Ne#lix	  Culture:	  Freedom	  &	  Responsibility	  	                  	                                           1	  
We	  Seek	  Excellence	  Our	  culture	  focusses	  on	  helping	  us	             achieve	  excellence	                  ...
Seven	  Aspects	  of	  our	  Culture	  •    Values	  are	  what	  we	  Value	  •    High	  Performance	  	  •    Freedom	 ...
Many	  companies	  have	  nice	    sounding	  value	  statements	  displayed	  in	  the	  lobby,	  such	  as:	            ...
Enron,	  whose	  leaders	  went	  to	  jail,	  	   and	  which	  went	  bankrupt	  from	  fraud,	  	  had	  these	  values...
The	  actual	  company	  values,	  	          as	  opposed	  to	  the	  	      nice-­‐sounding	  values,	  	     are	  sho...
Actual	  company	  values	  are	  the	        behaviors	  and	  skills	             that	  are	  valued	  	       in	  fel...
 At	  Ne#lix,	  we	  parNcularly	  value	  the	  following	  nine	  behaviors	  and	  skills	  	             in	  our	  co...
You	  make	  wise	  decisions	                 (people,	  technical,	  business,	  and	                 creaNve)	  despite...
You	  listen	  well,	  instead	  of	                      reacNng	  fast,	  so	  you	  can	  be^er	                      u...
You	  accomplish	  amazing	               amounts	  of	  important	  work	  	               	               You	  demonstr...
You	  learn	  rapidly	  and	  eagerly	  	                  	                  You	  seek	  to	  understand	  our	         ...
You	  re-­‐conceptualize	  issues	  to	                  discover	  pracNcal	  soluNons	  to	                  hard	  prob...
You	  say	  what	  you	  think	  even	  if	  it	                is	  controversial	  	                	                You...
You	  inspire	  others	  with	  your	                thirst	  for	  excellence	  	                	                You	  c...
You	  are	  known	  for	  candor	  and	                directness	  	                	                You	  are	  non-­‐po...
You	  seek	  what	  is	  best	  for	  Ne#lix,	                    rather	  than	  best	  for	  yourself	  or	             ...
Seven	  Aspects	  of	  our	  Culture	  •    Values	  are	  what	  we	  Value	  •    High	  Performance	  	  •    Freedom	 ...
Imagine	  if	  every	  person	  at	  Ne#lix	  	             is	  someone	  you	  	     respect	  and	  learn	  from…	     ...
Great	  Workplace	  is	  	            Stunning	  Colleagues	  Great	  workplace	  is	  not	  espresso,	  lush	  benefits,	 ...
Like	  every	  company,	  	   we	  try	  to	  hire	  well	                                         21	  
Unlike	  many	  companies,	  	          we	  pracNce:	  	                  	  adequate	  performance	  gets	  a	  generous...
We’re	  a	  team,	  not	  a	  family	                              	    We’re	  like	  a	  pro	  sports	  team,	  	      n...
The	  Keeper	  Test	  Managers	  Use:	                     Which	  of	  my	  people,	  	        if	  they	  told	  me	  th...
The	  other	  people	  should	  get	  a	  generous	  severance	  now,	  	  so	  we	  can	  open	  a	  slot	  to	  try	  to...
Honesty	  Always	  As	  a	  leader,	  no	  one	  in	  your	  group	  should	  be	  materially	  surprised	  of	           ...
Honesty	  Always	  Candor	  is	  not	  just	  a	  leader’s	  responsibility,	     and	  you	  should	  periodically	  ask	...
 All	  of	  Us	  are	  Responsible	  	  for	  Ensuring	  We	  Live	  our	  Values	      “You	  quesNon	  acNons	  inconsis...
Pro	  Sports	  Team	  Metaphor	  is	         Good,	  but	  Imperfect	    AthleNc	  teams	  have	  a	  fixed	  number	  of	 ...
Corporate	  Team	                 The	  more	  talent	  we	  have,	  	               the	  more	  we	  can	  accomplish,	 ...
We	  Help	  Each	  Other	  	        To	  Be	  Great	                                        31	  
Isn’t	  Loyalty	  Good?	  	  	  What	  about	  Hard	  Workers?	  What	  about	  Brilliant	  Jerks?	  	  	                 ...
Loyalty	  is	  Good	  •  Loyalty	  is	  good	  as	  a	  stabilizer	  •  People	  who	  have	  been	  stars	  for	  us,	  a...
Hard	  Work	  –	  Not	  Relevant	  •  We	  don’t	  measure	  people	  by	  how	  many	  hours	     they	  work	  or	  how	...
Brilliant	  Jerks	  •  Some	  companies	  tolerate	  them	  •  For	  us,	  cost	  to	  effecNve	  teamwork	  is	  too	  hig...
Why	  are	  we	  so	  insistent	  on	  	    high	  performance?	           In	  procedural	  work,	  the	  best	  are	  2x...
Why	  are	  we	  so	  insistent	  on	  	    high	  performance?	             Great	  Workplace	  is	  	            Stunnin...
Our	  High	  Performance	  Culture	  	               Not	  Right	  for	  Everyone	  •  Many	  people	  love	  our	  cultur...
Seven	  Aspects	  of	  our	  Culture	  •    Values	  are	  what	  we	  Value	  •    High	  Performance	  	  •    Freedom	 ...
The	  Rare	  Responsible	  Person	  •      Self	  moNvaNng	  •      Self	  aware	  •      Self	  disciplined	  •      Self...
Responsible	  People	  	        Thrive	  on	  Freedom,	  	  and	  are	  Worthy	  of	  Freedom	                            ...
Our	  model	  is	  to	  increase	  	   employee	  freedom	  as	  we	  grow,	               rather	  than	  limit	  it,	  	...
Most	  Companies	  	  	  Curtail	  Freedom	  as	  they	  get	  Bigger	                                Bigger	             ...
Why	  Do	  Most	  Companies	  	         Curtail	  Freedom	  	  and	  Become	  BureaucraNc	  	          as	  they	  Grow?	 ...
Desire	  for	  Bigger	  PosiNve	  Impact	  	              Creates	  Growth	                               Growth	         ...
Growth	  Increases	  Complexity	                            Complexity	                                             46	  
Growth	  Also	  Osen	  Shrinks	  Talent	  Density	                                              Complexity	               ...
Chaos	  Emerges	  Chaos	  and	  errors	  spike	  here	  –	  business	  has	  become	  too	  complex	  to	  run	  informall...
Process	  Emerges	  to	  Stop	  the	  Chaos	                          Procedures	                          No	  one	  love...
Process-­‐focus	  Drives	  More	  Talent	  Out	                         %	  High	  Performance	  Employees	               ...
Process	  Brings	  SeducNvely	  Strong	  	             Near-­‐Term	  Outcome	  •  A	  highly-­‐successful	  process-­‐driv...
Then	  the	  Market	  Shiss…	  •  Market	  shiss	  due	  to	  new	  technology	  or	     compeNtors	  or	  business	  mode...
