Netflix has long been a company known for its secrets: no Nielsen ratings, little commentary on why shows are canceled, no box office numbers for the rare movies that actually open in theaters.
However, for a place defined by its opaque approach to the outside world, the streaming giant has long been aggressively transparent internally. The company's philosophy was immortalized in 2009 when Reed Hastings, co-founder and CEO of the company, first presented corporate ethos in a 125-slide presentation that introduced new buzz phrases like “awesome colleagues,” “the gatekeeper test” and “honesty always.”
The presentation, with its insistence on constant, unfiltered candor, felt brutally and refreshingly antithetical to the normal way of doing business in Hollywood. To the frustration of former employees and current competitors, it may simply be the plan that has allowed Netflix to be so successful while its rivals have stumbled.
Over the years, three more cultural memoranda have followed. Before being published, senior executives study and analyze them for months. At the same time, any employee can access the Google document where the note is being prepared to leave an idea or comment.
The latest version of the document, which was published internally on May 8 and will soon be made public, underwent eight months of research and received 1,500 comments from employees, according to Sergio Ezama, Netflix's chief talent officer. It is five pages long (half the length of Hastings' final memo in 2022) and some key principles have changed, however slightly.
When Hastings titled his 2009 presentation “Netflix Culture,” he subtitled it “Freedom and Responsibility.” The idea was for Netflix to trust its employees to act in the best interest of the company. If you want a vacation, take a vacation. If you have a baby and need to go on leave, go on leave. The documents were shared widely throughout the company without fear of leaks.
While those principles hold true in practice, the new memo first highlights Netflix's “People Above Process” philosophy: “We hire unusually responsible people who thrive on this openness and freedom.”
The gatekeeper test, which is defined as “if x wanted to leave, would you fight to keep them?” – now includes this disclaimer: “The Guardian Test may seem scary. In fact, we encourage everyone to talk to their managers about what is going well and what is not on a regular basis.”
There is a line in the latest memo that says, “Not all opinions are equal,” because as the organization has grown to more than 13,000 employees, it is no longer feasible for everyone to weigh in on every decision. “It doesn't scale,” said Elizabeth Stone, the company's chief technology officer.
The company never shies away from reorganizing, a trait that critics say happens too often and leaves many employees worried they could be fired at any moment. Hastings has become CEO. Ted Sarandos and Greg Peters are co-CEOs and change is always afoot. Still, the latest cultural memo is much more about how the broadcaster expects his employees to behave than it is about what he wants to become.
“The key to Netflix's culture is that we really try to think systematically about what creates long-term excellence,” Hastings said in a video interview from his home in Santa Cruz, California. “Certainly, a lot of creativity, a lot of freedom.” , a lot of focus on innovation and trying to attract and develop people who are responsible for themselves.”
Talk to employees who work at Netflix and you get the sense that cultural principles have infiltrated their lives in ways they didn't expect. Many were skeptical, assuming that the memo itself was a public relations effort to make the company stand out. However, some of those people now describe it as 80 to 90 percent accurate.
Stone, who got married months after joining Netflix in 2020, said she and her husband “now use certain language like, 'Do you have any comments for me?' He would be the first to say at a cocktail party that he is very good at receiving feedback and that he is still working on giving it.”
The document is made to be read as aspirational and there is always room for improvement.
“Are we always totally direct with each other? No. Are we completely devoid of politics? No,” said Spencer Wang, vice president of finance and investor relations, who has been at Netflix for nine and a half years. The company is “not perfect in all of these dimensions, but I would say it is a remarkably accurate description of what we aspire to be and how we operate overall,” he said.
Reflecting on the initial presentation, Mr Hastings admitted that “leading with freedom was attractive” and added: “It was good bait.”
But as the company grew, some employees used the concept of freedom and responsibility, which many shortened to “FNR,” as justification for doing whatever they wanted. One year, an assistant spent $30,000, according to a company official, because there was no rule saying that wasn't allowed.
“We care about freedom when it creates excellence, not for its own sake,” Hastings said. “In retrospect, this is the draft I wish we had 15 years ago.”
From the beginning, Netflix was never going to be a place where most people stayed for their entire career. Employment contracts do not exist and an employee, regardless of his rank, can be fired at any time.
Although few leave of their own volition (voluntary resignations have ranged from 2.1 to 3.1 percent over the past two years), about 9 percent are asked to leave annually. This may come as a relief to those who describe the pace as all-consuming and find the company's key tenet of being “uncomfortably exciting” unsustainable. The company warns in the memo that the concept may cause “many people” to choose other places “that are more stable or run less risk.”
While some employees, including the two co-CEOs, have been at Netflix for more than 15 years, many consider lasting five years a significant achievement.
Still, some find the pressure exhilarating. Brandon Riegg, vice president of nonfiction and sports, said he had often felt stifled when he worked in traditional entertainment studios. He calls Netflix's culture “a lifeline” that has allowed him to make an impact that wouldn't have been possible at a traditional studio. Five years ago, he convinced his bosses to release episodes of the reality show “Rhythm + Flow” in batches for the first time. That practice has been repeated with other reality shows like “Love Is Blind” and scripted programming like “Bridgerton” and “Stranger Things.”
He said that while the strategy ran counter to what Netflix had done in the past, executives were willing to try it.
Their approach, Riegg said, was that “we hire you, and if you think this is the best, and you've cultivated dissent, and you've welcomed all the feedback, and this is where you landed, let's try it.”
Hastings seemed relaxed during the video interview, and that may be because he has shaken off the jet lag and “crazy” schedule that used to wear him down as CEO. (His new life of philanthropy and own a ski mountain may also be helping.)
Or maybe it's because you're no longer subject to the constant feedback the company is known for, something many employees find jarring upon entering the Netflix vortex, especially those who come from outside Silicon Valley.
Mr. Wang said that receiving honest feedback was fine, but that as an Asian American, he had initially found it difficult to provide it because “it rubbed against my cultural background.” More recently, he said, he was told he is “too direct,” so he is now working to be more sensitive.
Ms. Stone, the chief technology officer, recently recounted being at a happy hour event in New York City where an engineer introduced himself and proceeded to say, “I'm the engineer who wrote the bug in the code that caused the service will fail twice.” weeks ago.”
“He knew that presenting himself that way would spark a good conversation about what the culture is around improvement,” she said. “It wasn't like, 'Why is this person still here?' This person should be fired.'”
As for Mr. Hastings, he may not have to take any more feedback, but he can still dole it out. He said he appreciated that Sarandos and Peters waited a year after his departure to recast the cultural memorandum as their own.
“It's 10 percent better,” he said. “It's not radically better, but it's as good as any improvement I've made. So that's a compliment.”
