Netflix’s Unique Culture of Termination… That Employees Seem to Like

We hear a ton of great things about Netflix’s benefits and corporate culture, such as unlimited parental leave and an overall good pay/perks package. The firm fights for net neutrality, and people want to work there more than at other major tech companies. But once you’re hired at Netflix, it might prove difficult to keep your job for the long term.

Specifically, Netflix has something called the “keeper test,” which is a measure for management to fire or retain staff. It’s very simple; a manager is supposed to ask: “If one of the members of the team was thinking of leaving for another firm, would I try hard to keep them from leaving?” If the answer is “no,” that team member is out. One former marketing vice president told The Wall Street Journal they were fired for failing the test, but the “official” reason for termination was “poor cultural fit.”

Meanwhile, a Bloomberg article revisits the early days of Netflix, during which a similarly opaque management dictum governed hiring and firing. CEO Reed Hastings and then-HR Chief Patty McCord wanted to encourage “independent decision making” among employees, but also retain only those who were “highly effective.” As a result, they nurtured a culture in which even longtime employees were ruthlessly evaluated; if they were no longer the best at their role (at least in the eyes of their manager), they were out.

Ultimately, this corporate mindset cost McCord her job. When Hastings questioned whether he’d retain McCord for her own job, he realized he wouldn’t, so he fired her. Netflix now has a formal tool called “360,” which allows anyone at the company to review anyone else (including Hastings). The tool also provides context to everyone on why someone was let go – which also feeds into Netflix’s original five rules for the company (among them: “share information openly, broadly and deliberately,” and be “extraordinarily candid with each other.”)

The “360” and the “keeper test” are intertwined. The crux of these tests is to help managers decide (as Hastings did with McCord) if they would fight to keep an employee around. If the answer is no, that employee is terminated or asked to leave.

Netflix’s 360 tool provides broad context for personnel decisions. It’s meant to encourage objectivity, but it also seems to produce obscure, sometimes startling changes in the hierarchy. Last year, Hastings terminated chief product officer Neil Hunt. The reason given was “a lot has changed” as the company began producing original content and expanding into new markets outside the United Sates. Moreover, one of Hunt’s charges was apparently poised to take over his role. Even so, his dismissal didn’t follow the usual corporate playbook for such things.

Neither Hunt or McCord disagreed with Hastings’ decisions. Bloomberg also notes that Netflix’s termination rate isn’t incongruous with the national average, and the company has a far lower percentage of people quitting versus the average U.S.-based company.

But a company’s culture starts and ends with its leader. This culture of ‘objective’ termination works for Hastings, and it’s meant to create an effective leadership team in his likeness. But it could also create an office where people are in near-constant fear for their jobs. Simply put, you can’t copy it, because you’re not Reed Hastings, and your company isn’t Netflix.

Nor can you likely become him. Employees describe him as a man “unencumbered by emotion.” Though they mean that in a good way (we think), it’s not something you can just choose to emulate. As Netflix evolves, these hiring tests may not stand the test of time internally, and it might not serve you well to emulate them in your own company.

Related

20 Responses to “Netflix’s Unique Culture of Termination… That Employees Seem to Like”

  1. Absolutely, completely pathetic!!

    People have children to care for, rent or mortgage payments, food and other expenses and Netflix has this asinine “termination” practice?

    This makes me want to cancel my subscription with them, and I will.

    I am very, very disappointed in them!! Geez, makes me sick.

    • On the same dime, you know that going in when you go to work there so who cares? It seems to work well for those who want to be at netflix. For anyone, probably like you, who just wants a steady job, don’t go to work for this company. It isn’t for you and you aren’t the type of employee they want.

    • RangerOne

      I wouldn’t work for a company who did this. That being said, by doing this they attract a particular type of employee. Mainly those who are not highly concerned with job stability. On top of that, if you are able to pass an interview to get a job there, odds are job hoping is going to be easy for you because you are clearly a highly capable interviewer to get into a top tech company. So security is less important to you. This kind of mantality is also more common among people who like to work for startups. Again because at a startup your job tenure is always in question.

      I agree most companies should never try to emulate this.

  2. Greg Thompson

    On the one hand, I agree with this approach, but only to a limit.

    Sure, if an employee is no longer adding to the company’s bottom line, then yes, that person’s effectiveness should be evaluated. People get into a position of no longer adding to the bottom line for a variety of reasons, and some of them have nothing at all to do with the employee.

    But, instead of just outright firing someone, perhaps a new postion within the company could be evaluated first, eh?

    On the flip side, firing someone for no longer being a “rock star” sounds silly and absurd.

    Companies like to use this term “rock star”, especially in the world of software. The proverbial “rock star” is sort of like the “write once, run anywhere” software technology “dream”. It is more of a dream, than anything. Also, people are human. They go through phases of effectiveness from year-to-year, week-to-week, and even during the day.

    Netflix sounds like a company that is, shall we say, rather high on itself. Sort of like Microsoft back in the day. The executives beieve that everybody, and anybody, wants to work at their company, and Netflix is above all other companies on the “glorious and magnificent places to work” scale.

