gratitude. We would like to express our deepest appreciation to all those who have
provided the supervision, direction, and guidance to us for this project.

We are grateful for the constant guidance of our Professor, Umesh Bamel who gave us the opportunity to
work on such an interesting project and supported us throughout the completion of the proje ct.

We would also like to thank all the people, directly and indirectly, involved with our project, and our institute,
International Management Institute, New Delhi. We are highly indebted to each one of you.

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TABLE OF CONTENTS
ABSTRACT.............................................................................................................................................................................. 3
ABOUT NETFLIX .................................................................................................................................................................... 4
VALUES OF NETFLIX ......................................................................................................................................................... 4
TIMELINE OF NETFLIX’S HISTORY ................................................................................................................................... 5
BUSINESS MODEL OF NETFLIX........................................................................................................................................ 5
THE STORY OF NETFLIX........................................................................................................................................................ 5
HR STRATEGIES AT NETFLIX................................................................................................................................................. 6
A Culture That Drives Performance ............................................................................................................................... 6
“Management in Context, not Control” environment............................................................................................... 6
Freedom and Responsibility ........................................................................................................................................ 7
FLEXIBILITY AROUND WORK SCHEDULE ..................................................................................................................... 7
EASY DECISION-MAKING.............................................................................................................................................. 7
A culture of constant Feedback................................................................................................................................... 7
PERFORMANCE MANAGEMENT SYSTEM ...................................................................................................................... 7
DO, AS WE DO, NOT AS WE SAY.................................................................................................................................. 7
Annual evaluations are 1 year late.............................................................................................................................. 7
Needing the Dream Team............................................................................................................................................ 7
Understanding the full Context ................................................................................................................................... 8
WORK-LIFE PHILOSOPHY................................................................................................................................................. 8
HR BEST PRACTICES.............................................................................................................................................................. 8
SWOT ANALYSIS .................................................................................................................................................................10
PEST ANALYSIS....................................................................................................................................................................11
CHALLENGES FACED BY THE HR........................................................................................................................................11
RECOMMENDATIONS TO OVERCOME THESE CHALLENGES ..........................................................................................12
MAKING AN INVESTMENT AT NETFLIX ............................................................................................................................13
BIBLIOGRAPHY....................................................................................................................................................................15

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ABSTRACT
This report focused on HR strategies and their implications on an indication. The organization upon which we
carried our research was Netflix. The objective was to apply the theoretical knowledge of SHRM, align it with
the organization under study, and with the aid and assistance of conceptual knowledge analyze the various
HR strategies of Netflix.

The mode of collecting information was the internet and communication with a Netflix employee. The
information collected was utilized to assess the organization and the industry it belongs to. Models like 5P,
Pestle were some of the tools used to dive deep and come up with the positioning of the organization.

The report carried out as a group helped us gain insights into the work culture of the organization and
allowed us to link the theoretical knowledge gained from the course to the organization and see how it
shapes the organizations. The findings helped us conceptualize the learnings and gave us a broader horizon
to apply and practice the learnings in the future.

This report will help the future managers and especially the HR managers in the strategic HR management
domain and would provide them a reference for the future.

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ABOUT NETFLIX
Netflix is the leading digital entertainment streaming service provider with over 193 million subscribers .

• Founded: August 1997

• Based out of Scotts Valley, California,
• Corporate Headquarters: Los Gatos, California
• Founders: Marc Randolph and Reed Hastings
• CEO and Chairman: Reed Hastings
• Co-CEO and COO: Ted Sarandos
• Type of Company: Public Company
• Key Products / Services: Content streaming, content distribution, and content production
• Market Capitalization as on 2020-08-07: $218.2B
• Strategy: maximizing the competitive advantages of high operational efficiencies and cost-
effectiveness of information technologies.
• Competition: Amazon, HBO, YouTube, Hulu
• Industry: Tech & Entertainment, Mass Media

Vision: “To continue being one of the leading firms of the internet entertainment era.”

Mission: “To entertain the world.”

