No rules rules !

0:03 Elle est en live avec nous, voici la talentueuse auteure du best-seller autour du management et de son expertise. Un tonnerre d'applaudissements pour l'incroyable Erin Meyer. Erin, c'est à vous. Hello, everybody. My name is Erin. I am a professor at INSEAD. I am joining you from Paris. I study cultural differences in the workplace. And my first book, The Culture Map, was all about national cultural differences. But that's not what we're going to be talking about today. Today, we're going to be talking about how to develop an organizational culture that breeds innovation and flexibility. And in order to do this, we are going to be using one highly unusual company as a case study. And that company is Netflix. So I had a great opportunity to work with Netflix extensively. I interviewed 200 of their employees and I spent a lot of time with their founder and CEO,

1:05 Reed Hastings, in order to try to figure out what it was about their organizational culture that was leading them to be so successful. And then I worked with Reed in order to write a book about it, which is this book, No Rules Rules, that came out last year. Now, before we get started, and I want to try to go over some of my key learnings from that research to see if maybe... Some of that would be useful to you. But before we get started, let me say that Netflix is a very interesting company to study, not just because they have been incredibly successful and incredibly innovative, but also because they have managed to do something that is extremely rare. Which is that they have managed to reinvent themselves a number of times when the environment has changed around them. It was not many years ago that Netflix was a DVD by mail company in the U.S.

2:06 So they had warehouses around the U.S. And they were putting these DVDs into envelopes and putting them in the post and mailing them to their customers. Right. And then the environment shifted and Netflix shifted also. They reinvented themselves as a high tech streaming company, now streaming rerun television shows and old movies out to their customer base. But then the environment shifted and Netflix shifted also, this time reinventing themselves as a media company, moving to LA, opening up their own studios, hiring their own actors, and creating their own award-winning television shows. So this kind of flexibility, the ability to change direction as the environment changes, is highly unusual. And their founder and CEO, Reid, believes that the reason they've been able to do this and the reason they've been so successful is because of their highly unusual organizational culture.

3:12 Okay, so that's what we're going to be looking at today. Now, some of you have known about the Netflix corporate culture for many years. Perhaps you were one of the 20 million people that originally downloaded what is often referred to as the Netflix culture deck. Now, if you were, you are familiar with these slides. The first slide of this famous a PowerPoint deck starts like this. Many companies have nice sounding value statements displayed in the lobby, such as integrity, communication, respect, and excellence. Enron, for example, whose leaders went to jail and which went bankrupt from fraud, had these specific values displayed in their lobby. Right. So I just wanted to begin with one kind of general point, not linked specifically to Netflix culture.

4:15 But if you desire to articulate an organizational culture and then have that actually take root and impact your employees behavior. Right. You want to. Verbalize your corporate culture, and then it actually leads to how people behave. Please avoid speaking in absolute positives. So what I mean by that is that the word integrity, right? Of course, it's a great word, but there is no credible option to integrity, right? No organization would say that they value corruption, right? So instead, when you think about the type of organization, culture that you would like in your company, you want to focus on the tough dilemmas that your employees are facing on a daily basis and say to them, you know, when you come across this kind of dilemma, turn right, right?

5:16 Okay, now in order to give you a feel for what I mean, I'm going to give you some dilemmas. And what I'm going to do is put you in a situation, okay? And then I'll give you a multiple choice response. And I'd like every one of you to chat into the chat box what you would do in this situation. You'll choose A or B, okay? Here is the situation. I'd like you to imagine that you are a marketing manager leading a marketing team of eight marketing specialists, right? Now, you've got a great team, a really good collaboration. Things are going well. The only thing is that you are in talks, discussions with your own boss about a possible organizational restructuring. Now, if this restructuring takes place, it will have a big impact on your team. People will have to change departments. They'll have new bosses.

6:17 They might even be asked to move, right? Now, if this happens, it will happen in about four months, and it's about, let's say, 60% chance likely to happen. Okay, so my question to you is, what are you going to do? Are you going to tell your employees now about these discussions you're in about this organizational restructuring that may happen later? Okay, so you have to vote. Everyone should vote into the chat box. I'm going to take a little look over at your responses here as they're coming through. Okay, yeah, I'm not sure I can't see them. Okay, all right, so go ahead, chat in your chat, your answers. Here's what we've got. You can choose option A, which is no, I'm not going to tell them now. Okay, I'm not going to tell them now because they're likely to get distracted. They might get upset. They might even start looking for another job. So I'm going to wait, right?