Seems	  Like	  Three	  Bad	  OpNons	  1.  Stay	  creaNve	  by	  staying	  small,	  but	  therefore	      have	  less	  imp...
A	  Fourth	  OpNon	  •  Avoid	  Chaos	  as	  you	  grow	  with	  Ever	  More	  High	     Performance	  People	  –	  not	  ...
The	  Key:	  	  Increase	  Talent	  Density	   faster	  than	  Complexity	  Grows	                              mplexity	 ...
Increase	  Talent	  Density	            •  Top	  of	  market	  compensaNon	            •  A^ract	  high-­‐value	  people	 ...
Minimize	  Complexity	  Growth	  •  Few	  big	  products	  vs	  many	  small	  ones	  •  Eliminate	  distracNng	  complexi...
With	  the	  Right	  People,	  	                       	              	  Instead	  of	  a	  	  Culture	  of	  Process	  Ad...
Is	  Freedom	  Absolute?	  Are	  all	  rules	  &	  processes	  bad?	                                                      ...
Freedom	  is	  not	  absolute	                   	      Like	  “free	  speech”	  	        there	  are	  some	    limited	 ...
Two	  Types	  of	  Necessary	  Rules	  1.  Prevent	  irrevocable	  disaster	      –  Financials	  produced	  are	  wrong	 ...
Mostly,	  though,	  Rapid	  Recovery	  is	  	                  the	  Right	  Model	  •  Just	  fix	  problems	  quickly	   ...
“Good”	  versus	  “Bad”	  Process	  •  “Good”	  process	  helps	  talented	  people	  get	  more	  done	      –  Lerng	  o...
Rule	  Creep	  •  “Bad”	  processes	  tend	  to	  creep	  in	      –  PrevenNng	  errors	  just	  sounds	  so	  good	  •  ...
Example:	  Ne#lix	  VacaNon	  Policy	  	             and	  Tracking	        UnNl	  2004	  we	  had	  the	  standard	      ...
Meanwhile…	  We’re	  all	  working	  online	  some	  nights	  and	   weekends,	  responding	  to	  emails	  at	  odd	    h...
An	  employee	  pointed	  out…	  We	  don’t	  track	  hours	  worked	  per	  day	  or	  per	  week,	  so	  why	  are	  we	...
We	  realized…	   We	  should	  focus	  on	  what	  people	  get	  done,	            not	  on	  how	  many	  days	  worked...
Ne#lix	  VacaNon	  Policy	  	      and	  Tracking	        “there	  is	  no	  policy	  or	  tracking”	                     ...
Ne#lix	  VacaNon	  Policy	  	      and	  Tracking	            “there	  is	  no	  policy	  or	  tracking”	                 ...
No	  VacaNon	  Policy	  Doesn’t	  Mean	  	              No	  VacaNon	      Ne#lix	  leaders	  set	  good	  examples	  by	 ...
Another	  Example	  of	  Freedom	      and	  Responsibility…	                                            72	  
Most	  companies	  have	  complex	     policies	  around	  what	  you	  can	  expense,	  how	  you	  travel,	  what	  giss...
Ne#lix	  Policies	  	  for	  Expensing,	  Entertainment,	  	             Giss	  &	  Travel:	   “Act	  in	  NeHlix’s	  Best...
“Act	  in	  Ne#lix’s	  Best	  Interest”	  	                    Generally	  Means…	  1.  Expense	  only	  what	  you	  woul...
Freedom	  and	  Responsibility	  •  Many	  people	  say	  one	  can’t	  do	  it	  at	  scale	  •  But	  since	  going	  pu...
Summary	  of	  	      Freedom	  &	  Responsibility:	                           	    As	  We	  Grow,	  Minimize	  Rules	   ...
Seven	  Aspects	  of	  our	  Culture	  •    Values	  are	  what	  we	  Value	  •    High	  Performance	  	  •    Freedom	 ...
  If	  you	  want	  to	  build	  a	  ship,	  	    dont	  drum	  up	  the	  people	  	   to	  gather	  wood,	  divide	  the...
The	  best	  managers	  figure	  out	  how	  to	  get	  great	  outcomes	  by	  serng	  the	  appropriate	  context,	  rath...
Context,	  not	  Control	        Provide	  the	  insight	  and	  understanding	  to	  enable	  sound	  decisions	        	...
Good	  Context	  •  Link	  to	  company/funcNonal	  goals	  •  RelaNve	  priority	  (how	  important/how	  Nme	  sensiNve)...
Managers:	  When	  one	  of	  your	           talented	  people	    does	  something	  dumb,	          don’t	  blame	  the...
Managers:	  When	  you	  are	  tempted	     to	  “control”	  your	  people,	  ask	  yourself	  what	  context	  you	  coul...
Why	  Managing	  Through	           Context?	   High	  performance	  people	  will	  do	  be^er	  work	  if	  they	  under...
InvesNng	  in	  Context	      This	  is	  why	  we	  do	  new	  employee	  college,	  frequent	  department	  meeNngs,	   ...
ExcepNons	  to	  “Context,	  not	  Control”	  •  Control	  can	  be	  important	  in	  emergency	  	      –  No	  Nme	  to...
Seven	  Aspects	  of	  our	  Culture	  •    Values	  are	  what	  we	  Value	  •    High	  Performance	  	  •    Freedom	 ...
Three	  Models	  of	  Corporate	  Teamwork	  1.  Tightly	  Coupled	  Monolith	  2.  Independent	  Silos	  3.  Highly	  Ali...
Tightly	  Coupled	  Monolith	  •  Senior	  management	  reviews	  nearly	  all	  tacNcs	     –  e.g.,	  CEO	  reviews	  al...
Independent	  Silos	  •  Each	  group	  executes	  on	  their	  objecNves	  with	     li^le	  coordinaNon	     –  Everyone...
#3	  is	  the	  Ne#lix	  Choice	  1.  Tightly	  Coupled	  Monolith	  2.  Independent	  Silos	  3.  Highly	  Aligned,	  Loo...
Highly	  Aligned,	  Loosely	  Coupled	  •  Highly	  Aligned	       –  Strategy	  and	  goals	  are	  clear,	  specific,	  b...
Highly	  Aligned,	  Loosely	  Coupled	      teamwork	  effecNveness	  	                depends	  on	  	     high	  performa...
Seven	  Aspects	  of	  our	  Culture	  •    Values	  are	  what	  we	  Value	  •    High	  Performance	  	  •    Freedom	 ...
Pay	  Top	  of	  Market	  	                is	  Core	  to	     High	  Performance	  Culture	  One	  outstanding	  employee...
Three	  Tests	  for	  Top	  of	  Market	  	                     for	  a	  Person	  1.  What	  could	  person	  get	  elsew...
Takes	  Great	  Judgment	  •  Goal	  is	  to	  keep	  each	  employee	  at	  top	  of	     market	  for	  that	  person	  ...
