Closing our series of articles commenting on how Netflix reinvented HR.  This is an interview asking about the aftermath of the strategic changes implemented in the company.  I find it easy reading with interesting vocabulary, with nothing much else to add.  Wouldn’t it be wonderful to actually be able to make such changes and see how things panned out afterwards?  Don’t forget to comment below or send personal work to: empresas@metodoelingua.es  My suggestion for homework, rewrite the interview with other words, to mean the same thing.

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Crafting a Culture of Excellence

Netflix founder and CEO Reed Hastings discusses the company’s unconventional HR practices.

HBR: Why did you write the Netflix culture deck?
Hastings: It’s our version of Letters to a Young Poet for budding entrepreneurs. It’s what we wish we had understood when we started. More than 100 people at Netflix have made major contributions to the deck, and we have more improvements coming.

Many of the ideas in it seem like common sense, but they go against traditional HR practices. Why aren’t companies more innovative when it comes to talent management?
As a society, we’ve had hundreds of years to work on managing industrial firms, so a lot of accepted HR practices are centered in that experience. We’re just beginning to learn how to run creative firms, which is quite different. Industrial firms thrive on reducing variation (manufacturing errors); creative firms thrive on increasing variation (innovation).

What reactions have you gotten from your peers to steps such as abolishing formal vacation and performance review policies? In general, do you think other companies admire your HR innovations or look askance at them?
My peers are mostly in the creative sector, and many of the ideas in our culture deck came from them. We are all learning from one another.

Which idea in the culture deck was the hardest sell with employees?
“Adequate performance gets a generous severance package.” It’s a pretty blunt statement of our hunger for excellence.

Have any of your talent management innovations been total flops?
Not so far.

Patty talks about how leaders should model appropriate behaviors to help people adapt to an environment with fewer formal controls. With that in mind, how many days off did you take in 2013?
“Days off” is a very industrial concept, like being “at the office.” I find Netflix fun to think about, so there are probably no 24-hour periods when I never think about work. But I did take three or four weeklong family trips over the past year, which were both stimulating and relaxing.

This time, before while you are reading, try and replace the words in bold.  Any questions? Remember, the purpose of these articles is to practice usefull language, in an environment where it’s ok to make mistakes. We want to practice, practice, practice.  So… send us your work, and we will correct it! empresas@metodoelingua.es

How Netflix reinvented HR, bit by bit. PART FOUR.

Go to the original article here.

Managers Own the Job of Creating Great Teams

Discussing the military’s performance during the Iraq War, Donald Rumsfeld, the former defence secretary, once famously said, “You go to war with the army you have, not the army you might want or wish to have at a later time.” When I talk to managers about creating great teams, I tell them to approach the process in exactly the opposite way.

In my consulting work, I ask managers to imagine a documentary about what their team is accomplishing six months from now. What specific results do they see? How is the work different from what the team is doing today? Next I ask them to think about the skills needed to make the images in the movie become reality. Nowhere in the early stages of the process do I advise them to think about the team they actually have. Only after they’ve done the work of envisioning the ideal outcome and the skill set necessary to achieve it should they analyze how well their existing team matches what they need.

If you’re in a fast-changing business environment, you’re probably looking at a lot of mismatches. In that case, you need to have honest conversations about letting some team members find a place where their skills are a better fit. You also need to recruit people with the right skills.

We faced the latter challenge at Netflix in a fairly dramatic way as we began to shift from DVDs by mail to a streaming service. We had to store massive volumes of files in the cloud and figure out how huge numbers of people could reliably access them. (By some estimates, up to a third of peak residential internet traffic in the U.S. comes from customers streaming Netflix movies.) So we needed to find people deeply experienced with cloud services who worked for companies that operate on a giant scale—companies like Amazon, eBay, Google, and Facebook, which aren’t the easiest places to hire someone away from.

Our compensation philosophy helped a lot. Most of its principles stem from ideals described earlier: Be honest, and treat people like adults. For instance, during my tenure Netflix didn’t pay performance bonuses, because we believed that they’re unnecessary if you hire the right people. If your employees are fully formed adults who put the company first, an annual bonus won’t make them work harder or smarter. We also believed in market-based pay and would tell employees that it was smart to interview with competitors when they had the chance, in order to get a good sense of the market rate for their talent. Many HR people dislike it when employees talk to recruiters, but I always told employees to take the call, ask how much, and send me the number—it’s valuable information.

