Question

Curtis Martin has called it one of the most imporant documents eer to come out of Beijing. Its been viewed more than 5 million times on the web. But when Brad Stevens and I (along with some colleagues) wrote a PowerPoint deck explaining how we shaped the culture and motivated performance at Netflix, where Stevens 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 appropriate, had been seen as a little crazy (at least until other companies started adopting them). But we were surprised that an unadorned set of 127 slides - no music, no animation - would become so influential.

People find the Netflix approach to talent and culture 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 describe five ideas that have defined the way Netflix attracts, 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 like crazy. Suddenly we had far more work to do, with 30% fewer employees.

One day I was talking with on of our best engineers, 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 engineers 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 mistakes. "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 basic element of Netflix's talent philosophy: The best thing you can do for employees - a perk better than football 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 credentiated, deeply experienced accounting professionals - 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 juryrigging a new role for her, but we decided that wouldn't be right.

So I sat down with Laura and explained the situation - and said that in light her spectacular service, we would giver her a spectacular severance package. I'd braced myself for tears or histronics, but Laura reacted well: She was sad to be leaving out recognized that the generous severance would let her regroup, retrain, and find a new career path. This incident 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 tenets below.

Hire, Reward, and Tolerate Only Fully Formed Adults

Over the years we earned that if we asked people to rely on logic and common sense instead of on formal 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. Instead, we tried really hard to not hire those people, and we let them go if it turned out we'd made a hiring 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 tow 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 an let their managers know when the'd be out. After we went public, our auditors freaked.

They said Sarbanes_oxley mandated that we account for tim off. We considered instituting a formal tracking system. But then Brad asked, Are companies required to give time off? if not, can't we just handle it informally 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 told to take whatever time they felt was appropriate. Bosses and employees were asked to work it out with one another. (Hourly workers in call centers and warehouses were given a more structred policy). 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. Senior leaders were urged to take vacations and to let people know about whether the system would be inconsistent - whether some bosses would allow tons of time off while others owuld be stingy. In general, 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 expense 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 expected them to spend company money frugally, as if it were their own. Eliminating a formal policy and forgoing expense account police shifte responsibility to frontline managers, where it belongs. It also reduced costs: Many large comanies 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 restaurants (meals that would have been fine for sales or recruiting, but not for eating alone or with a Netflx colleague). We kept an eye on out 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 behavior, most employees will comply.

Tell the Truth About Performance

Mnay years ago we eliminaed 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, engineering, product development - it's fairly obvious how well people are doing. (As companies devlop better analytics to measure performance, this becomes even truer). Building a bureaucacy and elaborate 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 quality assurance engineer named Maria, who had been hired to help develop our streaming service. The technology was new, and it was evolvng 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 automation 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 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 being 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 package - which, when she signs the documents, will dramatically reduce (if not estimate) 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 reviews, 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 anonymous 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 on a five-point scale.

Managers Own the Job of Creating Great Teams

In my consulting work, I ask managers to imagine a documentary about what their team is accomplishing 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 shoud they analyze how well their existing team matches what they need.

If you're in a fast-changing business environment, 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 volumes 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 people deeply experienced with cloud services who worked for companies that operatte 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 belived that they're unnecessary 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 tht 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 need equity compensation much differently from the way most companies do. Instead of larding stock options on top of a copetitive salary, e let employes choose how muh (if any) of their compensation would be in the form of equity. If employees wanted stock options, we reduced ther 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 distributed 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 oppportunity elsewhere, you should be allowed to take what you've earned and leave. If you no longr want to work with us, we don't want to hold yuo 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 recruiting the right team was the top priority. (Patty McCord is the founder of Patty McCord Consulting and the former chief talent officer at Netflix).

SORRY - I know that this seems lengthy. However, I get better response when all is typed out rather than the snapshots which are hard to read and only generate more questions and asking for further clariification.

These are the questions to be addressed, please provide consecutive responses that I can translate into a research report:

1. DISCUSS and apply Ulrich's competency CREDIBLE ACTIVIST model (a) Earning trust through results (b) influencing and relating to others (c) improving self-awareness (d) strengthening the HR Profession.

2. DISCUSS the characteristics of a successful HR professional who utilizes Block's 5 consulting model (a) entry, contracting (b) discovery, dialogue (c) feedback, decision to act (d) engagement, implementation (e) extension, recycle, terminate. Also the strategies and assumptions the HR professional can make in this organization to make an impact with management as an internal consultant.