Core philosophy: People over process.

VALUES OF NETFLIX

INCLUSION INNOVATION PASSION CUROSITY

JUDGEMENT COMMUNICATION COURAGE SELFLESSNESS

INTEGRITY IMPACT

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TIMELINE OF NETFLIX’S HISTORY

BUSINESS MODEL OF NETFLIX

THE STORY OF NETFLIX

According to the most-told Netflix origin story, founder Reed Hastings was annoyed when Blockbuster
charged him a $40 late fee for not returning Apollo 13 on time. And that is How Netflix started. This tale was
more smart PR than truth, co-founder Marc Randolph later said, but the messaging worked. Later,

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Blockbuster passed on a chance to buy Netflix for $50 million, one of several fatal mistakes that eventually
doomed the video rental company.

Netflix is now known for a lot of weird facts like millions of people are Netflix thief, half of the couples are
Netflix cheaters. Terms like binge-watching and ‘Netflix & chill’ came into existence because of this platform,
that is becoming more famous than cable.

As we see this unique company taking pride in its extraordinary culture that is supposed to promote branding
to attract more and more talented high-performers, which according to Netflix is a sustainable strategy. Yet
people oppose how difficult it is to survive in this environment. There are numerous differentiating views of
present and ex-employees about its culture.

There are also articles that talk about how the lady who helped the founder to develop the core values of the
organization, eventually became the reason for her leave the company. In the early days of Netflix, Reed
Hastings, Co-Founder and CEO, wanted Patty McCord to help write out the company’s core values. At first,
they considered something standard — words like “excellence” and “respect.” Instead, McCord suggested
they “write down the things we expect in people.” This simple idea led to an infamous document and
philosophy now known as, “Netflix Culture: Freedom & Responsibility.” It’s a living set of “behaviors and
skills” that the Netflix management team updated continuously and fastidiously. And it drives toward a single
point: a company is like a pro sports team, where good managers are good coaches, and the goal is to field
stars in every position.

There are rumors that McCord herself was not able to survive such high standards of the work environment
and eventually had to leave the organization. It will be interesting to learn more about how Netflix keeps its
employees on its toes and yet how maintains to retain them in this cut-throat competitive environment.

HR STRATEGIES AT NETFLIX
Human resource strategy follows one simple rule- ‘Hire, Reward and Tolerate only Fully Formed Adults’. They
rely on the logic and common sense instead of formal policies and hire people who will put the company’s
interest at first, who understand and support for a high-performance workplace.

A CULTURE THAT DRIVES PERFORMANCE

Netflix is not only one of the greatest entertainment platforms to have existed, it is also undoubtedly a place
where several employees would like to be because of its fantastic workplace culture and great employer
branding.

Here is what makes Netflix’s work culture unique:

“MA NA GEMENT IN CO NTEXT, NO T CO NTRO L ” ENVIRO NMENT

Managers believe in letting the employees make an informed decision regarding to set their deadline for the
goals that need to be achieved within a time frame. Managers believe that their job is to liberate the
employees and remove any barrier that would limit effectiveness.

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FREEDO M A ND RESPO NSIBIL ITY
Similar to the work culture of an entrepreneur, the employees are responsible for their own resources and
their effective utilization and management. This empowers them to find what they want to do and how they
want to go about it.

FL EXIBIL ITY A RO UND W O RK SCHEDUL E

As long as they have their work organized and covered, the employees have the freedom to choose their
working hours, day-offs, and vacation breaks with the aim that they will come back more productive and
fresher from the occasional time offs.

EA SY DECISIO N-MA KING

To heighten their sense of responsibility and accountability, Netflix follows a system of “Informed Captains”
wherein every employee is responsible for his/her own ship. Rather than having a committee take decisions,
they have a group meeting where the discussion takes place, but in the end, only the “informed caption”
decides regardless of the job position.

A CUL TURE O F CO NSTA NT FEEDBA CK

Given Netflix’s culture that values transparency, communication, harmony and ownership, direct and non -
anonymous feedback at all levels, management as well as entry-level, is followed which is focused on work-
related behaviors rather than certain characterizations of an employee.