7:18 And wait until I'm sure or almost sure, right? Okay, or your option B. Your option is B. You know what? I'm going to go ahead and tell them now because even though I don't know if this is going to happen, I want to make sure I'm always transparent with my team, right? Okay, so let me just go ahead here and see if I can see your responses as they are coming through. All right, so what do we got here? Well, okay, we have a lot of A's and we have a lot of B's. Okay, in other words, we have a dilemma. Okay, now if you'd like to put in the chat box some comments about why you're choosing A or B, that's fine. But for now, I just want to make the point that here, as you're trying to think about what you would do, we have a dilemma between organizational transparency, a culture of organizational transparency, and a culture of workplace stability, right? Now, either of these types of cultures, makes sense.

8:23 We can argue for either answer, right? But here we really do have a dilemma. Okay, now I'm going to give you a second dilemma. Okay, we're going to do the same thing again. This situation starts out the same way. So you are still managing a marketing team of eight marketing specialists, all right? Now, one day, one of the women on your team, a woman named Sheila, she comes to you and she is really excited. Right. She says to you, you know, boss, I got to tell you, I have a great idea for how to move the business forward. Right. She says, I've been thinking about I've been thinking about it a lot. And I really believe that this idea is going to lead to great rewards for the team and for the organization. Right. She says, I know it's going to be expensive. I know it's going to take a lot of resources, but I've been talking to a lot of people about it, and I think it's going to lead to great rewards. Right.

9:23 Now, you listen to Sheila and you love her enthusiasm. The problem is that. You really don't think this is going to work out. You think it's going to fail. Okay, so you say to her, hey, Sheila, thank you so much for your passion, but let's think about it for a week and we'll come back because I have some concerns, right? And you tell her what your concerns are, right? So let's think about it for a week. We'll meet back in a week and discuss again. Okay, so a week goes by. A week later, Sheila comes back into your office and she is even more excited than she was the week before. for, right? She says, boss, I've been thinking about it all week long. I have some ideas for how to deal with the worries that you have. Here are my ideas. I've talked more with other people about it on the team. Again, I really think that this is going to lead to a lot of success, right? So please, what do you think? Can I move forward? Okay, so my question for you is, are you going to let Sheila, invest resources and time and money into something that you think isn't going to work out, right?

10:36 Okay, so again, please go ahead and chat into the chat box. You have to choose A and B. Okay, there's no C. So A is no. You know what? I am not going to let Sheila invest now because I don't think it's going to work out. And why would I invest the company's money and resources in something that I don't think is going to work? Plus, it's expensive. Right? Or yes, I'm going to let her invest in it now because I really want my employees to feel empowered to invest in projects that they believe in. And you know what? I have been wrong before. Okay, so go ahead. Let's get your votes in. Everyone should vote for either A or B. Okay, no, it depends. All right, so let's see what we've got going on over here. Okay, I see we have a dilemma. Okay, so again, we have a lot of A's coming in. We have a lot of B's coming in. Here we've got a dilemma.

11:39 We have a dilemma between a culture of innovation and a culture of error elimination, right? And depending on what kind of a work environment you have, you might want to promote one or you might want to promote the other, right? But I think we can all recognize that these two items are in tension with one another, meaning that, of course, we want to prevent error, but innovation requires trying some things out. Sometimes it works, sometimes it doesn't. And if we eliminate error, then we also squash out a lot of innovation that goes with it. Right. Okay. We will come back to Sheila a little later. For now, I just want to point out that if you desire to develop an organizational culture where you articulate the type of culture that you want in the organization, and that really impacts your employees'behaviors, please think in dilemmas.

12:39 Avoid saying things like, in this company, we are all about respect, because no organization would say that they valued disrespect, right? And instead, think, what are those tough dilemmas that my employee and managers are facing on a daily basis, and which way do I want them to turn when they come across these dilemmas? Right. Okay. Now, the next question is, if you desire to develop an organizational culture that breeds flexibility and innovation, what are the critical dilemmas that you should focus on? And in order to get that started, I'm going to tell you a story. So the first time that I interviewed Reed Hastings, the founder and CEO of Netflix, he told me a story about his first company, which was an organization called Pure Software. Now, when Reed opened PureSoft, at the beginning, It was just a small group of people who were operating in an entrepreneurial fashion.

