1-1: discussion: final project pattern

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For this discussion post, define the fact pattern in the Netflix case study, which you read about in the following Module One articles and presentation:

This information will be a key part of your final project for this course. According to Legal Dictionary, a fact pattern is “a concise description of all the occurrences or circumstances of a particular case, without any discussion of their consequences under the law.”

 

This information will be a key part of your final project for this course. According to Legal Dictionary, a fact pattern is “a concise description of all the occurrences or circumstances of a particular case, without any discussion of their consequences under the law.”

In other words, it provides the basic information—who, what, when, where, and why (which we will call the 5W approach):

  • Who: The individuals and organization involved in the issue
  • What: The issue at hand. What variables have created the situation that needs resolution, and what facts regarding the individuals involved and the organization can be codified as factual statements.
  • When: The timetable as to when the issue began and the approximate timeframe in which it must be settled. If not definitively known, provide an estimate of the duration.
  • Where: The geographic location, department, or division in which the problem exists.
  • Why: The drivers that created the situation needing resolution.
  • How: The ways in which the organizational culture may directly and/or indirectly impact the negotiation in an interpersonal or organization conflict situation.

Post your five Ws in your initial post, then comment on at least two of your peers’ posts. Review their posts to ensure their negotiation fact pattern is as comprehensive as possible and has fully captured all known facts of the case study.

WCM 510 Final Project Guidelines and Rubric

Overview
The final project for this course is the creation of an analysis and negotiation coaching recommendations for executive leadership (in either paper or
presentation format), which the chief human resources officer (CHRO) can read to prepare for the negotiation. The final product represents an authentic
demonstration of competency because it is a task that you may be asked to complete in the workplace. The project is divided into two milestones, which will be
submitted at various points throughout the course to scaffold learning and ensure quality final submissions. These milestones will be submitted in Modules
Three and Six. The final product will be submitted in Module Ten.

In this assignment, you will demonstrate your mastery of the following course outcomes:

 Assess the sources and uses of power using an organizational negotiator’s lens in identifying alternatives for effectively engaging with organizational
stakeholders

 Analyze negotiation practices for determining the influences of differing organizational cultures

 Apply principled negotiation methods in identifying opportunities for agreement that address the integrative interests of organizational stakeholders

 Differentiate between overt and tacit communications styles and practices for their implications on effective negotiations with organizational
stakeholders

 Determine appropriate negotiation tactics and gambits that advance a distributive negotiating agenda with organizational stakeholders

Prompt
For your final project you will place yourself in the role of an HR professional at Netflix, asked to prepare the chief human resources officer (CHRO), Sharon Slade,
for a possible severance negotiation involving a departing executive, Alice Jones. Your task is to create analysis and negotiation coaching recommendations for
executive leadership (in either paper or presentation format), which the CHRO can read to prepare for the negotiation. You will review three resources listed
below that provide background information about the Netflix organizational culture, performance expectations, and its unique approach to defined policies and
procedures. (Relative to other companies, it has very few policies and procedures.)

These resources are:

1. Library Article: How Netflix Reinvented HR
2. Article: The Woman Behind the Netflix Culture Doc
3. Presentation: Netflix Culture: Freedom & Responsibility

You will also review profiles and case study background information for the CHRO, Sharon Slade, as well as the executive, Alice Jones, who may be terminated.
These profiles, the case study background information and the three resources about Netflix provide the content of the case study necessary to complete the
final project. (Note: While this case study is based on a real company, the people and the scenario presented are fictional.)

Profile and Case Study Background Information: Sharon Slade—Chief Human Resources Officer at Netflix

Profile: Sharon Slade
Sharon Slade is the chief human resources officer (CHRO) at Netflix. She has been in her role at Netflix for three years, having been recruited from General
Electric, where she worked as the vice president of human resources. Sharon rose in through the ranks in human resources at GE, and was instrumental in
helping design, implement and manage the GE performance and development process, which used what was called a vitality curve. In summary, the vitality
curve was a modified bell curve, using a 20-70-10 percentage. All professional employees were force-ranked by their individual performance against set goals and
objectives each year. The top 20 percent of the workforce was identified as the best performers and were rewarded very well for their outstanding performance.
The 70 percent majority was deemed as performing their job adequately; the employees ranked in the bottom 10 percent were identified as low producers and
were terminated at the end of each year. The program soon gained the nickname as the “rank and yank” performance process. 1

Sharon accepted the CHRO job with Netflix as she saw its organizational values as fairly well aligned with her personal values and work ethic, several of which are
as follows:

 You accomplish amazing amounts of important work.

 You learn rapidly and eagerly.

 You say what you think even if it is controversial.

 You make tough decisions without agonizing over them.

 You care intensely about Netflix’s success.

 You are known for candor and directness.

 Adequate performance is not good enough; adequate performance gets you a generous severance package.

 Netflix is like a pro sports team. We hire, develop, and cut team members smartly, so we have stars in every position. 2

1

http://docslide.us/documents/jack-welch-vitality-curve.html

2 McCord, P. (2014). How Netflix reinvented HR.
https://hbr.org/2014/01/how-netflix-reinvented-hr/ar/1

The Woman Behind the Netflix Culture
http://firstround.com/review/The-woman-behind-the-Netflix-Culture-doc/

Netflix Culture: Freedom and Responsibility (PowerPoint presentation)

Case Study Background Information
Employees describe Sharon as a fair but firm—a “tough cookie”—who can hold her own in almost any setting. Employees fully understand she expects everyone
on the Netflix team to give 110% of their talent and effort to achieve their goals and objectives, and she has little tolerance for those who fail to deliver on their
objectives while citing excuses for why they failed. Sharon expects employees to proactively see where they are failing in their performance and develop an
action plan to get themselves back on track and stay on track.

