Introduction

Netflix was started in 1997 as a DVD Rental Company by Reed Hastings. It slowly
expanded to streaming media online and has even started producing and distributing
television series and movies under the title, ‘Netflix Original’. Today it has become a
household name and is the largest digital media and entertainment company in the world
with nearly 193 million subscriptions in April 2020. It is a company of high performers
who are dedicated to provide quality content to their audience in 190 different countries.
The company has managed to reinvent itself time and again and has stayed relevant
over the past 3 decades. 
 
Netflix’s HR Policy has always been out of the box and has managed to align the skills
and talents of its employee base with the future aspirations of the firm. They put a lot of
ownership in the hands of their employees and follow one basic principle, ‘Act in Netflix’s
best interests.’ Netflix expects nothing but the best performance from its employees and
mediocre performers are just asked to move on from the company. Their no-nonsense
attitude is like a breath of fresh air from the usual complex corporate structures and
dealings. It is very rare for a company this size to maintain such straightforward HR
policies, which include no ranking among employees, fully flexible vacation days, top of
the market pay, no 9-5 workday policy among others. Sheryl Sandberg, the COO of
Facebook, termed a presentation on Netflix’s HR policies as one of the most important
documents to have come out of the Silicon Valley. 
 
Our group has aimed to recognize and analyse the various steps taken by Netflix which
separates it from others and identify what makes the world Netflix and Chill.

Literature Review
With a rapidly changing external business environment, strategic agility is the way to
review or rediscover organization and organization’s strategy (Doz & Kosonen, 2008).  
 
   The technological changes in the era of globalization, de-regulation, and mass-
customization has created hypercompetitive environments for business and the
competitive advantages are temporary (D'Aveni, 1999; D'Aveni, Dagnino, & Smith,
2010). Netflix is operating in a rapid changing environment, which can be seen in its
marketing strategies which react simultaneously to the external stimulus, they need a
same set of culture inside the organization, so that their employees also categories Netflix
with the same values as their customers.

The organisational structure and strategy when changed according to external

environmental changes, can be leveraged into opportunity (Shin, Lee, Kim, & Rhim,
2015). This can be seen in the agility with which Netflix brings out content of various
genres, this helps it to connect with the audience on the recent event and help Netflix
grow.

    Chow and Chew (2006) discovered a positive relationship between flexible working
hours (FWH) and employee’s productivity. After conducting a study among workers with
Flexible Working Hours, with workers without FWH. The study showed significant
differences between the two groups in terms of operational productivity and
organizational commitment. They concluded that workers with FWH have a higher level of
productivity and organizational commitment than those without. 
   Job satisfaction is influenced positively by implementation of UVP (unlimited Vacation
Policy) for employees within individual tech-companies. However, the magnitude of this
direct effect fluctuates. that job satisfaction is further affected as a spillover effect of work-
life balance, that is an indirect effect of UVP of an employee’s job satisfaction.

HR Outcomes - Stakeholder imperatives

Employees: HR policies directly affect the employee morale and outlook towards the
company. There is a very visible difference in employee reviews of Netflix before and
after the HR policy implementation of 2014. Netflix values were structured to retain and
grow highly talented individuals because of which low performing employees ended up
having a beef with the management.

As per reviews on Glassdoor, there is a stark improvement on the following metrics:

Pre HR policy overhaul Post HR policy overhaul

Recommendation of company 1.5 4
Outlook towards company 2 4
Approval for CEO 1 3.5

Ratings by Employees
4 4
3.5

2
1.5
1

Recommendation of company Outlook towards company Approval for CEO

Pre HR policy overhaul Post HR policy overhaul

Customers: Netflix’s HR policies had a direct impact on the customer satisfaction levels.
The new HR policies focused primarily on the quality of people they had on board which
eventually percolated to the content they provided.

As per American Customer Satisfaction Index’s Retail Report, Netflix had a customer
satisfaction score of 79 in late 2013 which was 5% when compared with the previous
year. The ACSI Retail and E-Commerce Report 2013 is based on interviews over
telephone and email with 11,531 customers chosen at random between October and
December 2013. 
This is a clear indication of the impact that the HR policies had on the customers-at-large
who are the primary stakeholders of the company.

Investors: Netflix Inc was listed on NASDAQ in 2002. The share prices of Netflix
showcased a significant difference from ~13.71USD/share on 1/1/13 to ~51.87USD/share
on 1/1/14; a tremendous growth of 378.33% in just one year either side of which were the
new HR policies implemented by Netflix. A direct jump in revenue was because of an
increasing customer base which people attributed to better quality content.
 Organizational Structure & Decision Making
The organizational decision-making process at Netflix can be broken down into 2 segments:
1. Human Resource Decisions
2. Strategic Decisions

The Human Resource decisions can further be broken down into 5 segments :
1. HRM Policy : What was the strategic policy governing the HR decisions at Netflix?
2. Talent Management : What were the recruitment, placement & talent management
activities at the firm?
3. Training & Development : What were the policies regarding the talent management of the
employees?
4. Compensation & Rewards : What were the compensation policies? What was the rewards
system in place?
5. Employee Relations : How were the employee relations with the firm management

Organisational
Decision Making

A. Human
B. Strategic
Resource
Decisions
Decisions

1. Revenue
1. HRM Policy
Streams

2. Talent 2. Direct Cost

Management Minimizations

3. Training & 3. Sales &

Development Marketing

4. Types of
4. Compensation
movies & TV
& Rewards
shows

5. Employee 5. Geographic
Relations Exapnsion
The strategic decisions were taken by the people hired by Netflix. The strategic decisions
took were also implemented by the people hired by Netflix. Hence the human resource
decisions drove the strategic decisions and their implementation at the firm.

