How netflix reinvented hr case study summary

Case Study 6.1 Netflix

Introduction

Motivation practices and applications influence processes such as leadership, power and politics and communication affecting the organizational outcomes. Organizational outcomes such as individual performance, job satisfaction, team performance affect the organizational goals. The organization goals are affected by the entire process on how organizational behavior is handled in the entire organization.

Unit Learning Outcomes

ULO 1: Analyze the concept of intrinsic motivation and its primary determinants. (CLO 1 & 3) ULO 2: Evaluate the various types of extrinsic rewards. (CLO 4)

Directions

Mini-case studies: The students are expected to answer the questions associated with the case. These questions are intended to elicit thoughtful reactions to contemporary organizational behavior initiatives and challenges. The students are expected to carefully read the assignment instructions, then thoroughly and explicitly address each component of the corresponding case study questions.

The responses should reflect higher level cognitive processing (analysis, synthesis, and evaluation), which is essential for someone in any industry, as diversity decisions affect all levels and stakeholders within the organization and in the external marketplace.

There is no minimum number of references that need to be utilized to support the completion of this assignment; however, it is generally understood that any good case study analysis will incorporate the appropriate quality and quantity of scholarly sources to support any suppositions and recommendations.

The submission will not exceed four (4) pages in length, excluding the title and references pages.

The document must adhere to the APA writing style.

The document should be prepared as a Microsoft Word file.

Case Study 2

1. Read the case study 6.1 Netflix in your text.

2. Intrinsic Motivation

· http://www.theatlantic.com/business/archive/2015/05/being-a-go-getter-is-no-fun/393863/ (Links to an external site.)

· “New research suggests that competent employees are assigned more work—but they don't always like it.”

· This resource relates to Learning Objective 6.1. Read more on page 141.

3. Answer the case questions in a written APA paper format

Case Study 6.1: Netflix
Netflix’s new employee practices have grabbed attention, to put it mildly. In 2012, a simple internal PowerPoint explaining them went viral and was viewed more than 5 million times on the Web. Sheryl Sandberg, chief operating officer of Facebook, said it “may well be the most important document ever to come out of [Silicon] Valley.” Dozens of bloggers and journalists scrambled to analyze its contents. And Netflix is surely doing something right: In 2013, the company’s stock value tripled. It reached a record 29 million subscribers and won three Emmy Awards for its original show House of Cards.

What was revealed in that game-changing PowerPoint? It was simply a “commonsense” approach, according to Patty McCord, then Netflix’s chief talent officer and one of the presentation’s authors. Netflix treats the people it hires as grownups. It grants them a great deal of freedom, and it expects them to use it wisely.

Game Changers
Conventional human resources (HR) is full of structure and documentation. Directors spend hours drafting standard operating procedures about time off, performance appraisals, training, and more. Netflix has simplified the process by doing away with many of these policies and focusing on results rather than processes.

McCord realized that motivating employees to produce outstanding results had a lot to do with trusting them with greater independence. That didn’t mean installing an arcade or skateboard park, as other tech companies have done. Instead, Netflix started doing away with formal procedures. Among the first to go was the leave procedure. Gone were the standard 10 days of vacation, 10 holidays, and handful of sick days. The new policy? Take what you need when you need it.

Giving employees the leeway to take as much vacation time as they’d like might strike many HR professionals as reckless. Wouldn’t people abuse such a liberal leave plan? McCord, however, had shifted to a different philosophy. Written policies, she reasoned, were mainly designed to eliminate problems created by a very small percentage of employees. The vast majority of people, and particularly the type of person Netflix tries to recruit, could be counted on to use common sense in their decision making.

This approach was extended to other areas. Travel and expense accounts are generally kept under a watchful eye, policed by HR or accounting to ensure that money is being spent in an acceptable manner, with plenty of documentation and accountability. Netflix turned tradition on its head, creating what may be the shortest expense policy any company has ever set: “Act in Netflix’s best interests.” Employees are also allowed to book their own travel online rather than going through a designated travel agent, allowing them to choose the best price.

Netflix compensates its employees very well, but there’s freedom there, too. People can choose what portion of their pay they would like to receive in direct compensation and what portion in stock options. This allows them to consider what sort of risk level they’re comfortable with (the value of any company’s stock will fluctuate over time) and what is best for them and their families. Netflix also eliminated performance-based bonuses, preferring to pay people fairly and trust them to do good work. There are no “golden handcuffs”—a form of retention plan that does not allow employees to receive stock options or other incentives until they’ve reached a certain number of years of service. Employees are also encouraged to research and interview with competitor companies and then have frank discussions with HR. This helps both the department and the employee know what is are good salaries for various positions.