PERFORMANCE MANAGEMENT SYSTEM

Since the beginning, Netflix has been successful not only in retaining prime tale nt, but also in achieving a
high-performance culture.

Here is how Netflix overcomes these 4 common performance management challenges-

DO , A S W E DO , NO T A S W E SA Y
At Netflix, managers and leaders need to live and breathe the company values. The mission statement and
company values are supposed to be displayed throughout the work of the employees. Netflix rewards and
promotes employees who demonstrate these values and let go of those who don’t.

A NNUA L EVA L UA TIO NS A RE 1 YEA R L A TE

Opting for full transparency, Netflix follows a face-to-face 360-degree evaluation in terms of activities that an
employee should stop, start or continue. Managers believe that employees can handle anything, as long as
they are told the truth.

NEEDING THE DREA M TEA M

Managers use what they call a “Keeper’s test” to build a team that fosters collaboration, embraces a diversity
of viewpoints, supports information sharing, and discourages politics.

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UNDERSTA NDING THE FUL L CO NTEXT
According to Netflix’s former Chief Talent Officer, “The best managers figure out how to get great outcomes
by setting the appropriate context, rather than by trying to control their people.” Hence, leaders just provide
a clear context or framework and allow the employees to be autonomous thinkers.

WORK-LIFE PHILOSOPHY
Netflix doesn’t follow 9-to-5 workday and neither has policies prescribed for time off for salaried employees.
They do not practice scheduling holidays and vacations. They believe in working smarter, n ot harder.

1. Parental Leaves: The organization identifies the importance of the most special event in an
individual’s life- the birth of a child. Their parental leave policy is ‘take care of your baby and
yourself’. New parents can take leaves for around 4-8 months.

2. Time away: The organization believes in ‘take vacation’ policy. They intermix work and personal time
quite often. They encourage employees to observe what is best for them- including when the mind
and body need a break.

3. Family Forming: Netflix forms a global family forming benefit to support employees during fertility,
surrogacy or adoption. This benefit extends to not only employees but their spouse/partner,
irrespective of marital status, gender, or sexual orientation. They recognize these situations are
challenging both emotionally and financially. The organization offers an allowance to cover the costs
of family forming journey.

4. Stock Option Program: Employees are free to choose how much of their compensation they want to
receive in salary versus stock options. They can even choose, all cash, all options or whatever suits
them. These are 10-year fully vested stock options they can be kept even after leaving Netflix.

5. Work, Not-Drive: Netflix provides a rideshare while commuting to work so that you can focus on
work While traveling.

6. Relocation Benefits: Organization is not bound by any restrictions, when talent gets relocated a
dedicated team supports them with relocation service and financial benefits.

HR BEST PRACTICES
Netflix, the world’s largest streaming service, at its core, values ‘people over processes’. It offers to its
employees various benefits that make people act in the best of the company’s interests. Netflix is on its
mission to revolutionize the organizational culture. Netflix strives to create an environment that encourages
its people to be a better version of themselves. The very essence of the company culture comes down to
honesty. Netflix believes in proper communication among its employees. Managers are required to
communicate regularly with employees about their performance and the employees are encouraged to
enquire how they are performing and get honest timely feedback from the managers. Netflix and its culture
form a brilliant reference for the HR managers of today to learn from.

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1. Pattern Recognition and Common Sense
When hiring new employees, Netflix looks for patterns. Netflix believes in making judgmental calls
over time by looking at the performance and behavior of hired individuals. They equally believe in
common sense which includes decision-making not just in one’s interest but rather the organization
and the customers it serves. During hiring, the company looks for soft skills like empathy, EI and
envisages how well the candidates will fit into the team you are placing them with

2. Interview and Body language

Netflix believes that the in-person interview should be over in a day’s time. This is because they
believe that the body language of an individual tells everything about them. The actions and
reactions give away a lot about the person. If further interaction is required, it will be done via video
conferencing or over a call.

