1

Netflix Culture:
Freedom & Responsibility
2
We Seek Excellence
Our culture focuses on elpin! us
"cie#e excellence
$
Se#en %spects of our Culture

&"lues "re '"t 'e &"lue

(i! )erform"nce

Freedom & Responsibility

Context* not Control

(i!ly %li!ned* +oosely Coupled

)"y ,op of -"rket

)romotions & .e#elopment

/
-"ny comp"nies "#e nice
soundin! #"lue st"tements
displ"yed in te lobby* suc "s:
Integrity
Communication
Respect
Excellence
0
Enron* 'ose le"ders 'ent to 1"il*
"nd 'ic 'ent b"nkrupt from fr"ud*
"d tese #"lues displ"yed in teir lobby:
Integrity
Communication
Respect
Excellence
2,ese #"lues 'ere not* o'e#er* '"t '"s re"lly #"lued "t Enron3
4
,e actual comp"ny #"lues*
"s opposed to te
nice-sounding #"lues*
"re so'n by 'o !ets
re'"rded* promoted* or let !o
5
%ctu"l comp"ny #"lues "re
te
behaviors "nd skills
t"t "re valued
in fello' employees
6
%t Netflix* 'e p"rticul"rly
#"lue te follo'in! nine
be"#iors "nd skills
in our colle"!ues7
7me"nin! 'e ire "nd promote
people 'o demonstr"te tese
nine
8
9ou m"ke 'ise decisions
2people* tecnic"l*
business* "nd
cre"ti#e3 despite
"mbi!uity
9ou identify root c"uses* "nd
!et beyond tre"tin!
symptoms
9ou tink str"te!ic"lly* "nd
c"n "rticul"te '"t
you "re* and are not*
tryin! to do
9ou sm"rtly sep"r"te '"t
must be done 'ell
no'* "nd '"t c"n be
impro#ed l"ter
:ud!ment
1;
Communic"tion
9ou listen 'ell* inste"d of
re"ctin! f"st* so you
c"n better underst"nd
9ou "re concise "nd
"rticul"te in speec
"nd 'ritin!
9ou tre"t people 'it respect
independent of teir
st"tus or
dis"!reement 'it
you
9ou m"int"in c"lm poise in
stressful situ"tions
11
<mp"ct
9ou "ccomplis "m"=in!
"mounts of import"nt
'ork
9ou demonstr"te consistently
stron! perform"nce
so colle"!ues c"n
rely upon you
9ou focus on !re"t results
r"ter t"n on
process
9ou exibit bi"s>to>"ction*
"nd "#oid "n"lysis>
p"r"lysis
12
Curiosity
9ou le"rn r"pidly "nd e"!erly
9ou seek to underst"nd our
str"te!y* m"rket*
customers* "nd
suppliers
9ou "re bro"dly
kno'led!e"ble "bout
business* tecnolo!y
"nd entert"inment
9ou contribute effecti#ely
outside of your
speci"lty
1$
<nno#"tion
9ou re>conceptu"li=e issues
to disco#er pr"ctic"l
solutions to "rd
problems
9ou c"llen!e pre#"ilin!
"ssumptions 'en
'"rr"nted* "nd
su!!est better
"ppro"ces
9ou cre"te ne' ide"s t"t
pro#e useful
9ou keep us nimble by
minimi=in! complexity
"nd findin! time to
simplify
1/
Cour"!e
9ou s"y '"t you tink e#en
if it is contro#ersi"l
9ou m"ke tou! decisions
'itout "!oni=in!
9ou t"ke sm"rt risks
9ou ?uestion "ctions
inconsistent 'it our
#"lues
10
)"ssion
9ou inspire oters 'it your
tirst for excellence
9ou c"re intensely "bout
Netflix@s success
9ou celebr"te 'ins
9ou "re ten"cious
14
(onesty
9ou "re kno'n for c"ndor
"nd directness
9ou "re non>politic"l 'en
you dis"!ree 'it
oters
9ou only s"y tin!s "bout
fello' employees you
'ill s"y to teir f"ce
9ou "re ?uick to "dmit
mist"kes
15
Selflessness
9ou seek '"t is best for
Netflix* r"ter t"n
best for yourself or
your !roup
9ou "re e!o>less 'en
se"rcin! for te best
ide"s
9ou m"ke time to elp
colle"!ues
9ou s"re inform"tion openly
"nd pro"cti#ely
16
Se#en %spects of our Culture

