How Netflix Reinvented HR (2014)
hbr.org
hbr.org
I guess I'm too soft-hearted to be successful as a C-level manager, but I find the pragmatic, calculating nature of this approach appalling, even though I agree with many parts of the argument.
I had recently listened to the Planet Money episode about her work (http://www.npr.org/sections/money/2015/08/28/435583328/episo...), at the end she was let go from Netflix abruptly, too, probably using the practice she installed. Maybe I was biased with a Robespierrean expectation of karma returning, but she sounded like that was quite a blow to her, despite all her earlier rationalistic rhetoric. Now, reading it again, brought to mind this:
"It couldn't be called ungentle
But how thoroughly departmental"
But don't be fooled -- this sort of thing is a subtle change in status for finance and engineering jobs. You're no longer a professional, you're labor. That's a concept that tradesmen accept, but I don't think the average IT guy does.
The company need to acknowledge what that means too. If I'm just some keyboard puncher, I could give a fuck about what is best for the company.
Exactly. The one-sided sense of loyalty implicitly demanded in this article is astounding. Fuck that shit.
As long as they're upfront about it, that seems fair to me.
It's interesting, in that you need to look at Netflix more like a real estate developer or construction company than a tech player. I went to school with a kid whose dad was a multimillionaire real estate developer dude. Then a project got delayed by some external factor, which killed his cash flow. And the, and the economy shifted and killed his line of credit.
Result: multimillionaire->multithousandaire.
But I don't see why these rules couldn't work in a contracting revenue scenario, as long as you keep cutting staffing levels where they need to be to keep a runway.
That too makes it hard to stay calm though. The severance policy helps.
If all she did with that severance was go back to school and finish a four-year degree, then she'd absolutely kill it in the job market with her track record. Very possibly double her salary.
I do note that they don't trust their storage/stock workers as much, and she kind of glosses over that bit.
I don't understand why people would expect any loyalty from California-based tech companies, is there any precedence for that? I thought the entire business was generally based on pretty predatory hiring and firing practices? As if the colluding on salaries scandal wasn't enough of a hint?
At a bare minimum level, all states except 7 recognize public policy exceptions to at-will employment (firing employees for doing something compliant with public policy, like filing a disability claim).
At a "getting further away from pure at-will employment" level, 11 states require employers to act in good faith when firing employees (which basically excludes malicious firings)
And even if a state doesn't, the federal government does, so there are always public policy exceptions.
(+ it is about laws regulating unions, not literal rights to work.
Conveniently enough, someone calculated this last year using their IPO value, not the internal strike price:
http://www.investopedia.com/articles/active-trading/081315/i...
> Most companies spend endless time and money writing and enforcing HR policies to deal with problems the other 3% might cause. Instead, we tried really hard to not hire those people
> Netflix didn’t pay performance bonuses, because we believed that they’re unnecessary if you hire the right people.
Oh, so that's what you're supposed to do! Of course, you must mean you have a foolproof system for finding "A" players in your candidate pipeline then, and then it's just a matter of selecting only the best!
Sorry for the snark, but these things are practically truisms. Everybody wants to hire the very best people. Everybody wishes they didn't need incentive structures, because in an ideal world everybody is always incentivized to just do great work all the time because they're such an "A" player.
But really, unless they back it up with any real evidence that they've actually solved the hiring problem and found a reliable way to determine who the good candidates are, I'm more apt to call the whole thing luck.
Or maybe, just maybe, all the things Netflix is doing (lax vacation policies, no bonuses, easy to fire people) are just things companies should be doing regardless of how supposedly good at hiring they are.
> We also believed in market-based pay and would tell employees that it was smart to interview with competitors when they had the chance, in order to get a good sense of the market rate for their talent
Oh god, so it is true! We've had a few Netflix candidates interview, seem a great fit for a position, made them an offer, and they just reject it and never talk to us again. A rumor got around that Netflix candidates are all just using the interviews as leverage instead of being actually interested in the job. As a result, we no longer interview candidates who are currently working at Netflix, because we can never believe that they're serious about it.