    In another article, Reed was quoted as saying “When somebody is fired, he / she should not feel bad. Some other company will usually snap the person up the next day.”. As if “other companies” are lapping at Netflix’s feet, excitedly awaiting the availability of Netflix’s castoffs. Ha.

    • You say all of that because you wish you could write that onto your resume. Recruiters go into a frenzy when they see that kind of reference on paper and you can pick your salary, job, and benefits at that point.

    • John Paul

      So, I have noticed this culture in high tech, and as a scientist by trade I find it dangerous. You see, scientists are part of R&D the biggest cost center. Innovation occurs in spurts not a steady flow, and therefore we scientists who are creating experimenting and providing other valuable IP are always eliminated by envious social elements. These are the policies that take from those creating without providing in kind financial security for those yielding their IP. The most experienced persons are discarded from the island and top tallent are always stabbing each other in the back.

    • I appreciate Greg Thompson’s response. It seems this firing strategy could easily breed a very cliquish culture ruled by individual biased perceptions with no objectivity and little room for compassion. For example a top well-liked performer may be going through personal issues like a parent dying of cancer or perhaps something extremely private. Perhaps this person becomes depressed and withdrawn and folks take that as grumpy or unfriendly, and then they get canned for it?! It just seems over time, only a small group of people would remain at the company protecting one another. And then there is the insidious sexist bro-culture highly dominant in tech companies where assertive women are often disliked – especially if she’s semi attractive. I’ve seen it numerous times, assertive attractive women are disliked for playing ball or they are marginalized, where men are continually rewarded and get away with being total a-holes. Maybe Netflix should have its own reality corporate TV show – Surviving at Netflix.

  3. I hope anyone thinking of working at Netflix reads this and skips a job offer with them. No one is indispensable but whether an employee is adding value is very subjective. Suppose you don’t get along with your boss, you’re out. Or, your manager is not impressed with your solution to a problem. So, you stink as an engineer, so you’re out.

    What I have noticed about companies in the last 5 years is that they don’t care about the career growth of their employees. And, they wonder why employees have no company loyalty. Just as you have to prove yourself with a company, the company has to prove themselves with you.

  4. there is a flavor of this happening yet on the other side of the fence @AMEX. Going thru the hiring process there a candidate can find themselves getting blasted(not given a fair shot)by Indian contractors working there who currently are poised to go perm with the company, and have been brought into the “hiring process.” Their tactics are to grill a candidate with use cases that require a decent amount of knowledge about how AMEX works(hard to do if you’ve never worked there), and once U fail to provide said key answers, you are eliminated from the recruiting process and their job remains safe. Their new South Florida branch has this going on badly.

  5. ‘Employees describe him as a man “unencumbered by emotion.”’ That reminds me of articles I’ve read about clinical psychopaths in business. They are not all axe murderers and serial killers. Many have become successful CEOs. I would be very hesitant to work here.

  6. Scott Lee

    This brutalization of employees generates a high anxiety environment that sane people either suffer or leave, and sociopaths excel in. You end up with a company run by careerist gaming sociopaths who excel at presenting the optics of high performance while/by destroying or disabling their competition and ultimately company growth, innovation and stock value. People in high anxiety environments will either silo themselves to maintain sanity or play the game to survive. In either case real teamwork is destroyed and turnover skyrockets while stock price suffers. I know, I survived a similar environment at a large tech firm for 11 years, and quit the company I moved to when the conditions there were similar. This management style is pushed by many of the management consulting firms as a productivity maximizer, but the long term effects are immeasurably bad.

  7. Phillip Julian

    I like the comment about the “rock star”, which may describe the work experience of some software engineers at Netflix. When you have a very complex and complicated problem, it takes special skills to solve it or lead a team to a solution. Based upon my experience, that is where rock star engineers make a difference in projects that would never be timely or successful without them.

  8. They push for net “nuetrality” because Netflix is by and large the biggest user of bandwidth online. If they pass net nuetrality, other companies are FORCED to deliver their goods. Nothing like forcing other companies to do business the way YOU want.

  9. They also fire you if their cafeteria staff plays a prank on a vegan by hiding bacon in a veggie burger and said vegan gets sick because he has a medical condition. Their great benefits and pay suck when you’re spending so much time in the hospital and not actually working so you have to gamble to keep a roof over your head (literally learned to play blackjack to pay rent). Oh yeah now said hospital is suing me. Eff Netflix.

  10. Hugh Shipman

    If this was an article that followed a few journalistic rules, it wouldn’t 1) insert opinions about how employees “feel” about the practice because, in legal terms, that’s leading the reader into formalizing an up-front opinion (“They” like it? Really? Who?), 2). They would interview a few fired and as-yet-to-be fired employees to get some actual opinions on the practice, and 3). They would get some information on any other companies, or at the very least, HR (or similar) professionals and their thoughts on doing this.

    I’m a big believer on practice what you preach. The CEO and all top execs should live by these rules too. As it is, this doesn’t seem to be the case here is it?