&"lues "re '"t 'e &"lue

(i! )erform"nce

Freedom & Responsibility

Context* not Control

(i!ly %li!ned* +oosely Coupled

)"y ,op of -"rket

)romotions & .e#elopment

18
<m"!ine if every person "t
Netflix
is someone you
respect "nd le"rn from7
2;
Are"t Workpl"ce is
Stunning Colleagues
Are"t 'orkpl"ce is not espresso*
lus benefits* susi lunces* !r"nd
p"rties* or nice offices

We do some of tese tin!s* but
only if tey "re efficient "t "ttr"ctin!
"nd ret"inin!
stunnin! colle"!ues
21
+ike e#ery comp"ny*
'e try to ire 'ell
22
Bnlike m"ny comp"nies*
'e pr"ctice:
adequate performance gets a
generous severance package
2$
WeCre " team* not " f"mily
WeCre like " pro sports team*
not " kidCs recre"tion"l te"m
Netflix le"ders
ire* de#elop "nd cut smartly*
so 'e "#e st"rs in e#ery
position
2/
,e Keeper Test -"n"!ers
Bse:
Wic of my people*
if tey told me tey 'ere le"#in!*
for " simil"r 1ob "t " peer comp"ny*
'ould < fi!t "rd to keep "t NetflixD
20
,e Keeper Test -"n"!ers
Bse:
Wic of my people*
if tey told me tey 'ere le"#in!*
for " simil"r 1ob "t " peer comp"ny*
'ould < fi!t "rd to keep "t NetflixD
,e oter people sould !et " !enerous se#er"nce
no'*
so 'e c"n open " slot to try to find " st"r for
t"t role
24
(onesty %l'"ys
%s " le"der* no one in your !roup
sould be m"teri"lly surprised of
your #ie's
25
(onesty %l'"ys
C"ndor is not 1ust " le"derCs
responsibility* "nd you sould
periodic"lly "sk your m"n"!er: E<f
< told you < 'ere le"#in!* o' "rd
'ould you 'ork to c"n!e my
mindDF
26
%ll of Bs "re Responsible
for Ensurin! We +i#e our
&"lues
E9ou ?uestion "ctions inconsistent
'it our #"luesF is p"rt of te
Cour"!e #"lue
%kin to te onor code pled!e:
E< 'ill not lie* nor ce"t* nor ste"l*
nor tolerate those who do
28
)ro Sports ,e"m -et"por is
Aood* but <mperfect
%tletic te"ms "#e " fixed
number of positions* so te"m
members "re "l'"ys competin!
'it e"c oter for one of te
precious slots
$;
Corpor"te ,e"m
,e more t"lent 'e "#e*
te more 'e c"n "ccomplis*
so our people "ssist e"c oter "ll
te time
<ntern"l Ecuttro"tF or Esink or
s'imF
be"#ior is r"re "nd not toler"ted
$1
We (elp E"c Oter
,o Ge Are"t
$2
<snCt +oy"lty AoodD
W"t "bout ("rd WorkersD
W"t "bout Grilli"nt :erksD
$$
+oy"lty is Aood

+oy"lty is !ood "s " st"bili=er

)eople 'o "#e been st"rs for us* "nd

it " b"d p"tc* !et " ne"r term p"ss
bec"use 'e tink tey "re likely to
become st"rs for us "!"in

We '"nt te s"me: if Netflix its "

temporary b"d p"tc* 'e '"nt people to
stick 'it us

Gut unlimited loy"lty to " srinkin! firm* or

to "n ineffecti#e employee* is not '"t 'e
"re "bout
$/
("rd Work H Not Rele#"nt

We donCt me"sure people by o' m"ny

ours tey 'ork or o' muc tey "re in
te office

We do c"re "bout "ccomplisin! !re"t

'ork

Sust"ined G>le#el perform"nce* despite E%

for effortF* !ener"tes " !enerous
se#er"nce p"ck"!e* 'it respect

Sust"ined %>le#el perform"nce* despite

minim"l effort* is re'"rded 'it more
responsibility "nd !re"t p"y
$0
Grilli"nt :erks

Some comp"nies toler"te tem

For us* cost to effecti#e te"m'ork is too

i!