It's a huge risk to your employees to do something like this, because once word gets out about it, it becomes seriously difficult to explore other jobs while you're still employed.
We've had a few Netflix candidates interview, seem a great fit
for a position, made them an offer, and they just reject it and
never talk to us again. We started developing a theory that
Netflix candidates are all just using the interviews as leverage
instead of being actually interested in the job.
But when you see that it's literally Netflix's message that employees should go interview somewhere and bring in the offer to get their salary bumped, it starts making you not trust that the candidates are actually serious.
(Also I edited my comment after, but before I saw yours: We didn't just develop a theory about it, but there was a rumor that Netflix had this internal policy. I didn't believe it at first but here it is.)
1. Looks like netflix pays 200-300k http://h1bdata.info/index.php?em=netflix&job=&city=&year=All
In the software industry, no matter what one thinks the situation ought to be, the current fact of the matter is that a salary of $400K would be very unusually high, and so I am taking issue with rayiner's assertion that "it's not jaw dropping". It might be reasonable to say "it shouldn't be jaw dropping", based on the principle you're describing above, but that would be a different claim.
You can't on one hand go on about market forces etc etc and say that because Netflix's RPE is high its employees should be paid for. RPE has absolutely no bearing on the value individual employees bring to Netflix.
I have no doubt that there are developers at Netflix making $400k+. To imply that it's not a jaw droppingly large amount of money for a software developer to make is borderline insanity.
Yes, it's on a higher end compared to what you would normally see but I would say that the regular salaries are too low. As a software developer, we have the capability to generate tremendous amount of value. Currently, most of the value is captured by C level executives (getting paid millions). Why should software developers not getting more in proportion to the value they add?
http://www.jobsintech.io/immigration_companies/netflix/salar...
500k for Research Engineer Manager.
As for the parent comment: I do wonder... I'd hazard a guess that sometimes recruiters have dropped the ball, and not discussed salary ranges with the Netflix employee (and maybe they aren't allowed to), leading to an offer that's 1/2 or 1/4 what they are making.
And as for the parent topic... I couldn't bring myself to go interview _just_ to get salary intel, knowing I didn't want the job. And I can't see many of my coworkers doing it either. There would have to be a chance that I'd take the job.
I wasn't involved in the salary negotiations of the Netflix candidates so I can't tell for sure whether they had similar offers, but I would have no reason to believe otherwise, because since then I've been involved with other candidates and I now know what our guidance is.
But this was a year ago. This was a guy that was at Netflix for a while, so my guess is his salary hasn't grown to keep pace with the "new hire salary inflation" the whole industry has been experiencing, so he went to his manager and asked for a raise, which is when this quasi-policy of theirs starts to kick in: "go interview some places, bring us your offers and we'll match it!" And that's what happened. In all likelihood we gave him an offer higher than he made (new-hire salary inflation and all that), he took that back to Netflix and lived happily ever after.
But after a couple times more of that happening, and you read stuff like this, you no longer take Netflix candidates seriously.
I don't.
1) Netflix has confirmed they recommend this "non-serious interview" approach, and
2) The candidates are just going silent after an offer. If you were simply not offering enough, or the wrong kind of compensation, you would expect to hear back something from some of them.
Really scummy of Netflix to encourage this. Why not just ask an internal recruiter about expected compensation packages? There seem to be a lot better options than just burning up their time like that.
Just today I clicked on a linkbait title from Business Insider: http://www.businessinsider.com/the-stephen-curry-nba-draft-2...
It lists all the people who were drafted ahead of Stephen Curry, "arguably the greatest basketball player in the world right now". Curry was drafted seventh. The others were:
1) Blake Griffin, 5 all star games
2) Hasheem Thabeet, 0 all star games
3) James Harden, 3 all star games
4) Tyreke Evans, 0 all star games
5) Ricky Rubio, 0 all star games
6) Jonny Flynn, 0 all star games
Even in the very limited domain of professional basketball, it's impossible to predict who will be the superstars and who will quickly wash out of the league.
In the real world, it's much more difficult!
