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Spoiler: It's a long read! > Does this still holds? Is there any other organization in dissimilar industry where this works? McCord also convinced Hastings th

Spoiler: It's a long read! > Does this still holds? Is there any other organization in dissimilar industry where this works? McCord also convinced Hastings that he should ask himself a few times a year whether he would hire the same person in the same job if it opened up that day. If the answer was no, Netflix would write a larger check and let the employee go. “If you are going to insist on high performance,” McCord says, “then you have to get rid of the notion of retention. You’ll have to fire some really nice, hard-working people. But you have to do it with dignity. “I held the hands of people weeping, saying, ‘I want to be here forever,’ ” McCord says. “I would tell them, ‘Nothing lasts forever.’ I would say to Reed, ‘I love them, too, but it is our job to be sure that we always have the right people.’ ” > Ironically, in 2011 Hastings decided to re-evaluate everyone in the executive ranks, using the litmus test McCord taught him: Would he hire them again today? One of the people this led him to push out was McCord.

kefka 10y ago
And this precisely is why we Millenials have no qualms about leaving a job. They have no problem divorcing us because of some vapid "performance" metric. How do they quantify understanding how to get things done in that org? I know with my job, I'm learning how the institution hinders growth, except through certain channels. That meta-knowledge is absolutely essential... yet seemingly ignored.
- mercer 10y ago
  Instinctively and ideologically I mostly oppose the idea of this lack of loyalty toward employees. At the same time, for some reason it bothers me less the way it is presented to work within Netflix. I'm not sure why, though. Maybe it's to do with the fact that there are plenty of jobs in tech right now and Netflix apparently pays very well, enough for a future employee to accept that disadvantage. Partly it's also because of the transparency of it all. Another thing is that it can benefit the employee too, long term. I've worked in many different companies and there were always a bunch of 'holders-on' who held everyone back and didn't even seem happy themselves. I often thought they and the team would be much better off if they found work somewhere else where either they'd feel challenged to develop themselves further, or where their current skills were good enough. I still would not choose to run a company that way myself, but provided that 'performance' is measured in a somewhat accurate way, provided that the compensation offsets this risk, provided that there is honesty about it all, and provided that there are alternative jobs one can find afterwards, well, then I'd at least be curious to see if it works in practice. (and decreasing 'institutional knowledge' is one very big advantage, in my opinion.)
  - koralatov 10y ago
    > Partly it's also because of the transparency of it all. What's transparent about it? The process is totally opaque -- some executive evaluates whether they feel you're meeting their standards, which may or may not be obvious, and then decides to let you go if they feel you aren't. I don't think it could be any less transparent.
    - maxerickson 10y ago
      That they fire people rather arbitrarily is being written about in a national publication. So someone applying for a job has a good chance of understanding it going into the process. That's a pretty high degree of transparency about how they do things.
      - koralatov 10y ago
        That's not really what we're talking about when we're talking about 'transparency' her. Just because it's known that something happens doesn't mean it happens in a transparent fashion. Transparency of process is important, too, and required before you can really call something 'transparent'. As it stands, the person making the decision could be doing so for totally arbitrary reasons. It doesn't appear that there's an established process or criteria in place beyond "I don't feel like I'd hire X now" -- the rationale "Because Executive Y says so" is not transparent in the slightest.
        Programmatic 10y ago
        I think the part that is transparent is that you're not going to build your career and retire at Netflix, you know it's a stint. It may be arbitrary and capricious otherwise, but you know that in advance and can decide if it's worth it. I would not mind being in such an environment for a stint, myself.
        mindcrime 10y ago
        I think the part that is transparent is that you're not going to build your career and retire at Netflix, you know it's a stint. But anybody who has been paying attention has known that any job is "just a stint" since at least the 90's, if not the 80's. A big part of the Re-engineering[1] push of the 90's involved reducing costs, at least in part by reducing head-count. And before that, you had the 80's LBO[2] craze, which resulted in dramatic layoffs at many companies. As a Gen-X'er who grew up in the 80's, I have never expected to have a life-long career at a single company, and I can't imagine many - if any - of my peers imagining that either. In this regard, there's nothing unique at Netflix. All jobs are essentially "temp" jobs in this day and age. [1]: https://en.wikipedia.org/wiki/Business_process_reengineering https://en.wikipedia.org/wiki/Business_process_reengineering [2]: https://en.wikipedia.org/wiki/Leveraged_buyout https://en.wikipedia.org/wiki/Leveraged_buyout