3. Best practices and Dream Team

Netflix has some of the best practices followed to increase company productivity. One of these is a
‘Keeper Test’ which is nothing but a simple yet highly effective test. It asks the managers an
important question:
“If someone from your team tells you that they are leaving for a similar job at a different company,
would you fight hard to keep them there?”
If the answer is yes, the company would fight to prevent them from leaving. If the answer is no, the
employee is given a decent severance package.

4. High Performance
At Netflix, employees operate as a high performing sports team and not as a family. Employees join
the company to compete and every day they strive and do their best to contribute to the success of
the team. Employees are expected to be at top-notch, caring for each other and realizing that they
might not be part of the dream team forever.

5. Honest Feedback – A Game Changer

Transparency and communication are vital for Netflix and hence it takes the employee feedback
quite seriously. At Netflix, a manager giving feedback about an employee is required to share an
example to make their point and also clear the expectations with the employees so that there is no
miscommunication. Also, the company has a policy that no one should say anything about an
employee that they wouldn’t say to their face.

6. ‘Truly valuable’ values

With technology exploding and the dynamics of business changing rapidly, it’s no longer products
and services alone that drive business, but the brand. Values are building blocks of a brand and
Netflix understands this very well. Hence the company assures that the people it hires share the
same values that the company associates with. The recruiters at Netflix do not blindly go by the
resume of the candidates, but instead stresses on questions that reveal more behavior and

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 judgment. Netflix expects its employees to live and breathe the company values in everything they
do.

7. Pay top of the market

Netflix believes in hiring the best and paying top of the market salaries. According to them one
outstanding employee gets more done than two adequate employees.

8. Promotions and Development

Netflix believes that rather than the company shaping the career plan of its employees, people
themselves should shape their own future within the company. Netflix finds yearly reviews too
ritualistic and infrequent and hence scrapped the same. Managers and employees are encouraged to
have regular conversations regarding performance as a systematic part of the work.

Thus, Netflix is a market leader not just because of its position as the world’s top quality and largest
streaming platform but because of its unparalleled work culture that compromises with nothing. There is in
fact quite a lot that HRs of today and future can learn from this leader.

SWOT ANALYSIS

STRENGTH WEAKNESS OPPORTUNITY THREAT

•130 million plus consumer base
•Highly recognised brand.
•Streaming services available in
over 180 countries.
•Uninterrupted content watching
without any commercials.
•Produces vast amount of original
content in high quality.
•Less expensive than cable and
movie theatres.
•Flexible to various devices (Ipad,
tablet, phone, laptop, television,
etc.).
•Unbeatable customer service.
•Excellent customer friendly user
interface.
•Produces region specific content
in local language (Example Sacred
Games in Hindi in India, Money
Heist in Spanish in Spain).
•Multiple plan systems that users
can subscribe to as per their
need.
•High performance work culture.
•Open, frank and clear
communication process.
•The Pause Membership option.
•Great use of analytics.
•Does not possess ownership of
most original content and has
very few copyrights.
•Increasing debt and operating
costs.
•Decreasing profit margin.
•Heavily dependent on the U.S.
market.
•Business model does not promote
environmental sustainability.
•Users need a high speed internet
connection to avail Netflix’s
services.
•Culture of watching one’s own
back and tossing others under the
bus.
•Has the capacity and resources to
increase its customer base.
•Can form partnerships with
channel partners, telecom
partners, media houses, etc. to
strengthen brand equity and
market position.
•Can grab the best talent from the
market during this time at lower
compensation packages.
•Netflix already had a number of
competitors and after this
pandemic, the competition is only
going to get more severe and
tougher.
•In India, the most basic
subscription plan of Netflix is
currently priced at Rs. 499 per
month, whereas it costs much
less to subscribe to platforms like
Hotstar and Amazon Prime.
•High digital piracy threat.
•Strict and restrictive government
rules and regulations in some
countries.