13:47 So they were running fast and loose. And what I mean by that is that there were no rules or processes telling people what they could and couldn't do. Everybody was just using their best judgment to make decisions for the good of the company at every moment. Right. But then the organization started to grow. It grew to hundreds of people and thousands of people. Right. And as it grew, some people did stupid stuff and some people took advantage of the freedom that had been allotted to them. For example, there was this guy named Jim, and he used to fly every week from Los Angeles to San Francisco. And because there was no travel policy, he started flying first class, right? And there was this woman named Charlotte, and she had a little puppy dog that didn't like to be left alone. Because there was no rule saying she couldn't, she started bringing that dog to work, who eventually chewed a big hole in the conference room carpet, right?

14:54 Now, as these things happened, Reed got frustrated. So he sat down. with human resources, and together they created an employee handbook. And in the employee handbook, there was a detailed travel policy and lots of rules like no dogs at work. Now, as these procedures started to take place in the organization, take root in the organization, something else happened, which was that the most innovative, flexible, sorry, let's say the most innovative, the kind of like most creative thinkers in the company, they started to leave the organization because they wanted to work in a place that they could run free, right? Now, something else happened at this point, and we're going to watch a short video, one and a half minutes long, of Reed talking about what happened next. Please play the video. You know, the great thing about being able to do two companies in my life is not making the same mistakes.

16:02 So in the first company, as we grew and went public, we put in, excuse me, a lot of process because we had the idea if we could just eliminate errors, think how good we can be. And so every time something went wrong, we put in a new process. And we were so proud that we dummy-proofed the system. And what we didn't realize is if you dummy-proof the system, only dummies want to work there. And so then the market changed. And all of the kind of innovative, crazy thinkers had gone, and everybody who was still there was really good about following the rules. But the market had shifted. This was the rise of Java and the Internet. And we were unable as a company to adapt. And that's when it hit for me. Short-term optimization about being efficient is the death of long-term success and innovation. And that we should build a company in Netflix that tolerated some short-term chaos. And we manage right on the edge of chaos.

17:04 And the value of that is keeping and stimulating the amazing thinkers so when the market shifts, like DVD to streaming or license to expand to original content, we have within Netflix all kinds of original thinkers. And that's the long-term optimization that all of us in organizations want. Okay, so Reed's primary learning from Pure Software were two things, right? The first was employee freedom breeds innovation, right? And the second was process kills organizational flexibility, right? So when he opened up Netflix, he had this overriding image of trying to create an organization where he gave employees huge amounts of freedom and that that would then lead to huge amounts of innovation. But he also had some concerns.

18:05 He worried that if he put, that as the company grew larger, that if he didn't put in place these control mechanisms, the company was likely to descend into mayhem, not operate on the edge of chaos, but to descend into chaos, right? So he thought a lot about how to deal with this, and he came up with what we will call the Netflix experiment, right? And the Netflix experiment was basically this. In most organizations, most of the control mechanisms are put in place in order to deal with the kind of, let's say, average, adequate performers. But the top employees? They don't usually need those things. So what if I, Reed thought, what if I were to try to create an organization that was made up only of top performers, right? Then I could give them a lot more freedom.

19:08 But Reed had some concerns. His company didn't have much money. At that point, they were just a startup with very little resources. But he was aware of something that he told me about called the Rockstar Principle. And the Rockstar Principle is a study that looks at if you take, for example, 10 software engineers, all with the same skill set, that the top performer of the 10 will deliver 10 to 25 times the value of the average one, right? So he thought, what if I were going to hire maybe only one-tenth of the employees? In other words, or in any case, hire a lot less, right? And then if I were... to pay them a lot more in order to get that really top talent, right? Then perhaps I could get those high performers working for me, right?