A.) The 7'+ guy - because being able to chew gum and walk at the same time is rare at that height, and deserving of a number 2 pick - see Sam Bowie in 1984, over MJ.
B.) Minnesota inexplicably picking two point guards back-to-back. Dumb, dysfunctional teams frequently make poor draft decisions.
C.) All six players were drafted into the Western Conference, which has been consistently more talented and more competitive than the East since Jordan retired the second time. Tyreke Evans could probably have gotten a couple All-Star nods in the East - after all, he did win Rookie of the Year, gunning for an awful Kings team.
D.) Curry fit the archetype of the mid-major/small school high-usage gunner coming into the draft. He put up incredible numbers, but against second and third-tier competition, as pretty much the only scoring option on his teams. This doesn't often translate to the NBA level. See Jimmer Fredette, or Adam Morrison, or Doug McDermott.
And then it goes to hell.
I knew a guy who was hired for similar reasons: the company needed a warm body to do some really basic scripting, so their sole criteria was "does this guy have a beating heart and working hands?".
They ended up hiring the 17-year-old high-school dropout who was working in the coffee shop (owned by his father) at our office building, because the head of software is a coffee fiend and he makes good coffee. Since they just needed a warm body, why not hire him? Over the next year or so, I accumulated so many stories about his antics.
The one that tends to shock people the most involved him playfully threatening a co-worker with a knife in the elevator because his co-worker snarked at him for pushing all the buttons. No, he didn't get in trouble for it, but when the co-founder found out (well after the fact), he told him not to ever bring the knife to work again (he said he would've just fired his ass if he actually witnessed it, but he didn't even find out about it until a couple of weeks after it happened). And I have plenty more stories where that came from.
He was finally let go when, a year and a half later, he took a second job as a waiter (his dad had long since fired him from the coffee shop), and he focused so much on his new job that he simply stopped showing up at this one or even so much as calling in to tell us he can't make it. After a month of that, he removed himself from the company's Skype groups (yes, we used Skype instead of Slack) because "they were making [his] phone blow up" with stuff he found useless, so the company removed him from the payroll. Even before he stopped showing up, everyone agreed he was a useless do-nothing. It took him three months to return his company laptop after that, and the co-founder was on the verge of filing a police report over it. He only returned it because I walked down to the coffee shop and told his dad the co-founder was so pissed he'd set a deadline on when he'll go to the police, and his dad promptly called him and made him return it that day.
His biggest contribution to the company was providing me with enough material to shock and entertain anyone I meet.
That also is really unfortunate for people actually trying to switch jobs from Netflix because I would also ban them from interviewing if I saw that kind of behavior.
The best thing you can do for employees—a perk better than foosball or free sushi—is hire only “A” players to work alongside them. Excellent colleagues trump everything else.
I firmly and wholeheartedly believe in that. Find the absolute best people for the job, that play well with the team, pay them really well and treat them like adults. It's a winning combo that has repeatedly worked.
Argue all you want about how there aren't enough of "the best people" which I also agree with - but that's why it's worth working really hard to recruit them.
Do you hire junior "A" players who aren't really at the levels of skill or professionalism as their senior counterparts, but who have the potential to be and can still be given economically viable work to do? Do you call these people "lowercase 'a' players" or something?
How do you count on your "A" players to recognize top talent in slightly different domains or areas of expertise?
How do you account for people being creative and unique, like the person who has a background in something else but who adds value by being able to bridge cultures and bring new, unfamiliar ideas to your existing "A" players?
Yea, probably. If the goal is the dominate some sector, then having a mono-culture is incredibly valuable. Singular focus, shared task, shared vision is just staggering when it comes to effectiveness. All high functioning teams, from sports, to military and especially in business share this. And yes it looks like a cult from the outside - partly because it shares cult-like aspects.
It's worth defining what "A" players are, however because I think while there is a pool of them, not all of them would work out for any team.
I think people get the wrong idea that mono culture means no diversity. That's basically what your questions do.
I think back to the spy world and while everyone has the idea that all of the best spies in the world look like James Bond, the reality of it is that the best spy teams in the world look - well like a cross section of the planet. Old people, young people, uber nerds, jocks, preppies etc...but they all have a critical piece of a singular mission of collecting some critical piece of information.