Sharon has asked you to assist her in developing recommendations for a discussion with Alice Jones, a managing director at Netflix. Last year Alice’s department
was reorganized to refocus on growth, as the competition for on-demand entertainment increased significantly. The Netflix operations vice president expects
Netflix to be number one in all on-demand entertainment categories, and reorganized its operations to aggressively attain this goal. Sharon acknowledges that
Alice was a very good performer at Netflix for several years, but also knows her performance is faltering in this new aggressive growth model.

Profile and Case Study Background Information: Alice Jones—Operations Director at Netflix

Profile: Alice Jones
Alice Jones is an operations director at Netflix, a role that she has held for the past two years. Alice started at Netflix 10 years ago and did very well in all her
previous roles. As a result, she was a rising star at Netflix. Last year Netflix was facing significant challenges in the highly competitive on-demand entertainment
industry. Her department was reorganized and a new executive was brought in over her to lead the newly formed division.

Case Study Background Information
Alice was upset that she was not selected for the new role as executive to lead the newly reorganized division, since she felt she had “earned her stripes” at
Netflix and deserved to be promoted into this new role. Alice initially resented her new boss, Jane Smith, who was an external hire from a Fortune 500 company,
has a track record as a transformational leader in her previous firm, and has experience in driving major change.

Alice has to admit, however, that her new boss brings a lot of passion to the job, where she is driving significant change in the new division. Alice sees how the
changes have improved the division’s performance numbers. Jane Smith has begun having detailed discussions with Alice regarding her low performance
numbers. She recognizes that Alice performed well for 10 years at Netflix, and that she is talented and completely devoted to the company. Because of this, Jane
went out on a limb and placed Alice on a performance improvement plan (PIP), a practice at odds with the Netflix culture.

Alice feels Jane recognizes her value to the company. Alice is concerned that Jane has placed her on a performance improvement plan (PIP), but understands that
she has three months to turn her performance around or she will likely be terminated. Alice feels like the PIP is justified and her working relationship with Jane
has become constructive. She is appreciative of the opportunity to improve her performance and keep her job.

Sharon Slade has set up an appointment with Alice in two weeks about her future at Netflix. Alice is only one month into her PIP but has been working hard on
meeting its goals. She is nervous about the meeting with Sharon because she knows Sharon was not in favor of the PIP since this approach runs counter to the
Netflix culture.

Specifically, your analysis and negotiation coaching recommendations for executive leadership must address the following critical elements:

I. Summary. The purpose of this section is to prepare the chief human resources officer for entering the arena of this particular negotiation. Be sure to:
A. Summarize the negotiation fact pattern the chief human resources officer (CHRO) would need in advance of the negotiation.
B. Describe the types of power (positional, information, reward, coercive, social, charismatic) the CHRO has and how they are important to this

particular negotiation.
C. Describe appropriate alternatives that the CHRO would want to consider in the event that an agreement is not reached. In other words, what is

the CHRO’s BATNA? Does s/he have more than one?

II. Cultural Analysis Overview
A. What inferences can you draw about the company’s organizational culture based on how it reacts to an employee leaving? Support your

reasoning with specific examples.
B. Describe what cultural assumptions drive the organization’s policy decisions. Support your response with examples.
C. Explain how you would use these assumptions to engage in a severance negotiation that would result in the most beneficial outcome for the

company. Support your explanation with effective examples.

III. PIOC Analysis Overview
A. Formulate appropriate phrasing for the CHRO’s opening remarks that separate the people from the problems. Your phrasing must be based on

principled negotiation practices.
B. Identify case-specific negotiating positions and rephrase them as interests. For example, you could use a table to illustrate each position and the

appropriate rephrased interest (one row per position-interest).
C. Recommend options that can appropriately address the parties’ integrative interests. Feel free to consider potential creative options that may

not be as common.
D. Identify objective criteria that can be used to measure distributive elements of the negotiation. Explain the reasoning for your choices.

IV. Communication Strategies
A. Identify examples of effective overt communication that could be used in this negotiation. Explain the reasoning for your choices. For example,

when hearing a proposal from the executive that would be risky from a human resources perspective, how would you respond? Why?
B. Identify situations where tacit communication is important to this negotiation. Provide examples of how you might use such communication in

upcoming meetings. For example, if you are making an offer to the executive, what non-verbal cues can you provide to let him/her know the
offer is final and you would not be open to negotiating further?

C. Contrast the benefits and risks of using overt and tacit communication methods with respect to this negotiation. For example, might one
particular method be more appropriate than the other? Why?

V. Negotiation Tactics and Strategies
A. Summarize potential negotiating gambits that could advance a distributive negotiating agenda in this situation. For example, what might you say

to persuade the other party to stop asking for concessions?

B. Recommend which specific gambits would be most appropriate for advancing your agenda in this negotiation. Explain your reasoning.
C. What tactics would you advise the negotiator to avoid in this case? Explain your reasoning.

Milestones
Milestone One: Summary and Cultural Analysis Overview
In Module Three, you will submit a draft of Section I: Summary and Section II: Cultural Analysis Overview of the final project. You will submit this draft to your
instructor for review and feedback. This milestone will be graded with the Milestone One Rubric.

Milestone Two: People, Interests, Options, Criteria (PIOC) Analysis Overview and Communication Strategies
In Module Six, you will submit a draft of Section III: People, Interests, Options, Criteria (PIOC) Analysis Overview and IV: Communication Strategies of the final
project. This milestone will be graded with the Milestone Two Rubric.