20:10 Okay, so that was his first idea, that he would increase talent density. Less employees, more money to get more talent, right? But he thought, I might still have employees that try to take advantage of the freedom that's allotted to them, right? So what if in this case, I also try to create an environment where people are giving one another a lot of open feedback on an ongoing basis? Then when Jim tries to fly first class, someone else is likely to say, hey, Jim, I don't think that's a good use of company's money, right? And we will become accountable to one another, right? And if I were to do that. If I were to create an organization where we had increased talent density and increased candor, then perhaps I could also have a company with an unprecedented amount of employee freedom with really almost no rules and process.

21:12 Okay, so that's what we will call the Netflix experiment. And I think we can say it worked out rather well for them. Now, what I'd like to do in the rest of our time together is to go through each of these categories one at a time. And I'm going to begin with the first one. by giving you another dilemma. Okay, now this dilemma is the really provocative one. We'll see how you are. We'll see how ruthless you are. Here's the situation. I'd like you to imagine that you are still managing a marketing team of eight marketing specialists. Now, last year, when you opened this team, when you started this team, your goal was to create a high-performing team, right? So you did everything you could to find the best people. You decided to hire a lot less people, but to pay them a lot more in order to get and attract the best, right?

22:13 Then after you had found those people who you thought would be the best, you hired them, and then you threw your energy into coaching them and giving them feedback. Now, one year in, seven of your eight employees are amazing, right? Okay, these employees, they are the best, right? These seven people, if you went out on the market and tried to find a replacement for the amount of money that you have, you don't think you could find better, right? And then there is Fritz. Now, the thing about Fritz is he's not a poor performer. He's just not a great performer either. He's kind of... media. So on the one On the one hand, Fritz is a nice person and he works hard. On the other hand, Fritz, you have spent an enormous amount of time with Fritz, giving him coaching and feedback.

23:14 And it's now clear to you one year in that Fritz is never going to turn in to the high performer that you hoped he would when you hired him. So my question to you is, are you going to fire Fritz? Okay. All right. So let's go ahead and see what we've got here. You have A, I'm not going to fire him, right? I'm going to keep him on the team. And as you're thinking about this one, I'm sure some of you will think, well, you know what? Fritz is a nice person and he's hardworking and, you know, he's doing his best. And I want my team to see that I am loyal to hard work, right? And in return, I hope they will be loyal to me. So even though he's not a high performer and has shown me he won't be, I'm going to keep him on the team, right? Or B, you know what, dear Fritz, you're going to have to go. Okay. Fritz is going to have to leave the organization because he's not going to turn into the high performer that you'd hoped he would. And you hope that you can now use that spot to hire someone else.

24:18 Okay. So I see we have, aha, very interesting. Okay. So we have some Bs coming in and then we have a lot of As. Okay. So we have a lot of As. It's people who are thinking, you know what, Fritz is a nice person and he's doing his best, so I'm just going to keep him on the team. And then I do see we have at least a few of you who are ruthless. We say, okay, we've got to move Fritz out of here. Now, let me tell you, when we, when... Reed opened up Netflix. He actually agreed with you, all UAs. So he felt, on the one hand, that he wanted to have a high-performing organization, right, in order to give that freedom and get that innovation going. But he also thought that the reality of any organization was that there would always be some top performers and some medium ones.

25:20 He'd just never seen any other kind of organization. Plus, he wanted to show his workforce that he cared about them, right? He didn't want to get rid of people who were kind or who were working hard. So he opened up the organization. Netflix opened in 1997. And by 2001, he had used this methodology, trying to hire the best people, paying them really well, but then keeping kind of the mediocre employees on. Right now, in 2001, financial crisis hit and Reed found out that he was going to have to let go to do to do layoffs. Right. Either he was going to have to let go of one third of his employees. Or he would have to close the company. He had no option, right? At this point, the atmosphere around the office was fine and the company had been doing okay, right?

26:23 Until this financial crisis happened. So in any case, Reed didn't have a choice. He felt he didn't want to close the company, right? So he sat down with human resources and together they went through every name in the company, right? Anyone who was a little bit obnoxious had to go, even if they were a top performer. Anyone who was a poor team player, but technically excellent, they were going to have to go. And you know what? All of the fritzes, they were going to have to go too. All the sweet people or hardworking people who weren't doing great work, they were going to have to go. So the day came. Reed did the layoffs. People screamed and cried and slammed doors. It was just as bad as he had expected. But then within a three-month time period, the most surprising thing happened, which was that at this point, his 80 employees now seem to be getting done a lot more than the 120 employees had before them.