.i#erse styles "re fine H "s lon! "s person

embodies te 8 #"lues
$4
Wy "re 'e so insistent on
i! perform"nceD
<n procedur"l 'ork* te best "re 2x
better t"n te "#er"!eI
<n cre"ti#eJin#enti#e 'ork* te best
"re 1;x
better t"n te "#er"!e* so u!e
premium on cre"tin! effecti#e
te"ms of te best
$5
Wy "re 'e so insistent on
i! perform"nceD
Are"t Workpl"ce is
Stunning Colleagues
$6
Our (i! )erform"nce Culture
Not Ri!t for E#eryone

-"ny people lo#e our culture* "nd st"y "

lon! time

,ey tri#e on excellence "nd c"ndor "nd

c"n!e

,ey 'ould be dis"ppointed if !i#en "

se#er"nce p"ck"!e* but lots of mutu"l '"rmt
"nd respect

Some people* o'e#er* #"lue 1ob security

"nd st"bility o#er perform"nce* "nd donCt
like our culture

,ey feel fe"rful "t Netflix

,ey "re sometimes bitter if let !o* "nd feel

t"t 'e "re politic"l pl"ce to 'ork

WeCre !ettin! better "t "ttr"ctin! only te

former* "nd elpin! te l"tter re"li=e 'e
"re not ri!t for tem
$8
Se#en %spects of our Culture

&"lues "re '"t 'e &"lue

(i! )erform"nce

Freedom & Responsibility

Context* not Control

(i!ly %li!ned* +oosely Coupled

)"y ,op of -"rket

)romotions & .e#elopment

/;
,e R"re Responsible )erson

Self moti#"tin!

Self "'"re

Self disciplined

Self impro#in!

%cts like " le"der

.oesnCt '"it to be told '"t to do

)icks up te tr"s lyin! on te floor

/1
Responsible )eople
Thrive on Freedom*
"nd "re Worthy of Freedom
/2
Our model is to increase
employee freedom "s 'e
!ro'*
r"ter t"n limit it*
to continue to "ttr"ct "nd
nouris inno#"ti#e people*
so 'e "#e better c"nce of
sust"ined success
/$
-ost Comp"nies
Curt"il Freedom "s tey !et
Gi!!er
Gi!!er
Employee Freedom
//
Wy .o -ost Comp"nies
Curt"il Freedom
"nd Gecome Gure"ucr"tic
"s tey Aro'D
/0
.esire for Gi!!er )ositi#e <mp"ct
Cre"tes Aro't
Aro't
/4
Aro't <ncre"ses Complexity
Complexity
/5
Aro't %lso Often Srinks ,"lent
.ensity
K (i! )erform"nce Employees
Complexity
/6
C"os Emer!es
K (i! )erform"nce Employees
Chaos and errors spike here usiness
has ecome too complex to run
in!ormally "ith this talent level
Complexity
/8
)rocess Emer!es to Stop te
C"os
)rocedures
No one lo#es process* but
feels !ood comp"red to te
p"in of c"os
E,ime to !ro' upF becomes
te profession"l m"n"!ementCs
m"ntr"
0;
)rocess>focus .ri#es -ore
,"lent Out
K (i! )erform"nce Employees
01
)rocess Grin!s Seducti#ely
Stron!
Ne"r>,erm Outcome

% i!ly>successful process>dri#en comp"ny

Wit le"din! s"re in its m"rket

-inim"l tinkin! re?uired

Fe' mist"kes m"de H #ery efficient

Fe' curious inno#"tor>m"#ericks rem"in

&ery optimi=ed processes for its existin! m"rket

Efficiency "s trumped flexibility

02
,en te -"rket Sifts7

-"rket sifts due to ne' tecnolo!y or

competitors or business models

Comp"ny is un"ble to "d"pt ?uickly

bec"use te employees "re extremely !ood

"t follo'in! te existin! processes* "nd
process "derence is te #"lue system

Comp"ny !ener"lly !rinds p"infully into

irrele#"nce
0$
Seems +ike ,ree G"d Options
1I St"y cre"ti#e by st"yin! sm"ll* but
terefore "#e less imp"ct
2I %#oid rules "s you !ro'* "nd suffer
c"os
$I Bse process "s you !ro' to dri#e
efficient execution of current model* but
cripple cre"ti#ity* flexibility* "nd "bility to
tri#e 'en your m"rket e#entu"lly
c"n!es
0/
% Fourt Option

%#oid C"os "s you !ro' 'it E#er -ore

(i! )erform"nce )eople H not 'it Rules

,en you c"n continue to mostly run

inform"lly 'it self>discipline* "nd "#oid c"os

,e run inform"lly p"rt is '"t en"bles "nd

"ttr"cts cre"ti#ity
00
,e Ley: <ncre"se ,"lent
.ensity f"ster t"n Complexity
Aro's
K

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ity
04
<ncre"se ,"lent .ensity

,op of m"rket compens"tion

%ttr"ct i!>#"lue people trou!

freedom to m"ke bi! imp"ct

Ge dem"ndin! "bout i!
perform"nce culture
K

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m
p
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o
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e
s
05
-inimi=e Complexity Aro't
G
u
s
in
e
s
s
C
o
m
p
le
x
ity