Final Submission: An Analysis and Negotiation Coaching Recommendations for Executive Leadership
In Module Ten, you will submit your final project. It should be a complete, polished artifact containing all of the critical elements of the final product. It should
reflect the incorporation of feedback gained throughout the course. This submission will be graded with the Final Project Rubric (below).

Final Project Rubric
Guidelines for Submission: Your analysis and negotiation coaching recommendations for executive leadership paper should be 6–8 pages, double-spaced, using
12-point Times New Roman font and APA 6th edition format. You also have the option of submitting your analysis and negotiation coaching recommendations for
executive leadership as a presentation with 14–16 slides accompanied by speaker notes. Your presentation should be of professional quality and use APA 6th
edition format.

Critical Elements Exemplary (100%) Proficient (90%) Needs Improvement (70%) Not Evident (0%) Value

Summary: Negotiation
Fact Pattern

[WCM-510-01]

Meets “Proficient” criteria and
summary offers keen insight into
what might happen in the
negotiation

Summarizes the negotiation fact
pattern the CHRO would need in
advance of the negotiation

Summarizes the negotiation fact
pattern the CHRO would need in
advance of negotiation, but
summary is verbose or lacks
necessary detail

Does not summarize the
negotiation fact pattern the
CHRO would need in advance of
the negotiation

6.4

Summary: Types of
Power

[WCM-510-01]

Meets “Proficient” criteria and
makes especially cogent
connections between the types
of power the CHRO has and the
negotiation

Describes the types of power the
CHRO has and how they are
important to the particular
negotiation

Describes the types of power the
CHRO has and how they are
important to the particular
negotiation, but description is
cursory or contains inaccuracies

Does not describe the types of
power the CHRO has and how
they are important to the
particular negotiation

6.4

Summary: Appropriate
Alternatives

[WCM-510-01]

Meets “Proficient” criteria and
described alternatives offer keen
insight into what might happen in
the negotiation

Describes appropriate
alternatives that the CHRO would
want to consider in the event
that an agreement is not reached

Describes alternatives that the
CHRO would want to consider in
the event that an agreement is
not reached, but description is
cursory, contains inaccuracies, or
alternatives are not appropriate

Does not describe alternatives
that the CHRO would want to
consider in the event that an
agreement is not reached

6.4

Cultural Analysis:
Organizational

Culture [WCM-510-02]

Meets “Proficient” criteria and
examples provided make
particularly cogent connections
between the company’s reaction
and organizational culture

Determines what inferences can
be drawn about the company’s
organizational culture based on
the company’s reaction to an
employee leaving, supporting
reasoning with specific examples

Determines what inferences can
be drawn about the company’s
organizational culture based on
the company’s reaction to an
employee leaving, but
determination is illogical, or does
not support reasoning with
specific examples

Does not determine what
inferences can be drawn about
the company’s organizational
culture based on the company’s
reaction to an employee leaving

6.4

Cultural Analysis:
Cultural Assumptions

[WCM-510-02]

Meets “Proficient” criteria and
examples provided demonstrate
keen insight into the influence of
cultural assumptions on
organizational policy decisions

Describes what cultural
assumptions drive the
organization’s policy decisions,
supporting response with
examples

Describes what cultural
assumptions drive the
organization’s policy decisions,
supporting response with
examples, but description is
cursory, contains inaccuracies, or
contains gaps in support

Does not describe what cultural
assumptions drive the
organization’s policy decisions,
supporting response with
examples

6.4

Cultural Analysis:
Severance

Negotiation
[WCM-510-02]

Meets “Proficient” criteria and
examples provided demonstrate
keen insight into how cultural
assumptions in severance
negotiations can be beneficial for
the company

Explains how assumptions could
be used to engage in a severance
negotiation that results in the
most beneficial outcome for the
company and supports
explanation with effective
examples

Explains how assumptions could
be used to engage in a severance
negotiation that results in the
most beneficial outcome for the
company and supports
explanation with examples, but
explanation is cursory, contains
inaccuracies, or examples are not
effective

Does not explain how
assumptions could be used to
engage in a severance
negotiation that results in the
most beneficial outcome for the
company

6.4

PIOC Analysis: CHRO’s
Opening Remarks

[WCM-510-03]

Meets “Proficient” criteria and
phrasing demonstrates an astute
ability to separate people from
problems with principled
negotiation tactics

Formulates appropriate phrasing,
based on principled negotiation
practices, for the CHRO’s opening
remarks that separates the
people from the problems

Formulates phrasing for the
CHRO’s opening remarks based
on principled negotiation
practices, but phrasing is not
appropriate or logical, or does
not separate the people from the
problems

Does not formulate phrasing for
the CHRO’s opening remarks

4.8

PIOC Analysis: Case-
Specific Negotiating

[WCM-510-03]

Meets “Proficient” criteria and
rephrasing demonstrates keen
insight into case-specific
negotiating positions

Identifies appropriate case-
specific negotiating positions and
rephrases them as interests

Identifies negotiating positions
and rephrases them as interests,
but some positions are
inappropriate or are not case-
specific

Does not identify negotiating
positions and rephrase them as
interests

4.8

PIOC Analysis:
Integrative
Interests

[WCM-510-03]

Meets “Proficient” criteria and
recommendations demonstrate a
sophisticated approach to
addressing integrative interests

Recommends options that can
appropriately address the parties’
integrative interests

Recommends options that can
address the parties’ integrative
interests, but some
recommendations are illogical or
inappropriate

Does not recommend options
that can address the parties’
integrative interests

4.8

PIOC Analysis:
Objective
Criteria

[WCM-510-03]

