Netflix’s Reed Hastings Says Companies Aren’t Families. ‘You Would Never Lay Off 2 of Your Kids’
The Netflix cofounder explains why he stopped calling the company a family after a brutal early layoff. Airbnb’s Brian Chesky and Shopify’s Tobi Lutke reached the same conclusion.
Reed Hastings learned one of his most important leadership lessons after laying off a third of Netflix’s staff back in 2001. The dotcom bust had gutted the then-DVD rental company, and there was no way around deep cuts.
This experience reshaped how Hastings thought about the language leaders use to describe their companies.
“People respect great teams, and they respect families and how we operate,” Hastings recently toldSemafor. “But if you describe yourself as a family at a company, you better not ever do a layoff. You would never lay off two of your kids, right? Then people get very cynical if you say it’s a family but don’t operate that way.”
Be a championship team and not a family
Netflix experienced success again by capitalizing on the rise of DVD players, pivoting to a subscription delivery model and going public in 2002. During this time, Hastings decided that the company needed to make a shift in how he thought about workforce culture and messaging.
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“We realized, wow, maybe we should do a one-third layoff every year,” Hastings said. “And of course that’s impractical, but we said, how about if we keep the bar high and really think about us as a championship sports team rather than a family.”
That thinking became the foundation of Netflix’s well-known “keeper test,” which asks managers to regularly consider whether they would fight to keep each person on their team, or hire them again knowing what they know now. If the answer is no, Netflix’s philosophy is to part ways quickly rather than let the relationship drift.
High expectations, real flexibility
The idea of thinking of your workforce as a team and not a family isn’t just about performing under pressure. Netflix pairs that dynamic with more flexibility than most companies, including no fixed nine-to-five schedule, no prescribed vacation calendar, unlimited paid time off, and parental leave.
Source: www.inc.com
