Freedom and Responsibility Culture

Netflix’s Take on HR: Is the Manufacturing Industry Doomed?

In their influential power point deck explaining how Netflix shaped its company culture and motivated performance, Patty McCord and Reed Hastings present a very compelling case.

Their take on HR management resonates far beyond tech companies in Silicon Valley. It is very relevant to many industrial companies where the picture is much less focused, consistent, and readable.

Whereas many companies–in their blind push in contradictory directions–end up creating frustration, complacency and confusion, Netflix seems to have managed to define a clear, engaging vision for its people.

It is not rare to see companies promoting a whole range of almost contradictory values (Excellence and Continuous improvement with Rigor, Loyalty and Respect, Creativity, Unlimited thinking and Freedom with Service mindedness and Teamwork), unfocused visions (Quality, Competitiveness and Customer satisfaction, all at once), and a diluted brand promise (Innovation and Revolutionary prototypes with a Long history, Proven products, Safety and Technical excellence).

Netflix managed to focus its energy–and that of its people–in a clear, simple manner.

• Readable, consistent values that are directly linked to promotions and rewards
• Simply stating what Netflix does not particularly value; such as Unlimited loyalty or Hard work with moderate performance
• A clearly articulated High performance culture based on Freedom and Responsibility, instead of Processes and Procedures

Freedom and Responsibility vs. Bureaucracy #

In Netflix’s very accurate assessment, as companies grow, complexity grows and talent density decreases. And this leads to chaos. So process emerges to control the chaos. Process, in turn, drives more talent out of the company.

In the shortrun, in Netflix’s view, a process-driven company can thrive on a high level of efficiency. But as soon as the market shifts, such companies are unable to adapt and they eventually become irrelevant.

So Netflix has decided to avoid this scenario by seeking to hire more, not less, talented people as they grow in order to control the chaos without the need for accumulating processes.

But, in Netflix’s own analysis, this strategy is much more adapted to creative environments than to safety-critical environments such as the medical, nuclear or aerospace industries.

So are we Doomed in these Industries? #

And can there be a third way? After all, manufacturing industries are here to stay. We will probably always need some form of manufactured products: transportation machines, communication hardware, energy generators, etc.

One may argue that all of manufacturing is doomed for commoditization and robotization. In this future, all the creative work (programming, artificial intelligence, design, engineering, etc.) is done by highly talented people in the Netflix-way. And all the safety-critical, process-driven, painstaking work is automated and done by machines.

But how will the transition to this long-term scenario look like?

We would like to suggest that, in the near-term, the manufacturing companies that will strive are those who embrace this future and consciously and deliberately apply two sub-cultures within their organization: a Netflix-like culture in the creative parts of the organization (design, engineering, analysis, marketing, etc.), and a process-driven culture in the executing parts of the organization (quality assurance, manufacturing, assembly, maintenance, logistics, etc.)

Employees of such companies can, for example, either select to work in the design office creating a brand-new gear box system, governed by a Netflix-like culture. Or they can choose to work on the final assembly line, putting together a gear box system, by meticulously following a standardized process in a process-driven culture.

The former may perhaps evolve in a less predictable environment. The latter may benefit from more stability and less risk. And, at different stages of their lives, and depending on their talent and skills, employees may transfer from one environment to the other.

For example, when in a more energetic and creative period of their life, an engineer may prefer to work in the design office. At a later, calmer and more focused period, they may prefer to go to quality assurance.

Other companies may decide to specialize in one or the other area and its corresponding culture. So partnerships may be established between a talent-driven design company, on the one hand, and a process-driven manufacturing company, on the other.

By the way, this transition is already underway. Think Apple and Foxconn.

Author: E. Dib #

Further Reading #

• Patty McCord, Reed Hastings, et al., Netfilx Culture: Freedom and Responsibility
• Philip Ball, Critical Mass: Critical Mass: How One Thing Leads to Another
• Jonathan Haidt, The Righteous Mind: Why Good People are Divided by Politics and Religion