Titles	  Not	  Very	  Helpful	  •  Lots	  of	  people	  have	  the	  Ntle	  “Major	  League	     Pitcher”	  but	  they	  a...
Annual	  Comp	  Review	  •  At	  many	  firms,	  when	  employees	  are	  hired,	     market	  compensaNon	  applies	     •...
No	  Fixed	  Budgets	  •  There	  are	  no	  centrally	  administered	  “raise	     pools”	  each	  year	  •  Instead,	  e...
CompensaNon	  Over	  Time	  •  Some	  people	  will	  move	  up	  in	  comp	  very	     quickly	  because	  their	  value	...
CompensaNon	  Not	  Dependent	  	              on	  Ne#lix	  Success	  •  Whether	  Ne#lix	  is	  prospering	  or	  flounde...
Bad	  Comp	  PracNces	  •  Manager	  sets	  pay	  at	  Nth	  percenNle	  of	  Ntle-­‐   linked	  compensaNon	  data	      ...
When	  Top	  of	  Market	  Comp	  	                      Done	  Right...	  •  We	  will	  rarely	  counter	  with	  higher...
Versus	  TradiNonal	  Model	  •  TradiNonal	  model	  is	  good	  prior	  year	  earns	  a	     raise,	  independent	  of	...
Employee	  Success	  •  It’s	  pre^y	  ingrained	  in	  our	  society	  that	  the	  size	     of	  one’s	  raise	  is	  t...
Good	  For	  Each	  Employee	  to	         Understand	  Their	  Market	  Value	  •  It’s	  a	  healthy	  idea,	  not	  a	 ...
Efficiency	  •  Big	  salary	  is	  the	  most	  efficient	  form	  of	  comp	  	       –  Most	  moNvaNng	  for	  any	  given...
OpNonal	  OpNons	  •  Employees	  get	  top	  of	  market	  salary,	  and	  then	     can	  request	  to	  trade	  salary	...
Details	  on	  Stock	  OpNons	  •  The	  opNons	  are	  fully	  vested	  and	  are	  10-­‐years-­‐to-­‐   exercise	  opNon...
No	  VesNng	  or	  Deferred	  Comp	  •  We	  don’t	  want	  managers	  to	  “own”	  their	  people	     with	  vesNng	  –	...
No	  Ranking	  Against	  Other	  Employees	  •  We	  avoid	  “top	  30%”	  and	  “bo^om	  10%”	     rankings	  amongst	  e...
Seven	  Aspects	  of	  our	  Culture	  •    High	  Performance	  	  •    Values	  are	  what	  we	  Value	  •    Freedom	 ...
In	  some	  Nme	  periods,	  in	  some	     groups,	  there	  will	  be	  lots	  of	  opportunity	  and	  growth	  at	  Ne...
Baseball	  Analogy:	  Minors	  to	  Majors	  •  Very	  talented	  people	  usually	  get	  to	  move	  up,	  but	     only...
Ne#lix	  Doesn’t	  Have	  to	  Be	  for	  Life	  •  In	  some	  Nmes,	  in	  some	  groups,	  there	  may	  not	     be	  ...
Two	  Necessary	  CondiNons	  	                        for	  PromoNon	  1.  Job	  has	  to	  be	  big	  enough	      –  We...
Timing	  •  If	  a	  manager	  would	  promote	  to	  prevent	  an	     employee	  from	  leaving,	  the	  manager	  shoul...
Development	  •  We	  develop	  people	  by	  giving	  them	  the	     opportunity	  to	  develop	  themselves,	  by	     ...
Career	  “Planning”	  Not	  for	  Us	  •  Formalized	  development	  is	  rarely	  effecNve,	     and	  we	  don’t	  try	  ...
We	  Support	  Self-­‐Improvement	  •  High	  performance	  people	  are	  generally	  self-­‐   improving	  through	  exp...
We	  want	  people	  to	  manage	  	    their	  own	  career	  growth,	  	  and	  not	  rely	  on	  a	  corporaNon	  	   f...
Your	  Economic	  Security	  is	  based	   on	  your	  Skills	  and	  ReputaNon	      We	  try	  hard	  to	  consistently	...
Seven	  Aspects	  of	  our	  Culture	  •    Values	  are	  what	  we	  Value	  •    High	  Performance	  	  •    Freedom	 ...
We	  keep	  improving	  our	  culture	  as	  we	  grow	                   	    We	  try	  to	  get	  be^er	   at	  seeking...
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Culture9 090801103430-phpapp02

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Culture9 090801103430-phpapp02

  1. 1. Ne#lix  Culture:  Freedom  &  Responsibility       1  
  2. 2. We  Seek  Excellence  Our  culture  focusses  on  helping  us   achieve  excellence   2  
  3. 3. Seven  Aspects  of  our  Culture  •  Values  are  what  we  Value  •  High  Performance    •  Freedom  &  Responsibility  •  Context,  not  Control  •  Highly  Aligned,  Loosely  Coupled  •  Pay  Top  of  Market  •  PromoNons  &  Development     3  
  4. 4. Many  companies  have  nice   sounding  value  statements  displayed  in  the  lobby,  such  as:     Integrity   Communica/on   Respect   Excellence     4  
  5. 5. Enron,  whose  leaders  went  to  jail,     and  which  went  bankrupt  from  fraud,    had  these  values  displayed  in  their  lobby:   Integrity   Communica/on   Respect   Excellence     (These  values  were  not,  however,  what  was  really  valued  at  Enron)   5  
  6. 6. The  actual  company  values,     as  opposed  to  the     nice-­‐sounding  values,     are  shown  by  who  gets    rewarded,  promoted,  or  let  go   6  
  7. 7. Actual  company  values  are  the   behaviors  and  skills   that  are  valued     in  fellow  employees   7  
  8. 8.  At  Ne#lix,  we  parNcularly  value  the  following  nine  behaviors  and  skills     in  our  colleagues…   …meaning  we  hire  and  promote   people  who  demonstrate  these  nine   8  
  9. 9. You  make  wise  decisions   (people,  technical,  business,  and   creaNve)  despite  ambiguity       You  idenNfy  root  causes,  and  get  Judgment   beyond  treaNng  symptoms       You  think  strategically,  and  can   arNculate  what  you  are,  and  are   not,  trying  to  do       You  smartly  separate  what  must   be  done  well  now,  and  what  can   be  improved  later     9  
  10. 10. You  listen  well,  instead  of   reacNng  fast,  so  you  can  be^er   understand       You  are  concise  and  arNculate  in  CommunicaNon   speech  and  wriNng       You  treat  people  with  respect   independent  of  their  status  or   disagreement  with  you       You  maintain  calm  poise  in   stressful  situaNons     10  
  11. 11. You  accomplish  amazing   amounts  of  important  work       You  demonstrate  consistently   strong  performance  so  Impact   colleagues  can  rely  upon  you       You  focus  on  great  results  rather   than  on  process       You  exhibit  bias-­‐to-­‐acNon,  and   avoid  analysis-­‐paralysis     11  
  12. 12. You  learn  rapidly  and  eagerly       You  seek  to  understand  our   strategy,  market,  customers,   and  suppliers    Curiosity     You  are  broadly  knowledgeable   about  business,  technology  and   entertainment       You  contribute  effecNvely   outside  of  your  specialty     12  
