Powerful book summary
This book is well worth a read if you’re running a company and want an interesting take on how to build high functioning teams. Lots of anecdotal stories here from Netflix, some of which seem very specific to their culture, but still offers good insight and ideas which might apply to your company. I also liked that it was a succinct, short read.
Chapter 1: The greatest motivation is contributing to success
Reed on what people most want from work: to be able to come in and work with the right team of people — colleagues they trust and admire — and to focus like crazy on doing a great job together.
Our first big realization was that the remaining people were the highest performers, and it taught us that the best thing you can do for employees is hire only high performers to work alongside them. It’s a perk far better than foosball or free sushi or even a big signing bonus or the holy grail of stock options. Excellent colleagues, a clear purpose, and well-understood deliverables: that’s the powerful combination.
The greatest team achievements are driven by all team members understanding the ultimate goal and being free to creatively problem-solve in order to get there.
The strongest motivator is having great team members to work with, people who trust one another to do great work and to challenge one another.
The most important job of managers is to ensure that all team members are high performers who do great work and challenge one another.
You should operate with the leanest possible set of policies, procedures, rules, and approvals, because most of these top-down mandates hamper speed and agility.
Discover how lean you can go by steadily experimenting. If it turns out a policy or procedure was needed, reinstate it. Constantly seek to refine your culture just as you constantly work to improve your products and services.
Chapter 2: Every single employee should understand the business
People need to see the view from the C suite in order to feel truly connected to the problem solving that must be done at all levels and on all teams, so that the company is spotting issues and opportunities in every corner of the business and effectively acting on them.
Employees at all levels want and need to understand not only the particular work they are assigned and their team’s mission, but also the larger story of the way the business works, the challenges the company faces, and the competitive landscape.
Truly understanding how the business works is the most valuable learning, more productive and appealing than “employee development” trainings. It’s the rocket fuel of high performance and lifelong learning.
Communication between management and employees should genuinely flow both ways. The more leaders encourage questions and suggestions and make themselves accessible for give-and-take, the more employees at all levels will offer ideas and insights that will amaze you.
If someone working for you seems clueless, chances are they have not been told information they need to know. Make sure you haven’t failed to give it to them.
If you don’t tell your people about how the business is doing and the problems being confronted—good, bad, and ugly—then they will get that information somewhere else, and it will often be misinformation.
The job of communicating is never done. It’s not an annual or quarterly or even monthly or weekly function. A steady stream of communication is the lifeblood of competitive advantage.
Chapter 3: Humans hate being lied to and being spun
One of the pillars of the Netflix culture was that if people had a problem with an employee or with how a colleague in their own department or somewhere else in the company was doing something, they were expected to talk about it openly with that person, ideally face to face.
The most important thing about giving feedback is that it must be about behavior, rather than some essentializing characterization of a person, like “You’re unfocused.” It also must be actionable. The person receiving it has to understand the specific changes in their actions that are being requested.
Trust is based on honest communication, and I find that employees become cynical when they hear half-truths.
People can handle being told the truth, about both the business and their performance. The truth is not only what they need but also what they intensely want.
Telling the truth about perceived problems, in a timely fashion and face to face, is the single most effective way to solve problems.
Practicing radical honesty diffuses tensions and discourages backstabbing; it builds understanding and respect.
Radical honesty also leads to the sharing of opposing views, which are so often withheld and which can lead to vital insights.
Failing to tell people the truth about problems in their performance leads to an undue burden being shouldered by managers and other team members.
The style of delivery is important; leaders should practice giving critical feedback so that it is specific and constructive and comes across as well intentioned.
Model openly admitting when you are wrong. In addition, talk about what went into your decisions and where you went wrong. That encourages employees to share ideas and opposing views with you, even if they directly contradict your position.
Chapter 4: Debate vigourously
The way to keep employees committed is to hire people who are really interested in a problem like the one you’re hiring for and who have a track record of or proclivity for working on things for a very long time.
In the Culture Deck we wrote that one of the core qualities we looked for in those we hired and promoted was good judgment, defined, in essence, as the ability to make good decisions in ambiguous conditions, to dig deeply into the causes of problems, and to think strategically and articulate that thinking.
Intense, open debate over business decisions is thrilling for teams, and they will respond to the opportunity to engage in it by offering the very best of their analytical powers.
Set terms of debate explicitly. People should formulate strong views and be prepared to back them up, and their arguments should be based primarily on facts, not conjecture.
Instruct people to ask one another for explanations of their views and of the problems being debated, rather than making assumptions about these things.
Be selfless in debating. That means being genuinely prepared to lose your case and openly admitting when you have.
Beware of data masquerading as fact; data is only as good as the conclusions it allows you to draw from it. People will be drawn to data that supports their biases. Hold your data up to rigorous scientific standards.
Debates among smaller groups are often best because everyone feels freer to contribute—and it’s more noticeable if they don’t. Smaller groups also aren’t as prone to groupthink as large groups are.
Chapter 5: Build the company now that you want to be then
When there were openings at Netflix that we might have promoted people into, in many instances we knew the much better option was to bring in someone who had already been a top performer in the job we needed done. If people were eager to take on responsibilities we couldn’t give them, or to do work that wasn’t a priority for us, we encouraged them to look for those opportunities elsewhere. We also suggested that our employees interview elsewhere regularly, so that they could gauge the market of opportunities. This also allowed us to get a better understanding of how sought after they were and what we should be paying them.
