When we think about culture and responsibility in the workplace, companies generally fall into one of two categories. Some seek to monitor their employees and keep them in a structured order by implementing rules and policies for every interaction. This is more common and tends to happen as companies scale and become more established. The result is a thick handbook and a set of employees who don’t need to think as much about what to do, because the thinking has been done for them.
The alternative seems more chaotic: companies that have very few procedures and regulations in place. This is most often seen in startups or businesses with few employees. Employees are given the freedom to make their own decisions, which often inspires creativity and innovation. This freedom usually lasts until the business begins to grow, and limitations are imposed. Controls seem necessary; a few wrong budgeting decisions might have a major impact on a growing business.
So as business scales, how do we give employees the freedom to make decisions while keeping chaos in check?
Netflix: Creating a culture of freedom at scale
Lucky for us, Netflix CEO Reed Hastings experienced both scenarios, and he and Erin Meyer, a bestselling author and international culture expert, have written the book on innovative culture in the workplace. Last week, I was fortunate to attend Erin’s Thinkers50 and Insight to Impact webinar: No Rules Rules (replay available here).
In the webinar, Erin described Reed’s experience launching his first business, a software troubleshooting company. At first, there were no rules. But as the business began to grow, Reed started implementing more policies. He found that the new restrictions drove his most creative employees out of the company.
When he started Netflix, he wanted to keep the freedom but avoid the negative impact of “wrong decisions”. The outcome? A $30 billion business with a culture deck that has been downloaded 20 million times.
Culture is about reconciling dilemmas
In the webinar, Erin explained that while most companies describe their culture in bold value statements with words like “integrity”, “communication”, “excellence”, and “respect”, there is no way of measuring these absolute positives. Instead, leaders and management teams must think in terms of dilemmas.
Similar to Fons Trompenaars’ message in Episode 3 of our new podcast, both culture and strategy are about reconciling dilemmas. What are the dilemmas that arise on a day-to-day basis, and how should we respond if we want to create innovative and flexible teams?
Three steps to employee freedom
Netflix found three steps to employee freedom, which Erin says can be applied at scale:
- Increase talent density: During the 2001 financial crisis, Reed found that he would have to lay off one-third of all employees or close the company. He kept only the highest performers, and soon found that they were able to accomplish the same amount of work. Performance is contagious, and it’s worth investing in a smaller team that can get the job done.
- Increase candor: Netflix practices live 360-degree reviews. These are usually done over dinner, where the team gets together and offers feedback to their colleagues according to four A’s: aim to assist, actionable, appreciate, and accept or decline. In a group setting, teammates are encouraged to offer constructive, actionable feedback that can then be confirmed or denied by other members.
- Remove controls: With the right people and the right communication methods in place, your organization will be able to remove some of the policies and procedures that stifle innovation. Start with small steps and open feedback to transition decision-making responsibility to employees.
Erin recognized that this approach comes from an innovative company in a creative industry. What about large enterprises with a pre-existing culture? Can these practices be applied to any business?
Yes, she says. Rethinking culture is a step-by-step process and Netflix has had success applying these practices to teams around the world. If your team isn’t fully ready to embrace “No Rules Rules”, think about the small steps you can take toward employee freedom.
- How can you shift your hiring resources to fewer employees with higher potential?
- If your team isn’t practicing live 360-degree reviews, what exercise could you do to encourage candid, constructive feedback?
- If these ideas are implemented from the top-down, how can local managers adapt them to suit their needs and existing culture?