  13. 13. You  re-­‐conceptualize  issues  to   discover  pracNcal  soluNons  to   hard  problems       You  challenge  prevailing  InnovaNon   assumpNons  when  warranted,   and  suggest  be^er  approaches       You  create  new  ideas  that  prove   useful       You  keep  us  nimble  by   minimizing  complexity  and   finding  Nme  to  simplify     13  
  14. 14. You  say  what  you  think  even  if  it   is  controversial       You  make  tough  decisions   without  agonizing    Courage     You  take  smart  risks       You  quesNon  acNons   inconsistent  with  our  values     14  
  15. 15. You  inspire  others  with  your   thirst  for  excellence       You  care  intensely  about   Ne#lix‘s  success    Passion     You  celebrate  wins       You  are  tenacious   15  
  16. 16. You  are  known  for  candor  and   directness       You  are  non-­‐poliNcal  when  you   disagree  with  others    Honesty     You  only  say  things  about  fellow   employees  you  will  say  to  their   face       You  are  quick  to  admit  mistakes     16  
  17. 17. You  seek  what  is  best  for  Ne#lix,   rather  than  best  for  yourself  or   your  group       You  are  ego-­‐less  when  searching  Selflessness   for  the  best  ideas       You  make  Nme  to  help   colleagues       You  share  informaNon  openly   and  proacNvely   17  
  18. 18. Seven  Aspects  of  our  Culture  •  Values  are  what  we  Value  •  High  Performance    •  Freedom  &  Responsibility  •  Context,  not  Control  •  Highly  Aligned,  Loosely  Coupled  •  Pay  Top  of  Market  •  PromoNons  &  Development     18  
  19. 19. Imagine  if  every  person  at  Ne#lix     is  someone  you     respect  and  learn  from…   19  
  20. 20. Great  Workplace  is     Stunning  Colleagues  Great  workplace  is  not  espresso,  lush  benefits,   sushi  lunches,  grand  parNes,  or  nice  offices    We  do  some  of  these  things,  but  only  if  they  are   efficient  at  a^racNng  and  retaining     stunning  colleagues   20  
  21. 21. Like  every  company,     we  try  to  hire  well   21  
  22. 22. Unlike  many  companies,     we  pracNce:      adequate  performance  gets  a  generous  severance  package   22  
  23. 23. We’re  a  team,  not  a  family     We’re  like  a  pro  sports  team,     not  a  kid’s  recreaNonal  team     Ne#lix  leaders   hire,  develop  and  cut  smartly,    so  we  have  stars  in  every  posiNon   23  
  24. 24. The  Keeper  Test  Managers  Use:   Which  of  my  people,     if  they  told  me  they  were  leaving,   for  a  similar  job  at  a  peer  company,     would  I  fight  hard  to  keep  at  Ne#lix?   24  
  25. 25. The  other  people  should  get  a  generous  severance  now,    so  we  can  open  a  slot  to  try  to  find  a  star  for  that  role  The  Keeper  Test  Managers  Use:   Which  of  my  people,     if  they  told  me  they  were  leaving,   for  a  similar  job  at  a  peer  company,     would  I  fight  hard  to  keep  at  Ne#lix?   25  
  26. 26. Honesty  Always  As  a  leader,  no  one  in  your  group  should  be  materially  surprised  of   your  views   26  
  27. 27. Honesty  Always  Candor  is  not  just  a  leader’s  responsibility,   and  you  should  periodically  ask  your  manager:  “If  I  told  you  I  were  leaving,  how  hard  would  you  work  to  change  my  mind?”   27  
  28. 28.  All  of  Us  are  Responsible    for  Ensuring  We  Live  our  Values   “You  quesNon  acNons  inconsistent  with  our   values”  is  part  of  the  Courage  value     Akin  to  the  honor  code  pledge:     “I  will  not  lie,  nor  cheat,  nor  steal,    nor  tolerate  those  who  do”     28  
  29. 29. Pro  Sports  Team  Metaphor  is   Good,  but  Imperfect   AthleNc  teams  have  a  fixed  number  of   posiNons,  so  team  members  are  always   compeNng  with  each  other  for  one  of   the  precious  slots   29  
  30. 30. Corporate  Team   The  more  talent  we  have,     the  more  we  can  accomplish,    so  our  people  assist  each  other  all  the  Nme     Internal  “cu^hroat”  or  “sink  or  swim”     behavior  is  rare  and  not  tolerated   30  
  31. 31. We  Help  Each  Other     To  Be  Great   31  
  32. 32. Isn’t  Loyalty  Good?      What  about  Hard  Workers?  What  about  Brilliant  Jerks?       32  
  33. 33. Loyalty  is  Good  •  Loyalty  is  good  as  a  stabilizer  •  People  who  have  been  stars  for  us,  and  hit  a  bad   patch,  get  a  near  term  pass  because  we  think   they  are  likely  to  become  stars  for  us  again  •  We  want  the  same:    if  Ne#lix  hits  a  temporary   bad  patch,  we  want  people  to  sNck  with  us  •  But  unlimited  loyalty  to  a  shrinking  firm,  or  to  an   ineffecNve  employee,  is  not  what  we  are  about   33  
  34. 34. Hard  Work  –  Not  Relevant  •  We  don’t  measure  people  by  how  many  hours   they  work  or  how  much  they  are  in  the  office  •  We  do  care  about  accomplishing  great  work  •  Sustained  B-­‐level  performance,  despite  “A  for   effort”,  generates  a  generous  severance   package,  with  respect  •  Sustained  A-­‐level  performance,  despite   minimal  effort,  is  rewarded  with  more   responsibility  and  great  pay   34  
  35. 35. Brilliant  Jerks  •  Some  companies  tolerate  them  •  For  us,  cost  to  effecNve  teamwork  is  too  high  •  Diverse  styles  are  fine  –  as  long  as  person   embodies  the  9  values   35  
  36. 36. Why  are  we  so  insistent  on     high  performance?   In  procedural  work,  the  best  are  2x     be^er  than  the  average.   In  creaNve/invenNve  work,  the  best  are  10x    be^er  than  the  average,  so  huge  premium  on   creaNng  effecNve  teams  of  the  best   36  
  37. 37. Why  are  we  so  insistent  on     high  performance?   Great  Workplace  is     Stunning  Colleagues   37  
  38. 38. Our  High  Performance  Culture     Not  Right  for  Everyone  •  Many  people  love  our  culture,  and  stay  a  long  Nme   –  They  thrive  on  excellence  and  candor  and  change   –  They  would  be  disappointed  if  given  a  severance  package,   but  lots  of  mutual  warmth  and  respect  •  Some  people,  however,  value  job  security  and  stability   over  performance,  and  don’t  like  our  culture   –  They  feel  fearful  at  Ne#lix   –  They  are  someNmes  bi^er  if  let  go,  and  feel  that  we  are   poliNcal  place  to  work  •  We’re  gerng  be^er  at  a^racNng  only  the  former,  and   helping  the  la^er  realize  we  are  not  right  for  them   38  