The company also decided to forego conventional performance reviews. It eliminated the performance metrics typical of many companies’ evaluations, like grading an employee on a five-point scale in a variety of different tasks and expectations. Instead, a “360-degree review” is performed, which is an open conversation between employees and their managers about feedback from people inside (and occasionally outside) the company who have any contact with the employee. The evaluation is largely centered on one question for the manager, known as the “keeper test”: “Which of my people, if they told me they were leaving in two months for a similar job at a peer company, would I fight hard to keep at Netflix?” If someone’s skills and abilities are no longer a match for the company, the person is given a generous severance package upon exit. As CEO Reed Hastings told the Harvard Business Review, paraphrasing a section of the now-famous PowerPoint: “‘Adequate performance gets a generous severance package.’ It’s a pretty blunt statement of our hunger for excellence.”

The document is “our version of Letters to a Young Poet for budding entrepreneurs,” Reed continued. “It’s what we wish we had understood when we started.” He goes on to argue that a relatively new industry—online, on-demand entertainment—demands new paradigms. “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 firms thrive on reducing variation (manufacturing errors); creative firms thrive on increasing variation (innovation).”

The Payoffs
Netflix’s overhaul of its HR policies has yielded positive results. Despite the lack of carefully outlined procedures, the expectations are still clear: you have the freedom to make decisions, but keep in mind what is best for the company. The HR department at Netflix has realized that it isn’t necessary to beat its people over the head with exactly how to make good decisions.

Freedom equals reduced stress, arguably. The level of flexibility and self-management that Netflix also offers creates more efficiency. Employees don’t have to worry about whether they’ve racked up enough days off to take a trip or whether they’ve worked long enough hours to impress the boss. They aren’t fretting over how the big annual review will go, or whether they’ll get the score that will earn the bonus they’ve been counting on. Eliminating these typical workplace stressors motivates employees to stay focused on creating ideas and solutions for the business.

At Netflix, clear and honest communication thrives. Employees don’t fear retribution for looking into openings with other companies; they can go to HR and openly discuss other possibilities. Managers no longer have to spend time “in the weeds” developing improvement plans and riding mediocre workers for results. Likewise, employees are less likely to have to pick up slack for colleagues who are not performing. While Netflix lets people go whose knowledge and skills are no longer relevant, it’s candid about why. As McCord puts it, “People can handle anything as long as they’re told the truth.”

Being straightforward has costs, but having direct conversations with and offering a generous severance package to employees who are no longer a good fit has resulted in zero lawsuits over termination to date. HR is also empowered to find someone who fits the bill rather than continuing to invest in someone who cannot do what’s needed while risking the morale and motivation of fellow coworkers.

By allowing its employees plenty of liberty to make decisions for themselves, Netflix has reaped great rewards in employee motivation, efficiency, and productivity. While the premise may have seemed risky, it proved to be a commonsense solution for issues most HR departments face. Considering the way it revolutionized and streamlined the movie rental process for changing times, it is hardly surprising that Netflix seems to have done the same for employee motivation.

Case Questions
1. How does Netflix use intrinsic motivation to support its HR practices?

2. Why would a creative firm choose to use intrinsic motivation where an industrial firm would probably choose to use extrinsic rewards?

3. Explain the appeal of nontraditional work schedules and how Netflix has chosen to implement them.

Sources
Baer, Drake. “Netflix’s Major HR Innovation: Treating Humans Like People.” Fast Company. March 13, 2014. www.fastcompany.com/3027124/lessons-learned/netflixs-major-hr-innovation-treating-humans-like-people.

Fenzi, Francesca. “3 Big Ideas to Steal from Netflix.” Inc. February 5, 2013. www.inc.com/francesca-fenzi/management-ideas-to-steal-from-netflix.html.

Grossman, Robert J. “Tough Love at Netflix.” HR.. April 1, 2010. www.shrm.org/Publications/hrmagazine/EditorialContent/2010/0410/Pages/0410grossman3.aspx.

Kamensky, John. “Netflix’s 5 Tenets of HR.” Government Executive. February 14, 2014. www.govexec.com/excellence/promising-practices/2014/02/netflixs-5-tenets-hr/78827/.

McCord, Patty. “How Netflix Reinvented HR.” Harvard Business Review (January–February 2014). http://hbr.org/2014/01/how-netflix-reinvented-hr.

Nisen, Max. “Legendary Ex-HR Director from Netflix Shares 6 Important Lessons.” Business Insider. December 30, 2013. www.businessinsider.com/netflix-corporate-culture-hr-policy-2013-12.

No Author. “Netflix Wins Three Emmys.” Huffington Post. September 23, 2013. www.huffingtonpost.com/2013/09/22/netflix-emmys-house-of-cards-wins_n_3973794.html.