Netflix does not pay staff members performance-based rewards. Co-CEO Reed Hastings describes why he thinks they impede development. (NFLX).
Netflix credits its unconventional corporate culture with helping it outmaneuver larger, more established rivals like Smash hit and Disney.
The streaming business can move quickly, and pivot where essential, because its culture fosters development, Netflix co-CEO and cofounder Reed Hastings wrote in his book, co-authored by Erin Meyer, “No Rules Rules: Netflix and the Culture of Reinvention.”
It’s the factor Netflix does not provide performance-based rewards. It may run contrary to conventional thinking, but Netflix believes rewards can squash creativity.
“People are most innovative when they have a big enough wage to remove a few of the stress from home,” Hastings wrote. “But people are less innovative when they don’t know whether or not they’ll make money additional. Huge incomes, not benefit bonus offers, benefit innovation.”
Hastings shared an example with Netflix’s previous chief marketing officer, Leslie Kilgore.
In 2003, Hastings and previous talent chief, Patty McCord, were preparing to link perks to efficiency objectives and choosing the metrics for different senior supervisors. Kilgore’s bonus offer was to be tied to the number of new clients that Netflix signed up. However as Hastings was congratulating Kilgore on the current wave of customers her team had registered, she informed him the more crucial metric for a growing business must be consumer retention.
“I gained from that exchange with Leslie that the whole reward system is based on the facility that you dependably predict the future, which you can set an objective at any given minute that will continue to be essential down the roadway,” Hastings composed. “However at Netflix, where we need to be able to adjust instructions quickly in response to quick changes, the last thing we want is our workers rewarded in December for obtaining some objective repaired the previous January.”
Staff members could get slowed down in targets and fail to think about the needs of the company as it grew. Hastings composed that altering course, as might be necessary, includes investment and might risk earnings margins or stock performance.
“That’s why a business like Warner or Disney may not have the ability to change considerably with the times, the way we’ve often done at Netflix,” he composed.
Hastings told Business Insider’s Nich Carlson that the streaming business rewards terrific work by merely paying people what they deserve, and giving raises gradually. The company’s policy is to pay top of market for each person’s role, or slightly more than the staff member would make doing the same job at another company.
“If you’re actually fantastic and you’ve done incredible work, then you ‘d get a raise for next year,” Hastings stated in the interview. “It forms that favorable benefit for terrific efficiency. And after that, what we do not require to do is record all the important things that the reward may be based upon, since we wish to be extremely versatile as a service.”
SEE ALSO: Netflix co-CEO Reed Hastings unpacks the approach behind sending out honest e-mails to staffers explaining why a coworker was fired
Join the conversation about this story “