  39. 39. Seven  Aspects  of  our  Culture  •  Values  are  what  we  Value  •  High  Performance    •  Freedom  &  Responsibility  •  Context,  not  Control  •  Highly  Aligned,  Loosely  Coupled  •  Pay  Top  of  Market  •  PromoNons  &  Development     39  
  40. 40. The  Rare  Responsible  Person  •  Self  moNvaNng  •  Self  aware  •  Self  disciplined  •  Self  improving  •  Acts  like  a  leader  •  Doesn’t  wait  to  be  told  what  to  do  •  Picks  up  the  trash  lying  on  the  floor     40  
  41. 41. Responsible  People     Thrive  on  Freedom,    and  are  Worthy  of  Freedom   41  
  42. 42. Our  model  is  to  increase     employee  freedom  as  we  grow,   rather  than  limit  it,    to  conNnue  to  a^ract  and  nourish   innovaNve  people,     so  we  have  be^er  chance  of     sustained  success   42  
  43. 43. Most  Companies      Curtail  Freedom  as  they  get  Bigger   Bigger   Employee  Freedom   43  
  44. 44. Why  Do  Most  Companies     Curtail  Freedom    and  Become  BureaucraNc     as  they  Grow?   44  
  45. 45. Desire  for  Bigger  PosiNve  Impact     Creates  Growth   Growth   45  
  46. 46. Growth  Increases  Complexity   Complexity   46  
  47. 47. Growth  Also  Osen  Shrinks  Talent  Density   Complexity   %  High  Performance  Employees   47  
  48. 48. Chaos  Emerges  Chaos  and  errors  spike  here  –  business  has  become  too  complex  to  run  informally  with  this  talent  level   Complexity   %  High  Performance  Employees   48  
  49. 49. Process  Emerges  to  Stop  the  Chaos   Procedures   No  one  loves  process,  but   feels  good  compared  to  the   pain  of  chaos     “Time  to  grow  up”  becomes   the  professional  management’s   mantra   49  
  50. 50. Process-­‐focus  Drives  More  Talent  Out   %  High  Performance  Employees   50  
  51. 51. Process  Brings  SeducNvely  Strong     Near-­‐Term  Outcome  •  A  highly-­‐successful  process-­‐driven  company   –  With  leading  share  in  its  market   –  Minimal  thinking  required   –  Few  mistakes  made  –  very  efficient   –  Few  curious  innovator-­‐mavericks  remain   –  Very  opNmized  processes  for  its  exisNng  market   –  Efficiency  has  trumped  flexibility   51  
  52. 52. Then  the  Market  Shiss…  •  Market  shiss  due  to  new  technology  or   compeNtors  or  business  models  •  Company  is  unable  to  adapt  quickly     –  because  the  employees  are  extremely  good  at   following  the  exisNng  processes,  and  process   adherence  is  the  value  system  •  Company  generally  grinds  painfully  into   irrelevance   52  
  53. 53. Seems  Like  Three  Bad  OpNons  1.  Stay  creaNve  by  staying  small,  but  therefore   have  less  impact  2.  Avoid  rules  as  you  grow,  and  suffer  chaos  3.  Use  process  as  you  grow  to  drive  efficient   execuNon  of  current  model,  but  cripple   creaNvity,  flexibility,  and  ability  to  thrive   when  your  market  eventually  changes   53  
  54. 54. A  Fourth  OpNon  •  Avoid  Chaos  as  you  grow  with  Ever  More  High   Performance  People  –  not  with  Rules   –  Then  you  can  conNnue  to  mostly  run  informally   with  self-­‐discipline,  and  avoid  chaos   –  The  run  informally  part  is  what  enables  and   a^racts  creaNvity   54  
  55. 55. The  Key:    Increase  Talent  Density   faster  than  Complexity  Grows   mplexity   Bus iness  Co 55  
  56. 56. Increase  Talent  Density   •  Top  of  market  compensaNon   •  A^ract  high-­‐value  people  through   freedom  to  make  big  impact   •  Be  demanding  about  high   performance  culture   56  
  57. 57. Minimize  Complexity  Growth  •  Few  big  products  vs  many  small  ones  •  Eliminate  distracNng  complexity  (barnacles)  •  Be  wary  of  efficiency  opNmizaNons  that   increase  complexity  and  rigidity   mplexity   Bus iness  Co Note:  someNmes  long-­‐term  simplicity  is   achieved  only  through  bursts  of  complexity  to   rework  current  systems   57  
  58. 58. With  the  Right  People,        Instead  of  a    Culture  of  Process  Adherence,       We  have  a  Culture  of    CreaNvity  and  Self-­‐Discipline,   Freedom  and  Responsibility   58  
  59. 59. Is  Freedom  Absolute?  Are  all  rules  &  processes  bad?   59  
  60. 60. Freedom  is  not  absolute     Like  “free  speech”     there  are  some   limited  excepNons  to     “freedom  at  work”   60  
  61. 61. Two  Types  of  Necessary  Rules  1.  Prevent  irrevocable  disaster   –  Financials  produced  are  wrong   –  Hackers  steal  our  customers’  credit  card  info  2.  Moral,  ethical,  legal  issues   –  Dishonesty,  harassment  are  intolerable   61  
  62. 62. Mostly,  though,  Rapid  Recovery  is     the  Right  Model  •  Just  fix  problems  quickly   –  High  performers  make  very  few  errors  •  We’re  in  a  creaNve-­‐invenNve  market,  not  a   safety-­‐criNcal  market  like  medicine  or  nuclear   power  •  You  may  have  heard  prevenNng  error  is   cheaper  than  fixing  it   –  Yes,  in  manufacturing  or  medicine,  but…   –  Not  so  in  crea/ve  environments   62  
  63. 63. “Good”  versus  “Bad”  Process  •  “Good”  process  helps  talented  people  get  more  done   –  Lerng  others  know  when  you  are  updaNng  code   –  Spend  within  budget  each  quarter  so  don’t  have  to   coordinate  every  spending  decision  across  departments   –  Regularly  scheduled  strategy  and  context  meeNngs  •  “Bad”  process  tries  to  prevent  recoverable  mistakes   –  Get  pre-­‐approvals  for  $5k  spending   –  3  people  to  sign  off  on  banner  ad  creaNve   –  Permission  needed  to  hang  a  poster  on  a  wall   –  MulN-­‐level  approval  process  for  projects   –  Get  10  people  to  interview  each  candidate     63  
  64. 64. Rule  Creep  •  “Bad”  processes  tend  to  creep  in   –  PrevenNng  errors  just  sounds  so  good  •  We  try  to  get  rid  of  rules  when  we  can,  to   reinforce  the  point   64  
  65. 65. Example:  Ne#lix  VacaNon  Policy     and  Tracking   UnNl  2004  we  had  the  standard   model  of  N  days  per  year   65  
  66. 66. Meanwhile…  We’re  all  working  online  some  nights  and   weekends,  responding  to  emails  at  odd   hours,  spending  some  asernoons  on  personal  Nme,  and  taking  good  vacaNons   66  