Meets “Proficient” criteria and
explanation makes especially
cogent connections between
objective criteria and distributive
elements

Identifies objective criteria that
can be used to measure
distributive elements of the
negotiation, explaining reasoning
for choices

Identifies criteria that can be
used to measure distributive
elements of the negotiation, but
not all criteria are objective, or
does not explain choices

Does not identify criteria that can
be used to measure distributive
elements of the negotiation

4.8

Communication
Strategies: Overt
Communication
[WCM-510-04]

Meets “Proficient” criteria and
reasoning offers keen insight into
what makes overt
communication effective in
different circumstances

Identifies examples of effective
overt communication that could
be used in the negotiation,
explaining reasoning

Identifies examples of overt
communication that could be
used in the negotiation,
explaining reasoning, but not all
examples are effective for the
given situation, or reasoning is
cursory or illogical

Does not identify examples of
overt communication that could
be used in the negotiation,
explaining reasoning for choices

6.4

Communication
Strategies: Tacit
Communication
[WCM-510-04]

Meets “Proficient” criteria and
examples offer keen insight into
the role of tacit communication
in the negotiation

Identifies situations where tacit
communication is important to
the negotiation and provides
examples of how such
communication might be used in
upcoming meetings

Identifies situations where tacit
communication might be used in
the negotiation and provides
examples of how to do so, but
not all situations and examples
identified are important to the
negotiation, involve tacit
communication, or are relevant
for the given situation

Does not identify situations
where tacit communication might
be used and provide examples of
how to do so

6.4

Communication
Strategies: Benefits and

Risks
[WCM-510-04]

Meets “Proficient” criteria and is
exceptionally insightful about
how overt and tacit
communication can be both
beneficial and risky in
negotiations

Contrasts the benefits and risks
of using overt and tacit
communication methods with
respect to the negotiation

Contrasts the benefits and risks
of using overt and tacit
communication methods, but
contrast contains inaccuracies, or
is not done with respect to the
negotiation

Does not contrast the benefits
and risks of using overt and tacit
communication methods

6.4

Negotiation Tactics and
Strategies: Potential

Gambits
[WCM-510-05]

Meets “Proficient” criteria and
summary offers keen insight into
how potential negotiating
gambits could advance a
distributive negotiating agenda

Summarizes potential negotiating
gambits that could advance a
distributive negotiating agenda in
the situation

Summarizes potential negotiating
gambits that could advance a
distributive negotiating agenda,
but summary is verbose, lacks
necessary detail, or gambits are
not specific to the situation

Does not summarize potential
negotiating gambits that could
advance a distributive
negotiating agenda

6.4

Negotiation Tactics and
Strategies: Specific

Gambits
[WCM-510-05]

Meets “Proficient” criteria and
explanation makes especially
cogent connections between
specific gambits and the
negotiation

Recommends which specific
gambits would be most
appropriate for advancing agenda
in this negotiation, explaining
reasoning

Recommends specific gambits for
advancing agenda in this
situation, explaining reasoning,
but not all gambits are
appropriate, or reasoning
contains gaps in logic

Does not recommend specific
gambits for advancing agenda in
this situation, explaining
reasoning

6.4

Negotiation Tactics and
Strategies: Tactics

[WCM-510-05]

Meets “Proficient” criteria and
explanation offers keen insight
into why the negotiator should
avoid certain tactics

Determines which tactics the
negotiator should avoid in this
case and explains reasoning

Determines which tactics the
negotiator should avoid and
explains reasoning, but response
is cursory, illogical, or is not
relevant for the given situation

Does not determine which tactics
the negotiator should avoid and
explain reasoning

6.4

Articulation of
Response

Submission is free of errors
related to citations, grammar,
spelling, syntax, and organization
and is presented in a professional
and easy-to-read format

Submission has no major errors
related to citations, grammar,
spelling, syntax, or organization

Submission has major errors
related to citations, grammar,
spelling, syntax, or organization
that negatively impact readability
and articulation of main ideas

Submission has critical errors
related to citations, grammar,
spelling, syntax, or organization
that prevent understanding of
ideas

4

Total 100%

Graduate Discussion Rubric

Overview

Your active participation in the discussions is essential to your overall success this term. Discussion questions will help you make meaningful connections
between the course content and the larger concepts of the course. These discussions give you a chance to express your own thoughts, ask questions, and gain
insight from your peers and instructor.

Directions

For each discussion, you must create one initial post and follow up with at least two response posts.

For your initial post, do the following:

 Write a post of 1 to 2 paragraphs.

 In Module One, complete your initial post by Thursday at 11:59 p.m. Eastern.

 In Modules Two through Ten, complete your initial post by Thursday at 11:59 p.m. of your local time zone.

 Consider content from other parts of the course where appropriate. Use proper citation methods for your discipline when referencing scholarly or
popular sources.

For your response posts, do the following:

 Reply to at least two classmates outside of your own initial post thread.

 In Module One, complete your two response posts by Sunday at 11:59 p.m. Eastern.

 In Modules Two through Ten, complete your two response posts by Sunday at 11:59 p.m. of your local time zone.

 Demonstrate more depth and thought than saying things like “I agree” or “You are wrong.” Guidance is provided for you in the discussion prompt.

