Netflix Culture Memo: what can we learn from the update?

Global streaming giant, Netflix has rolled out an update. Like many new tech releases, the change has caused a stir. But this is not a new platform feature or bug fix. It’s a reboot of Netflix’s famous culture memo; the set of principles used to shape its company culture.

When Netflix’s first culture memo came in 2009, it set the precedent for HR teams in Silicon Valley. The startup hub has struggled to mature its people policies, but Netflix paved the way with rules on pay (top-rate), employee performance (top-level), and decisions (top-down).

15 years later, though, the company now employs an 11,000-strong workforce across the globe. There are things it wants to do differently. Netflix co-founder and former CEO Reed Hastings wrote on LinkedIn that this version is “the draft I wish we had 15 years ago.”

So what is in the new guidelines, and how has it evolved since 2009? At over 2,000 words, the article is hardly a light read. Below, we’ll see past the sales talk to reveal what businesses and HR leaders need to know from Netflix’s new culture memo.

1. Less is more

Netflix’s original culture memo was a bit of a beast. At 129 slides, it would have taken almost a full day to read it over; and a lifetime to memorise the content. As the memo says, “we’ve shortened it by focusing on what’s most important, and what differentiates Netflix.”

The new document is still over 2,000 words and far from tight. But by doing away with case studies, summaries, and jokes, Netflix has managed to reduce its guidelines down to just four company value statements. These are:

• The Dream Team: We aim only to have the highest performers at Netflix, modelling ourselves on a professional sports team, not a family.
• People over Process: Our goal is to inspire and empower more than manage because employees have more impact when they’re free to make decisions about their own work.
• Uncomfortably Exciting: Netflix works best if you thrive on change because success in entertainment requires us to think differently, experiment and adapt (often quickly).
• Great and Always Better: We often say we suck today by comparison to where we want to be in the future. So we focus on constant improvement, and the resilience needed to get there.

These fundamentals are much easier for staff to understand, and for managers to relay. They are also, in many ways, clearer than Netflix’s previous memo, which had so many ideas and buzzwords it apparently caused misunderstandings.

“We’ve had our fair share of failures,” the memo acknowledges, “and a few people have taken advantage of our culture.”

2. Employees should argue back

We all love a good Netflix drama. Apparently, so does its HR team. The streaming brand wants its workers to view constructive feedback as part of their everyday routine, arguing that ”extraordinary candor helps us improve faster as individuals and a company.”

There is a phrase that Netflix uses to explain this: “farming for dissent”. It says it “expects informed captains to seek out different opinions and listen to people at every level.”

Still, good team communication requires businesses to provide a space for employees to give feedback. Leaders must also be prepared to hear ideas or opinions they disagree with; as other large employers, such as Manchester United, were not.

When remote staff disagreed with its return to office (RTO) mandate last month, the football club offered them condolences in the form of a ‘voluntary’ redundancy package.

3. Laissez-faire leadership

Throughout the new memo, Netflix consistently demonstrates a ‘laissez-faire’ style of leadership. Also known as ‘delegative leadership’, this form of management is all about stepping back and letting your employees make their own decisions.

“We avoid decision-making by committee, which tends to slow companies down and undermine accountability” the memo states. “This highly aligned and loosely coupled approach gives teams the freedom to move quickly and operate independently.”

Netflix has applied the anti-management ethos to its employee benefit package. It offers unlimited vacation time to employees, and even has a ‘no work hours’ policy designed to give workers complete control over their working schedule and time off.

Taking the hands off the wheel is an attractive notion for organisations, who want to believe their staff will rise to the occasion. Netflix certainly thinks its ‘dream team’ hiring strategy is sound enough, stating “we aim only to have high performers at Netflix.”

Still, business owners must be aware that they must hire right for the policy to work, and for them to source individuals who thrive independently.

4. Freedom has rules

Netflix has balanced its desire to give staff more control by coupling “freedom and responsibility”. This phrase was the title of its original culture memo. But Netflix co-CEO Greg Peters told The Verge that staff only readily embraced the former concept.

“What people ended up hearing was, “Oh, I can join Netflix and essentially all the decisions that I make are mine, and I don’t have to worry about that overarching responsibility to our collective corporate goals,” said Peters.

The new memo caveats that while employees are “free to make decisions about their own work”, this “should not be confused with hands-off management”.

“Managers need to be involved in the work being done around them, and actively coach their teams”, the memo adds. “They may also have to step in when someone is about to make a decision that is unethical or could materially harm Netflix.”

Manage, but don’t be managed. It’s a difficult balance to strike, and may not avoid the past misunderstandings Peters alludes to in the context of a laissez-faire leader approach.

5. The ‘keeper test’ will stay

HR teams will likely already be familiar with Netflix’s ‘keeper test’. The instructions are simple.  Managers should ask themselves: ‘if X wanted to leave, would I fight to keep them?’. If the answer is ‘no’, the worker is let go.

Commenters often use this policy to exemplify how cutthroat the tech industry is in performance reviews. Perhaps spotting a PR problem, Netflix has softened its language.

The new version clarifies that “we encourage everyone to speak to their managers about what’s going well and what’s not on a regular basis. This helps avoid surprises.”

Employees who make mistakes also may not be fired if they were pushing for innovation. “You need people who challenge the status quo [so] we stick with employees through short-term bumps”, says the memo. Whether this will qualm nervous new hires is debatable.

Budget is also a factor. Last year, a Netflix spokesperson said the company had made hundreds of layoffs “so that our costs are growing in line with our slower revenue growth.”

6. No to meaningful work

The new memo reaffirms Netflix’s belief that staff should “support the artistic expression of the creators we choose to work with [even] if some stories run counter to personal values.”

Netflix first introduced this value in 2022, one year after the company came under fire for airing what many saw as transphobic jokes from the comedian, Dave Chapelle. As a result of the controversy, two Netflix employees resigned from the company in protest.

With its latest version, Netflix has cemented its stance against meaningful work, a post-pandemic trend where individuals seek out jobs that align with their personal beliefs.

“We understand that, depending on our roles, we may need to work on TV shows, films or games we perceive to be harmful,” the memo declares. “If you’d find it hard to support the breadth of our slate, Netflix is probably not the best place for you.

Whether that will affect Netflix’ recruitment efforts is debatable. In a survey by Qualtrics, 56% of employees said they wouldn’t work for a company that has values they disagree with.

Culture “key to success” for Netflix

That Netflix has updated its culture memo is a reassuring statement for small business owners who care about shaping a positive, inclusive workplace.

In an era when many CEOs are deprioritising HR spending, Netflix has reaffirmed its commitment to these types of people-based values.

Sergio Ezama, Head of Talent at Netflix, said: “I’m often asked, why do we place so much emphasis on the culture memo? We believe that our culture is key to our success.

“We want to ensure that anyone applying for a job here knows what motivates Netflix – and all employees are working from a shared understanding of what we value most.”