Book Notes: No Rules Rules

No Rules Rules: Netflix and the Culture of Reinvention by Reed Hastings, Erin Meyer
My rating: 4 of 5 stars

A culture of “Freedom and Responsibility” (F&R)

  • First
    • Build up talent density by creating a workforce of high performers
      • Your number one goal as a leader is to develop a work environment consisting exclusively of stunning colleagues
      • Stunning colleagues accomplish significant amounts of important work and are exceptionally creative and passionate
      • Jerks sackers, sweet people with non-stellar performance or pessimists left on the team will bring down the performance of everyone
    • Introduce candour by encouraging loads of feedback
      • With candour, high performers become outstanding performers. Frequent candid feedback exponentially magnifies the speed and effectiveness of your team or workforce.
      • Set the stage for candour by building feedback moments into your regular meetings
      • Coach your employees to give and receive feedback effectively, following the 4A guideline
        • Give
          • Aim to assist
          • Actionable
        • Receive
          • Appreciate
          • Accept or discard
      • As the leader, solicit feedback frequently and respond with belonging cues when you receive it.
      • Get rid of jerks as you instil a culture of candour
    • Remove controls such as vacation, travel and expenses policies
      • Vacation
        • Explain there is no need to ask for prior approval and that neither the employees themselves nor their managers are expected to keep track of their days away from the office
        • It is left to the employee alone to decide if and when he or she feels like taking a few hours, a day, a week or a month off work
        • Leaders need to fill the hole of the policy with context on how employees should approach it
        • Leaders modelling the behaviour they expect is key – a leader never taking a holiday will result in an organisation that never does either.
      • Travel and expenses
        • When removing the policy set context and then check some receipts at the end – if people overspend set more context.
        • With no policy the finance department will need to audit a portion of receipts annually
        • When you find people abusing the system fire them and speak about it openly. This is needed so others understand the ramifications.
        • Some expenses may increase with freedom, but the costs from overspending are not nearly as high as the gains that freedom provides
        • With expenses freedom, employees will be able to make quick decisions to spend money in ways that help the business
        • Without the time and administrative costs associated with purchase orders and procurement processes, you will waste fewer resources
        • Many employees will respond to their new freedom by spending less than they would in a system with rules. when you tell people you trust them, they will show you how trustworthy they are.
  • Second
    • Strengthen talent density by paying top of market
      • The method used by most companies to compensate employees are not idea for a creative, high-talent-density workforce.
      • Divide your workforce into creative and operational employees. Pay the creative workers top of the market. This may mean hiring one exceptional individual instead of ten or more adequate people.
      • Don’t pay performance-based bonuses. Put these resources into salary instead.
      • Teach employees to develop their network and to invest in getting to know their own (and their teams) market value on an ongoing basis. This might mean taking calls from recruiters or even going to interviews at other companies. Adjust salaries accordingly.
    • Increase candour by emphasising organisational transparency
      • To instigate a culture of transparency, consider what symbolic messages you send. Get rid of closed offices, assistants who act as guards, and locked spaces.
      • Open up the books to your employees. Teach them how to read the P&L. Share sensitive financial and strategic information with everyone in the company.
      • When making decisions that will impact your employees’ well-being, like reorganisations or layoffs, open up to the workforce early, before things are solidified. This will cause some anxiety and distraction, but the trust you build will outweigh the disadvantages.
      • When transparency is in tension with an individual’s privacy, follow this guideline: If the information is about something that happened at work, choose transparency and speak candidly about the incident. If the information is about an employee’s personal life, tell people it’s not your place to share and they can ask the person concerned directly if they choose.
      • As long as you’ve already shown yourself to be competent, talking openly and extensively about your own mistakes-and encouraging all your leaders to do the same-will increase trust, goodwill, and innovation throughout the organisation.
    • Release more controls such as decision-making approvals
      • In a fast and innovative company, ownership of critical, big-ticket decisions should be dispersed across the workforce at all different levels, not allocated according to hierarchical status.
      • In order for this to work the leader must teach her staff the Netflix principle, “Don’t seek to please your boss.”
      • When new employees join the company, tell them they have a handful of metaphorical chips that they can make bets with. Some gambles will succeed, and some will fail. A worker’s performance will be judged on the collective outcome of his bets, not on the results from one single instance.
      • To help your workforce make good bets, encourage them to farm for dissent, socialise the idea, and for big bets, test it out.
      • Teach your employees that when a bet fails, they should sunshine it openly.
  • Third
    • Max-up talent density by implementing the Keeper Test
      • In order to encourage your managers to be tough on performance, teach them to use the Keeper Test: “Which of my people, if they told me they were leaving for a similar job at another company, would fight hard to keep?”
      • Avoid stack-ranking systems, as they create internal competition and discourage collaboration.
      • For a high-performance culture, a professional sports team is a better metaphor than a family. Coach your managers to create strong feelings of commitment, cohesion, and camaraderie on the team, while continually making tough decisions to ensure the best player is manning each post.
      • When you realise you need to let someone go, instead of putting him on some type of PIP, which is humiliating and organisationally costly, take all that money and give it to the employee in the form of a generous severance payment.
      • The downside to a high-performance culture is the fear employees may feel that their jobs are on the line. To reduce fear, encourage employees to use the Keeper Test Prompt with their managers: “How hard would you work to change my mind if were thinking of leaving?”
      • When an employee is let go, speak openly about what happened with your staff and answer their questions candidly. This will diminish their fear of being next and increase their trust in the company and its managers.
    • Max-up candour by creating circles of feedback
      • Candour is like going to the dentist. Even if you encourage everyone to brush daily, some won’t do it. Those who do may still miss the uncomfortable spots. A thorough session every six to twelve months ensures clean teeth and clear feedback.
      • Performance reviews are not the best mechanism for a candid work environment, primarily because the feedback usually goes only one way (down) and comes from only one person (the boss).
      • A 360 written report is a good mechanism for annual feedback. But avoid anonymity and numeric ratings, don’t link results to raises or promotions, and open up comments to anyone who is ready to give them.
      • Live 360 dinners are another effective process. Set aside several hours away from the office. Give clear instructions, follow the 4A feedback guidelines, and use the Start, Stop, Continue method with roughly 25 percent positive, 75 percent developmental-all actionable and no fluff.
  • Eliminate most controls by leading with context not control
    • In order to lead with context, you need to have high talent density, your goal needs to be innovation (not error prevention), and you need to be operating in a loosely coupled system.
    • Once these elements are in place, instead of telling people what to do, get in lockstep alignment by providing and debating all the context that will allow them to make good decisions.
    • When one of your people does something dumb, don’t blame that person. Instead, ask yourself what context you failed to set. Are you articulate and inspiring enough in expressing your goals and strategy? Have you clearly explained all the assumptions and risks that will help your team to make good decisions? Are you and your employees highly aligned on vision and objectives?
    • A loosely coupled organisation should resemble a tree rather than a pyramid. The boss is at the roots, holding up the trunk of senior managers who support the outer branches where decisions are made.
    • You know you’re successfully leading with context when your people are moving the team in the desired direction by using the information they’ve received from you and those around you to make great decisions themselves.

Map out your corporate culture and compare it to the cultures of the countries you are expanding into. For a culture of F&R, candour will need extra attention.

In less direct countries, implement more formal feedback mechanisms and put feedback on the agenda more frequently, because informal exchanges will happen less often.

With more direct cultures, talk about the cultural differences openly so the feedback is understood as intended.

Make ADAPTABILITY the fifth A of your candour model. Discuss openly what candour means in different parts of the world. Work together to discover how both sides can adapt to bring this value to life.

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