No Rules Rules Summary and Review | Reed Hastings and Erin Meyer

Read time: 10 min

Netflix and The Culture of Reinvention

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Reed Hastings’ Perspective

Reed Hastings co-founded Netflix in 1997. The company develops, licenses, and delivers video entertainment across various genres and languages. By 2022, the platform served more than 200 million people in 190 countries. In 1991, he founded Pure Software, which creates tools for software developers. After a 1995 IPO and several acquisitions, Rational Software purchased Pure in 1997.

Hastings is an active educational philanthropist. He served on the California State Board of Education from 2000 to 2004. He is on the board of several educational organizations, including DreamBox Learning, KIPP, and Pahara. He’s also a board member of Facebook and was on the board of Microsoft from 2007 to 2012.

Erin Meyer’s Perspective

Erin Meyer is a professor at INSEAD, a leading international business school. Her work focuses on how the world’s most successful managers work with cultural differences in a global environment. She has helped executives in five continents to work with cross-cultural complexities. Erin frequently publishes in Harvard Business Review. In 2019, Erin accepted an award from Thinkers50 for the second time. They labeled her one of the fifty most impactful business writers globally. In 2018, she was one of the top 30 most influential HR thinkers of the year in HR magazine.

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Introduction

When it comes to working at Netflix, there are no rules, and that’s what No Rules Rules is about. Reed Hastings, Netflix’s co-founder, outlines how he cultivated a unique work environment. Netflix values both individual and collective initiatives. Working with Erin Meyer, he looks at a unique leadership style that goes against corporate rules.

It’s time for a change in the way we do business. You can rely on your coworkers. Be brutally honest. Moreover, you should never, ever try to win over your boss.

If you’re a Netflix employee, these are among the guidelines to follow. Netflix has evolved from a DVD mail-order startup to a streaming juggernaut. Today, it boasts more than 200 million loyal subscribers.

Today’s main threat is not making mistakes or losing focus. It is struggling to attract top talent and develop new products. Inability to pivot fast when the environment changes is also a factor. New ideas can’t thrive in a business repeatedly bound by the same rules. As painful as it may be to make many small mistakes, they are essential to the innovation process.

When it comes to running a business, Netflix offers a new approach. It is more in sync with today’s ever-changing and fast-paced world. This culture is the pinnacle of innovation, production, and creativity. 

StoryShot #1: A Great Workplace Has Stunning Colleagues

“Once you have high talent density in the workplace and have eliminated less-than-great performers, you’re ready to introduce a culture of candor.”

— Reed Hastings

Dream Teams Consist of Stunning Colleagues

Your priority should be to build a workplace that consists of stunning colleagues. A stunning colleague is creative, passionate, and productive. Once most of your team are stunning colleagues, you can safely call it a dream team. As well as working effectively, individual members will feel valued as part of a dream team. An excellent workplace is one where the team pursues ambitious common goals.

Developing a dream team is important, but developing these teams can be challenging. The process of creating a dream team starts with effective recruitment. Encourage collaboration, diverse viewpoints, and discourage politics within the workplace. This means Netflix has no rules about cutting the bottom percentage of employees. Staff are not worried about losing their jobs. Instead, they can focus on helping others within their team. 

How Netflix Builds Dream Teams

Netflix does not have rules around acceptable topics of conversation with managers. Team members are safe to talk to their managers about any subject. They are safe to make mistakes as long as they search for improvement afterwards. If you have performed well in the past, Netflix gives you greater leeway if your performance is taking a dip. 

Successful dream teams are not built on hard work. Instead, success is about being effective. Measure your colleagues on their contributions to the team, rather than how hard they work. When you identify colleagues who are effective, pay them at the top of their personal market.  So, instead of giving a standard pay raise, increase it in line with the market. Similarly, never reduce your employees’ pay if you are experiencing financial difficulty. 

The Keeper Test

“If you have a team of five stunning employees and two adequate ones, the adequate ones will sap managers’ energy, so they have less time for the top performers, reduce the quality of group discussions, lowering the team’s overall IQ, force others to develop ways to work around them, reducing efficiency, drive staff who seek excellence to quit, and show the team you accept mediocrity, thus multiplying the problem.”

— Reed Hastings.

After the dot-com bubble burst, Netflix introduced a test to decide which employees to keep within their team. They had to lay off one-third of their 120-person staff. They encouraged leaders to ask themselves which employees they would fight hardest for. Do not waste money on attempting to improve employee performance. Give this money to the employee in a generous severance payment. Finally, when you fire someone, speak about what happened and answer their questions. 

StoryShot #2: Run Your Company Like A Team, Not A Family

“We are family” talk belongs to Sister Sledge, not your company culture. Parents don’t hire their children because they’re the best, but because they’re related. They also don’t fire them. 

Instead, consider your company a sports team competing for a title. A top performer should fill every position. As a high-performance team, they form close bonds and care for one another. 

Additionally, removing the family dynamic makes it less personal. It makes it more purpose and procedure-oriented. Don’t worry about pleasing your boss; try to do what is best for the business instead.

StoryShot #3: No Approval Processes Required

Netflix uses decentralized decision-making instead of having employees work to please their bosses. The paradigm works in high-density organizations with open and transparent employee relations. 

This system facilitated Netflix’s growth and innovation. Here are a few principles in this paradigm:

• Jobs that allow people to make their own decisions are rewarding. 
• Project ownership motivates staff to do their best in their respective jobs.
• Make bets that you are confident in placing. Netflix encourages staff to place bets, even if others consider them stupid.
• Allowing great people to establish brilliant ideas will lead to innovation.
• Various people in the organization should make large-scale choices.
• Encourage opposition when generating ideas to get them noticed and tested. Be honest about losing bets. 

Criticism

This book is a worthwhile investment. It’s educational, interesting, and well-written. Unfortunately, certain concepts may not apply beyond the US.

In certain countries, talent culling and radical transparency may be impossible. Moreover, there are labor rules that make it difficult to dismiss employees. 

The Asian culture also places a high value on “saving face.” Telling someone they are mistaken or their concept isn’t good enough can be offensive.

Rating

We rate this book 4.4/5.

Editor’s Note

This article was first published in April 2021. It was updated in April 2022.

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