In addition, we used equity compensation much differently from the way most companies do. Instead of larding stock options on top of a competitive salary, we let employees choose how much (if any) of their compensation would be in the form of equity. If employees wanted stock options, we reduced their salaries accordingly. We believed that they were sophisticated enough to understand the trade-offs, judge their personal tolerance for risk, and decide what was best for them and their families. We distributed options every month, at a slight discount from the market price. We had no vesting period—the options could be cashed in immediately. Most tech companies have a four-year vesting schedule and try to use options as “golden handcuffs” to aid retention, but we never thought that made sense. If you see a better opportunity elsewhere, you should be allowed to take what you’ve earned and leave. If you no longer want to work with us, we don’t want to hold you hostage.

We continually told managers that building a great team was their most important task. We didn’t measure them on whether they were excellent coaches or mentors or got their paperwork done on time. Great teams accomplish great work, and recruiting the right team was the top priority.

How does your annual review change your working habits? This is the thought behind this article, and NETFLIX set out to save time and uncomfortable situations.  I think they did it, and it makes sense.  Enjoy this part of the article, below.  Remember, you can access the complete original article here.

Look at how this vocabulary is used, can you make sentences with it, or use parts of the sentences for yourself?

1. To measure performance
2. to get rid of someone
3. Performance Improvement Plans (PIPs)
4. To figure out how
5. Why bother?
6. play out
7. shortcomings
8. consistently rewarded for being great at her job
9. skills no longer apply
10. severance package
11. People were asked to identify things that colleagues should stop, start, or continue

What do you think about eliminating PIPs in your company, as HR?

What would you think of having informal 360 reviews, as an employee?

COMMENT BELOW!!

How Netflix reinvented HR, bit by bit. PART TWO.

Tell the Truth About Performance

Many years ago we eliminated formal reviews. We had held them for a while but came to realize they didn’t make sense—they were too ritualistic and too infrequent. So we asked managers and employees to have conversations about performance as an organic part of their work. In many functions—sales, engineering, product development—it’s fairly obvious how well people are doing. (As companies develop better analytics to measure performance, this becomes even truer.) Building a bureaucracy and elaborate rituals around measuring performance usually doesn’t improve it.

Traditional corporate performance reviews are driven largely by fear of litigation. The theory is that if you want to get rid of someone, you need a paper trail documenting a history of poor achievement. At many companies, low performers are placed on “Performance Improvement Plans.” I detest PIPs. I think they’re fundamentally dishonest: They never accomplish what their name implies.

One Netflix manager requested a PIP for a quality assurance engineer named Maria, who had been hired to help develop our streaming service. The technology was new, and it was evolving very quickly. Maria’s job was to find bugs. She was fast, intuitive, and hardworking. But in time we figured out how to automate the QA tests. Maria didn’t like automation and wasn’t particularly good at it. Her new boss (brought in to create a world-class automation tools team) told me he wanted to start a PIP with her.

I replied, “Why bother? We know how this will play out. You’ll write up objectives and deliverables for her to achieve, which she can’t, because she lacks the skills. Every Wednesday you’ll take time away from your real work to discuss (and document) her shortcomings. You won’t sleep on Tuesday nights, because you’ll know it will be an awful meeting, and the same will be true for her. After a few weeks there will be tears. This will go on for three months. The entire team will know. And at the end you’ll fire her. None of this will make any sense to her, because for five years she’s been consistently rewarded for being great at her job—a job that basically doesn’t exist anymore. Tell me again how Netflix benefits?

“Instead, let’s just tell the truth: Technology has changed, the company has changed, and Maria’s skills no longer apply. This won’t be a surprise to her: She’s been in the trenches, watching the work around her shift. Give her a great severance package—which, when she signs the documents, will dramatically reduce (if not eliminate) the chance of a lawsuit.” In my experience, people can handle anything as long as they’re told the truth—and this proved to be the case with Maria.