Here is how I define an "A" team: A team that for a defined macro-goal, there is no better possible combination of persons on the planet to be filling the individuals roles, which accomplish micro-goals in furtherance of the macro-goal.
You compose that as needed. It doesn't "look" any way - but there are common features among the individuals usually: Domain expertise, Flexibility, Leadership Ability (which includes followership), Emotional Maturity etc...
> If your employees are fully formed adults who put the company first, an annual bonus won’t make them work harder or smarter.
The contrast painted here is astounding. It demands so much loyalty from the employee, and in return, offers no loyalty whatsoever from the employer.
As for the annual bonus, Netflix assumes that everyone is functioning at a high level and pays as if they were making the top-end of the bonus range at other companies. Which is part of the rationale behind the high base compensation.
To me, this is the problem - who determines this and what is their dataset? I worked at a company in the past that claimed to do this, but to do this they generally need some sort of data source. And the data sources for salary data are tough to use in this way - positions/responsibilities vary, regions vary, etc. Just tough to get this right - even with the best intentions.
As an employee, you don't get to see all of the requests for raises, all of the people negotiating salaries, etc. But there's people in the company who do. That's all the data you need.
Source: I have interviewed with them.
I have also not heard any stories about Netflix employees being underpaid, except one being lured away by FB for over $1M.
> so much loyalty from the employee, and in return, offers no
> loyalty whatsoever from the employer.
I disagree.
Netflix clearly says "interview elsewhere" and demands the opposite of blind loyalty to the company. They provide compensation at the top end of the spectrum and if employees want to go they let them (at least as far as I can tell from reading the article).
Where are you seeing the demand for "loyalty"?
"Our compensation philosophy helped a lot. Most of its principles stem from ideals described earlier: Be honest, and treat people like adults. For instance, during my tenure Netflix didn’t pay performance bonuses, because we believed that they’re unnecessary if you hire the right people. If your employees are fully formed adults who put the company first, an annual bonus won’t make them work harder or smarter. We also believed in market-based pay and would tell employees that it was smart to interview with competitors when they had the chance, in order to get a good sense of the market rate for their talent. Many HR people dislike it when employees talk to recruiters, but I always told employees to take the call, ask how much, and send me the number—it’s valuable information."
She says they paid market rate and no bonuses. She emphasizes here and elsewhere in the article the importance of hiring people who put Netflix first.
She was also devastatingly "moved on" herself: http://www.npr.org/2015/09/03/437291792/how-the-architect-of...
Encouraging employees to interview elsewhere seems to be the exact opposite of demanding loyalty. To my mind it is like saying "we are willing to compete for your loyalty"
If you look elsewhere in this thread it is estimated that senior engineers tend to make $400k ... which is 400% of the 75th percentile of the Canadian wage http://www.jobbank.gc.ca/report-eng.do?area=9219&lang=eng&no...
No bonus doesn't feel like quite as big a deal if you're paid a base-rate of many times more what a bonus would be.
I understand that salaries in SV are higher to begin with, but $400K is likely in the 200% range right?
That doesn't feel like demanded loyalty so much as loyalty purchased at a fair price.
That said, there is a lot of good stuff in this article. Getting rid of formal vacation policies, not using performance bonuses as a motivator, relying on people to be adults instead of on HR.
Bonus for example: studies show that people are not motivated by performance bonuses. At least for professionals, compensation is a retention issue, not a productivity issue: high performers will be resentful if his buddy at another company is paid more for the same work.
They're in the exact same category of stupidity as combined sick and holiday days. It looks great on paper, until your office perpetually has sick people in it because no one wants to burn a vacation day.
I've been on a PIP. It was a place with an "up or out" mentality as a legit part of the business culture. The only mistake they had made was not being brutally honest about that when I'd gone there in the first place. And some of that was probably on me. You either went into essentially program management or out. I'd been looking for a job for about a year before I got laid off. It was disruptive, but it was for the best.