  67. 67. An  employee  pointed  out…  We  don’t  track  hours  worked  per  day  or  per  week,  so  why  are  we  tracking   days  of  vacaNon  per  year?   67  
  68. 68. We  realized…   We  should  focus  on  what  people  get  done,   not  on  how  many  days  worked        Just  as  we  don’t  have  an  9am-­‐5pm  workday   policy,  we  don’t  need  a  vacaNon  policy   68  
  69. 69. Ne#lix  VacaNon  Policy     and  Tracking   “there  is  no  policy  or  tracking”   69  
  70. 70. Ne#lix  VacaNon  Policy     and  Tracking   “there  is  no  policy  or  tracking”     There  is  also  no  clothing  policy  at  Ne#lix,     but  no  one  comes  to  work  naked     Lesson:  you  don’t  need  policies  for  everything   70  
  71. 71. No  VacaNon  Policy  Doesn’t  Mean     No  VacaNon   Ne#lix  leaders  set  good  examples  by   taking  big  vacaNons  –  and  coming   back  inspired  to  find  big  ideas   71  
  72. 72. Another  Example  of  Freedom   and  Responsibility…   72  
  73. 73. Most  companies  have  complex   policies  around  what  you  can  expense,  how  you  travel,  what  giss   you  can  accept,  etc.      Plus  they  have  whole  departments   to  verify  compliance     with  these  policies   73  
  74. 74. Ne#lix  Policies    for  Expensing,  Entertainment,     Giss  &  Travel:   “Act  in  NeHlix’s  Best  Interest”     (5  words  long)   74  
  75. 75. “Act  in  Ne#lix’s  Best  Interest”     Generally  Means…  1.  Expense  only  what  you  would  otherwise  not   spend,  and  is  worthwhile  for  work  2.  Travel  as  you  would  if  it  were  your  own  money  3.  Disclose  non-­‐trivial  vendor  giss  4.  Take  from  Ne#lix  only  when  it  is  inefficient  to   not  take,  and  inconsequenNal   –  “taking”  means,  for  example,  prinNng  personal   documents  at  work  or  making  personal  calls  on  work   phone:  inconsequenNal  and  inefficient  to  avoid   75  
  76. 76. Freedom  and  Responsibility  •  Many  people  say  one  can’t  do  it  at  scale  •  But  since  going  public  in  2002,  which  is   tradiNonally  the  end  of  freedom,  we’ve   substanNally  increased  talent  density  and   employee  freedom   76  
  77. 77. Summary  of     Freedom  &  Responsibility:     As  We  Grow,  Minimize  Rules     Inhibit  Chaos  with  Ever  More     High  Performance  People     Flexibility  is  More  Important    than  Efficiency  in  the  Long  Term   77  
  78. 78. Seven  Aspects  of  our  Culture  •  Values  are  what  we  Value  •  High  Performance    •  Freedom  &  Responsibility  •  Context,  not  Control  •  Highly  Aligned,  Loosely  Coupled  •  Pay  Top  of  Market  •  PromoNons  &  Development     78  
  79. 79.   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.     -­‐Antoine  De  Saint-­‐Exupery,       Author  of  The  Li^le  Prince   79  
  80. 80. The  best  managers  figure  out  how  to  get  great  outcomes  by  serng  the  appropriate  context,  rather  than  by   trying  to  control  their  people   80  
  81. 81. Context,  not  Control   Provide  the  insight  and  understanding  to  enable  sound  decisions     Context  (embrace)   Control  (avoid)  •  Strategy   •  Top-­‐down  decision-­‐making  •  Metrics   •  Management  approval  •  AssumpNons   •  Commi^ees  •  ObjecNves   •  Planning  and  process  valued  •  Clearly-­‐defined  roles     more  than  results  •  Knowledge  of  the  stakes  •  Transparency  around   decision-­‐making   81  
  82. 82. Good  Context  •  Link  to  company/funcNonal  goals  •  RelaNve  priority  (how  important/how  Nme  sensiNve)   –  CriNcal  (needs  to  happen  now),  or…   –  Nice  to  have  (when  you  can  get  to  it)  •  Level  of  precision  &  refinement   –  No  errors  (credit  cards  handling,  etc…),  or…   –  Pre^y  good  /  can  correct  errors  (website),  or…   –  Rough  (experimental)  •  Key  stakeholders  •  Key  metrics  /  definiNon  of  success   82  
  83. 83. Managers:  When  one  of  your   talented  people   does  something  dumb,   don’t  blame  them     Instead,     ask  yourself  what  context   you  failed  to  set   83  
  84. 84. Managers:  When  you  are  tempted   to  “control”  your  people,  ask  yourself  what  context  you  could  set   instead     Are  you  arNculate  and  inspiring   enough  about  goals  and  strategies?     84  
  85. 85. Why  Managing  Through   Context?   High  performance  people  will  do  be^er  work  if  they  understand  the   context   85  
  86. 86. InvesNng  in  Context   This  is  why  we  do  new  employee  college,  frequent  department  meeNngs,   and  why  we  are  so  open  internally   about  strategies  and  results   86  
  87. 87. ExcepNons  to  “Context,  not  Control”  •  Control  can  be  important  in  emergency     –  No  Nme  to  take  long-­‐term  capacity-­‐building  view  •  Control  can  be  important  when  someone  is   sNll  learning  their  area   –  Takes  Nme  to  pick  up  the  necessary  context  •  Control  can  be  important  when  you  have  the   wrong  person  in  a  role   –  Temporarily,  no  doubt   87  
  88. 88. Seven  Aspects  of  our  Culture  •  Values  are  what  we  Value  •  High  Performance    •  Freedom  &  Responsibility  •  Context,  not  Control  •  Highly  Aligned,  Loosely  Coupled  •  Pay  Top  of  Market  •  PromoNons  &  Development     88  
  89. 89. Three  Models  of  Corporate  Teamwork  1.  Tightly  Coupled  Monolith  2.  Independent  Silos  3.  Highly  Aligned,  Loosely  Coupled   89  
  90. 90. Tightly  Coupled  Monolith  •  Senior  management  reviews  nearly  all  tacNcs   –  e.g.,  CEO  reviews  all  job  offers  or  adverNsing  •  Lots  of  x-­‐departmental  buy-­‐in  meeNngs  •  Keeping  other  internal  groups  happy  has   equal  precedence  with  pleasing  customers  •  Mavericks  get  exhausted  trying  to  innovate  •  Highly  coordinated  through  centralizaNon,  but   very  slow,  and  slowness  increases  with  size   90  
  91. 91. Independent  Silos  •  Each  group  executes  on  their  objecNves  with   li^le  coordinaNon   –  Everyone  does  their  own  thing  •  Work  that  requires  coordinaNon  suffers  •  AlienaNon  and  suspicion  between   departments  •  Only  works  well  when  areas  are  independent   –  e.g.,  aircras  engines  and  blenders  for  GE   91  
