In Silicon Valley, there is a document which has become legendary.

It is a document which outlines some of the company and HR policies which have created a company which completely disrupted an industry sector.

And much of its value comes from the fact that it contains policies which seem so ridiculous in theory, but end up being so effective in spurring a culture of innovation and the trust which underpins it.

It is called “Netflix Culture: Freedom & Responsibility”, and is a simple 125 page slide deck, attached below, that you can review in a few minutes.

“It may well be the most important document ever to come out of the Valley,” Facebook’s COO Sheryl Sandberg has said.

Recently, the CEO of Netflix, Reed Hastings, gave a podcast interview for the co-founder of Linkedin, Reid Hoffman’s Masters of Scale podcast. (Ed: there seem to be a lot of successful ‘Reed’s in Silicon Valley…).

We have also included the podcast here, which offers some great insights into what makes a great, innovative company culture:

What are some of the major points from the document and from the podcast?

  1. Actual company values are the behaviours and skills that are valued in fellow employees (not just the “values” list of words in a company building)
  2. The Nine behaviours and skills which Netflix looks for (and which they promote people for):
    1. Judgement
    2. Communication
    3. Impact
    4. Curiosity
    5. Innovation
    6. Courage
    7. Passion
    8. Honesty
    9. Selflessness
  3. If someone is displaying adequate performance, they will be offered a generous severance package. They want their teams to be full of stars, and think of themselves more like a pro sports team than a family. The severance package should open up a slot to try and find a star
  4. They use what they call the Keeper test:
    1. Managers should ask themselves: “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 Netflix?”
  5. The talent they have should assist each other all the time. Internal cutthroat / “sink or swim” behaviour or “brilliant jerks” are not tolerated
  6. Hard work is not relevant. Sustained A-Level performance, despite minimal effort, is rewarded with more responsibility and great pay. Sustained B-Level Performance with “A for effort” gets a respectful severance package
  7. Netflix believes that for most work, the best people are 2x better than the average. But for inventive / creative work, the best are 10x better than the average
  8. Freedoms
    1. Responsible people thrive on freedom and are worthy of freedom. They have a culture of creativity and self-discipline, freedom and responsibility
    2. They say that as most companies grow and become more complex, the proportion of high-performance talented people out of everyone begins to fall.
    3. Procedures become necessary when complexity becomes too much for some lower-performing people to handle, put in place to reduce mistakes and be more efficient
    4. High performers are much more likely to leave when strict procedures, which are aimed at the lower performing people, begin to frustrate them
    5. But when the market shifts, these process-focussed companies are less able to adapt
    6. Netflix’s solution: Increase talent density faster than complexity can grow. This allows them to reduce the number of rules people need to obey
  9. Netflix’s Unlimited Vacation Policy and tracking:
    1. Official stance: “there is no policy or tracking”
    2. “There is also no clothing policy at Netflix, and no one comes to work naked”. You don’t need policies for everything
    3. Policy on tracking expenses: “Act in Netflix’s Best Interest”
  10. If you want to build a ship, don’t drum up the people to gather wood, divide the work, and give orders. Instead, teach them to yearn for the vast and endless sea. Management is all about context, and not so much about control. Employees should also not be compared against one another, such as in performance reviews
  11. Highly aligned, loosely coupled teamwork effectiveness depends on high performance people and good context. The goal is to be Big, Fast and Flexible
  12. Pay should be at the top of the market, and treat people individually
  13. Career planning is up to the individual

So what do you think about these policies? Do you think they could work at your company? Let me know in the comments below.

Did you know that scientific evidence shows your creativity decreases over time

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Nick Skillicorn

Chief Editor, Founder & CEO at Improvides Innovation Consulting
Creativity & Innovation expert: I help individuals and companies build their creativity and innovation capabilities, so you can develop the next breakthrough idea which customers love. Chief Editor of Ideatovalue.com and Founder / CEO of Improvides Innovation Consulting. Coach / Speaker / Author / TEDx Speaker / Voted as one of the most influential innovation bloggers.