distances 10y ago
> You’ll have to fire some really nice, hard-working people. But you have to do it with dignity. I wonder if this is part of the reason why there are not too many Netflix-like high achieving companies in Europe -- firing people is not possible. Even totally sucking at your job isn't acceptable reason for employment contract termination, that'd be just a reason for further training. You'll have to go through different hoops, usually concerning the company's financial needs -- and which high achiever would want to join a company that announces dire economical times? This (easier to get rid of people) is also a reason behind a recent trend of people-for-hire companies and freelancers-only requirements. Disclaimer: probably does not apply to all of Europe.
- dominotw 10y ago
  >I wonder if this is part of the reason why there are not too many Netflix-like high achieving companies in Europe -- firing people is not possible. This probably explains why I've never seen my German counterparts ever being fired. The lowest performers are endlessly shuffled between projects, maybe hoping they would leave voluntarily ?
  - distances 10y ago
    That's perhaps one way. Or assigning the employee no tasks at all, just an empty room with a desk and chair, and a requirement to be there during normal working hours. No sane person takes that for a longer time. Companies do have longish probation periods (say, 6-9 months) before the contract is final. Within this period either party can cancel the employment at will, with no notice period. This is meant to be the testing time during which both parties can confirm that they are happy with the deal.
    - majewsky 10y ago
      I saw an article a year back or so about an administrative office in Germany that was dismantled. But because they couldn't fire the officers, they put them in a building with nothing to do until everyone quit voluntarily. The toughest made it about over a year. (Can't find the original article, sadly.)
talmand 10y ago
I hope there's more to it than that. Firing "really nice, hard-working people" is stupid. There are far better things to do with such people than firing them. All that teaches people is to have no loyalty whatsoever to their company since the company's leader directly gives them a reason not to. All that leads to is "really nice, hard-working people" you would not fire jumping ship at the first sign of a slightly better deal, because why not?
- mc32 10y ago
  One thing that pops up is that it does not include the context of the other people in the organization and how they work as a whole. That's to say you may have it where the most efficient organization is made up of non individually optimum components rather than it being comprised of the most optimum individual components.
- aianus 10y ago
  > All that leads to is "really nice, hard-working people" you would not fire jumping ship at the first sign of a slightly better deal, because why not? If you combine this behavior with really high compensation for those you keep, you'll likely be the best deal. Most companies' compensation does not match their rhetoric about 'hiring the best' and will balk at the cost to poach from you. That and the fact that high-performers want to work with other high-performers so they wouldn't risk a crappier work environment without a big raise.
  - asimuvPR 10y ago
    From experience: high performers tend to want to work alone. Most wise up and open their own company.
  - talmand 10y ago
    A positive work environment and satisfaction is not just about compensation. Working with other high-performers is good, I agree, except the company policy is that high-performers can be shown the door at any moment due to various changes outside the control of that high-performer. That's not a good work environment.
perseusprime11 10y ago
Did Reed hold McCord's hands and say 'Nothing lasts forever.'
- koralatov 10y ago
  We can only hope that he did.
quantumhobbit 10y ago
Netflix gets a lot of flack for their approach here, but at least they are honest about it and try to compensate by paying employees very well. The truth is there are many companies that are just as ruthless about firing employees they view as underperforming but try to hide it with layoffs and don't compensate employees nearly as well. If you take a job with Netflix at least you know what you are getting into.
- bbarn 10y ago
  Yeah, but the one problem is other companies you're going to afterwards don't know what you were getting into. So you are interviewing and they interviewer is impressed you led X big project at Netflix, recieved a promotion, etc.. and were fired for non performance. How do you explain that without saying "I was no longer good enough, but I'm way good enough for this job"
