Employee Empowerment the Netflix Way

This article is an excerpt from the Shortform book guide to "No Rules Rules" by Reed Hastings. Shortform has the world's best summaries and analyses of books you should be reading.

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Do you want to know the key to employee empowerment? How does Netflix give its staff greater autonomy over to decisions?

At Netflix, employees are given the freedom to make decisions in their areas of expertise. You can use their example of employee empowerment for your own organization.

Keep reading to find out more about employee empowerment the Netflix way.

Employee Empowerment

In most companies, all big decisions must pass through the higher-ups. However, managers and executives are not necessarily the most qualified to make decisions on everything from marketing strategies to financial structuring—that’s why they have competent staff to lead those efforts. When one or a handful of company leaders has the final say-so on everything, their lack of vision or fixed perspective can severely limit innovation. Additionally, running every decision up the chain of command slows progress and growth, and if the boss shoots down an idea, employees have to spend even more time developing a new proposal. That’s not employee empowerment.

By contrast, Netflix follows a model of dispersed decision-making, which empowers lower-level employees to make decisions and own the consequences, rather than seeking approval from managers. People want the power to make their own decisions, and they perform best under these conditions: When employees have control over their projects, they feel ownership and are motivated to make sure the projects are successful. In fact, employees are encouraged to move forward on projects that they believe in, even if their bosses disagree. In the spirit of Freedom and Responsibility, Netflix urges its employees not to make decisions that will please their boss, but ones that will benefit the company.

Dispersed decision-making is critical for companies like Netflix, where creative innovation is the key to adapting and staying relevant (as opposed to industries like medicine, where error prevention is the top priority). This structure is only possible with the foundation of high talent density and culture of candor and radical transparency. This structure is also important for employee empowerment. In order for managers to feel confident watching employees forge ahead against their advice, they must believe in the competence of that employee and they must rest assured that their equally competent colleagues will candidly share feedback on the proposal. Yet, even with those elements, managers must be trained to refrain from overriding decisions they disagree with. When a manager opposes an employee’s proposal, the manager should ask herself four questions: 

  1. Is the employee talented and high-performing? 
  2. Does the employee have good judgment? 
  3. Is the employee capable of making a positive impact for the team and the company? 
  4. Is the employee competent enough to be on the team? 

If the answer to any of these questions is “no,” then the employee should be fired (we’ll talk more about this in the next chapter). If the answer to all of these questions is “yes,” then the manager must allow the employee to move forward. 

Employees Bet on Ideas They Believe In 

Here’s employee empowerment the Netflix way. Netflix encourages employees to approach proposals like bets: It’s as if each employee gets a stack of chips when they join the company, and they use those chips to make bets on projects they believe in. Dispersed decision-making gives the employee the freedom and power to make those bets, as well as the burden of responsibility when bets flop. Company leaders expect some bets to fail, and they expect employees to learn from those failures to avoid making the same mistake twice. Employee performance is not based on the outcome of any single bet, but rather on their overall record of making bets that benefit the company. That means that people don’t lose their jobs for placing a bad bet—only for failing to bet big or for making consistently bad bets. 

Exercise: How Much Ownership Do You Have?

Reflect on employee empowerment by thinking about the freedom you have to pursue projects you believe in. 

  • Describe the last project you pitched or spearheaded.  
  • How much freedom did you have to see the project through execution? 
  • At which point(s) did you have to consult or seek approval from a manager in order to move forward? 
  • What would you have done differently if you were responsible for making all decisions for the project? 
  • Who would have taken the blame if the project had failed? 
Employee Empowerment the Netflix Way

———End of Preview———

Like what you just read? Read the rest of the world's best book summary and analysis of Reed Hastings's "No Rules Rules" at Shortform.

Here's what you'll find in our full No Rules Rules summary:

  • How Netflix achieved massive success in a short period of time
  • The unusual business practices that have helped Netflix sustain its success
  • Why Netflix fires adequate employees

Rina Shah

An avid reader for as long as she can remember, Rina’s love for books began with The Boxcar Children. Her penchant for always having a book nearby has never faded, though her reading tastes have since evolved. Rina reads around 100 books every year, with a fairly even split between fiction and non-fiction. Her favorite genres are memoirs, public health, and locked room mysteries. As an attorney, Rina can’t help analyzing and deconstructing arguments in any book she reads.

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