27:29 And better than that, the atmosphere in the office had improved dramatically. So it now seemed that Reed had a group of employees who were madly in love with their work. So Reed couldn't figure out why this had happened, but he talked to a lot of people about it, and he finally came to a conclusion. And his conclusion was, for top performers, for those really like star are innovative thinkers. A great workplace is not about having a fancy office or a sushi lunch. A great workplace is about being surrounded by the best, right? A great workplace is about stunning colleagues. Now, okay, I know many of you love Fritz, and you know what? I love Fritz too. And some of you are probably starting a Save Fritz campaign, right?

28:32 And you may be thinking, if you are on the Save Fritz campaign, you may be thinking, well, Netflix is just one company, right? But it is interesting. There's quite a lot of research that supports the idea that performance is contagious. There was one piece of research that was conducted by a colleague of mine, a professor at another business school named William Phelps. And Professor Phelps conducted a study where he invited four MBA students into his lab at a time. He gave them a task and he rewarded them financially based on how well they behaved. Right. Now, they were unaware that in 50 percent of the teams, there was an actor named Nick. And Nick had been hired to act just like. Any of the other MBA students. students, but to do some things that were a little bit undesirable.

29:34 Sometimes he would act a little bit bored, like he might put his feet up on the desk and text his girlfriend, right? Sometimes he would act a little bit obnoxious. He might say things like, have you ever attended a business school class before? Right? What Professor Phelps found, and team after team, study after study, was that those teams that had Nick on them performed at a 40% worse rate. More striking was something else that happened. Here is Professor Phelps on a short audio clip to tell you about it. Please play the audio clip. It's no visual, just words only. Go ahead, please. But what was sort of eerily surprising was how these team members would start to sort of take on his characteristics.

30:36 So, for example, I mean, remember we videotaped all of these, and you would see that people would start, well, so when he was a jerk, they would be a jerk too, right? So they would start being a little bit insulting or abrasive or obnoxious. And what was really interesting is they wouldn't just do it sort of in response to him, but also to each other, right? So this is sort of like a spillover effect. And you can see that over a 10, 15, 20 minute period, his behavior just starts to bleed all over the group.

31:40 After about 20 minutes, one of the real MBA students puts her head down on the desk and she says, oh, when is this going to be over? So I just wanted to point this out because when you think about what to do with Fritz, most of us think an individual performance problem is an individual problem, right? That's a problem between Fritz and me, Fritz's manager. But we actually know from a lot of research that an individual performance problem is not an individual problem. It's a systemic problem that impacts the entire team, maybe even the entire organization. And that's not just for behavior issues like we had with Nick, but also for performance issues like we saw with Fritz. And I actually have one quote here. I'm always sorry to have to give this news, but what we've seen in a lot of research is that the best predictor of how a team performs is not how great the best performer is

32:45 or what the average performer is like. Most often, it comes down to what the worst team member is like. In other words, poor performance is especially contagious. Okay, now, however you want. are feeling about Fritz. Whatever you feel you want to do with the Fritz's in your organization, I can tell you that Reed became very focused after in 2002 on continuing to have this work environment where there was so much energy and love of work that was coming from being surrounded by stunning colleagues and that cycling up of performance that was coming as that great performance was contagious, that he became very focused on in the future doing everything he could to always have this high performing work environment. And at Netflix, they do something that I know sounds very provocative, but I actually think it's probably a good exercise for us all to do, at least in our mind.