Fe' bi! products #s m"ny sm"ll ones

Elimin"te distr"ctin! complexity 2b"rn"cles3

Ge '"ry of efficiency optimi="tions t"t

incre"se complexity "nd ri!idity
Note: sometimes lon!>term simplicity is
"cie#ed only trou! bursts of
complexity to re'ork current
systems
06
Wit te Ri!t )eople*
Instead of "
Culture of )rocess %derence*
We "#e " Culture of
Cre"ti#ity "nd Self>.iscipline*
Freedom "nd Responsibility
08
<s Freedom %bsoluteD
%re "ll rules & processes b"dD
4;
Freedom is not "bsolute
+ike Efree speecF
tere "re some
limited exceptions to
Efreedom "t 'orkF
41
,'o ,ypes of Necess"ry Rules
1I )re#ent irre#oc"ble dis"ster

Fin"nci"ls produced "re 'ron!

("ckers ste"l our customersC credit c"rd info

1I -or"l* etic"l* le!"l issues

.isonesty* "r"ssment "re intoler"ble

42
-ostly* tou!* Rapid
Recovery is
te Ri!t -odel

:ust fix problems ?uickly

#igh per!ormers make very !e" errors

WeCre in " cre"ti#e>in#enti#e m"rket* not "

s"fety>critic"l m"rket like medicine or
nucle"r po'er

9ou m"y "#e e"rd pre#entin! error is

ce"per t"n fixin! it

9es* in m"nuf"cturin! or medicine* but7

$ot so in creative environments

4$
EAoodF #ersus EG"dF )rocess

EAoodF process elps t"lented people !et

more done

+ettin! oters kno' 'en you "re upd"tin!

code

Spend 'itin bud!et e"c ?u"rter so donCt

"#e to coordin"te e#ery spendin! decision
"cross dep"rtments

Re!ul"rly sceduled str"te!y "nd context

meetin!s

EG"dF process tries to pre#ent reco#er"ble

mist"kes

Aet pre>"ppro#"ls for M0k spendin!

$ people to si!n off on b"nner "d cre"ti#e

)ermission needed to "n! " poster on " '"ll

-ulti>le#el "ppro#"l process for pro1ects

Aet 1; people to inter#ie' e"c c"ndid"te

4/
Rule Creep

EG"dF processes tend to creep in

)re#entin! errors 1ust sounds so !ood

We try to !et rid of rules 'en 'e c"n* to

reinforce te point
40
Ex"mple: Netflix &"c"tion
)olicy
"nd ,r"ckin!
Bntil 2;;/ 'e "d te st"nd"rd
model of N d"ys per ye"r
44
-e"n'ile7
WeCre "ll 'orkin! online some
ni!ts "nd 'eekends* respondin!
to em"ils "t odd ours* spendin!
some "fternoons on person"l
time* "nd t"kin! !ood #"c"tions
45
%n employee pointed out7
We donCt tr"ck ours 'orked per
d"y or per 'eek* so 'y "re 'e
tr"ckin! d"ys of #"c"tion per
ye"rD
46
We re"li=ed7
We sould focus on '"t people
!et done* not on o' m"ny d"ys
'orked
:ust "s 'e donCt "#e "n 8"m>
0pm 'orkd"y policy* 'e donCt
need " #"c"tion policy
48
Netflix &"c"tion )olicy
"nd ,r"ckin!
Etere is no policy or tr"ckin!F
5;
Netflix &"c"tion )olicy
"nd ,r"ckin!
Etere is no policy or tr"ckin!F
,ere is "lso no clotin! policy "t
Netflix*
but no one comes to 'ork n"ked
+esson: you donCt need policies
for e#erytin!
51
No &"c"tion )olicy .oesnCt
-e"n
No &"c"tion
Netflix le"ders set !ood ex"mples
by t"kin! bi! #"c"tions H "nd
comin! b"ck inspired to find bi!
ide"s
52
%noter Ex"mple of Freedom
"nd Responsibility7
5$
-ost comp"nies "#e
complex policies "round '"t
you c"n expense* o' you
tr"#el* '"t !ifts you c"n
"ccept* etcI
)lus tey "#e 'ole
dep"rtments to #erify
compli"nce
'it tese policies
5/
Netflix )olicies
for Expensin!* Entert"inment*
Aifts & ,r"#el:
%&ct in $et!lix's (est Interest
20 'ords lon!3
50
E%ct in NetflixCs Gest <nterestF
Generally -e"ns7
1I Expense only '"t you 'ould oter'ise
not spend* "nd is 'ort'ile for 'ork
2I ,r"#el "s you 'ould if it 'ere your o'n
money
$I .isclose non>tri#i"l #endor !ifts
/I ,"ke from Netflix only 'en it is
inefficient to not t"ke* "nd
inconse?uenti"l

