A Culture Test
Exceptional cultures are not right for everyone. And they remain exceptional to the degree that its leaders are willing to make difficult decisions when the distinctive aspects of that culture are truly tested. Last week was such a test for Netflix.
No modern business organization has arguably done more to teach us about culture than Netflix. In 2009, the company famously published its culture memo, a 125-slide PowerPoint deck that is considered a must-read for anyone interested in understanding culture. The memo described in detail the company's Freedom and Responsibility culture – one that is premised on high-density talent coupled with minimal process and maximum autonomy. The document outlines a set of values and practices, many of which challenge conventional thinking. In place of a lengthy, traditional expense policy, for example, the memo sets forth the company's approach in just five simple words: “Act in Netflix’s best interests.” I frequently offer Netflix as an example of how to build an extraordinary culture, not because I necessarily agree with the pillars of the culture itself, but because it is a model of a culture that is incredibly intentional, thoughtful, and distinctive. In the company's own words: “Our high-performance culture is not right for everyone.”
To be sure, exceptional* cultures are not right for everyone. And they remain exceptional to the degree that its leaders are willing to make difficult decisions when the distinctive aspects of that culture are truly tested. Last week was such a test for Netflix. The company was widely criticized for its release of comedian Dave Chappelle's latest show, The Closer, in which he makes remarks deemed transphobic by many. I have not seen the show, nor do I plan on watching it. Reviews have been critical not just for its offensive content but because it's not particularly great comedy. Whether Netflix should cancel the show isn't the subject of this week's email. My general view is that these matters are complex and deserve equally complex thinking. Anyone claiming an easy answer – either keep the show on air in the name of free speech or cancel it because of its offensive nature – simply doesn't appreciate the inherent complexity of the world we live in.
More interesting from the standpoint of culture, however, is the company’s recent firing of an employee who was attempting to organize a walkout in protest of the show’s airing. The terminated employee, who is Black and currently pregnant, is alleged to have leaked internal company metrics that ended up in a Bloomberg report. On its face, I can understand the public outrage that followed the news of the termination. However, those who follow the company closely will likely know that transparency is a sacred part of the Netflix culture. In the book No Rules Rules, Netflix co-CEO Reed Hastings describes his decision to double down on transparency after the company went public in 2002:
We are perhaps the only public company that shares financial results internally in the weeks before the quarter is closed. We announce these numbers at a quarterly business review meeting with our top 700 or so managers. The financial world sees this as reckless. But the information has never been leaked. When it does one day leak (I imagine it will), we won't overreact. We’ll just deal with that one case and continue with transparency. For our employees, transparency has become the biggest symbol of how much we trust them to act responsibly. The trust we demonstrate in them in turn generates feelings of ownership, commitment, and responsibility.
A spokesperson commenting on the recent employee termination offered a similar explanation: “We have let go of an employee for sharing confidential, commercially sensitive information outside the company. We understand this employee may have been motivated by disappointment and hurt with Netflix, but maintaining a culture of trust and transparency is core to our company.”
Putting aside the emotionally charged nature of the past week's events and whether you agree or disagree with the firing itself, the termination can be seen and understood as a noteworthy example of a company willing to make an unpopular decision to protect its culture. This is the real lesson for leaders today. It is the difficult and unpopular decisions that will both define true leadership and sustain exceptional cultures. The ability to make such decisions thoughtfully, and with grace and maturity, will be the real mark of leadership over the next several years.
*I use the word exceptional here in its literal sense (i.e., that which is an exception to the norm or not normal), not in its normative sense (i.e., superior).
One of my favorite writers on leadership is Robert Quinn, Director of the University of Michigan’s Center for Positive Organizations. In this HBR article, “How One Person Can Change the Conscience of an Organization,” he and his colleagues argue that one person with skill and determination can fundamentally affect the culture of an entire organization.
Here’s a good piece from The Atlantic, “The Great Resignation Is Accelerating.” One thing I found surprising in the article is the myth of the average 1960s worker who stayed at one company for forty years. It turns out that since the 1980s employees have been quitting less than they did in the 1960s and 1970s.
I’ve written a lot about a paradigm shift underway in our understanding of emotions – that they aren’t hardwired, but rather are constructed. Here’s a good article that goes into some depth on the subject. Pair that with Lisa Feldman Barrett’s excellent book How Emotions Are Made if you want to go really deep.