No Rules Rules

Reed Hastings is a co-founder of Netflix in 1997, and he has served as chairman and CEO since 1999. He previously started Pure Software which launched in 1991 and was acquired in 1997. Reed Hastings is an active educational philanthropist, and has served on the California State Board of Education, and as a director of Dreambox Learning, KIPP, and Pahara. He counts serving in the Peace Corps as a hugely influential experience in his career. Reed Hastings is a graduate of Bowdoin College and Stanford University.

Erin Meyer is a professor at INSEAD, one of Europe's leading international business schools. She is the author of The Culture Map, and her articles have been published in the Harvard Business Review, The New York Times, and Forbes.com.In 2019, Erin Meyer was identified as one of the fifty most influential business thinkers in the world. She is a graduate of INSEAD, and also served in the Peace Corps from 1994 to 1995.

Most companies tend to get more rules and processes as they grow larger. Netflix has excelled by going in the opposite direction. As the company has grown, it has built a culture of having less rules, not more.

So how does Netflix pull that off? It uses a 3-step process that gets cycled again and again. That process looks like this:

What's most impressive about this is Netflix has used that same cycle as it has navigated four major industry transitions to stay at the top. The company has evolved from being a small DVD rental by mail operation to streaming other people's content, to creating its own content, to becoming a global company entertaining people in 190 countries.

Netflix has achieved that by becoming a different type of workplace, which promotes flexibility, employee freedom, and innovation, rather than focusing on error prevention and rule adherence.

1. First steps to building a culture of freedom & responsibility. To start building a Netflix style culture, your initial actions should be:

2. Next steps to a culture of freedom and responsibility. To then take things to a higher level, your next actions should be:

3. Techniques to reinforce a culture of freedom & responsibility. To reinforce and stoke a culture of freedom and responsibility:

1. Performance inside a company is infectious. If you have adequate performers, everyone will tend to be adequate. If you have a team of only high performers, that's the way everyone will perform as well.
2. Great companies figure out ways to remove controls. That attracts top talent, who need less and less controls anyway. It's a self-reinforcing cycle.

Awesome book this week. The fact that Netflix has no management controls over how much vacation time its employees get attracted a lot of publicity a few years ago. In NO RULES RULES, Netflix co-founder Reed Hastings and management guru Erin Meyer put that into context. They explain that it's not just a matter of letting people decide on their own vacation schedules but it's more a deliberate part of an overall aim to have less rules on its employees, so they can be creative and effective.

That all aligns with their observation most companies tend to get more rules as they grow larger, and that ends up slowing them down. Reed Hastings makes the case this "less rules" ethos has helped Netflix make the transformation from renting DVDs by mail to streaming to creating content. The company is obviously doing something right as it has now grown to become a juggernaut in the entertainment industry. Having a culture of freedom and responsibility seems to be working for Netflix. Maybe it will work for you as well?