Et"kin!F me"ns* for ex"mple* printin!

person"l documents "t 'ork or m"kin!
person"l c"lls on 'ork pone:
inconse?uenti"l "nd inefficient to "#oid
54
Freedom "nd Responsibility

-"ny people s"y one c"nCt do it "t sc"le

Gut since !oin! public in 2;;2* 'ic is

tr"dition"lly te end of freedom* 'eC#e
subst"nti"lly increased t"lent density "nd
employee freedom
55
Summ"ry of
Freedom & Responsibility:
%s We Aro'* -inimi=e Rules

<nibit C"os 'it E#er -ore
(i! )erform"nce )eople
Flexibility is -ore <mport"nt
t"n Efficiency in te +on! ,erm
56
Se#en %spects of our Culture

&"lues "re '"t 'e &"lue

(i! )erform"nce

Freedom & Responsibility

Context* not Control

(i!ly %li!ned* +oosely Coupled

)"y ,op of -"rket

)romotions & .e#elopment

58
If you want to build a ship,
dont drum up the people
to gather wood, divide the
work, and give orders!
Instead, teach them to yearn
for the vast and endless sea!
>%ntoine .e S"int>Exupery*
%utor of ,e +ittle )rince
6;
,e best m"n"!ers fi!ure out
o' to !et !re"t outcomes by
settin! te "ppropri"te
context* r"ter t"n by tryin!
to control teir people
61
Context* not Control
Context )emrace*

Str"te!y

-etrics

%ssumptions

Ob1ecti#es

Cle"rly>defined roles

Lno'led!e of te st"kes

,r"nsp"rency "round
decision>m"kin!
Control )avoid*

,op>do'n decision>
m"kin!

-"n"!ement "ppro#"l

Committees

)l"nnin! "nd process

#"lued more t"n results
)ro#ide te insi!t "nd underst"ndin! to en"ble sound decisions
62
Aood Context

+ink to comp"nyJfunction"l !o"ls

Rel"ti#e priority 2o' import"ntJo' time

sensiti#e3

Critic"l 2needs to "ppen no'3* or7

Nice to "#e 2'en you c"n !et to it3

+e#el of precision & refinement

No errors 2credit c"rds "ndlin!* etc73* or7

)retty !ood J c"n correct errors 2'ebsite3*

or7

Rou! 2experiment"l3

Ley st"keolders

Ley metrics J definition of success

6$
-"n"!ers: Wen one of your
t"lented people
does sometin! dumb*
don"t blame them
<nste"d*
"sk yourself '"t context
you f"iled to set
6/
-"n"!ers: Wen you "re
tempted to EcontrolF your
people* "sk yourself '"t
context you could set inste"d
%re you "rticul"te "nd inspirin!
enou! "bout !o"ls "nd
str"te!iesD
60
Wy -"n"!in! ,rou!
ContextD
(i! perform"nce people 'ill do
better 'ork if tey underst"nd te
context
64
<n#estin! in Context
,is is 'y 'e do ne' employee
colle!e* fre?uent dep"rtment
meetin!s* "nd 'y 'e "re so
open intern"lly "bout str"te!ies
"nd results
65
Exceptions to EContext* not
ControlF

Control c"n be import"nt in emer!ency

No time to t"ke lon!>term c"p"city>buildin!

#ie'

Control c"n be import"nt 'en someone

is still le"rnin! teir "re"

,"kes time to pick up te necess"ry context

Control c"n be import"nt 'en you "#e

te 'ron! person in " role

,empor"rily* no doubt
66
Se#en %spects of our Culture

&"lues "re '"t 'e &"lue

(i! )erform"nce

Freedom & Responsibility

Context* not Control

(i!ly %li!ned* +oosely Coupled

)"y ,op of -"rket

)romotions & .e#elopment

68
,ree -odels of Corpor"te
,e"m'ork
1I ,i!tly Coupled -onolit
2I <ndependent Silos
$I (i!ly %li!ned* +oosely Coupled
8;
,i!tly Coupled -onolit

Senior m"n"!ement re#ie's ne"rly "ll

t"ctics

eI!I* CEO re#ie's "ll 1ob offers or "d#ertisin!

