{"id":25515,"date":"2021-01-18T10:26:00","date_gmt":"2021-01-18T14:26:00","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=25515"},"modified":"2021-01-30T19:14:19","modified_gmt":"2021-01-30T23:14:19","slug":"mbo-process","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/mbo-process\/","title":{"rendered":"MBO Process: Leading With Goals, Not Rules"},"content":{"rendered":"\n

What is the MBO process<\/a>? How can providing goals give employees flexibility to shape their own work?<\/p>\n\n\n\n

The MBO process, also known as management by objectives, is a management style in which employees have goals mapped to organizational priorities. The employee then gets to determine how they want to achieve those goals.<\/p>\n\n\n\n

Read on for more about the MBO process and how it is used at Netflix.<\/p>\n\n\n\n\n\n\n\n

Netflix and the MBO Process<\/h2>\n\n\n\n

Unlike at most companies, when Netflix employees face big decisions, company leaders don\u2019t exert control <\/em>by intervening. At Netflix, managers use the MBO process to provide employees with the context <\/em>to make decisions that align with the company\u2019s goals and strategies.<\/strong> For example, when Adam Del Deo, the head of documentary programming, was considering bidding an unprecedented amount of money for the streaming rights to a compelling film, his boss didn\u2019t tell him whether he was putting too much money on the line\u2014instead, he provided context by asking Adam whether the documentary would be successful enough to merit the cost, and then he deferred to Adam\u2019s expertise. <\/p>\n\n\n\n

The MBO process builds on the dispersed decision-making<\/a> model discussed in Chapter 6, and it greatly contrasts with the direct oversight that most companies practice. In many workplaces, managers give employees instructions, monitor progress, and correct their work before finalizing it or presenting it to clients. Even when company leaders try to move away from direct oversight, they often implement control processes that continue to give them the final say and that prevent employees from having real freedom. For example, instead of explicitly telling employees what to do, leaders use the MBO process to develop goals with employees and subsequently monitor employees\u2019 progress as they work toward these goals. <\/p>\n\n\n\n

In many ways, it\u2019s easier to lead with direct oversight and control processes. But\u2014as with many of Netflix\u2019s practices\u2014the benefits of removing controls are far greater than the costs. <\/p>\n\n\n\n

Follow a Tree-Shaped Leadership Structure <\/strong><\/h3>\n\n\n\n

In most companies, the decision-making hierarchy is structured like a pyramid: At the bottom, there are a lot of junior employees who are empowered to make fairly low-level decisions. If an issue comes up that employees at this level can\u2019t decide themselves, they must consult with their bosses, the junior managers who comprise the next level. When even bigger issues arise, those junior managers must defer to their bosses, who are among an even smaller number of managers at the next level. Each ascending level holds fewer people\u2014from directors to vice presidents to senior vice presidents\u2014and at the top sits the CEO. The bigger the problem or question, the higher on the pyramid you have to go to get an answer.<\/p>\n\n\n\n

By contrast, Netflix\u2019s leadership is structured like a tree: Hastings is the roots, senior leadership is the trunk, descending levels of managers are various branches, and employees<\/strong>\u2014making decisions as informed captains\u2014are the highest branches.<\/strong> This is an ideal structure for the MBO process. For example, when Netflix was preparing to expand globally, Hastings set the high-level context for that priority to company leaders at the QBR. He explained why the company was moving in a global direction, which countries he wanted to focus on, and why. <\/p>\n\n\n\n

After the QBR, the chief content officer (the tree trunk) provided another layer of context to Melissa Cobb, the vice president of original animation. He told Cobb that the company had a lot to learn about the way audiences in other countries watch Netflix\u2014for example, do Indonesians typically watch alone or with their families? Do Italians favor comedies or documentaries? Cobb\u2019s boss urged her to take big risks in order to get big wins, but also to learn big lessons. If a potential failure promised a significant learning opportunity, she should take it. <\/p>\n\n\n\n

Cobb, perched on a big branch on the leadership tree, took this message back to her team and proposed that they make their original children\u2019s shows appeal to kids around the world, regardless of where the shows were set. One of Cobb\u2019s direct reports\u2014on a medium-sized branch\u2014delivered this message to her team, along with an added layer of context: They should focus on animated shows, which are easier to adapt to different languages and more likely to resonate with children all over the world. At the time, Aram Yacoubian, a content acquisition manager and a member of that team, was considering an animated show for preschoolers that was set in India. Yacoubian, an informed captain, felt confident that the show would do well in India, but he wasn\u2019t certain whether it was the right fit for Netflix. He considered the context set at each level of leadership: <\/p>\n\n\n\n

  1. Roots: Prioritize international growth. <\/li>
  2. Trunk: Take big risks and learn big lessons. <\/li>
  3. Big branch: Develop global children\u2019s programming. <\/li>
  4. Medium branch: Focus on animated shows. <\/li><\/ol>\n\n\n\n

    With this context, Yacoubian decided to buy the show, Mighty Little Bheem<\/em>. Less than a month after the show launched, it was one of the most-watched animated series on Netflix. Through the tree organizational structure, Yacoubian was able to align his personal expertise<\/strong>\u2014knowledge of Indian audiences and the Indian animation market\u2014with the goals and strategies of the company.<\/strong> <\/p>\n\n\n\n

    Recap: Benefits of Eliminating Controls<\/strong><\/h4>\n\n\n\n

    Chapter 3, Chapter 6, and this chapter explain how to eliminate various controls within a company and the benefits that come from those changes. To recap: <\/p>\n\n\n\n