According to the acclaimed psychologist and author, Erin Meyer:
Your performance, both good and bad, and that of your colleagues is infectious.
As well as publishing books in her own right, Meyer co-authored a best-selling book called "No Rules Rules" with Netflix founder, Reed Hastings.
You may not know that, prior to founding Netflix, Hastings took his first company, Pure Software, public in 1995. It was no easy journey though. Hastings found the company's growth challenging and blamed himself and his lack of managerial experience for many of the company's ups and downs.
When Reed Hastings and Marc Randolph founded Netflix in 1997, they decided to do things differently. Over time Hastings, in particular, was able to shed his fixation on process, which he felt demoralised his most innovative, creative people and instead moved to a new strategy. Clearly it worked. Today Netflix is valued at nearly $200 billion.
What do employees desire from their employer?
Hastings came to believe the following, in his own words:
For top performers a great workplace isn’t about a lavish office, a beautiful gym or a free sushi lunch; it’s about the joy of being surrounded by people who are both talented and collaborative, people who can help you be better. When every member is excellent, performance spirals upward as employees learn from and motivate one another.
In contrast, he also believed that a team with one or two merely adequate performers brings down the performance of nearly everyone on the team, because adequate performers will:
- Sap managers’ energy, so they have less time for the top performers.
- Reduce the quality of group discussions, lowering the team’s overall IQ.
- Force others to develop ways to work around them, reducing efficiency.
- Drive staff who seek excellence to quit.
- Show staff that you accept mediocrity, thus multiplying the problem.
What's the best strategy for hiring, motivating and retaining high-performing employees?
Netflix believes anyone can build a high-performance culture with two simple steps, as follows:
First, create talent density
The Netflix executive team say they discovered this by accident. In the dot-com crash of 2000, Netflix was burning millions of dollars and nobody wanted to invest in another internet startup. When Blockbuster famously refused to buy them for the "laughable" price of $50m, Hastings and Randolph had no option but to make layoffs.
The strangest thing happened. Expecting a backlash from the remaining employees or at least a significant dip in morale, Hastings and his team witnessed the opposite. Productivity and morale soared.
Without realising it, by removing anyone they believed to be only an adequate performer, a poor team player, or difficult to work with, the Netflix team had achieved what they call "increasing talent density".
Second, increase candour
The next step in producing a motivating employees is counter-intuitive, because as human beings we naturally avoid conflict or doing anything that might result in group rejection. As a result we tend to tell people what they want to hear and avoid confronting people with uncomfortable truths. Just as we feel elated when we receive praise, we also feel hurt when someone criticises us. And yet it is only from criticism that we can tackle our weaknesses, adapt and improve.
The answer, according to Hastings and Meyer, is to create a culture of "candour with positive intent".
How to create a high-performance culture
Netflix uses the following steps:
- Do everything you can to build and retain talent density.
- Offer what's needed to attract and hire the highest performing, most collaborative employees on the market.
- Coach managers to have the courage and discipline to get rid of any employees that were displaying undesirable behaviours or weren't performing at exemplary levels.
- Build candour by giving employees the freedom and safety to give feedback to their bosses (later bosses can give feedback too);
- Put "feedback" as the first/last item on all 1-to-1 meeting agendas;
- Remember that the most valuable comments for growth are also the most painful;
- Continually demonstrate to employees that it’s safe for them to give feedback by:
- Showing gratitude for all feedback.
- Telling employees their candour makes them an even more valued member of the team.
- Praising employees publicly for their courage and honesty when giving feedback.
Netflix employees aren't just encouraged to give constructive feedback, they are taught that it is their duty and responsibility to do so, and to ensure others do the same. In the words of Netflix's Chief Content Officer, Ted Sarandos:
"We hire you for your opinions. Every person in that room is responsible for telling me frankly what they think."
We can't wait to implement this at DQ Ventures.
This article is inspired and in some cases lifted directly from the text of "No Rules Rules" by Reed Hastings and Erin Meyer. It's not only an informative read, but unlike many business books, it's entertaining and hard to put down. This is one every aspiring founder should read.
– Featured image by David Mark.