33:54 And the exercise is that you, as a manager, you ask yourself a question maybe once a year. You imagine that Stanley comes to your office and then Janine comes to your office. And you think with each of them, if Stanley told me that he was leaving the organization, He said, boss, I'm leaving the company. How would I feel? Would you be devastated? Would you say, oh, no, Stanley, don't leave me. Would you do everything you could to keep Stanley? Would you fight to keep him? If so, you know Stanley is the right person for that job, right? Would you feel a little bit relieved? Would you think, oh, good, now I can focus my energy where I want to on my top performers. Would you feel a little bit excited thinking about who you could get in those jobs in that position? And I think if you'd feel, in truth, if you would feel either relieved or excited when one of your employees told you that they were leaving,

35:00 leaving the company, that that's probably a pretty clear sign that that person is not the best person for that job and that they actually would be happier somewhere else and that your team would be better off without them in that role, right? However you want to deal with it. Okay, now let's move on to our next dilemma, okay? Something less sensitive, okay? Now, the next dilemma is actually not provocative at all, okay? So now we've increased talent density, okay? We've got that. So let's say, all right, now you have taken the step to hire less people and pay them more. And then you have used the keeper test throughout the organization. If you've determined that you would not fight to keep somebody, then you've asked yourself the question, have I given this person the feedback and coaching that they need to succeed? And if you haven't, then you better go give it now, right?

36:01 But if you have, Then you've found a way to move that person out of the organization in order to bring in a top performer so that that person's performance doesn't pull the performance of the team down. Okay, you have increased talent density. Okay, now, dilemma number four. Okay, now this dilemma, I have to say, is not provocative. The question with this dilemma is whether you will tell the truth. Okay, now what I mean by that is that most people, I find, have difficulty telling the truth with this. So please remember that the question is not what should you, not what would you do, not what, sorry, not what should you do, but what would you do? Okay. Here's the question. Here's the dilemma. You are still on a marketing team of eight marketing specialists, but you are no longer the manager of the team. You are now just one of the group.

37:04 Okay, you're just one of those marketing specialists. Now, one day you go to a meeting with one of your colleagues. And during that meeting, your colleague does something that is not great. Now, before we move forward, let me tell you, this colleague is a little bit senior to you in the organization, but he's not your boss. Okay. And you have a friendly relationship with this individual, but you don't know him very well. Okay. And during the meeting, he speaks, your colleague speaks with so much energy and velocity, volume, that he kind of squashes out all of the air in the room. And your customer, who's a little bit of a quiet person, you can kind of see her almost like shrink. back in the face of his intensity, right? Now, while he's doing this, you're thinking to yourself, oh, I wish he wouldn't do that, right?

38:12 And at the end of the meeting, you have a dilemma. And my question to you is, Are you going to give this person that feedback? Okay, now here I've given you an option C. Okay, I'll tell you why I'll give that later. So you have three options. Go ahead and put in what you would do in this situation. So yes, I'm going to give the feedback. Okay, I see that it would help him. It would help the team. It would help me if he decided to take it. So I'm going to go ahead and give the feedback. Or you know what? He didn't ask me for the feedback. I don't know if he wants the feedback. I don't know how he's going to respond when he gets the feedback. I'm not his boss. I'll give him the feedback if the right moment arises. Okay, that's B. Or C, you know, I think in this situation, given that he didn't ask me for the feedback and I'm not his boss, I think I'm probably not going to give the feedback.

39:19 Okay, so please go ahead. Let's see a vote from everybody, A, B, or C. Okay, so what I see here is that we have lots and lots of A's coming in. Okay, now I want to tell you that I used to get 100% A, which is why I had to add a C, right? And then I would say to my groups, I would say, wow, every one of you said that you would give the feedback, right? And then I would say, well, what about your colleagues, right? What about your teammates? Would they give the feedback? And you know what my participants would say? Oh, no, they wouldn't give the feedback. No one on my team ever gives me any feedback. And I would think, well, isn't that interesting that only the people who attend my session would give the feedback?

40:21 Okay, now I want to say here that, of course, I think we all can recognize that logically giving the feedback is a good, the best answer. I mean, feedback is free, and it is probably the most underutilized management tool. If the people on your team are giving one another a lot of open and honest feedback about how they believe the others can do their job better with kindness, right, that can really boost the performance of the entire team. But usually we don't get this feedback going in an organization. And that's because of a dilemma in our own brains, a dilemma between your frontal cortex and your amygdala. So your frontal cortex, that's the most logical part of your brain. Okay, your frontal cortex loves feedback. Your frontal cortex knows that if I give my colleague feedback, if he chooses to take it, it'll help him, it'll help the team, it'll help the organization.