Rubric

Critical Elements Exemplary Proficient Needs Improvement Not Evident Value

Comprehension Develops an initial post with an
organized, clear point of view or
idea using rich and significant
detail (100%)

Develops an initial post with a
point of view or idea using
appropriate detail (90%)

Develops an initial post with a
point of view or idea but with
some gaps in organization and
detail (70%)

Does not develop an initial post
with an organized point of view
or idea (0%)

20

Timeliness N/A Submits initial post on time
(100%)

Submits initial post one day late
(70%)

Submits initial post two or more
days late (0%)

10

Engagement Provides relevant and
meaningful response posts with
clarifying explanation and detail
(100%)

Provides relevant response
posts with some explanation
and detail (90%)

Provides somewhat relevant
response posts with some
explanation and detail (70%)

Provides response posts that are
generic with little explanation or
detail (0%)

20

Critical Elements Exemplary Proficient Needs Improvement Not Evident Value

Critical Thinking Draws insightful conclusions
that are thoroughly defended
with evidence and examples
(100%)

Draws informed conclusions
that are justified with evidence
(90%)

Draws logical conclusions (70%) Does not draw logical
conclusions (0%)

30

Writing (Mechanics) Initial post and responses are
easily understood, clear, and
concise using proper citation
methods where applicable with
no errors in citations (100%)

Initial post and responses are
easily understood using proper
citation methods where
applicable with few errors in
citations (90%)

Initial post and responses are
understandable using proper
citation methods where
applicable with a number of
errors in citations (70%)

Initial post and responses are
not understandable and do not
use proper citation methods
where applicable (0%)

20

Total 100%

Artwork Freegums, Good Vibrations
2011, acrylic on wood, 8′ x 15’Spotlight

Spotlight on TalenT and Performance

Patty McCord is the
founder of Patty McCord
Consulting and the former
chief talent officer at Netflix.

How Netflix
Reinvented HR
Trust people, not policies. Reward candor. And throw away
the standard playbook. by Patty McCord

People find the Netflix approach to talent and cul-
ture compelling for a few reasons. The most obvious
one is that Netflix has been really successful: During
2013 alone its stock more than tripled, it won three
Emmy awards, and its U.S. subscriber base grew
to nearly 29 million. All that aside, the approach is
compelling because it derives from common sense.
In this article I’ll go beyond the bullet points to de-
scribe five ideas that have defined the way Netflix at-
tracts, retains, and manages talent. But first I’ll share
two conversations I had with early employees, both
of which helped shape our overall philosophy.

The first took place in late 2001. Netflix had been
growing quickly: We’d reached about 120 employees
and had been planning an IPO. But after the dot-com
bubble burst and the 9/11 attacks occurred, things
changed. It became clear that we needed to put the
IPO on hold and lay off a third of our employees. It
was brutal. Then, a bit unexpectedly, DVD players
became the hot gift that Christmas. By early 2002
our DVD-by-mail subscription business was growing

S
heryl Sandberg has called
it one of the most impor-
tant documents ever to
come out of Silicon Valley.
It’s been viewed more
than 5 million times on
the web. But when Reed
Hastings and I (along
with some colleagues)
wrote a PowerPoint deck

explaining how we shaped the culture and moti-
vated performance at Netflix, where Hastings is CEO
and I was chief talent officer from 1998 to 2012, we
had no idea it would go viral. We realized that some
of the talent management ideas we’d pioneered,
such as the concept that workers should be allowed
to take whatever vacation time they feel is appropri-
ate, had been seen as a little crazy (at least until other
companies started adopting them). But we were sur-
prised that an unadorned set of 127 slides—no music,
no animation—would become so influential.

hbr.org

January–February 2014 harvard business review 71

like crazy. Suddenly we had far more work to do,
with 30% fewer employees.

One day I was talking with one of our best engi-
neers, an employee I’ll call John. Before the layoffs,
he’d managed three engineers, but now he was a
one-man department working very long hours. I
told John I hoped to hire some help for him soon.
His response surprised me. “There’s no rush—I’m
happier now,” he said. It turned out that the engi-
neers we’d laid off weren’t spectacular—they were
merely adequate. John realized that he’d spent too
much time riding herd on them and fixing their mis-
takes. “I’ve learned that I’d rather work by myself
than with subpar performers,” he said. His words
echo in my mind whenever I describe the most ba-
sic element of Netflix’s talent philosophy: The best
thing you can do for employees—a perk better than
foosball or free sushi—is hire only “A” players to
work alongside them. Excellent colleagues trump
everything else.

The second conversation took place in 2002, a
few months after our IPO. Laura, our bookkeeper,
was bright, hardworking, and creative. She’d been
very important to our early growth, having devised
a system for accurately tracking movie rentals so
that we could pay the correct royalties. But now, as
a public company, we needed CPAs and other fully
credentialed, deeply experienced accounting profes-
sionals—and Laura had only an associate’s degree
from a community college. Despite her work ethic,
her track record, and the fact that we all really liked
her, her skills were no longer adequate. Some of us
talked about jury-rigging a new role for her, but we
decided that wouldn’t be right.

So I sat down with Laura and explained the situa-
tion—and said that in light of her spectacular service,
we would give her a spectacular severance package.
I’d braced myself for tears or histrionics, but Laura
reacted well: She was sad to be leaving but recog-
nized that the generous severance would let her re-
group, retrain, and find a new career path. This inci-
dent helped us create the other vital element of our
talent management philosophy: If we wanted only

“A” players on our team, we had to be willing to let go
of people whose skills no longer fit, no matter how

valuable their contributions had once been. Out of
fairness to such people—and, frankly, to help us
overcome our discomfort with discharging them—
we learned to offer rich severance packages.

With these two overarching principles in mind,
we shaped our approach to talent using the five te-
nets below.

