No Rules, Rules

ℹ️ What was going on in my life as I read this book?

  1. I listened to this audiobook in February-March 2022 while thinking a lot about how to improve the Fulfillment team’s operations.

🚀 The Book in 3 Sentences

  1. Reed Hastings from Netflix learned through an odd experience, after a round of layoffs, that having a fewer employees, but on average better ones, was a net positive for the company — from there on he focuses on “talent density” as a key thing to manage at Netflix. Average performers are let go with a generous severance package to open up spots for elite performers.
  2. With a high talent density, experiment with removing rules and leaving more decisions up to the individual’s judgement. Have ways to handle when things go wrong, but instead of adding more rules just use those as examples to let others know what is wrong. For example, if someone abuses the freedom of the expense policy being mainly up to the individual – fire them and let others know why they were fired. If someone leaks confidential information, fire them and make an example of it. Etc.
  3. When mistakes can be very costly, policies and clear processes are more important and can’t really be replaced. If you’re an organization working on healthcare, for example, the risk of leaving things to employee is too high and not worth it — the Netflix approach is mainly applicable to industries in which creativity is key and the biggest risk is in not moving fast and innovating.

📒 Summary + Notes

From my Literal review.

  1. One average performer has a significant (negative) performance on an otherwise excellent team.
  2. If you build up your talent density (concentration of great performers) you can give them more flexibility and get rid of processes that slow everyone down.
  3. Process is important in areas where safety is key, Netflix has a ton of processes around specific types of work. But, where creativity is much more valuable than avoiding mistakes, lead with context and give freedom and responsibility.
  4. Pay top of market and encourage people to go out and interview/talk to recruiters to find out their market value. Avoid bonus payment schemes for creative workers, instead just pay a large base salary. Data and Netflix experience show that bonuses for creative work aren’t helpful.
  5. To help employees grow and do their best work, build a culture of candor, where everyone gets helpful feedback often. Get rid of jerks, and train everyone else to give and receive candid feedback well and use it to improve.
  6. Keeper test: as a manager, how hard would you fight to keep this person if they told you they were planning to leave the company? Ask yourself that question periodically for each of your direct reports. If the answer is “wouldn’t fight much”, manage that person out of your team (fire or move then to another role)

Miscellaneous notes I took:

  • Build up talent density
  • Introduce Candor
  • Remove controls
  • Pay top of market and keep increasing talent density
    Eliminate more rules
  • Lead with context
  • One person’s performance spreads very infectiously, thus the criticality of ensuring the talent density is high is critical.
  • Stunning colleagues: creative, accomplish a lot of work, collaborative.
  • Develop a culture of Candor. Get employees to give feedback to their leaders. “tell the emperor when he has no clothes”
  • Make sure you display belonging cues when receiving feedback. Make sure they understand that you are grateful for the feedback. Do this often.

Teach people how to give feedback effectively. 4 As framework:

  • Aim to assist. Explain how it will help the company.
  • Actionable.
  • Appreciate: when receiving feedback. Listen carefully and don’t become defensive.
  • Accept it and decide how or whether to adopt it.

Leaders need to model the values — take vacations if removing a vacation policy.

Values updates?

  • If you disagree, say it. It is disloyal to the company to not contribute your dissenting opinions.
  • We strive to remove processes that slow down people.

Techniques to reinforce culture

  1. Build talent density
  2. Max out feedback/candor
  3. Remove control, increase freedom and responsibility

Build up talent density

  1. Hire well
  2. Fire good, but not great, employees

Keeper test

  1. If this employee told me they are going to quit, how hard would I fight to keep them?
  2. Flip side, ask your boss, how hard would they fight to keep me? Do this regularly to learn more of why.

Candor with firing

  1. Make sure people know the reasons someone was let go.
  2. Make it clear that people get feedback before being let go.

Instead of a PIP, give a generous severance package and get the employee to agree not to sue

Max out candor

  1. Only say about someone what you’d say to their face.
  2. Set up formal processes for feedback in all directions
  3. Set a value about feedback, not providing feedback is “disloyal”.