  92. 92. #3  is  the  Ne#lix  Choice  1.  Tightly  Coupled  Monolith  2.  Independent  Silos  3.  Highly  Aligned,  Loosely  Coupled   92  
  93. 93. Highly  Aligned,  Loosely  Coupled  •  Highly  Aligned   –  Strategy  and  goals  are  clear,  specific,  broadly  understood   –  Team  interacNons  focused  on  strategy  and  goals,  rather  than  tacNcs   –  Requires  large  investment  in  management  Nme  to  be  transparent  and   arNculate  and  percepNve  •  Loosely  Coupled   –  Minimal  cross-­‐funcNonal  meeNngs  except  to  get  aligned  on  goals  and   strategy   –  Trust  between  groups  on  tacNcs  without  previewing/approving  each   one  –  so  groups  can  move  fast   –  Leaders  reaching  out  proacNvely  for  ad-­‐hoc  coordinaNon  and   perspecNve  as  appropriate   –  Occasional  post-­‐mortems  on  tacNcs  necessary  to  increase  alignment   93  
  94. 94. Highly  Aligned,  Loosely  Coupled   teamwork  effecNveness     depends  on     high  performance  people     and  good  context     Goal  is  to  be     Big  and  Fast  and  Flexible   94  
  95. 95. Seven  Aspects  of  our  Culture  •  Values  are  what  we  Value  •  High  Performance    •  Freedom  &  Responsibility  •  Context,  not  Control  •  Highly  Aligned,  Loosely  Coupled  •  Pay  Top  of  Market  •  PromoNons  &  Development     95  
  96. 96. Pay  Top  of  Market     is  Core  to   High  Performance  Culture  One  outstanding  employee  gets  more  done   and  costs  less  than  two  adequate   employees     We  endeavor  to  have  only     outstanding  employees   96  
  97. 97. Three  Tests  for  Top  of  Market     for  a  Person  1.  What  could  person  get  elsewhere?  2.  What  would  we  pay  for  replacement?  3.  What  would  we  pay  to  keep  that  person?   –  If  they  had  a  bigger  offer  elsewhere   ConfidenNal   97  
  98. 98. Takes  Great  Judgment  •  Goal  is  to  keep  each  employee  at  top  of   market  for  that  person     –  Pay  them  more  than  anyone  else  likely  would   –  Pay  them  as  much  as  a  replacement  would  cost   –  Pay  them  as  much  as  we  would  pay  to  keep  them   if  they  had  higher  offer  from  elsewhere   98  
  99. 99. Titles  Not  Very  Helpful  •  Lots  of  people  have  the  Ntle  “Major  League   Pitcher”  but  they  are  not  all  equally  effecNve  •  Similarly,  all  people  with  the  Ntle  “Senior   MarkeNng  Manager”  or  “Director  of   Engineering”  are  not  equally  effecNve  •  So  the  art  of  compensaNon  is  answering  the   Three  Tests  for  each  employee   99  
  100. 100. Annual  Comp  Review  •  At  many  firms,  when  employees  are  hired,   market  compensaNon  applies   •  But  at  comp  review  Nme,  it  no  longer  applies!  •  At  Ne#lix,  market  comp  always  applies:   –  EssenNally,  top  of  market  comp  is  re-­‐established   each  year  for  high  performing  employees   –  At  annual  comp  review,  manager  has  to  answer   the  Three  Tests  for  the  personal  market  for  each   of  their  employees   ConfidenNal   100  
  101. 101. No  Fixed  Budgets  •  There  are  no  centrally  administered  “raise   pools”  each  year  •  Instead,  each  manager  aligns  their  people  to   top  of  market  each  year  –  the  market  will  be   different  in  different  areas   101  
  102. 102. CompensaNon  Over  Time  •  Some  people  will  move  up  in  comp  very   quickly  because  their  value  in  the  marketplace   is  moving  up  quickly,  driven  by  increasing  skills   and/or  great  demand  for  their  area  •  Some  people  will  stay  flat  because  their  value   in  the  marketplace  has  done  that   –  Depends  in  part  on  inflaNon  and  economy   –  Always  top  of  market,  though,  for  that  person   102  
  103. 103. CompensaNon  Not  Dependent     on  Ne#lix  Success  •  Whether  Ne#lix  is  prospering  or  floundering,   we  pay  at  the  top  of  the  market   –  i.e.,  sports  teams  with  losing  records  sNll  pay   talent  the  market  rate  •  Employees  can  choose  how  much  they  want   to  link  their  economic  desNny  to  Ne#lix  by   deciding  how  many  Ne#lix  stock  opNons  they   want  to  hold   103  
  104. 104. Bad  Comp  PracNces  •  Manager  sets  pay  at  Nth  percenNle  of  Ntle-­‐ linked  compensaNon  data   –  The  “Major  League  Pitcher”  problem  •  Manager  cares  about  internal  parity  instead  of   external  market  value   –  Fairness  in  comp  is  being  true  to  the  market  •  Manager  gives  everyone  a  4%  raise   –  Very  unlikely  to  reflect  the  market   104  
  105. 105. When  Top  of  Market  Comp     Done  Right...  •  We  will  rarely  counter  with  higher  comp  when   someone  is  voluntarily  leaving  because  we   have  already  moved  comp  to  our  max  for  that   person  •  Employees  will  feel  they  are  gerng  paid  well   relaNve  to  their  other  opNons  in  the  market   105  
  106. 106. Versus  TradiNonal  Model  •  TradiNonal  model  is  good  prior  year  earns  a   raise,  independent  of  market   –  Problem  is  employees  can  get  materially  under-­‐  or   over-­‐paid  relaNve  to  the  market,  over  Nme   –  When  materially  under-­‐paid,  employees  switch   firms  to  take  advantage  of  market-­‐based  pay  on   hiring   –  When  materially  over-­‐paid,  employees  are   trapped  in  current  firm  •  Consistent  market-­‐based  pay  is  be^er  model   106  
  107. 107. Employee  Success  •  It’s  pre^y  ingrained  in  our  society  that  the  size   of  one’s  raise  is  the  indicator  of  how  well  one   did  the  prior  year   –  but  for  us  the  other  factor  is  the  outside  market  •  Employee  success  is  sNll  a  big  factor  in  comp   because  it  influences  market  value   –  In  parNcular,  how  much  we  would  pay  to  keep  the   person   107  
  108. 108. Good  For  Each  Employee  to   Understand  Their  Market  Value  •  It’s  a  healthy  idea,  not  a  traitorous  one,  to   understand  what  other  firms  would  pay  you,   by  interviewing  and  talking  to  peers  at  other   companies   –  Talk  with  your  manager  about  what  you  find  in   terms  of  comp   –  Stay  mindful  of  company  confidenNal  informaNon   108  