  - coredog64 10y ago
    There's plenty of places like that. We couldn't hire the former CTO from Netflix, but maybe we could hire some VP/director that couldn't go any higher as our CTO.
- beamatronic 10y ago
  Should you not expect to have a good work-life balance while at Netflix?
  - zjaffee 10y ago
    The type of person who will thrive at Netflix doesn't see an issue here. Either they have no issues whatsoever about having work always on their mind, or they are just simply so good at their jobs that they can still be one of the best engineers around only working 40 hours a week. The problem with this whole thing is that people view working at a company of this caliber as some type of competition, they want to be the one working at the company with the best and brightest so others see them as the best and brightest. The truth is that if you aren't really up there, you won't thrive in such an environment, and the vast majority of people will both advance the most, and be happiest working at a place where they are able to be the big fish.
11thEarlOfMar 10y ago
It's this: 'The key concept is summed up in the 23rd slide. “We’re a team, not a family,” it reads. “Netflix leaders hire, develop and cut smartly, so we have stars in every position.” ' I see it like a professional sports team. Players have to deliver performance game after game. If they can't keep it up, they are traded or released, or their contract is not renewed. When they age-out, they either go into coaching, buy or start their own team, or move on to do something different entirely. They are taken off the field. Applying this approach to a corporate workplace is controversial and I'd be interested in knowing what policies the legal department has put in place regarding employee agreements and termination processes to specifically accommodate Netflix' approach.
- yardie 10y ago
  The minimum salary in the NFL is currently $450,000. The "job" is unionised and you have lifetime benefits (negotiated after some players with chronic concussion related illnesses were found broke and homeless). While the careers are short the compensation is fair. And you are legally allowed to work a side job, i.e. sponsorships. I don't imagine corporate USA saying yes to high salaries, unionisation, pensions, nor side projects willingly.
  - rpgmaker 10y ago
    They also have "job security" for the duration of the contract and if they are "fired" as we traditionally understand it usually they have to be compensated in some form (although it depends on the contract).
    - yardie 10y ago
      Sadly that is not that case. The contract is per game. If they are cut midseason they forfeit the contract. NFL contracts are really nasty things. Most of the big valuations you see will probably never pay out. They can backload them so that a player with a 5 year $10mm contract will probably never see that amount. They'll get $1mm the first year, and the same for each year, with the remaining $5mm paid out at the end. If they don't make it that far they don't get it. It's not unheard of for a player to make it 50% of their time on contract and only see 20% of their pay. I only know this because I have a family member who plays professionally. The NFL likes to present an image that they take care of their players. It's a business to make money (and a not-for-profit) and exists only to enrich themselves. If they can short a player out of his money they will do it.
draw_down 10y ago
When you combine it with top-of-market compensation and generous severance, as Netflix does, one can reasonably believe that this practice is actually done for the reason they claim (keeping the best talent). When you don't combine it with good compensation, it's simply a rationalization for firing people whenever you want.
dasil003 10y ago
I sort of agree that if I wouldn't re-hire a person for a role then they should be let go: after all once someone has been trained in and is gelled with the team, they should be better at the job than anyone coming in from outside. In that sense this is just a dramatic reframing of standard performance evaluation wisdom. But I also find it a very strange thing to say, because the biggest challenge of hiring new people is that you really never know how they'll perform until you actually start working with them. In my case I've always hired for smaller organizations with a smaller pool of applicants, so I prefer to just roughly gauge for Spolsky's test of "smart and gets things done" as well as I can and then turn them loose to see what they can do. In large, well-known companies with huge hiring funnels false negatives matter much less and they are incentivized to screen very aggressively on whatever axes they can. However in either case, the existing employee has a known performance profile, and the new hire is unknown regardless of how good they look on paper. So I just find it an obtuse apples-to-oranges comparison to frame performance reviews this way.

