No Rules Rules

“No Rules Rules” by Reed Hastings and Erin Meyer provides an insider’s look at Netflix’s unique corporate culture. The book details how Netflix built a culture of freedom and responsibility that has helped it become one of the most innovative companies in the world.

The book centers around three key principles that form the foundation of Netflix’s culture:

• Talent Density: Hire the best people and keep only the highly effective ones. Netflix believes in paying top-of-market salaries and maintaining a workforce of exceptional performers.
• Radical Candor: Foster candid feedback at all levels of the organization. This creates an environment where honest communication drives improvement and innovation.
• Remove Controls: Eliminate vacation policies, expense approval processes, and other traditional corporate controls. Trust employees to make decisions that are in the company’s best interest.

One of the most controversial aspects of Netflix’s approach is their “keeper test” - managers regularly ask themselves if they would fight to keep an employee. If the answer is no, that person is given a generous severance package and let go. While this might seem harsh, it maintains the high talent density that makes their other cultural elements possible. Without the key concept of high talent density, the rest of their recommendations wouldn’t quite pan out.

The book also explores how Netflix gradually removed traditional controls as it grew. Instead of adding more rules and processes, they focused on increasing transparency and context. Employees are trusted with sensitive information and expected to make decisions based on what’s best for Netflix. How does this help? This helps by eliminating complexity, which tends to grow as companies scale. This counteracts the natural growth of complexity within businesses and keeps them nimble. Again, this cannot happen if the talent density isn’t high. This book is not meant to tell you how to run a factory or a call center.

The book is essentially a toolset against bureaucracy and a good remedy for business complexity. If you find yourself fighting unnecessary rules and regulations, this book is a great source of inspiration on how to fight that. It is clear Netflix’s culture isn’t for everyone, and not every business should attempt to copy it, but I find that many of their values are good values and I embrace many of them in my businesses.