The Critical Skillset Most Technology Leaders Are Missing

[Update (05/26/2022): Yes, Netflix stock took a beating recently and there were some layoffs. They will undoubtedly emerge even stronger. The following piece still rings true today even as things have changed a bit since it was written in 2020.]

In 2009, Netflix CEO Reed Hastings published a fascinating slide deck on the Netflix culture, how they hire, what values they embrace, and how they work together to build new products. It's amazing, and you should read it. It still contains lessons that every technology leader should heed, and very few actually do.

The values that Netflix promoted back then are directly aligned with the principles of modern leadership that have been emerging more broadly of late: Freedom and Responsibility.

Hastings is exceptionally clear in the deck about the importance of building teams that can experiment and execute freely, recover quickly from failure, and share information widely and openly across the company In fact, the Netflix values are strikingly similar to Dan Pink's notion from the book, "Drive", which he outlines as the key elements of intrinsic motivation in any innovative knowledge-work field: autonomy, mastery, and purpose.

I don't think many would argue that Netflix has continued to become a wildly successful company. There are a lot of useful measures of this, but at a minimum Netflix stock scraped the underside of $60 per share in 2009 when the slide deck was published. It was well over $500 per share as of this writing, 11 years later.

Who do you admire?

It's important to identify the companies that model good behavior, the kind that we would love to embrace in our own organizations. While we must always chart our own course, we can use these companies as inspiration.

Netflix is not the only shining example of a bravely positive culture producing great business outcomes. Toyota is, of course, the ultimate archetype of a company culture that prize servant leadership, the importance of a learning organization, and being compassionate but ruthlessly honesty, over and above the hurly burly of the quarterly earnings cycle that thrash about the cultures of most of their competitors.

Come what may, for the last sixty or so years, Toyota has boasted a near continuous record of growth and profitability (interrupted only briefly during that brake recall episode in 2009), while maintaining its legendary focus on respecting people and continuous improvement.

Adobe, whom I've had the pleasure of working with directly, is also well known for having a great company culture that values openness, honesty, and experimentation. Despite being under constant pressure from upstarts like Sketch, Adobe has managed to fully embrace Lean and Agile methods to iterate quickly with new cloud-based products that are delighting their customers. And, to be honest, for a minute there I wasn't sure they'd pull it off. They could not have done so without the freedom and flexibility espoused in Reed's slide deck also appearing throughout their culture, even if they aren't as explicit about it.

Zappos is another celebrated example of putting happiness, both for customers and employees, at the top of the list of values, eventually acquired by Amazon. Founder Tony Hsieh, who we were deeply saddened to lose last year, was a champion of positive company culture, and his book "Delivering Happiness" is a must read for tech leaders.

And Github was a marvel of freedom, creativity, and self-organization along with rapid growth, right up to the point where it was snapped up by Microsoft, a tech giant who itself is now turning toward more openness and autonomy in its culture.

By contrast, the once great IPO darlings Uber and WeWork were rocked by scandals of abusive management and savage overworking of their staff long before they finally reached their ultimate reckoning in the market.

Even the mighty G.E. suffered enormous setbacks over the last few years simply because its decades-old top-down culture wasn't flexible enough to let it get out of its own way enough that it could truly adapt to Lean and Agile methods. It's now finally crawling back from the brink, led by CEO Lawrence Culp, who cut his teeth at Danaher, a company whose success was a direct outcome of work with Toyota in defining their culture and process. Let's wish Larry the best in bringing GE back from the brink, and early indications are good.

Why aren't we getting there faster?

The secret of the success of Netflix and the others mentioned above is not solely due to the technical prowess of their engineers. Yes, Netflix has some incredible engineering talent, and they have led the way in the use of cloud technology and open source. But copying their approach to building scalable micro-services isn't going to give you the market dominance that they enjoy.

What is critical about their approach is the use of autonomy to allow teams to move fast, experiment, and recover quickly from failure. As they said, Freedom and Responsibility.

In his celebrated book, "Team of Teams," Gen. Stanley McChrystal reminds us that the individuals and teams closest to a problem, armed with unprecedented levels of insights from across the network, offer the best ability to decide and act decisively. This is because information critical to the success of any project is typically located adjacent to the most front-line workers. They must be empowered to make their own decisions quickly without approval.

This is a notion echoed by many others, including Don Reinertsen, whose book "Flow" any Lean enthusiast will readily recognize, and David Marquet, author of "Turn the Ship Around." In fact, the notion of empowering workers on the line to make decisions around quality control dates all the way back to the godfather of the quality movement, W. E. Deming himself.

But such a policy of autonomy requires leaders to relinquish control of decision-making, and face their deep seated fear of mistakes. And for most leaders today that lack of control is just too much to ask for.

What's holding you back?

Why is it so difficult for today's leaders to release control to their teams and individual contributors, even as volumes of leadership literature have shown that self-organized teams are more effective than rigidly controlled corporate hierarchies?

The answer lies in the heart, not in the head.

If you're like most technical people, you are very comfortable with the thinking side of your brain, and less comfortable with the emotional and creative side.

But if you are always in your head, ruminating away, when you imagine giving your teams autonomy, you'll probably feel fear. And your mind will interpret that fear, and tell you it's a bad idea to give your people more freedom.

This is because deep down you know that you haven't really prepared your people for a self-organized culture. You haven't built a culture of freedom and responsibility. So, at least some of the fear is justified. And then you just keep perpetuating the same cycle of rigid control and fear of failure over and over.

Your feelings provide you with critical information in any decision. But if you are not connected to your emotional side, that information is no longer available to you as a tool in evaluating various options. If you are not in touch with your emotions, you'll just sense the conclusion that autonomy is a bad idea, and not recognize the fear you are feeling as a unique bit of extra information to be unpacked and evaluated.

By contrast, the more skilled you are with identifying those feelings as feedback, the more information you have to make decisions with. And when it comes to decisions, more information is always better.

The solution to this is to talk openly with your people about the fear of failure, to have a rational conversation about why you want your teams to be more autonomous and what is going to take for them to get there.

It's not going to happen overnight. No-one is asking you to just through them into the deep end. But in order to build a culture of responsibility you need apply a little bit more freedom as an experiment. And to have a conversation like that takes courage.

Are you ready?

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