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PEST ANALYSIS

1. Political:

• In certain countries, the taxation on OTT companies is as much as 26%. This can lead to very thin
profit margins for Netflix.
• Certain countries like the EU have put a compulsion on Netflix to produce at least 30% strictly
European content. This heavily controls a major part of the content that is made available in the
European Union.
• Certain petitions have been filed demanding a limitation on the usage of online streaming platforms.
This may be done by increasing internet prices which can in turn, hamper Netflix’s business.
• In some countries, certain boards have demanded censorship of content that is shown on online
streaming platforms.

2. Economic:

• Because of coronavirus, a lot of people have started cutting down costs. If the lockdown continues
and the economy does not revive, people might start spending more cautiously and think of Netflix
as an unnecessary expense.
• Increase in inflation and VAT might force Netflix to increase its prices which may make the service a
luxury for a lot of people.

3. Social:

• The trend of binge-watching is on the rise and so companies like Netflix are a great service.
• People nowadays have such busy schedules that they feel going to a movie theatre takes up too
much time. Hence, online streaming platforms are great when it comes to watching shows and
movies anytime, anywhere.

4. Technological:

• Technology is something that is at the core of the company. Netflix’s software makes use of
algorithms and machine learning that provide its users a list of recommended shows or movies based
on their previous watches. This is one of the most vital features of the Netflix experience.
• The purchase of 4k television has gone up substantially throughout the world. Netflix is aiming to
provide great quality for 4k content. However, making sure that a massive amount of data is not
consumed while streaming 4k content is a huge challenge.

CHALLENGES FACED BY THE HR

• Netflix only looks for exceptional performers and the focus is on high productivity. The employees
are seen as part of a dream team and likened to players of a sports team, driving performance where
failures are appreciated, there is communication, open fe edback, etc. But when the employee’s skill
is not required any more, the company lets go of her with a generous severance package. It doesn’t
place much importance on development and training to upgrade skills. This impacts employee

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 morale and Netflix makes a trade-off between hiring one with the required skills/capabilities and
retaining an employee with long experience and understanding of the company's work culture.

• The famous Keeper’s test which replaces a formal feedback/appraisal system relies on asking your
immediate supervisor if she will fight to keep this employee or let her go. This system is fraught with
concerns of subjectivity, unfairness, non-transparency of evaluation as it relies heavily on the
supervisor's judgement.

• In one of the values Netflix observes, “share information openly, broadly and deliberately”, it allows
any and all employees to access and comment on nearly all documents. Documents on strategy
decisions, competitors, product feature tests are open for all and at times gives rise to leaks and can
grow to be a serious confidentiality issue.

• The cultural framework of no policy on many fronts such as travel, leaves, other expenses etc. and
asking employees to “act in Netflix’s best interest” gives rise to ambiguity. In general, the freedom
and empowerment that employees are allowed is not without its risk and in rare c ases have led to
misuse.

• In 2019, Netflix had 8,600 full-time employees which was double of what it employed in 2016. From
2017 to 2018 alone, it saw an increase of 32.73 % in count. With that rate of increase in employee
size, it will be particularly difficult to manage employees with an anti-rule policy. The reason for the
success of Netflix’s culture of freedom and employee discretion can to a good extent also be credited
to the small employee size.

• Also, if Netflix’s profit margin does not increase in proportion to its employee base, the high
compensation, stock options and other benefits employees enjoy will be impacted. Also, with
employee engagement, it is more favorable when there is high profit margin and low employee size.

RECOMMENDATIONS TO OVERCOME THESE CHALL ENGES

• The present feedback system is informal and for a growing company like Netflix, a formal feedback
and appraisal system replacing the keeper’s test is likely to inject objectivity, transparency and will
bring better acceptance levels and perceived fairness among employees. A 360 degree feedback
system can be implemented as it will be multi-source, more comprehensive and will give a well-
rounded perspective.