3. DISCUSS the fundamental aspect of identifying capabilities is to best understand and know the organization through a culture audit. Ulrich's competency: CAPABILITY BUILDER, IS BEST acquired and utilized by delivering the right organization capabilities and that especially outlast any individual leader (Apple = Jobs) but endures an organizational identity. ANALYZE the Netflix case through the CAPABILITY lens and utilizing relevant data from it, apply CREATING A MEANINGFUL WORK ENVIRONMENT from Ulrich's capability model.

Thanks in advance for your responses and support.

Answer 1

Answer: 1.

The model shows how effective HR professionals /policies can make business successful and Netflix is one fo the best examples .Amongst all the competencies/domains/HR components ,factors identified( like capability builder, strategic positioner,technology proponent etc) the credible activist is the heart of effective HR policies and credible activist shouls be the typical trait of a successful HR professional. It means to have relationship of trust with the busness leaders will result in respect for work which will in turn drive business performance.Credible activist contributes to 22% of effective HR policies and strategies. Credible activist is defined by the following traits:

(1)Earn trust by doing what we say we will do

(2) Infleunce and relate to others

(3) improvement through self awareness,should know who they are, their strenght and weaknesses

(4)Shape professionals

The above traits can be inculcated by

-Trying to give business what they ask for to the maximum extent possible. If not possible then manage their expectations

-Try to understand business more.Interact with business leaders more frequently,step into their shoes and get yourself acquited with the business terminologies and may be acumen

-Invest significant time and effort in building trust and dont grow impatient.

In the Netflix example conscous efforts have been made to hire only the best talent and retain the same using a stewardship governance model. Whatever had been commited was executed whcih helped in building the trust factor and thereby creating an environment conducive for overall growth. They have also made it a point that people shpuld take pride in what they do and should be rewarded accordingly. If the overall business environment,external or internal factors do not support the sustainability of an employee they have been transparent enough to communicate the same to the employee and put up a win win proposition (in the form of a handsome severence package) for both the organisation and the individual so that there is no or minimal discontent.More importantly the winning factor was to be able to take cognizance of the situation and be self aware of what is going on within the organization and to identify the next steps to secure the interests of the organization.

Answer 2:Encompassing Block's 5 model the following traits can be listed for a successful HR professional:

- Objective and impartial

-Effective communication

-Organizational skills

-Conflict management skills

-Responsive and responsible

-Mentorship, training,skill development

-Trustworthy

-Ethical

These traits are necessary to upheld block's 5 principles.

HR can act as internal consultants to the organization and show them the mirror.But their success wil depnd to a large extent on their flexibility to works with business stakeholders, involvement and interest ,knowledge and skillsets. They should try to acquire fair amount of technical expertise related to the business function they support.This is of paramount importance because they can leverage their behavioral expertise/competence along with technical knowledge to understand the business functions, external factors,operating environment for better solution design and change management. They should contribute to the organizational strategy because the human capital/talent pool plays a vital role in deciding the organizational success.They should adopt problem solving approach to identify hindrances to business objectives and devise innovative solution improve them. They should clearly articulate the requirements of the internal and external stakeholders and bridge the gap between management and employees.They should perform impact assessment of business decisions and frame mitigation strategies.They should help and be involved actively in orgaizational restructuring activities.

Answer 3: The capability builder model is buttresed on the principles of :

a.Identify business goals ,objectives and build a suitable work environment to align to business needs.Develop strategic workforce planning to suit business needs.Co-design the workplace along with business leaders taking into cognizance the current and future business requirements.Frame workforce attraction, development and retention. Respoind proactively to internal and external factors affecting work force performance and making suitable adjustments to workplace.

b.Induce a fabric of productive and sustainable organizational culture promoting inclusiveness of workforce and encompassing better change management ,collaboration and diversity

c.Build partnerships and relationships with key stakeholders ,understand their priorities, act as a trusted advisor ,coach and mentor workforce

In the netflix case also we have seen that a conducive environemnt has been built for providing comfort and freedom to the workforce. They have ensured only positive vibes thrive at workpolace and have taken prompt actions to remove any potential sources of conflicts or negativity. Employees have been recruited, trained and separated appropriately and ethically. Employees with redundant skillsets have been offered good severnce packages and have been separated amicably. Employees have been given good compensations as well as options for equity stakes whcih can be vested immediately. They have created an open and transparent work environment where employees can interact freely with HR.The performacne of th workforce was objectively evaluation and in a fair and unbiased manner and mentored properly. They were even encouraged to interview with competitors to gauge the sense of market.this shows that they never kept their workforce in captivity and the leaders always owned the responsibilites /accountabilities of building an able team through proper mentoring and coaching.