Netflix CEO: why you shouldn't try to please your boss

With 193 million subscribers worldwide, Netflix has transformed the TV and film industry. Part of its success is down to Reed Hastings, Netflix's CEO, who has pioneered a radical management style. He allows unlimited holiday, expects every employee to vie for their position, and tells them to never, ever try to please their boss. Reed Hastings, welcome to The Economist Asks. Thank you so much. What a pleasure. In your book, No Rules Rules, you lay out a very unconventional way that you run the company. You call it a unique cultural experiment. Now, there's a bold claim. What does that mean in practice? Well, you know, for 300 years, the factory has dominated our economy. And so it's natural that the factory metaphor, the top-down boss, all the rules, a focus on efficiency, becomes the dominant paradigm for management. But when your company is really about idea generation, about creativity, there's a different way to manage. There's a different way to lead. And so we tell people, don't manage. Try to inspire. Try to support. And we do get some chaos, and we do get some mistakes. But we also get some great ideas that help us evolve and stay relevant. If you're told not to please your boss, doesn't that mean that the employee has to kind of figure out quite a lot for themselves? And also, it induces a kind of nervousness that they might not be pleasing their boss, because they don't really know what they're supposed to be doing anyway. The goal is to get people to think about what's best for the company. How do we grow? How do we please our members ever more? And we want people to be independent thinkers. We don't want them to ever hide anything from their manager. But we want them to be thinking about, how can we do things better? And that first principle thinking is what's helped Netflix evolve through so many changes. Isn't it a recipe for being cautious? If you're worried that you'll get fired, if you're seen to not be performing at a level, it seems a bit harder to figure out what is required of you. Most of our industrial culture is not really focused on creativity. It's focused on error prevention. And that's good if you're an airline or a hospital. But if you're a creative organization, what you want to do is make it safe for people to make mistakes and to try things. Sort of managing on the edge of chaos, where you're very creative, but it hasn't actually tipped into chaos. You know, we model ourselves on professional sports, where you want the team to really work well together and to play their heart out. I mean, athletes know that they can be injured at any moment, but they don't focus on it. They focus on how do they play the best game that they can. And our employees are similar. They focus on how do they have an incredible professional experience, learn a lot, grow an incredible amount, and change the company for the better. You're known to be quite quick to fire people. Is that a fair reputation? No, I think we're very considered and thoughtful, but we do say that everybody's playing for their position. And that's how you get championship performance, is being able and willing to take the tough steps. What about things like allocated leave or not having allocated leave? Could be a bit of an urban myth, but is it the case if I were a Netflix employee, I'd just make up my own leave allocation? And how does that work? What does it motivate? We encourage people to take holiday and to refresh and recharge, but we don't manage how much they take. So formally, it's unlimited holiday. They can do whatever they want and we leave it to people's judgment. But I would say we encourage everyone to set a good example and to take vacation and to think broadly and, you know, also to read and exercise and, you know, just generally be healthy. What's the thing you've essentially coming back to a view of management theory that feels it does feel quite distinctively like something that you would want to wrap your arms around. But I wondered if you the same kind of manager that you were when you made your way up to the head of one of the world's top streaming services. What have you learned and what's been the painful learning? Well, the painful learning was in my first company, which was about 30 years ago, was a technical software company. And I wrote about this in the book. Every time someone made a mistake, I put a process in place. So we didn't make that mistake again. And over time, we can get filled with process. And we had the people who liked following process. And then the market shifted and we were unable to adapt because people weren't thinking about the right thing for the business. They were thinking about following the process. And that's when I realized that if you optimize for efficiency, you don't have much flexibility. And for a creative business, it's going to change a lot. It's better to focus on flexibility and tolerate less efficiency, kind of managing on the edge of chaos. Thank you very much for joining us, Reid Hastings. Pleasure. You can listen to the full interview in our podcast, The Economist Asks. Every week, we talk to a high profile figure. Click the link opposite to find this episode. And thanks for watching.