Hire, Reward, and Tolerate Only
Fully Formed Adults
Over the years we learned that if we asked people to
rely on logic and common sense instead of on for-
mal policies, most of the time we would get better
results, and at lower cost. If you’re careful to hire
people who will put the company’s interests first,
who understand and support the desire for a high-
performance workplace, 97% of your employees will
do the right thing. Most companies spend endless
time and money writing and enforcing HR policies
to deal with problems the other 3% might cause. In-
stead, we tried really hard to not hire those people,
and we let them go if it turned out we’d made a hir-
ing mistake.

Adultlike behavior means talking openly about
issues with your boss, your colleagues, and your
subordinates. It means recognizing that even in
companies with reams of HR policies, those policies
are frequently skirted as managers and their reports
work out what makes sense on a case-by-case basis.

Let me offer two examples.
When Netflix launched, we had a standard

paid-time-off policy: People got 10 vacation days,
10 holidays, and a few sick days. We used an honor
system—employees kept track of the days they took
off and let their managers know when they’d be out.
After we went public, our auditors freaked. They said
Sarbanes-Oxley mandated that we account for time
off. We considered instituting a formal tracking sys-
tem. But then Reed asked, “Are companies required
to give time off ? If not, can’t we just handle it in-
formally and skip the accounting rigmarole?” I did
some research and found that, indeed, no California
law governed vacation time.

So instead of shifting to a formal system, we went
in the opposite direction: Salaried employees were

The company’s expense policy is five words
long: “Act in Netflix’s best interests.”

HBR.ORG To view the complete Netflix culture
deck, go to hbr.org/mccord.

72  Harvard Business Review January–February 2014

SpOTliGHT oN TaleNT aNd PeRfoRmaNce

told to take whatever time they felt was appropri-
ate. Bosses and employees were asked to work it out
with one another. (Hourly workers in call centers
and warehouses were given a more structured pol-
icy.) We did provide some guidance. If you worked
in accounting or finance, you shouldn’t plan to be
out during the beginning or the end of a quarter,
because those were busy times. If you wanted 30
days off in a row, you needed to meet with HR. Se-
nior leaders were urged to take vacations and to let
people know about them—they were role models
for the policy. (Most were happy to comply.) Some
people worried about whether the system would
be inconsistent—whether some bosses would allow
tons of time off while others would be stingy. In gen-
eral, I worried more about fairness than consistency,
because the reality is that in any organization, the
highest-performing and most valuable employees
get more leeway.

We also departed from a formal travel and ex-
pense policy and decided to simply require adultlike
behavior there, too. The company’s expense policy
is five words long: “Act in Netflix’s best interests.” In
talking that through with employees, we said we ex-
pected them to spend company money frugally, as
if it were their own. Eliminating a formal policy and
forgoing expense account police shifted responsibil-
ity to frontline managers, where it belongs. It also
reduced costs: Many large companies still use travel
agents (and pay their fees) to book trips, as a way to
enforce travel policies. They could save money by
letting employees book their own trips online. Like
most Netflix managers, I had to have conversations
periodically with employees who ate at lavish res-
taurants (meals that would have been fine for sales
or recruiting, but not for eating alone or with a Net-
flix colleague). We kept an eye on our IT guys, who
were prone to buying a lot of gadgets. But overall we
found that expense accounts are another area where

if you create a clear expectation of responsible be-
havior, most employees will comply.

Tell the Truth About Performance
Many years ago we eliminated formal reviews. We
had held them for a while but came to realize they
didn’t make sense—they were too ritualistic and too
infrequent. So we asked managers and employees to
have conversations about performance as an organic
part of their work. In many functions—sales, engi-
neering, product development—it’s fairly obvious
how well people are doing. (As companies develop
better analytics to measure performance, this be-
comes even truer.) Building a bureaucracy and elab-
orate rituals around measuring performance usually
doesn’t improve it.

Traditional corporate performance reviews are
driven largely by fear of litigation. The theory is that
if you want to get rid of someone, you need a paper
trail documenting a history of poor achievement.
At many companies, low performers are placed on

“Performance Improvement Plans.” I detest PIPs. I
think they’re fundamentally dishonest: They never
accomplish what their name implies.

One Netflix manager requested a PIP for a qual-
ity assurance engineer named Maria, who had
been hired to help develop our streaming service.
The technology was new, and it was evolving very
quickly. Maria’s job was to find bugs. She was fast,
intuitive, and hardworking. But in time we figured
out how to automate the QA tests. Maria didn’t like
automation and wasn’t particularly good at it. Her
new boss (brought in to create a world-class auto-
mation tools team) told me he wanted to start a PIP
with her.

I replied, “Why bother? We know how this will
play out. You’ll write up objectives and deliverables
for her to achieve, which she can’t, because she lacks
the skills. Every Wednesday you’ll take time away

Idea in Brief
The Idea
If a company hires correctly,
workers will want to be star
performers, and they can be
managed through honest com-
munication and common sense.
Most companies focus too
much on formal policies aimed
at the small number of employ-
ees whose interests aren’t fully
aligned with the firm’s.

The SoluTIon
Hire, reward, and tolerate only
fully formed adults. Tell the
truth about performance. Make
clear to managers that their top
priority is building great teams.
Leaders should create the com-
pany culture, and talent manag-
ers should think like innovative
businesspeople and not fall into
the traditional HR mind-set.

HbR.oRg

January–February 2014 Harvard business Review 73

How NeTFlIx ReINveNTed HR

from your real work to discuss (and document) her
shortcomings. You won’t sleep on Tuesday nights,
because you’ll know it will be an awful meeting, and
the same will be true for her. After a few weeks there
will be tears. This will go on for three months. The
entire team will know. And at the end you’ll fire her.
None of this will make any sense to her, because for
five years she’s been consistently rewarded for be-
ing great at her job—a job that basically doesn’t exist
anymore. Tell me again how Netflix benefits?