+ots of x>dep"rtment"l buy>in meetin!s

Leepin! oter intern"l !roups "ppy "s

e?u"l precedence 'it ple"sin! customers

-"#ericks !et ex"usted tryin! to

inno#"te

(i!ly coordin"ted trou! centr"li="tion*

but #ery slo'* "nd slo'ness incre"ses
'it si=e
81
<ndependent Silos

E"c !roup executes on teir ob1ecti#es

'it little coordin"tion

E#eryone does teir o'n tin!

Work t"t re?uires coordin"tion suffers

%lien"tion "nd suspicion bet'een

dep"rtments

Only 'orks 'ell 'en "re"s "re

independent

eI!I* "ircr"ft en!ines "nd blenders for AE

82
N$ is te Netflix Coice
1I ,i!tly Coupled -onolit
2I <ndependent Silos
+, #ighly &ligned- .oosely Coupled
8$
(i!ly %li!ned* +oosely
Coupled

(i!ly %li!ned

Str"te!y "nd !o"ls "re cle"r* specific* bro"dly

understood

,e"m inter"ctions focused on str"te!y "nd

!o"ls* r"ter t"n t"ctics

Re?uires l"r!e in#estment in m"n"!ement

time to be tr"nsp"rent "nd "rticul"te "nd
percepti#e

+oosely Coupled

-inim"l cross>function"l meetin!s except to

!et "li!ned on !o"ls "nd str"te!y

,rust bet'een !roups on t"ctics 'itout

pre#ie'in!J"ppro#in! e"c one H so !roups
c"n mo#e f"st

+e"ders re"cin! out pro"cti#ely for "d>oc

coordin"tion "nd perspecti#e "s "ppropri"te

Occ"sion"l post>mortems on t"ctics

necess"ry to incre"se "li!nment
8/
(i!ly %li!ned* +oosely
Coupled te"m'ork
effecti#eness
depends on
high per!ormance people
"nd good context
Ao"l is to be
(ig and /ast and /lexile
80
Se#en %spects of our Culture

&"lues "re '"t 'e &"lue

(i! )erform"nce

Freedom & Responsibility

Context* not Control

(i!ly %li!ned* +oosely Coupled

)"y ,op of -"rket

)romotions & .e#elopment

84
)"y ,op of -"rket
is Core to
(i! )erform"nce Culture
One outst"ndin! employee !ets
more done "nd costs less t"n
t'o "de?u"te employees
We ende"#or to "#e only
outst"ndin! employees
85
,ree ,ests for ,op of -"rket
for " )erson
1I W"t could person !et else'ereD
2I W"t 'ould 'e p"y for repl"cementD
$I W"t 'ould 'e p"y to keep t"t personD

<f tey "d " bi!!er offer else'ere

86
,"kes Are"t :ud!ment

Ao"l is to keep e"c employee "t top of

m"rket for that person

)"y tem more t"n "nyone else likely 'ould

)"y tem "s muc "s " repl"cement 'ould

cost

)"y tem "s muc "s 'e 'ould p"y to keep

tem if tey "d i!er offer from else'ere
88
,itles Not &ery (elpful

+ots of people "#e te title E-"1or

+e"!ue )itcerF but tey "re not "ll
e?u"lly effecti#e

Simil"rly* "ll people 'it te title ESenior

-"rketin! -"n"!erF or E.irector of
En!ineerin!F "re not e?u"lly effecti#e

So te "rt of compens"tion is "ns'erin!

te ,ree ,ests for e"c employee
1;;
%nnu"l Comp Re#ie'

%t m"ny firms* 'en employees "re ired*

m"rket compens"tion "pplies

Gut "t comp re#ie' time* it no lon!er "ppliesO

%t Netflix* m"rket comp "l'"ys "pplies:

Essenti"lly* top of m"rket comp is re>

est"blised e"c ye"r for i! performin!
employees

%t "nnu"l comp re#ie'* m"n"!er "s to

"ns'er te ,ree ,ests for te person"l
m"rket for e"c of teir employees
1;1
No Fixed Gud!ets

,ere "re no centr"lly "dministered Er"ise

poolsF e"c ye"r

<nste"d* e"c m"n"!er "li!ns teir people

to top of m"rket e"c ye"r H te m"rket
'ill be different in different "re"s
1;2
Compens"tion O#er ,ime

Some people 'ill mo#e up in comp #ery

?uickly bec"use teir #"lue in te
m"rketpl"ce is mo#in! up ?uickly* dri#en
by incre"sin! skills "ndJor !re"t dem"nd
for teir "re"