I could have gone for a Masters degree and possibly stayed, but towards what end? I'm already "overqualified" as it is. The logistics of that alone meant 120 mile round trips and there were actual financial risks involved.
Nearly everybody in the hiring cohort I was part of was let go.
I'd actually told a boss, face to face, that I wanted to stay technical - that my value-add wasn't in the more... clerical emphasis they were trying to pivot me to.
I worked a few contracts after that and made some of the best networking contacts to date. This worked out just fine.
Maybe Netflix could have figured out a way to make it work, maybe not. You pays your money and you takes your chances. They took a way out and at least ended it. The only thing that is suspicious about the story is that she wasn't perceived to be of value to the new automation scheme ( which I presume is the legendary Chaos Monkey ).
The phrase that ticks me off the most is "fire fast". Like seriously? You spent all this time on hiring the best candidate and now are going to get rid of them fast because they don't pass your smell test? I think many experienced/older people in tech have been burned by this at some point, and it makes them vary of working for startups.
But there are exceptions. I have a friend who is fairly senior ... he quit a cushy corp job for a well funded startup. My friend was working like crazy for some interim deadline .. the CEO saw what he was doing and said "this is a marathon, not a sprint. don't burn yourself out". Now, that is the kind of leader you want in a company. Hire self-motivated and technically competent people and realize that employees are humans. Tech is about speed but as an industry, we are letting quality and humanity slip in favor of speed. And that is wrong and foolish IMHO.
There's always a missing subtext to something like this - this really does have a "John Henry and the steam drill" feel to it. "Chaos Monkey is now the story. You are not of the body. GTFO." Bummer, man :)
I love your last paragraph. The Thing is the only one what knows when it will come to be. Over-grinding is a definite anti-pattern.
There is probably not a general theory of this - it's just going to be wrong a lot.
Sounds like they were loyal to her.
But I agree, none of this works without 2 way loyalty.
Now I'm no executive, but is there a reason the blindingly obvious strategy of investing the money they're clearly willing to expend in training so that this individual's skills did fill a need they had?
That said, it's hard to imagine there wasn't something she could have done, somewhere in the company.
Now if someone was given a random promotion and it turned out to be a bad fit, that individual may be more willing to step back down.
Except for the employee who has zero path forward at the company.
Not if you destigmatize it. They weren't a good fit for that particular role, or they didn't have the right skills yet. That doesn't mean they have no path upwards.
If someone told me "if you come work for us, you'll be employed for life and guaranteed at least a cost-of-living adjustment each year, but you'll never see a promotion even once", I'd take it in a heartbeat.
Now I think that if you're a large company, having this venue open, and letting basically anyone apply for retraining to another skill set is a good idea. But I think it's not obvious to execute, and involves a lot of risk.
Same here. If I have X weeks of paid vacation, I know I can take X weeks of vacation.
If I have 'unlimited vacation', I know I can take... some amount, I guess... but I have to constantly vigilant to the whims of HR and management to keep from taking 'too much'.
That's only possible when equity is a direct substitute for the income, similar to when an employee would buy the stock/options through their broker for the money out of their paycheck. Imagine hiring your 5th employee for 1.5% of the company and they leave the next day.
If a person wants to leave 18 months into it let them go with 18/(412) percent instead of having them wait around another 6 months to get 50% instead of 25%.
For the 1 day employee that could work out to 1/(4365) * 1.5%. But there should be a cliff as having them jump that early can be disruptive.
If I were to over-simplify what they've actually done, it seems more like they changed the culture closer to survival-of-the-fittest (which seems quite optimal), and put more actual power in the hands of managers (which could be good, if you have a good manager).
Generally though, investment banking is generally pretty successful at making people rich (whichever side they're on) -- maybe a similar effect will be observed on Netflix's software.
And it could all be avoided if the company would simply define a number so expectations are crystal clear. Simple. Instead, what happens, is it becomes an internal competition to see how few days you can take and creates a very toxic atmosphere where people are judged based on the days they take.
Companies should be setting a static number of days/hours and encouraging their employees to take ALL of those days off, or at the very least, pay them out or roll them over if they don't use them.