Analysis of Employee Handbook of Netflix

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Netflix is an American entertainment company found in 1997, which provides stream media, online on-demand video service, and DVD via mails (Pogue, 2007). Initially, Netflix’s business model is acquiring revenues from DVD sales and DVD rental services by mails. In 2007, the company has expanded its business into stream media services, and continued the DVD sales and rental services. In 2013 it has enriched its business with entering the TV and film production and online distribution. The company has also approached international customers with firstly stepping into the Canadian market in 2010. With globalization and changes in customers’ preferences, the company has shifted its focus to the stream media service. By 2016, it has already entered over 190 foreign markets with the stream media service (Minaya and Sharma, 2016). As Netflix’s shareholder letter (2018) claims, until April of 2018, it has maintained 125 million of subscribers with $3.6 billion streaming revenue in the first quarter of 2018, representing a 43% growth compared to Q1 of 2017. Its online TV and film production business is also booming, with numerous nomination and awards of significant movie award, such as the Primetime Emmy Award and Golden Globe Award (Farley, 2013; Stelter, 2013). According to data from Statista (2018), there have been around 5,500 employees working at Netflix, and 5,400 were full-time, of which 600 are temporary. Netflix’s success is not without reasons. It has distinctive HR practices that have provided implications to countless smaller companies such as the hiring policy, the vacation policy, compensation and performance appraisal policy, thus to attract and maintain the best people. In 2009, Netflix released its Employee Handbook publicly, which is named “Netflix Culture: Freedom & Responsibility”, with the form of 128-page presentation to transmit important cultural values to employees. The handbook is considered as one of the most inspiring and compelling Employee Handbook examples with no formal regulations written inside (Robinson, 2015). This essay would analyze these practices and aims to provide relevant suggestions to some of the practices. The personal working experience of the author at China would also be related with the conpensation method of Netflix to see how relevant practice can be applied. 

In terms of hiring policy, Netflix insist to hire the top talents. As the company has proposed that employees tend to be happier and more productive when they work with other excellent colleagues, and vice versa (Nisen, 2013). The example at Netflix is that, years ago one engineer at Netflix who had managed three men in his team had to work by himself after the layout. While as the business expanded and the Chief Talent Office told him they could staff up to reduce his pressure, the engineer answered, “There’s no rush – I’m happier now”. Netflix, however, does respect diversity and inclusion, so long as employees embody the firm values.

Netflix has another interesting while compelling hiring principle that strongly presents their organizational culture, which is that they don’t hire “brilliant jerks” (Roettgers, 2017). It insists that brilliant people are also able to deal with human interactions decently. Also, the cost to teamwork with a “brilliant jerk” on the team is so high that is not effective to the team results.

The vacation policy is also different from others, as the firm does not limit the time of vacation, says the handbook (pp. 66 -72). Employees are able to take as long as time they want, but it needs them to put energy on work in extra hours. For illustration, employees may reply email in nights, while take off for weekday afternoons for their kids. The highly free work style encourages employees to manage tasks in prior order, however, this also increases concerns that intermix personal time and work time would distract employees’ attention on work even though the firm does not tolerate for dishonest and immoral behaviors. 

There is also no compensation policy and performance appraisal policy inside Netflix, which is to say, it never distributes performance-based bonuses to employees (Netflix, 2009, pp. 97-106). The company’s performance has no connection with the compensation to employees. In contrast, it pays the employees with the top salaries in the market. There are neither Performance improvement plans (PIPs) as right people would put the company in the first place no matter there are bonuses or not. This would help reduce the speculative actions when employees approach their tasks. As the company salary is top of the market, talents are also encouraged to talk with competitors’ recruiters, such as Google, eBay and Amazon, so as to learn the rate of the market. Additionally, employees could choose the percentage of equity versus salary for their compensation, which gives much autonomy for employees. These all encourage employees to work for Netflix with single-minded motivation. But this strategy may be ineffective sometimes when their employees could face more attractive payment in competitors’ companies, which could lead to the rise of human capital cost or loss of talents.

 The Netflix’s human resources practices have strong presence in attracting and maintaining top talents, which could offer Chinese enterprises important implications considering that increasing graduates choose to stay abroad instead of working for Chinese local companies. One of the most important reasons is that the salary level for graduates is not high or even quite low, which is a common attitude for Chinese enterprises to entry-level employees. As more work years is gained, the salary would increase gradually. Although this is reasonable considering fresh graduates don’t have much experience, it may threaten many top talents away. Take my work experience at China Telecom, one of the three monopolies in Chinese mobile service industry, the salary for entry-level graduates in the marketing position in Beijing is only 6,000 to 8,000 RMB before tax, which makes satisfying the basic physiological needs of employees become difficult. In this situation, young workers are more likely to jump to another firm when competitive salary is provided. The high turnover rate also increases the pressure to takeover job tasks, and may lead to customer dissatisfaction. If China Telecom would increase the payment level that can satisfy the basic physiological needs to live in Beijing, the company would be more attractive to top talents.

In conclusion, Netflix has established a quite distinctive Human Resource system and successful practices with strong cultural values embedded to motive the enthusiasm and loyalty of workers. The hiring policy reveals the importance of hiring best people and no “brilliant jerk” and the firm would like to acquire the best people via the highest salary in the market. Freedom and responsibility are two vital values during the daily work that encourages employees to be a fully formed adult and manage their work with maximum efficiency. The vacation value also indicates that the self-control in task management is quite important for employees at Netflix. Although there exist controversial voices in terms of the vacation and compensation policies, the Human Resources practices at Netflix have exhibited other companies a new way to treat their employees and maintain top talents. The Employee Handbook has informatively and directly outlined the important cultural values and beliefs that Netflix embraces, which encourages employees to should their responsibilities and enjoy deserved benefits such as freedom and high salary.

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