“Instead, let’s just tell the truth: Technology has
changed, the company has changed, and Maria’s
skills no longer apply. This won’t be a surprise to
her: She’s been in the trenches, watching the work
around her shift. Give her a great severance pack-
age—which, when she signs the documents, will
dramatically reduce (if not eliminate) the chance
of a lawsuit.” In my experience, people can handle
anything as long as they’re told the truth—and this
proved to be the case with Maria.

When we stopped doing formal performance re-
views, we instituted informal 360-degree reviews.
We kept them fairly simple: People were asked to
identify things that colleagues should stop, start,
or continue. In the beginning we used an anony-
mous software system, but over time we shifted to
signed feedback, and many teams held their 360s
face-to-face.

HR people can’t believe that a company the size
of Netflix doesn’t hold annual reviews. “Are you
making this up just to upset us?” they ask. I’m not. If
you talk simply and honestly about performance on
a regular basis, you can get good results—probably
better ones than a company that grades everyone on
a five-point scale.

Managers Own the Job of
Creating Great Teams
Discussing the military’s performance during the
Iraq War, Donald Rumsfeld, the former defense
secretary, once famously said, “You go to war with
the army you have, not the army you might want or
wish to have at a later time.” When I talk to managers
about creating great teams, I tell them to approach
the process in exactly the opposite way.

In my consulting work, I ask managers to imag-
ine a documentary about what their team is accom-
plishing six months from now. What specific results
do they see? How is the work different from what
the team is doing today? Next I ask them to think
about the skills needed to make the images in the
movie become reality. Nowhere in the early stages
of the process do I advise them to think about the
team they actually have. Only after they’ve done the
work of envisioning the ideal outcome and the skill
set necessary to achieve it should they analyze how
well their existing team matches what they need.

If you’re in a fast-changing business environ-
ment, you’re probably looking at a lot of mismatches.
In that case, you need to have honest conversations
about letting some team members find a place where
their skills are a better fit. You also need to recruit
people with the right skills.

We faced the latter challenge at Netflix in a fairly
dramatic way as we began to shift from DVDs by mail
to a streaming service. We had to store massive vol-
umes of files in the cloud and figure out how huge
numbers of people could reliably access them. (By
some estimates, up to a third of peak residential
internet traffic in the U.S. comes from customers
streaming Netflix movies.) So we needed to find

Netflix founder and CEO Reed Hastings discusses the
company’s unconventional HR practices.

Crafting a Culture of Excellence

HBR: Why did you write the Netflix
culture deck?
Hastings: It’s our version of Letters to
a Young Poet for budding entrepre-
neurs. It’s what we wish we had un-
derstood when we started. More than
100 people at Netflix have made major
contributions to the deck, and we have
more improvements coming.

Many of the ideas in it seem like
common sense, but they go against
traditional HR practices. Why aren’t
companies more innovative when it
comes to talent management?
As a society, we’ve had hundreds
of years to work on managing
industrial firms, so a lot of accepted
HR practices are centered in that
experience. We’re just beginning
to learn how to run creative firms,
which is quite different. Industrial

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74  Harvard Business Review January–February 2014

SpOTliGhT ON tAlENt ANd PERfORMANCE

people deeply experienced with cloud services
who worked for companies that operate on a giant
scale—companies like Amazon, eBay, Google, and
Facebook, which aren’t the easiest places to hire
someone away from.

Our compensation philosophy helped a lot. Most
of its principles stem from ideals described earlier:
Be honest, and treat people like adults. For instance,
during my tenure Netflix didn’t pay performance
bonuses, because we believed that they’re unneces-
sary if you hire the right people. If your employees
are fully formed adults who put the company first,
an annual bonus won’t make them work harder or
smarter. We also believed in market-based pay and
would tell employees that it was smart to interview
with competitors when they had the chance, in order
to get a good sense of the market rate for their talent.
Many HR people dislike it when employees talk to
recruiters, but I always told employees to take the
call, ask how much, and send me the number—it’s
valuable information.

In addition, we used equity compensation much
differently from the way most companies do. In-
stead of larding stock options on top of a competitive
salary, we let employees choose how much (if any) of
their compensation would be in the form of equity. If
employees wanted stock options, we reduced their
salaries accordingly. We believed that they were
sophisticated enough to understand the trade-offs,
judge their personal tolerance for risk, and decide
what was best for them and their families. We dis-
tributed options every month, at a slight discount
from the market price. We had no vesting period—
the options could be cashed in immediately. Most
tech companies have a four-year vesting schedule

and try to use options as “golden handcuffs” to aid
retention, but we never thought that made sense. If
you see a better opportunity elsewhere, you should
be allowed to take what you’ve earned and leave. If
you no longer want to work with us, we don’t want
to hold you hostage.

We continually told managers that building a
great team was their most important task. We didn’t
measure them on whether they were excellent
coaches or mentors or got their paperwork done on
time. Great teams accomplish great work, and re-
cruiting the right team was the top priority.

Leaders Own the Job of
Creating the Company Culture
After I left Netflix and began consulting, I visited a
hot start-up in San Francisco. It had 60 employees
in an open loft-style office with a foosball table, two
pool tables, and a kitchen, where a chef cooked
lunch for the entire staff. As the CEO showed me
around, he talked about creating a fun atmosphere.
At one point I asked him what the most important
value for his company was. He replied, “Efficiency.”

“OK,” I said. “Imagine that I work here, and it’s
2:58 pm. I’m playing an intense game of pool, and I’m
winning. I estimate that I can finish the game in five
minutes. We have a meeting at 3:00. Should I stay
and win the game or cut it short for the meeting?”

