Question

As we learned in class, companies vary in their centralization and they may change their centralization based on environmental contingencies. Reed Hastings, co-CEO of Netflix, has said that he does not want to make tactical decision such as casting decisions. He wants to work on the overall long-term health of the company. Give an example of one specific change in Netflix’ environment that would likely lead him to continue to decentralize decision making. Give an example of one specific environmental change that would likely lead him to centralize decision making. Explain your reasoning in both hypothetical cases.

Answer 1

Here are some examples of centralization as environment change in Netflix :-

Employees don’t need pre-approvals for expenses or certain strategic decisions, but they’re fired if they do something dumb.
The book reveals that one Netflix employee in Taiwan had been reimbursed for more than $100,000 on lavish personal vacations over three years without his manager catching it. He was canned after Netflix’s finance department ran an audit of his receipts.

Netflix asks employees to get salary estimates from recruiters trying to poach them, and relay that to their boss.

Managers are encouraged to know the “market value” of their team members and proactively give them raises so they don’t jump ship. “It costs a lot more to lose people and to recruit replacements than to overpay a little in the first place.

When you sunshine your failed bets, everyone wins. You win because people learn they can trust you to tell the truth and to take responsibility for your actions. The team wins because it learns from the lessons that came out of the project.

Here are examples of decentralized as environment change in Netflix :-

The Netflix “Freedom & Responsibility” approach work across the entire company.
Hastings concedes that eliminating oversight and rules altogether is impossible. He cites the company’s processes for employee safety and sexual harassment, customer data privacy, and financial reporting.

Netflix has successfully codified its processes — and yes, it still has many of those — that buck age-old conventional wisdom. More important, the company has done so in a way that (mostly) seems to have scaled across the company’s 8,600-plus workforce and let it operate at a high level.

Encouragement :

The company encourages its staff to take the time first to be creative—to ensure options, ideas and opportunities are properly dreamed up—and then it moves into judicious decision-making for the long-term.