Some people 'ill st"y fl"t bec"use teir

#"lue in te m"rketpl"ce "s done t"t

.epends in p"rt on infl"tion "nd economy

%l'"ys top of m"rket* tou!* for t"t person

1;$
Compens"tion Not .ependent
on Netflix Success

Weter Netflix is prosperin! or

flounderin!* 'e p"y "t te top of te
m"rket

iIeI* sports te"ms 'it losin! records still p"y

t"lent te m"rket r"te

Employees c"n coose o' muc tey

'"nt to link teir economic destiny to
Netflix by decidin! o' m"ny Netflix stock
options tey '"nt to old
1;/
G"d Comp )r"ctices

-"n"!er sets p"y "t Nt percentile of title>

linked compens"tion d"t"

,e E-"1or +e"!ue )itcerF problem

-"n"!er c"res "bout intern"l p"rity

inste"d of extern"l m"rket #"lue

F"irness in comp is bein! true to te m"rket

-"n"!er !i#es e#eryone " /K r"ise

&ery unlikely to reflect te m"rket

1;0
Wen ,op of -"rket Comp
.one Ri!tIII

We 'ill r"rely counter 'it i!er comp

'en someone is #olunt"rily le"#in!
bec"use 'e "#e "lre"dy mo#ed comp to
our m"x for t"t person

Employees 'ill feel tey "re !ettin! p"id

'ell rel"ti#e to teir oter options in te
m"rket
1;4
&ersus ,r"dition"l -odel

,r"dition"l model is !ood prior ye"r e"rns

" r"ise* independent of m"rket

)roblem is employees c"n !et m"teri"lly

under> or o#er>p"id rel"ti#e to te m"rket*
o#er time

Wen m"teri"lly under>p"id* employees

s'itc firms to t"ke "d#"nt"!e of m"rket>
b"sed p"y on irin!

Wen m"teri"lly o#er>p"id* employees "re

tr"pped in current firm

Consistent m"rket>b"sed p"y is better

model
1;5
Employee Success

<tCs pretty in!r"ined in our society t"t te

si=e of oneCs r"ise is te indic"tor of o'
'ell one did te prior ye"r

but for us te oter f"ctor is te outside

m"rket

Employee success is still " bi! f"ctor in

comp bec"use it influences m"rket #"lue

<n p"rticul"r* o' muc 'e 'ould p"y to keep

te person
1;6
Aood For E"c Employee to
Bnderst"nd ,eir -"rket &"lue

<tCs " e"lty ide"* not " tr"itorous one* to

underst"nd '"t oter firms 'ould p"y
you* by inter#ie'in! "nd t"lkin! to peers "t
oter comp"nies

,"lk 'it your m"n"!er "bout '"t you find in

terms of comp

St"y mindful of comp"ny confidenti"l

inform"tion
1;8
Efficiency

Gi! s"l"ry is te most e!!icient form of

comp

-ost moti#"tin! for "ny !i#en expense le#el

No bonuses* no free stock options* no

pil"ntropic m"tc

<nste"d* put all that expense into ig

salaries- "nd !i#e people freedom to spend
teir s"l"ries "s tey tink best

(e"lt benefits: employees !et M1;k per

ye"r

<f tey coose Netflix pl"ns t"t "re less t"n

M1;k* tey keep te difference

<f tey donCt need benefits from us* tey keep

"ll M1;k

CEO or receptionist: e#eryone !ets M1;k for

benefits
11;
Option"l Options

Employees !et top of m"rket s"l"ry* "nd

ten c"n re?uest to tr"de s"l"ry for stock
options

Some people t"ke "ll c"s* some people

re?uest "lf teir comp in options

Got "re OL

,is is consistent 'it freedom "nd

responsibility* "nd lets employees decide
o' muc riskJre'"rd is comfort"ble for
tem
111
.et"ils on Stock Options

,e options "re fully vested "nd "re 1;>

ye"rs>to>exercise options* independent of
o' lon! one st"ys "t Netflix

,ese fully #ested options "re !r"nted

montly "t te ten current stock price* so
employees !et price "#er"!in! on teir
exercise price

,ese options cost employees less t"n

"lf of '"t suc options 'ould cost in te
open m"rket* "nd "re from pre>t"x s"l"ry*
so "re " !re"t de"l

Employees c"n c"n!e teir option

re?uest "nnu"lly

Options become #"lu"ble only if #etflix

stock climbs
112
No &estin! or .eferred Comp

We donCt '"nt m"n"!ers to Eo'nF teir

people 'it #estin! H "ll comp is fully
#ested

We '"nt m"n"!ers to be responsible for

cre"tin! " !re"t pl"ce to 'ork* "nd p"yin!
"t te top of m"rket

Employees "re free to le"#e us "nytime*

'itout pen"lty* but ne"rly e#eryone st"ys

Employees st"y bec"use tey "re

p"ssion"te "bout teir 'ork* "nd 'ell p"id*
not bec"use of " deferred compens"tion
system
11$
No R"nkin! %!"inst Oter
Employees