• Netflix enjoys a good glassdoor rating. It is rated 4.2 out of 5 for compensation and benefits bu t
lower in work-life balance 3.3/5 (2018). The high-productivity demand interferes with work life
balance and a more sustainable approach would be to have some demarcation. While it has a no-
policy leave policy, Netflix’s voluntary leave rate is 3%, much lower than the industry’s 18%. This
highlights the work-life conflict employees face as if they do not keep up with the “high-performance
culture”, they can lose their job. No policy on vacation, leaves, expenses leaves employees without a
demarcation between work and personal life. Also, while Netflix’s culture deck philosophies a “no-
policy” rule, in reality they do interfere.

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The parental policy states to take care of your child and in 2015 allowed till one year of leave but when
employees started assuming an automatic one year parental leave, the management interfered to promote
4-8 months of leave.

In another instance, while employees are allowed to make expenses, they use a “sunshine” system where the
employee has to speak about it in front of all other peers when the management feels it was not a wise
decision.

Many employees have criticized Netflix for their dubiousness on freedom, empowerment, no-policy rule as
employee conduct is regulated at various points. Netflix, therefore, should have a policy framework that will
give greater clarity to both employees and the management. At present, it is open to interpretation and can
lead to misappropriation by employees as well as the employer.

MAKING AN INVESTMENT AT NETFLIX

Netflix has been known for its disruptive growth, how it has changed, adapted and transformed itself with
respect to the external factors and competition. The growing success story lies in the continuous
improvement the firm has been making and working well with their strategic decisions.

The stock pattern of Netflix is showing progress since last year. The prices have been increasing and making
progress.

Reasons to invest in Netflix:

1. Presence of Global Talent: Netflix has physical presence in almost 19 countries and provides services
to 190 countries. Diversity of talent caters to the faster innovative practices. It also helps the
company to have an opportunity of attracting talent from all over the world. Global talent helps to

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 compete with local as well as international competitors. Local presence also helps to customize the
needs of niche markets and deliver promising, better quality products and services.

2. Ability to Outpace Rivals: The original content created by Netflix depicts the presence of creativity
among its talented employees. It has been able to provide tough competition to its rivals like HBO &
Amazon. Netflix is way ahead in terms of content as compared to its competition.

3. Distinguished Performance Culture: The word about its culture can be heard from everyone, there is
no doubt that Netflix follows what it preaches. The strategic alignment of its practices with business
goals forms a clear picture that it has zero tolerance for complacent people and would do anyth ing
to have high performers for its subject.

4. Strong Leadership: CEO Reed Hastings has been leading the organization for more than two decades
and is known to be one of the most iconic CEOs of Silicon valley, also regarded as an extremely
competent executive. He is the founder of the company and has led the organization under his
vision. Ted Sarandos, currently the co-CEO of the company and Chief Content Officer has been with
the company for almost two decades.

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BIBLIOGRAPHY
Cohan, P. (2020, August 14). 4 reasons o invest in netflix. Retrieved from forbes.com:
https://www.forbes.com/sites/petercohan/2015/01/21/4-reasons-to-invest-in-
netflix/#2abd39616b2d

Hosch, W. L. (2020, August 14). Netflix Inc. Retrieved from britanica.com:

https://www.britannica.com/topic/Netflix-Inc

McFadden, C. (2020, August 14). The fascinating history of netflix. Retrieved from inteestingengineering.com:
https://interestingengineering.com/the-fascinating-history-of-netflix

Netfix Jobs. (2020, August 14). Retrieved from Jobs.netflix.com: https://jobs.netflix.com/

Sharma, K. (2020, August 14). hr managers learn netflix company culture. Retrieved from gethppy.com:
https://gethppy.com/company-culture/hr-managers-learn-netflix-company-culture

Spangler, T. (2020, August 14). neflix culture of fear problem. Retrieved from variety.com:
https://variety.com/2018/digital/news/netflix-culture-of-fear-problem-1202998259/

The Woman Behind the Netflix Culture Doc. (2020, August 14). Retrieved from The First Round Riview:
https://firstround.com/review/The-woman-behind-the-Netflix-Culture-doc/

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