To stay agile and move at the speed of change, hire the people you need for the future now.
On a regular basis, take the time to envision what your business must look like six months from now in order to be high-performing. Make a movie of it in your head, imagining how people are working and the tools and skills they have. Then start immediately making the changes necessary to create that future.
More people will not necessarily do more work or better work; it’s often better to have fewer people with more skills who are all high performers.
Successful sports teams are the best model for managers; they are constantly scouting for new talent and culling their current roster. You’re building a team, not raising a family.
Some members of your team may simply not be able to grow into high performers for the future you’re heading to. It is not the job of the business to invest in developing them; the job is to develop the product and market.
Develop and promote from within when that’s the best option for performance; when it’s better to hire from outside, be proactive in doing so.
The ideal is for people to take charge of developing themselves; this drives optimal growth for both individuals and companies.
Chapter 6: Someone really smart in every job
At Netflix we had three fundamental tenets to our talent-management philosophy. First, the responsibility for hiring great people, and for determining whether someone should move on, rested primarily with managers. Second, for every job, we tried to hire a person who would be a great fit, not just adequate. Finally, we would be willing to say goodbye to even very good people if their skills no longer matched the work we needed done.
Hiring great performers is a hiring manager’s most important job. Hiring managers should actively develop their own pipelines of talent and take the lead in all aspects of the hiring process. They are the lead recruiters.
The teams and companies most successful in staying ahead of the curve manage to do so because they proactively replenish their talent pool.
Retention is not a good measure of team-building success; having a great person in every single position on the team is the best measure.
Sometimes it’s important to let even people who have done a great job go in order to make space for high performers in new functions or with different skills.
Bonuses, stock options, high salaries, and even a clear path to promotion are not the strongest draw for high performers. The opportunity to work with teams of other high performers whom they’ll learn from and find it exhilarating to work with is by far the most powerful lure.
Making a great hire is not about bringing in an “A player”; it’s about finding a great match for your needs. Someone who is a high performer for one team may not be for another team.
Get beyond the résumé. Be really creative about where you look for talent. Dig further than a list of experiences. Consider wide-ranging experiences and focus on people’s fundamental problem-solving abilities.
Make the interviewing experience extremely impressive all the way through. You want every single person you interview to want to join the company at the end of the process.
HR must be businesspeople who truly understand the way your business works, even if that’s quite technical. They should be creative, proactive partners in the hiring process. Investing time in explaining to them the details of the talents you need will pay remarkable dividends.
Chapter 7: Pay people what they're worth to you
It’s better to focus more on what you can afford to pay for the performance you want and the future you’re heading to.
No question: pay is one of people’s favorite things to gripe and gossip about. But that’s actually a great reason to be more transparent about it. Being open allows you to explain to people why others are being paid as they are. Having a good rationale for the discrepancy reinforces that you’re a performance culture. If you don’t have a rationale you can share openly with people, then you probably ought to take a hard look at why.
The skills and talents for any given job will not match a template job description, and salaries should not be predetermined according to templates.
Information from salary surveys is always behind current market conditions; do not rely on them in making salary offers.
Consider not only what you can afford given your current business but also what you will be able to afford given the additional revenue a new hire might enable you to bring in.
Rather than paying at some percentile of top of market, consider paying top of market, if not for all roles, then for those that are most important to your growth.
Signing bonuses can lead to the impression of a salary decrease in the year after the person joins; paying the salary you need in order to bring in a top performer is the better option.
Being transparent with staff about compensation encourages better judgment about salaries and undercuts biases, as well as offering the occasion for more honest dialogue about the contributions of various roles to the company’s performance.
Chapter 8: The art of good good-byes
When you hire someone and it turns out that they can’t do the job, the problem is with the hiring process, not the individual. You simply hired the wrong person. It’s not their fault! So you shouldn’t make them feel like it
“You want to be a lifelong learner; you want to always be acquiring new skills and having new experiences, and that doesn’t have to be at the same company. The fact is that sometimes you’re hired by a company to do something, and then you do it and it’s done.
Employees need to be able to see whether their talents and passions are a good match for the future you are heading to, in order to determine whether they may be a better fit at another firm.
People should hear frequently about how well they’re performing. Even if doing away with the annual performance process is not feasible for you, institute much more frequent meetings to discuss performance.
If doing away with the annual review process is an option for you, try it! The process is a big waste of time and can become a stand-in for real-time information about performance.
Either make performance improvement plans genuine efforts to help people improve performance or get rid of them.
The chances you’ll get sued by an employee who is let go are vanishingly slim, especially if you have been responsibly and regularly sharing with that person the problems you perceive with their performance.
The focus on employee engagement is misplaced; there is not necessarily a correlation between high engagement and high performance. There is also not necessarily a correlation between high performance in a current job and high performance in the job of the future.
Use my algorithm in making personnel decisions: Is what this person loves to do, that they’re extraordinarily good at doing, something we need someone to be great at?
All managers can actively help their exiting team members find great new opportunities; goodbyes can be very good.
Managers who adopt this more fluid approach to performance review and team building come to clearly see that it is better for all concerned and better for overall team performance.