Testing, testing: how Netflix built a culture of innovation

It’s safe to say last week was a pretty good one for Netflix.

It began with news that Barack and Michelle Obama will produce documentaries and television series for the streaming service. And it ended with Netflix topping Disney as the world’s most valuable media company.

Netflix is doing more than disrupt the business model of show business. With exploding growth (its stock is the S&P 500’s top performer this year), it’s become a case study in the culture of innovation, as it melds the moonshot minds of Silicon Valley with the creative souls of Hollywood.

To do that, the company puts a lot of emphasis on attracting the right talent, and getting out of their way. Which is how Netflix says it has pivoted successfully — twice — in its two-decade existence.

Its credo was established in the 2009 Netflix Manifesto — a 120-slide masterpiece that was updated last year as a crisper, 10-page outline known simply as “Netflix Culture.”

Among the highlights: Set your own vacation, don’t bother with performance reviews and demand “adult-like behaviour.” And most critically: always be testing. Whether it’s ideas, shows or people.

I sat down with Jessica Neal, Netflix’s chief talent officer, at the C2 conference in Montreal to talk about that culture and how it’s evolving as they company goes global.

Neal, a Kentucky native who studied at New York’s School of Visual Arts, was an early Netflix talent scout who left to work at a couple of other Valley startups. She returned last year to help CEO Reed Hastings manage a growth trajectory that now spans 4,000 full-time employees and 125 million customers in 190 countries.

Here’s some of what she had to say:

Give employees a long leash.

Netflix gives its employees lots of runway: to make decisions, to experiment and to fail. For instance, the company doesn’t have a corporate expense policy. Instead, it asks employees to “spend the company’s money as if it was your own.” And it has found that, when you give employees that kind of freedom and responsibility, they generally make the right choices. Giving employees a high degree of independence is one of the reasons why founder Hastings claims he sometimes goes an entire quarter without making a single decision.

Information is power — and it should be shared broadly.

Netflix decided to become a “memo culture” around the time it hit the 1,000-employee mark. Rather than share minutes of a meeting after it’s over, Netflix asks anyone scheduling a meeting to write up the main takeaways and desired outcome before it even starts. The practice allows employees to get to the point faster and reduces the number of follow-on meetings. A relentless focus on information and data underpins pretty much everything Netflix does, which Neal credits for enabling the company to abandon bad ideas early and pivot to better ones. (Netflix began as a mail-order DVD supplier before embarking on streaming and later morphing into one of the world’s biggest producers of entertainment content.)

Expect feedback. A lot of it.

Netflix encourages employees to try out new ideas and doesn’t shy away from failure, in the belief that continuous experimentation and feedback will allow the best ideas to surface. Even the CEO is open about “things he needs to get better at,” Neal says. It’s part of a culture of “sun shining” — bringing failures out into the open so all employees can learn from them. But feedback is about more than commentary. As part of its testing culture, it relies heavily on data to show how employees are doing — and ensures they know.

Don’t be afraid to let people go.

Working at Netflix isn’t for everyone. It’s a high-performance culture, and Neal says the company is pretty committed to parting ways with employees who don’t have what it takes. It can also require an array of executives and managers — often in the scores — to comment on a hire or promotion before it’s made. The company talks a lot about “dream teams” — the ideal mix of talent that thrives when working together. And as Neal put it, a team isn’t a family. It’s there to win.

Inclusion is emblazoned.

Inclusion is a big part of the Netflix Culture document, as it strives to help employees recognize and work past their biases. To many, it doesn’t embody the “bro culture” that’s common in the tech world. But what about #MeToo? Neal says that, as an executive who works in both the Valley and Hollywood, she continues to push for progress. Among her concerns: ensuring female talent gets paid fairly. “Equal pay isn’t that hard, just write a cheque” she says. “Just pay them.”