kefka 10y ago

And this precisely is why we Millenials have no qualms about leaving a job. They have no problem divorcing us because of some vapid "performance" metric. How do they quantify understanding how to get things done in that org? I know with my job, I'm learning how the institution hinders growth, except through certain channels. That meta-knowledge is absolutely essential... yet seemingly ignored.

mercer 10y ago
Instinctively and ideologically I mostly oppose the idea of this lack of loyalty toward employees. At the same time, for some reason it bothers me less the way it is presented to work within Netflix. I'm not sure why, though. Maybe it's to do with the fact that there are plenty of jobs in tech right now and Netflix apparently pays very well, enough for a future employee to accept that disadvantage. Partly it's also because of the transparency of it all. Another thing is that it can benefit the employee too, long term. I've worked in many different companies and there were always a bunch of 'holders-on' who held everyone back and didn't even seem happy themselves. I often thought they and the team would be much better off if they found work somewhere else where either they'd feel challenged to develop themselves further, or where their current skills were good enough. I still would not choose to run a company that way myself, but provided that 'performance' is measured in a somewhat accurate way, provided that the compensation offsets this risk, provided that there is honesty about it all, and provided that there are alternative jobs one can find afterwards, well, then I'd at least be curious to see if it works in practice. (and decreasing 'institutional knowledge' is one very big advantage, in my opinion.)
- koralatov 10y ago
  > Partly it's also because of the transparency of it all. What's transparent about it? The process is totally opaque -- some executive evaluates whether they feel you're meeting their standards, which may or may not be obvious, and then decides to let you go if they feel you aren't. I don't think it could be any less transparent.
  - maxerickson 10y ago
    That they fire people rather arbitrarily is being written about in a national publication. So someone applying for a job has a good chance of understanding it going into the process. That's a pretty high degree of transparency about how they do things.
    - koralatov 10y ago
      That's not really what we're talking about when we're talking about 'transparency' her. Just because it's known that something happens doesn't mean it happens in a transparent fashion. Transparency of process is important, too, and required before you can really call something 'transparent'. As it stands, the person making the decision could be doing so for totally arbitrary reasons. It doesn't appear that there's an established process or criteria in place beyond "I don't feel like I'd hire X now" -- the rationale "Because Executive Y says so" is not transparent in the slightest.
      - Programmatic 10y ago
        I think the part that is transparent is that you're not going to build your career and retire at Netflix, you know it's a stint. It may be arbitrary and capricious otherwise, but you know that in advance and can decide if it's worth it. I would not mind being in such an environment for a stint, myself.
        mindcrime 10y ago
        I think the part that is transparent is that you're not going to build your career and retire at Netflix, you know it's a stint. But anybody who has been paying attention has known that any job is "just a stint" since at least the 90's, if not the 80's. A big part of the Re-engineering[1] push of the 90's involved reducing costs, at least in part by reducing head-count. And before that, you had the 80's LBO[2] craze, which resulted in dramatic layoffs at many companies. As a Gen-X'er who grew up in the 80's, I have never expected to have a life-long career at a single company, and I can't imagine many - if any - of my peers imagining that either. In this regard, there's nothing unique at Netflix. All jobs are essentially "temp" jobs in this day and age. [1]: https://en.wikipedia.org/wiki/Business_process_reengineering https://en.wikipedia.org/wiki/Business_process_reengineering [2]: https://en.wikipedia.org/wiki/Leveraged_buyout https://en.wikipedia.org/wiki/Leveraged_buyout

distances 10y ago

> You’ll have to fire some really nice, hard-working people. But you have to do it with dignity. I wonder if this is part of the reason why there are not too many Netflix-like high achieving companies in Europe -- firing people is not possible. Even totally sucking at your job isn't acceptable reason for employment contract termination, that'd be just a reason for further training. You'll have to go through different hoops, usually concerning the company's financial needs -- and which high achiever would want to join a company that announces dire economical times? This (easier to get rid of people) is also a reason behind a recent trend of people-for-hire companies and freelancers-only requirements. Disclaimer: probably does not apply to all of Europe.

dominotw 10y ago
>I wonder if this is part of the reason why there are not too many Netflix-like high achieving companies in Europe -- firing people is not possible. This probably explains why I've never seen my German counterparts ever being fired. The lowest performers are endlessly shuffled between projects, maybe hoping they would leave voluntarily ?
- distances 10y ago
  That's perhaps one way. Or assigning the employee no tasks at all, just an empty room with a desk and chair, and a requirement to be there during normal working hours. No sane person takes that for a longer time. Companies do have longish probation periods (say, 6-9 months) before the contract is final. Within this period either party can cancel the employment at will, with no notice period. This is meant to be the testing time during which both parties can confirm that they are happy with the deal.
  - majewsky 10y ago
    I saw an article a year back or so about an administrative office in Germany that was dismantled. But because they couldn't fire the officers, they put them in a building with nothing to do until everyone quit voluntarily. The toughest made it about over a year. (Can't find the original article, sadly.)

talmand 10y ago

I hope there's more to it than that. Firing "really nice, hard-working people" is stupid. There are far better things to do with such people than firing them. All that teaches people is to have no loyalty whatsoever to their company since the company's leader directly gives them a reason not to. All that leads to is "really nice, hard-working people" you would not fire jumping ship at the first sign of a slightly better deal, because why not?

mc32 10y ago
One thing that pops up is that it does not include the context of the other people in the organization and how they work as a whole. That's to say you may have it where the most efficient organization is made up of non individually optimum components rather than it being comprised of the most optimum individual components.
aianus 10y ago
> All that leads to is "really nice, hard-working people" you would not fire jumping ship at the first sign of a slightly better deal, because why not? If you combine this behavior with really high compensation for those you keep, you'll likely be the best deal. Most companies' compensation does not match their rhetoric about 'hiring the best' and will balk at the cost to poach from you. That and the fact that high-performers want to work with other high-performers so they wouldn't risk a crappier work environment without a big raise.
- asimuvPR 10y ago
  From experience: high performers tend to want to work alone. Most wise up and open their own company.
- talmand 10y ago
  A positive work environment and satisfaction is not just about compensation. Working with other high-performers is good, I agree, except the company policy is that high-performers can be shown the door at any moment due to various changes outside the control of that high-performer. That's not a good work environment.