  109. 109. Efficiency  •  Big  salary  is  the  most  efficient  form  of  comp     –  Most  moNvaNng  for  any  given  expense  level   –  No  bonuses,  no  free  stock  opNons,  no  philanthropic  match   –  Instead,  put  all  that  expense  into  big  salaries,  and  give   people  freedom  to  spend  their  salaries  as  they  think  best  •  Health  benefits:  employees  get  $10k  per  year   –  If  they  choose  Ne#lix  plans  that  are  less  than  $10k,  they   keep  the  difference   –  If  they  don’t  need  benefits  from  us,  they  keep  all  $10k   –  CEO  or  recepNonist:  everyone  gets  $10k  for  benefits   109  
  110. 110. OpNonal  OpNons  •  Employees  get  top  of  market  salary,  and  then   can  request  to  trade  salary  for  stock  opNons  •  Some  people  take  all  cash,  some  people   request  half  their  comp  in  opNons   –   Both  are  OK  •  This  is  consistent  with  freedom  and   responsibility,  and  lets  employees  decide  how   much  risk/reward  is  comfortable  for  them   110  
  111. 111. Details  on  Stock  OpNons  •  The  opNons  are  fully  vested  and  are  10-­‐years-­‐to-­‐ exercise  opNons,  independent  of  how  long  one  stays  at   Ne#lix  •  These  fully  vested  opNons  are  granted  monthly  at  the   then  current  stock  price,  so  employees  get  price   averaging  on  their  exercise  price  •  These  opNons  cost  employees  less  than  half  of  what   such  opNons  would  cost  in  the  open  market,  and  are   from  pre-­‐tax  salary,  so  are  a  great  deal  •  Employees  can  change  their  opNon  request  annually  •  OpNons  become  valuable  only  if  NeElix  stock  climbs     111  
  112. 112. No  VesNng  or  Deferred  Comp  •  We  don’t  want  managers  to  “own”  their  people   with  vesNng  –  all  comp  is  fully  vested  •  We  want  managers  to  be  responsible  for  creaNng   a  great  place  to  work,  and  paying  at  the  top  of   market  •  Employees  are  free  to  leave  us  anyNme,  without   penalty,  but  nearly  everyone  stays  •  Employees  stay  because  they  are  passionate   about  their  work,  and  well  paid,  not  because  of  a   deferred  compensaNon  system   112  
  113. 113. No  Ranking  Against  Other  Employees  •  We  avoid  “top  30%”  and  “bo^om  10%”   rankings  amongst  employees  •  We  don’t  want  employees  to  feel  compeNNve   with  each  other  •  We  want  all  of  our  employees  to  be  “top  10%”   relaNve  to  the  pool  of  global  candidates  •  We  want  employees  to  help  each  other,  and   they  do   113  
  114. 114. Seven  Aspects  of  our  Culture  •  High  Performance    •  Values  are  what  we  Value  •  Freedom  &  Responsibility  •  Context,  not  Control  •  Highly  Aligned,  Loosely  Coupled  •  Pay  Top  of  Market  •  PromoNons  &  Development     114  
  115. 115. In  some  Nme  periods,  in  some   groups,  there  will  be  lots  of  opportunity  and  growth  at  Ne#lix   Some  people,  through  both  luck  and   talent,  will  have  extraordinary  career   growth   115  
  116. 116. Baseball  Analogy:  Minors  to  Majors  •  Very  talented  people  usually  get  to  move  up,  but   only  true  for  the  very  talented  •  Some  luck  in  terms  of  what  posiNons  open  up   and  what  the  compeNNon  is  •  Some  people  move  to  other  teams  to  get  the   opportunity  they  want  •  Great  teams  keep  their  best  talent  •  Some  minor  league  players  keep  playing  even   though  they  don’t  move  up  because  they  love  the   game   116  
  117. 117. Ne#lix  Doesn’t  Have  to  Be  for  Life  •  In  some  Nmes,  in  some  groups,  there  may  not   be  enough  growth  opportunity  for  everyone    •  In  which  case  we  should  celebrate  someone   leaving  Ne#lix  for  a  bigger  job  that  we  didn’t   have  available  to  offer  them   –  If  that  is  what  the  person  prefers   117  
  118. 118. Two  Necessary  CondiNons     for  PromoNon  1.  Job  has  to  be  big  enough   –  We  might  have  an  incredible  manager  of  something,   but  we  don’t  need  a  director  of  it  because  job  isn’t  big   enough   •  If  the  incredible  manager  les,  we  would  replace  with  a   manager,  not  with  a  director  2.  Person  has  to  be  a  superstar  in  current  role   –  Could  get  the  next  level  job  here  if  applying  from   outside  and  we  knew  their  talents  well   –  Could  get  the  next  level  job  at  peer  firm  that  knew   their  talents  well   118  
  119. 119. Timing  •  If  a  manager  would  promote  to  prevent  an   employee  from  leaving,  the  manager  should   promote  now  instead  of  waiNng  •  Both  tests  sNll  have  to  be  passed     1.  Job  big  enough     2.  Superstar  in  current  role   119  
  120. 120. Development  •  We  develop  people  by  giving  them  the   opportunity  to  develop  themselves,  by   surrounding  them  with  stunning  colleagues   and  giving  them  big  challenges  to  work  on   –  Mediocre  colleagues  or  unchallenging  work  is   what  kills  progress  of  a  person’s  skills   120  
  121. 121. Career  “Planning”  Not  for  Us  •  Formalized  development  is  rarely  effecNve,   and  we  don’t  try  to  do  it   –  e.g.,  Mentor  assignment,  rotaNon  around  a  firm,     mulN-­‐year  career  paths,  etc.     121  
  122. 122. We  Support  Self-­‐Improvement  •  High  performance  people  are  generally  self-­‐ improving  through  experience,  observaNon,   introspecNon,  reading,  and  discussion   –  As  long  as  they  have  stunning  colleagues  and  big   challenges  to  work  on   –  We  all  try  to  help  each  other  grow   –  We  are  very  honest  with  each  other   122  
  123. 123. We  want  people  to  manage     their  own  career  growth,    and  not  rely  on  a  corporaNon     for  “planning”  their  careers   123  
  124. 124. Your  Economic  Security  is  based   on  your  Skills  and  ReputaNon   We  try  hard  to  consistently  provide   opportunity  to  grow  both  by   surrounding  you  with  great  talent   124  
  125. 125. Seven  Aspects  of  our  Culture  •  Values  are  what  we  Value  •  High  Performance    •  Freedom  &  Responsibility  •  Context,  not  Control  •  Highly  Aligned,  Loosely  Coupled  •  Pay  Top  of  Market  •  PromoNons  &  Development     125  
  126. 126. We  keep  improving  our  culture  as  we  grow     We  try  to  get  be^er   at  seeking  excellence   126  

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