In 2014, Netflix reinvented the HR system. We can still learn from them today, even though some of their ideas could be considered radical.
Furthermore, Netflix adopted the policy of only hiring A+ employees. Netflix had to undergo a massive layoff in the early 2000s. After the layoff, they discovered that the employees who were left without a team were happier than they were with the extra help, for the extra "help" was actually holding them back because they were not top-tier employees.
After this discovery, Netflix decided only to hire A+ employees. Having excellent employees will improve overall employee performance. Additionally, Netflix had employees who put the company's interests first. If you hire employees who will put the company's interest first, you will not have to worry about most HR problems because these employees will do the right thing.
The other part of only having A+ employees was that Netflix had to accept that they would have to let other employees go. Because they were laying off more employees, Netflix offered generous severance packages.
Previously, Netflix offered a standard vacation policy to keep its auditors happy. But, when they discovered that enforcing a strict vacation time policy was not mandatory, they shifted to an informal system.
Netflix decided to become highly flexible with their vacation times. They embraced the concept that salaried workers should be allowed to take vacation time when they felt it was appropriate. The company did provide some guidance. Bosses and employees worked out vacation time together. It also depended on the department as to when you could take off. For example, the accounting and finance department was urged not to take off during the beginning or end of the quarter because it is the busiest time of the year.
This concept was very controversial in 2014 and even now. However, flexibility in the workplace is becoming more and more common, and we could eventually get to the point where flexible vacation time is more common.
The expense policy of Netflix was straightforward- "Act in Netflix's best interests." Adultlike behavior was also adopted for travel and other expenses. When paying for expenses, Netflix told their employees to act like the company's money was their own money. It also saved the company money because they did not have to rely on expensive travel agents. Netflix found that if employers create a clear expectation of responsible behavior, most employees will comply with policies.
Netflix eliminated formal performance reviews. Instead, they asked their managers to have organic conversations about employee performance. The company instituted 360-degree reviews. Using these reviews, Netflix asked employees to identify things their colleagues should stop, start, or continue. Over time, these reviews went from anonymous to face-to-face. The results were that employees' performance improved because the company openly and honestly discussed issues.
Primarily, Netflix looked at the manager's role in the organization as someone in charge of building great teams. What results do they want to see from their team? How do the managers need to change their teams' work to achieve these goals? These are questions that the managers needed to ask themselves to create their dream teams.
Netflix needed employees with specific skills. They had to attract candidates away from companies such as Google, Facebook, Amazon, and other cloud-based companies. This is not the easiest thing to achieve. Netflix had to create a company culture that was attractive to these candidates, so they would want to come to work for them.
Netflix's compensation policy helped to lead this culture of treating employees like adults. Employees were urged to go on job interviews to see what they were worth in the current market. Netflix used a market-based pay system to keep up with competitors.
Additionally, equity compensation was also used, but it was used differently than most companies. Netflix lets employees choose how much of their paycheck would be in the form of equity. They could also opt out of receiving any stock and receive their paycheck. Netflix decided to let employees choose what was right for them and offered them supplies for a slight discount on the market price. The options could be cashed immediately because Netflix did not want to hold anyone hostage if they found a better opportunity elsewhere.
Netflix created a company culture based on treating its employees like adults. Although controversial, companies today can learn from Netflix and the company culture they created to give employees the freedom and flexibility they desire.