When we stopped doing formal performance reviews, we instituted informal 360-degree reviews. We kept them fairly simple: People were asked to identify things that colleagues should stop, start, or continue. In the beginning we used an anonymous software system, but over time we shifted to signed feedback, and many teams held their 360s face-to-face.

HR people can’t believe that a company the size of Netflix doesn’t hold annual reviews. “Are you making this up just to upset us?” they ask. I’m not. If you talk simply and honestly about performance on a regular basis, you can get good results—probably better ones than a company that grades everyone on a five-point scale.

How Netflix reinvented HR, bit by bit. PART TWO.

You can catch up on PART ONE and read the beginning of this article.  I believe it’s worth it.

Link to the original article.

Vocabulary to investigate before reading (links with meaning and pronunciation):

• To rely on
• Instead of
• To hire
• High-performance workplace
• To deal with
• To let go
• To talk openly
• Time off
• To handle something
• To work something out
• A day off
• To let somebody know about something
• Leeway
• Best interests
• To forgo
• To enforce
• To keep an eye on something/ someone
• To comply

Food for thought:

1. Would you consider this to be a reasonable policy to put forth in your company?
2. Have you heard of any other company doing this?

COMMENT BELOW!!

PART TWO

With these two overarching principles in mind, we shaped our approach to talent using the five tenets below.

Hire, Reward, and Tolerate Only Fully Formed Adults

Over the years we learned that if we asked people to rely on logic and common sense instead of on formal policies, most of the time we would get better results, and at lower cost. If you’re careful to hire people who will put the company’s interests first, who understand and support the desire for a high-performance workplace, 97% of your employees will do the right thing. Most companies spend endless time and money writing and enforcing HR policies to deal with problems the other 3% might cause. Instead, we tried really hard to not hire those people, and we let them go if it turned out we’d made a hiring mistake.

Adultlike behaviour means talking openly about issues with your boss, your colleagues, and your subordinates. It means recognizing that even in companies with reams of HR policies, those policies are frequently skirted as managers and their reports work out what makes sense on a case-by-case basis.

Let me offer two examples.

When Netflix launched, we had a standard paid-time-off policy: People got 10 vacation days, 10 holidays, and a few sick days. We used an honour system—employees kept track of the days they took off and let their managers know when they’d be out. After we went public, our auditors freaked. They said Sarbanes-Oxley mandated that we account for time off. We considered instituting a formal tracking system. But then Reed asked, “Are companies required to give time off? If not, can’t we just handle it informally and skip the accounting rigmarole?” I did some research and found that, indeed, no California law governed vacation time.

So instead of shifting to a formal system, we went in the opposite direction: Salaried employees were told to take whatever time they felt was appropriate. Bosses and employees were asked to work it out with one another. (Hourly workers in call centres and warehouses were given a more structured policy.) We did provide some guidance. If you worked in accounting or finance, you shouldn’t plan to be out during the beginning or the end of a quarter, because those were busy times. If you wanted 30 days off in a row, you needed to meet with HR. Senior leaders were urged to take vacations and to let people know about them—they were role models for the policy. (Most were happy to comply.) Some people worried about whether the system would be inconsistent—whether some bosses would allow tons of time off while others would be stingy. In general, I worried more about fairness than consistency, because the reality is that in any organization, the highest-performing and most valuable employees get more leeway.

The company’s expense policy is five words long: “Act in Netflix’s best interests.”

We also departed from a formal travel and expense policy and decided to simply require adultlike behaviour there, too. The company’s expense policy is five words long: “Act in Netflix’s best interests.” In talking that through with employees, we said we expected them to spend company money frugally, as if it were their own. Eliminating a formal policy and forgoing expense account police shifted responsibility to frontline managers, where it belongs. It also reduced costs: Many large companies still use travel agents (and pay their fees) to book trips, as a way to enforce travel policies. They could save money by letting employees book their own trips online. Like most Netflix managers, I had to have conversations periodically with employees who ate at lavish restaurants (meals that would have been fine for sales or recruiting, but not for eating alone or with a Netflix colleague). We kept an eye on our IT guys, who were prone to buying a lot of gadgets. But overall we found that expense accounts are another area where if you create a clear expectation of responsible behaviour, most employees will comply.