Netflix’s Secret Sauce

By Rich Bond

Reed Hastings’ book “No Rules Rules: Netflix and the Culture of Reinvention,” which is co-authored with Erin Meyer, reveals some pretty startling stuff about the business culture at Netflix. How did Netflix make Blockbuster obsolete? How was Netflix able to create “The Crown” or “Stranger Things” or “The Queen’s Gambit”? What is the secret behind Netflix’s seemingly unstoppable growth? How does the company so adroitly straddle both the technology and entertainment industries? The book claims it all comes down to the culture Reed built.

The essential building block of that culture is to have “high talent density.” You get that by eliminating less-than-great performers. Reed says that he only hires and keeps stellar performers because people who are merely adequate bring down the achievement of the entire team. “Your number one goal as a leader is to develop a work environment consisting exclusively of stunning colleagues.”

Reed learned this lesson during the dot-com financial crisis. While it was painful for Reed to get rid of a third of his staff during downturn, doing so improved the performance of everyone who was left. He could not believe what a difference it made! Erin Meyer, a professor at INSEAD, says research does show that the lowest performing member of a team of exceptional people drags down the performance of the entire team. Previously, people thought that the lowest performer would be pulled up by the rest of the group.

This made me think of companies I’ve worked with where a merely adequate controller or CFO has hurt the performance of an entire company. Replacing the less-than-stellar controller actually increased sales and profits and improved cash flow.

If you feel any of your finance people are less-than-great, I would welcome the opportunity to talk with you to see if you’re right. Contact me via LinkedIn messenger (https://www.linkedin.com/in/richardrbond/), email (Richard.bond@bondandcompany.com), or text (203-216-0618).

 

 

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