Talent Training & Compensation Employee

HRM Policy
Management Development & Rewards Relations
HRM POLICY

• Since the strategic decisions of the company are majorly driven by the HR activities
at the firm, we can use the Dave-Ulrich model to explain the HR system at Netflix.

• Strategic Partner
I. The HR identifies top key talents at the firm
II. HR aims to increase productivity across the firm by using the knowledge base of top
performers and spreading it over their team mates.

• Change Agent
I. The HR at Netflix plans internal communication & intervenes to make them achievable
and understandable by employees
II. HR supports changes in the organization & leads initiatives to make changes easier for
employees

• Administrative Expert
I. HR at Netflix demonstrates deep knowledge of labor law and dealing with difficult
employees
II. HR also implements changes in legislation, regulations, work & safety rules etc.
• Employee Champion

I. The HR represents employees and makes sure strategic initiatives especially

regarding pay structures and performances are well balanced. Below is a
comprehensive skills matrix used for appraisal decision making.
L
3
L
2
L
1
Judgement Communication Impact Curiosity Innovation Courage Passion Honesty Selflessness

We can assume the recruitment to be based on the above skill matrix. The levels attributed
to different skills are different across roles. L3 is the highest level for that role and L1 is the
base.

For eg. For a software developer, impact, judgement and curiosity would be required of the
highest level (L3) however in case of a product manager or higher level manager
communication would also play a major role in addition to the other important metrics.

Salient Features of Netflix’s HR system:

Value of high performance: The best are 10X better than the average, so there is a heavy
premium on creating effective teams of the best.

The keeper test: Only retain those people for whose retention their managers would
fight hard.

Highly aligned and loosely coupled framework:

 Strategy and goals are clearly understood through team interactions
 Management time is transparent & articulate
 Minimal cross-functional meetings
 Leaders reach out proactively for ad-hoc coordination
Compensation: Sustained A-Level performance, despite minimal effort, is rewarded with
more responsibility & great pay.
Vacation Policy: The employee can take as many vacations as you want as long as you
are on top of your work and have completed the tasks assigned.

Expectations and Reality

A flexible work environment is designed to promote a performance-oriented culture.
People are expected to deliver the predetermined goals at the maximum speed and
efficiency they can and then use rest of the time in self-fulfilment through non-work
activities. This helps in countering stress and promotes creativity in them, which was very
well observed at Netflix [3]. A grand severance package and a remuneration structure
with ‘no-strings attached’ (nothing like deferred component) ensured that anyone who
wants to move on can do so without any misgivings. So, we get a pool of employees who
are really passionate about the work they do.
People were expected to behave as adults in their company dealings. They have to be
frugal in their spending and think best of the organisation at all times. This created a
sense of belongingness and responsibility towards the organisation, which pays in the
long run. Many employees really enjoy the freedom and minimal supervision in the tasks
they execute.

As we researched over glassdoor [2] reviews, we got to know about many downsides of
this unconventional HR policy. The ‘Keeper Test’, which was supposed to be the one
guiding factor to decide whether to fire or retain, has become a political playground. Many
employees complain of the 360 degree feedback process as being biased towards
favourites (non-performance factors). Lack of clarity about several HR policies, where
people are advised to ‘what you think is best’ has led to confusion. Many a times, firing is
so swift that employees don’t have clarity over what went wrong as no warning or
feedback process is in place.

Lack of a formal training process and an overambitious workforce has made the
environment very competitive. Not everyone is suited to work in such an unconventional
setup. Thus, a culture of uncertainty and fear has developed. The problem with the office
hour flexibility is that on one hand, many people become freeloaders, but many do not
take a single leave/ break in a very long time due to the fear of getting fired.

Avoiding “brilliant jerks”, or bullies at any cost; this has been showcased as the base
policy in Neltflix’s HR Primer, but the fast paced environment, high-achiever employees
and cut-throat competition do not go hand in hand with what’s proclaimed.

Coming to flexibility, it is similar to what many people are experiencing during Covid.
Work From Home was supposed to be less loaded than the typical office work but the
contrary is happening. Similarly, many employees at Netflix complain that they have to
make their timelines flexible to accommodate off-time meetings and tasks with nothing in
return, primarily because work hours are not measured.

Conclusions and Recommendations

On considering the qualitative and quantitative aspects, we can safely conclude that the
revolutionary HR policies implemented by Netflix significantly increased stakeholder
wealth across the board. Even though there was some dissatisfaction among the
employees, in the longer run, the talented employees were very satisfied as well.

We observed that the hyper competitive environment in addition to an unstructured

review process added to the anxiety of the employees. The employees, who were very
talented but could not confront the fast paced environment and the ‘political’ review
process were had to subsequently leave the organisation. This policy of ‘Up or Out’
imposes huge pressure on the recruitment. On these lines, we would like to recommend a
structured review and promotion process in the company.