41:30 I'll give the feedback. And actually, one study showed that 72% of employees would like to receive more honest feedback about what they could do differently, what they could do better. They feel it would improve their performance. The problem is the amygdala. The amygdala is the most primitive part of your brain, and the amygdala is very concerned with finding safety in numbers, right? So if you give me direct feedback about something you think I did poorly or something I could do better, my amygdala is likely to start sending off an alarm. And that alarm is, oh my gosh, I'm going to get kicked out of the group, right? And when your amygdala sends off this alarm, it physically throws your body into fight or flight, right? Okay, so fight. It's not true, right? I'm not the problem. You're the problem.

42:31 You deny it, right? Or flight. You say, thank you. Thank you so much for that feedback. I really appreciate it. That'll help me a lot. Thank you. And then you try to never speak to that person again. That's the flight. Okay. So the question is, what can we do in an organization to get all of that healthy feedback out there to get the benefits of all of our employees giving? feedback, generous, kind, helpful feedback to one another while keeping the amygdala calm. And I'm just going to give you two very simple ideas here. The first one I think is not surprising, but very few organizations do it. That's simply that we want to start putting feedback on the agenda, right? So what if I were to tell you, what if I were to tell you, you know what, that guy that you went to that meeting with, right?

43:33 It just happens that you always meet with him every Monday. Right? And you have decided, the two of you, that the first Monday of every month, you'll give one another some feedback about how to do those customer meetings better. Right? So I'll tell him what I think he can do better, and he'll tell me what he thinks I can do better. Would you give the feedback then? And I think any leftover Bs or even Cs would say, oh, yeah, in that case, I'll give the feedback, right? Tell your employees, you know what? Once a quarter, I want each of you to sit down, you know, in a formal meeting space, right? And prepare and give one another some feedback about how you think that that person could. Improve their performance, right? Just putting feedback on the agenda gets the feedback out there and then We get that boost of performance that comes with it, right?

44:34 Okay, now at Netflix, they do do one thing that I thought was absolutely crazy when I first heard about it. It's what they call live 360-degree feedback dinners. And with a live feedback dinner, basically, we all get together maybe once a year over a meal, right? You can do it over Zoom if necessary. But ideally, over a meal for several hours and you take turns, right? Now, let me warn you, this only works if you already have managed to get high talent density in your organization. And if you are practicing no brilliant jerks, okay, that's an important part of your talent density, not having jerks around, right? But once you've got a high performing team, you go out for dinner and you take turns, right? I'm up first, we go around, and each person at the table, one by one, gives me some feedback about what he or she thinks I could do in order to up my performance, right?

45:42 And then we move on to the next person, right? When I first heard about this, I thought it was crazy. I mean, why do you have to drag my weaknesses through the group? Can't you tell me that in private? But I came to see it was such an interesting mechanism. Because when you give feedback one-on-one, you never really know, is that about my individual relationship with that person? Or is that actually something about me, right? But when you have these kind of open forums for giving feedback with generosity but honesty, we all start to see what are the real things we need to be working on. And here I have one quote from one Netflix employee. He said, getting. Publicly ripped apart sounds like torture. Each time I go to a live 360, I'm nervous. But after you get started, you see it will be fine because everyone is watching.

46:42 People are careful to be generous and supportive with the single intention of helping you succeed. No one wants to embarrass you or attack you. Everyone gets a lot of tough advice, so you're not singled out. When your turn comes, it might be difficult to hear what people have to say, but this is one of the greatest developmental gifts of your life. Right. OK, I actually started doing these at my own team at INSEAD and I found them to be incredibly helpful. So maybe something to think about. OK, you have now eaten your vegetables. What do I mean by that? OK, you have implemented the keeper test. So first you implemented the rock star principle. That means you hired less people and you paid them more. right, in order to get the best. And then you implemented the keeper test, right, to move out all of those mediocre performers and get the advantages of that high performer

47:50 performance spiraling up because performance is contagious. You have now increased talent density, right? That's your spinach. What do I mean by that? Some of you love the idea of the keeper test, and I'm sure some of you hate it. That's your spinach, right? Okay, then you have increased candid feedback throughout your team and organization. You've got this feedback on the agenda. Maybe you're even doing these live 360s, right? You've increased candor. That's your mushrooms. And what I mean by that is I know that some of you love the idea of working at a place with a lot of candid feedback and some of you hate it, right? But the deal is that once you've eaten your spinach and you've eaten your mushrooms, then you get to eat your cake. And everybody loves the cake, right? Once you have that talent density and you have that candor, now, only now, are you ready to start removing all of those control mechanisms, the

