No Rules Rules by Reed Hastings

Last updated on May 5, 2021 - My Free Marketing newsletter 👀

No Rules Rules by Reed Hastings and Erin Meyer was one of the best business books I’ve read this decade. Most books have generic advice and aren’t based on hugely successful plus dynamic companies. This is an amazing inside view at one of the most successful companies with clear / actionable strategies to win.

Since reading this book we have used a LOT of the ways they improve the company inside AppSumo.com.

Here’s major takeaways:

Netflix had one thing that Blockbuster did not: a culture that valued people over process, emphasized innovation over efficiency, and had very few controls.

While at Reed’s first company he says they failed to innovate quickly. Became increasingly efficient and decreasingly creative. We had selected and conditioned our employees to follow process, not to think freshly or shift fast. With my next company, Netflix, proved flexibility, employee freedom, and innovation, instead of error prevention and rule adherence.

To build an organization of high performers:

• Build up talent density - an organization of top performers need little controls.
• Increase candor - Talented people have enormous amount to learn from one another. Get into the feedback habit.
• Reduce controls - Remove rules and increase context of decisions, such as “don’t seek to please your boss”

The keepers in your company - exceptionally creative, did great work, and collaborated well with others
The borderline class are the tough people to let go, did adequate work.

After removing everyone except keeps the company felt like it was filled with people who were madly in love with their work.

A company with high talent density is a company everyone wants to work for. Working with really talented colleagues was exciting, inspiring, and a lot of fun.

A study found that groups working with just 1 underperformed did worse than other teams by 30-40%.

Number one goal as a leader - develop a work environment consisting exclusively of stunning colleagues.

Giving and receiving transparent feedback helped us so much. Day by day candor was increasing talent density in the office.

A feedback loop - is one of the most effective tools for improving performance.

Make sure to get employees to give candid feedback to the boss.

How to give feedback - 4A guidelines:

• Aim to assist - give it with positive intent
• Actionable - Focus on what the recipient can do differently
• Appreciate - How can I show appreciation for this feedback?
• Accept or discard - be the smart filter what you want to change

Netflix entire travel policy - “Act in Netflix’s best interest”

For operational roles you can pay an average salary and your company will do very well. BUT for creative jobs we would pay one incredible employee at the top of her personal market, pay tremendously.

The #1 reason people quit their jobs is for more money.

Bonuses are bad.

• It risks that the employee will focus on a target instead of spot what’s best for the company in the present moment.
• People value the entire amount they know of vs the potential amount they can receive at the end of the year unless that’s 100% clear from the start the final total amount.
• Contingent pay works for routine tasks but actually decreases performance for creative work.
• Gain a competitive edge just putting all that money into salary
• People are most creative when they have a big enough salary to remove some of the stress from home.

Netflix’s salaries are estimated what the person could make at any other company and then pay just above that.

“I don’t want my employees to feel like they’re working for Netflix; I want them to feel like that are part of Netflix.”

Netflix treats employees like adults!

Netflix strives to develop good decision-making muscles everywhere in their company. They believe the company is faster and most innovative when employees throughout the company make and own decisions.

“The amazing thing was to sit with you all day long and see that you didn’t make one decision!” - Sheryl Sandberg said this about Reed’s workday.

Employees don’t need the boss’s approve to move forward (but they should let the boss know what’s going on)

It’s disloyal to Netflix when you disagree with an idea and do not express that disagreement.

Farm for dissent - encourage people to give opinions on projects to get different insights / feedback.

If a project succeeds or fails , major key - ask what learning came from the project.

I ask all our managers to complete a simple form outlining their bets from the last few years. Divide into 3 categories: bets that went well, didn’t go well and open bets. This exercise reminds everyone that they are expected to implement bold ideas and that as part of the process, some risks won’t pay off! *

Make sure reaction to failure is not penalizing and more supported that risk is encouraged in your company culture.

It’s critical that your employees are continually hearing about the failed bets of others, so that they are encouraged to take bets.

Risk big, learn big. Get some big messy losses where we learn how to succeed better the next time.

One of the hardest things is firing a good employee when you think you can get a great one.

If a person on your team were to quit tomorrow, would you try to change their mind? Or would you accept their resignation, perhaps with a little relief?

Experts have found that if you stare at what you are deserpartve to avoid, you are actually more likely to paddle into it. <== If you focus on mitigating a culture of fear at your company.

“If I were thinking of leaving, how hard would you work to change my mind?” Ask this to your boss.

360 feedback is critical and even better to do it LIVE.