“You should finish the game,” he insisted. I wasn’t
surprised; like many tech start-ups, this was a casual
place, where employees wore hoodies and brought
pets to work, and that kind of casualness often ex-
tends to punctuality. “Wait a second,” I said. “You
told me that efficiency is your most important cul-
tural value. It’s not efficient to delay a meeting and

Crafting a Culture of Excellence
firms thrive on reducing variation
(manufacturing errors); creative
firms thrive on increasing variation
(innovation).

What reactions have you gotten
from your peers to steps such as
abolishing formal vacation and
performance review policies? In
general, do you think other compa-
nies admire your HR innovations
or look askance at them?
My peers are mostly in the creative
sector, and many of the ideas in our

culture deck came from them. We are
all learning from one another.

Which idea in the culture deck was
the hardest sell with employees?

“Adequate performance gets a generous
severance package.” It’s a pretty blunt
statement of our hunger for excellence.

Have any of your talent management
innovations been total flops?
Not so far.

Patty talks about how leaders
should model appropriate behaviors
to help people adapt to an environ-
ment with fewer formal controls.
With that in mind, how many days
off did you take in 2013?

“Days off” is a very industrial concept,
like being “at the office.” I find Netflix
fun to think about, so there are prob-
ably no 24-hour periods when I never
think about work. But I did take three
or four weeklong family trips over the
past year, which were both stimulating
and relaxing.

hBr.org

January–February 2014 harvard Business review 75

HOw NetFLix ReiNveNted HR

keep coworkers waiting because of a pool game.
Isn’t there a mismatch between the values you’re
talking up and the behaviors you’re modeling and
encouraging?”

When I advise leaders about molding a corporate
culture, I tend to see three issues that need attention.
This type of mismatch is one. It’s a particular prob-
lem at start-ups, where there’s a premium on casual-
ness that can run counter to the high-performance
ethos leaders want to create. I often sit in on com-
pany meetings to get a sense of how people operate.
I frequently see CEOs who are clearly winging it.
They lack a real agenda. They’re working from slides
that were obviously put together an hour before or
were recycled from the previous round of VC meet-
ings. Workers notice these things, and if they see a
leader who’s not fully prepared and who relies on
charm, IQ , and improvisation, it affects how they
perform, too. It’s a waste of time to articulate ideas
about values and culture if you don’t model and re-
ward behavior that aligns with those goals.

The second issue has to do with making sure
employees understand the levers that drive the
business. I recently visited a Texas start-up whose
employees were mostly engineers in their twen-
ties. “I bet half the people in this room have never
read a P&L,” I said to the CFO. He replied, “It’s true—
they’re not financially savvy or business savvy, and
our biggest challenge is teaching them how the
business works.” Even if you’ve hired people who
want to perform well, you need to clearly commu-
nicate how the company makes money and what
behaviors will drive its success. At Netflix, for in-
stance, employees used to focus too heavily on sub-
scriber growth, without much awareness that our
expenses often ran ahead of it: We were spending
huge amounts buying DVDs, setting up distribution
centers, and ordering original programming, all be-
fore we’d collected a cent from our new subscribers.
Our employees needed to learn that even though
revenue was growing, managing expenses really
mattered.

The third issue is something I call the split per-
sonality start-up. At tech companies this usually
manifests itself as a schism between the engineers
and the sales team, but it can take other forms. At
Netflix, for instance, I sometimes had to remind
people that there were big differences between the
salaried professional staff at headquarters and the
hourly workers in the call centers. At one point our
finance team wanted to shift the whole company

to direct-deposit paychecks, and I had to point out
that some of our hourly workers didn’t have bank
accounts. That’s a small example, but it speaks to
a larger point: As leaders build a company culture,
they need to be aware of subcultures that might re-
quire different management.

Good Talent Managers Think Like
Businesspeople and Innovators First,
and Like HR People Last
Throughout most of my career I’ve belonged to
professional associations of human resources ex-
ecutives. Although I like the people in these groups
personally, I often find myself disagreeing with them.
Too many devote time to morale improvement ini-
tiatives. At some places entire teams focus on getting
their firm onto lists of “Best Places to Work” (which,
when you dig into the methodologies, are really
based just on perks and benefits). At a recent confer-
ence I met someone from a company that had ap-
pointed a “chief happiness officer”—a concept that
makes me slightly sick.

During 30 years in business I’ve never seen an HR
initiative that improved morale. HR departments
might throw parties and hand out T-shirts, but if
the stock price is falling or the company’s products
aren’t perceived as successful, the people at those
parties will quietly complain—and they’ll use the
T-shirts to wash their cars.

Instead of cheerleading, people in my profes-
sion should think of themselves as businesspeople.
What’s good for the company? How do we com-
municate that to employees? How can we help
every worker understand what we mean by high
performance?

Here’s a simple test: If your company has a per-
formance bonus plan, go up to a random employee
and ask, “Do you know specifically what you should
be doing right now to increase your bonus?” If he or
she can’t answer, the HR team isn’t making things as
clear as they need to be.

At Netflix I worked with colleagues who were
changing the way people consume filmed entertain-
ment, which is an incredibly innovative pursuit—yet
when I started there, the expectation was that I
would default to mimicking other companies’ best
practices (many of them antiquated), which is how
almost everyone seems to approach HR. I rejected
those constraints. There’s no reason the HR team
can’t be innovative too.

HBR Reprint R1401E

76  Harvard Business Review January–February 2014

HBR.oRgSPoTLIGHT on TalEnT and PERfoRmancE

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