We "#oid Etop $;KF "nd Ebottom 1;KF

r"nkin!s "mon!st employees

We donCt '"nt employees to feel

competiti#e with each other

We '"nt "ll of our employees to be Etop

1;KF rel"ti#e to te pool of !lob"l
c"ndid"tes

We '"nt employees to elp e"c oter*

"nd tey do
11/
Se#en %spects of our Culture

(i! )erform"nce

&"lues "re '"t 'e &"lue

Freedom & Responsibility

Context* not Control

(i!ly %li!ned* +oosely Coupled

)"y ,op of -"rket

)romotions & .e#elopment

110
<n some time periods* in some
!roups* tere 'ill be lots of
opportunity "nd !ro't "t
Netflix
Some people* trou! bot luck
"nd t"lent* 'ill "#e extr"ordin"ry
c"reer !ro't
114
G"seb"ll %n"lo!y: -inors to
-"1ors

&ery t"lented people usu"lly !et to mo#e

up* but only true for te #ery t"lented

Some luck in terms of '"t positions open

up "nd '"t te competition is

Some people mo#e to oter te"ms to !et

te opportunity tey '"nt

Are"t te"ms keep teir best t"lent

Some minor le"!ue pl"yers keep pl"yin!

e#en tou! tey donCt mo#e up bec"use
tey lo#e te !"me
115
Netflix .oesnCt ("#e to Ge for
+ife

<n some times* in some !roups* tere m"y

not be enou! !ro't opportunity for
e#eryone

<n 'ic c"se 'e sould celebr"te

someone le"#in! Netflix for " bi!!er 1ob
t"t 'e didnCt "#e "#"il"ble to offer tem

<f t"t is '"t te person prefers

116
,'o Necess"ry Conditions
for )romotion
1I :ob "s to be bi! enou!

We mi!t "#e "n incredible m"n"!er of

sometin!* but 'e donCt need " director of it
bec"use 1ob isnCt bi! enou!

<f te incredible m"n"!er left* 'e 'ould repl"ce

'it " m"n"!er* not 'it " director
1I )erson "s to be " superst"r in current
role

Could !et te next le#el 1ob ere if "pplyin!

from outside "nd 'e kne' teir t"lents 'ell

Could !et te next le#el 1ob "t peer firm t"t

kne' teir t"lents 'ell
118
,imin!

<f " m"n"!er 'ould promote to pre#ent "n

employee from le"#in!* te m"n"!er
sould promote no' inste"d of '"itin!

Got tests still "#e to be p"ssed

1I :ob bi! enou!
2I Superst"r in current role
12;
.e#elopment

We de#elop people by !i#in! tem te

opportunity to de#elop temsel#es* by
surroundin! tem 'it stunnin!
colle"!ues "nd !i#in! tem bi! c"llen!es
to 'ork on

-ediocre colle"!ues or unc"llen!in! 'ork is

'"t kills pro!ress of " personCs skills
121
C"reer E)l"nnin!F Not for Bs

Form"li=ed de#elopment is r"rely

effecti#e* "nd 'e donCt try to do it

eI!I* -entor "ssi!nment* rot"tion "round "

firm* multi>ye"r c"reer p"ts* etcI
122
We Support Self><mpro#ement

(i! perform"nce people "re !ener"lly

self>impro#in! trou! experience*
obser#"tion* introspection* re"din!* "nd
discussion

%s lon! "s tey "#e stunnin! colle"!ues "nd

bi! c"llen!es to 'ork on

We "ll try to elp e"c oter !ro'

We "re #ery onest 'it e"c oter

12$
We '"nt people to m"n"!e
teir o'n c"reer !ro't*
"nd not rely on " corpor"tion
for Epl"nnin!F teir c"reers
12/
9our Economic Security is
b"sed on your Skills "nd
Reput"tion
We try "rd to consistently
pro#ide opportunity to !ro' bot
by surroundin! you 'it !re"t
t"lent
120
Se#en %spects of our Culture

&"lues "re '"t 'e &"lue

(i! )erform"nce

Freedom & Responsibility

Context* not Control

(i!ly %li!ned* +oosely Coupled

)"y ,op of -"rket

)romotions & .e#elopment

124
We keep impro#in!
our culture "s 'e !ro'
We try to !et better
"t seekin! excellence