perseusprime11 10y ago

Did Reed hold McCord's hands and say 'Nothing lasts forever.'

koralatov 10y ago
We can only hope that he did.

quantumhobbit 10y ago

Netflix gets a lot of flack for their approach here, but at least they are honest about it and try to compensate by paying employees very well. The truth is there are many companies that are just as ruthless about firing employees they view as underperforming but try to hide it with layoffs and don't compensate employees nearly as well. If you take a job with Netflix at least you know what you are getting into.

bbarn 10y ago
Yeah, but the one problem is other companies you're going to afterwards don't know what you were getting into. So you are interviewing and they interviewer is impressed you led X big project at Netflix, recieved a promotion, etc.. and were fired for non performance. How do you explain that without saying "I was no longer good enough, but I'm way good enough for this job"
- coredog64 10y ago
  There's plenty of places like that. We couldn't hire the former CTO from Netflix, but maybe we could hire some VP/director that couldn't go any higher as our CTO.
beamatronic 10y ago
Should you not expect to have a good work-life balance while at Netflix?
- zjaffee 10y ago
  The type of person who will thrive at Netflix doesn't see an issue here. Either they have no issues whatsoever about having work always on their mind, or they are just simply so good at their jobs that they can still be one of the best engineers around only working 40 hours a week. The problem with this whole thing is that people view working at a company of this caliber as some type of competition, they want to be the one working at the company with the best and brightest so others see them as the best and brightest. The truth is that if you aren't really up there, you won't thrive in such an environment, and the vast majority of people will both advance the most, and be happiest working at a place where they are able to be the big fish.

11thEarlOfMar 10y ago

It's this: 'The key concept is summed up in the 23rd slide. “We’re a team, not a family,” it reads. “Netflix leaders hire, develop and cut smartly, so we have stars in every position.” ' I see it like a professional sports team. Players have to deliver performance game after game. If they can't keep it up, they are traded or released, or their contract is not renewed. When they age-out, they either go into coaching, buy or start their own team, or move on to do something different entirely. They are taken off the field. Applying this approach to a corporate workplace is controversial and I'd be interested in knowing what policies the legal department has put in place regarding employee agreements and termination processes to specifically accommodate Netflix' approach.

yardie 10y ago
The minimum salary in the NFL is currently $450,000. The "job" is unionised and you have lifetime benefits (negotiated after some players with chronic concussion related illnesses were found broke and homeless). While the careers are short the compensation is fair. And you are legally allowed to work a side job, i.e. sponsorships. I don't imagine corporate USA saying yes to high salaries, unionisation, pensions, nor side projects willingly.
- rpgmaker 10y ago
  They also have "job security" for the duration of the contract and if they are "fired" as we traditionally understand it usually they have to be compensated in some form (although it depends on the contract).
  - yardie 10y ago
    Sadly that is not that case. The contract is per game. If they are cut midseason they forfeit the contract. NFL contracts are really nasty things. Most of the big valuations you see will probably never pay out. They can backload them so that a player with a 5 year $10mm contract will probably never see that amount. They'll get $1mm the first year, and the same for each year, with the remaining $5mm paid out at the end. If they don't make it that far they don't get it. It's not unheard of for a player to make it 50% of their time on contract and only see 20% of their pay. I only know this because I have a family member who plays professionally. The NFL likes to present an image that they take care of their players. It's a business to make money (and a not-for-profit) and exists only to enrich themselves. If they can short a player out of his money they will do it.

draw_down 10y ago

When you combine it with top-of-market compensation and generous severance, as Netflix does, one can reasonably believe that this practice is actually done for the reason they claim (keeping the best talent). When you don't combine it with good compensation, it's simply a rationalization for firing people whenever you want.

dasil003 10y ago

I sort of agree that if I wouldn't re-hire a person for a role then they should be let go: after all once someone has been trained in and is gelled with the team, they should be better at the job than anyone coming in from outside. In that sense this is just a dramatic reframing of standard performance evaluation wisdom. But I also find it a very strange thing to say, because the biggest challenge of hiring new people is that you really never know how they'll perform until you actually start working with them. In my case I've always hired for smaller organizations with a smaller pool of applicants, so I prefer to just roughly gauge for Spolsky's test of "smart and gets things done" as well as I can and then turn them loose to see what they can do. In large, well-known companies with huge hiring funnels false negatives matter much less and they are incentivized to screen very aggressively on whatever axes they can. However in either case, the existing employee has a known performance profile, and the new hire is unknown regardless of how good they look on paper. So I just find it an obtuse apples-to-oranges comparison to frame performance reviews this way.