48:58 bureaucracy, the processes, the procedures, the rules that we have at most companies, and to let your employees run free. And that's what I'm going to talk about now for the next five minutes. Now, we will have a few minutes at the end of our session for a little bit of Q&A. So please go ahead and get your questions in there. You can chat them into the chat box if you like. No question is too provocative. And let me say, I know a lot of this stuff is really provocative. Right. And that's my job. Right. My my job is to simply get you thinking. So go ahead. No question is too provocative. Go ahead and put your questions into the chat box. OK, now. Here is a list of all of the many, many of the rules, processes, control mechanisms that you will find at most companies that you won't find at Netflix. Now, as you look at them, you will see they've fall into a few different categories.

50:02 So some of them are policies. So at Netflix, there is no vacation policy. The vacation policy is take some. Okay, so each employee decides how much vacation he or she wants to take. There is no expense policy. The expense policy is spend money in Netflix's best interest. Okay, so any employee can sign off on a multimillion dollar deal or can purchase a new computer for their desk using their best judgment, right? Spend money in the best interest of the company. Okay, now these policies, these are really just, let's say, symbols of freedom. These aren't the important ones, but the deal is that if you show your employees with symbols that you expect them to behave like adults and you think they are adults by not telling them what they can spend or when they can go on vacation, they will respond by behaving more like adults.

51:09 Okay, so that's the freedom. That's the cycle of give freedom to get responsibility. But these are just the symbols, not the important ones. Okay, then we have here a couple of other things. At Netflix, there are no key performance indicators, no KPIs, no management by objective, and no pay per performance. Bonuses. Now, you might not think of these things as control mechanisms, but they are. I mean, this is a way that we can give our employees some level of freedom while still keeping our hands like firmly on their shoulder, right? Making sure they're still walking in the right direction. Okay. Now, you might think there's no way I can give my employees that level of freedom. But you know what? Maybe if you had only top performers on your team, you could. Maybe if you'd gotten rid of the Knicks and you'd gotten rid of Fritz's, maybe you could give your employees an environment where there were no KPIs.

52:11 You could let them run a little bit more free. Maybe. Okay, now, I think this is the really critical one. If there is one reason that Netflix has been so incredibly successful over the last several years, it's because at Netflix, there are no approval processes and no decision-making approvals needed, right? You remember at the beginning when I asked you if Sheila came to you and told you that she had a new project she was working on, right? Would, oh, sorry, she had a new idea and you thought it was going to fail. Would you let her invest in it, right? Some of you said yes, some of you said no, right? But at Netflix, actually, as the boss, it's not your choice. At Netflix, It's up to Sheila to first farm for dissent, hear everybody's opinion, socialize the idea, talk to a lot of people about it, but then she's the decision maker, not you, right?

53:13 Now, I just want to wrap up here by saying at Netflix, they have two sayings. The first one is, Don't seek to please your boss. Seek to do what's best for the company. And the second is lead with context, not control. And I'm just going to end by giving you a last, and then we'll have a few questions, right? I just want to end by giving you a last image. At most companies, the decision-making model is like a pyramid, right? You have the chairman at the top of the pyramid, the lower-level employees at the bottom. The lower-level employees, they can make small, unimportant decisions. But for anything important or expensive, it has to get pushed up for some type of approval, right? Okay, we all know about the pyramid. At Netflix, the decision-making model is like a tree.

54:19 And with the tree, we have the chairman who's down there in the dirt, at the roots of the tree, right? Not telling people, yes, you can work on this project. No, you can't. Really not even making any decisions at all. Instead, the chairman is down there in the dirt, setting the context for the company. This is the direction we are running. This is our North Star. These are all of the things that we have to keep in mind as we are making decisions. This is our organizational culture and the types of dilemmas that you need to keep in mind and know which way to turn when you come across them. Right. And then we have the senior executives, those next level of executives. They're at the bottom of the trunk of the tree, setting more context for their team and organization. But then we have those lower level managers who are often up there at the small tree, at the small branches, at the little leaves.

55:21 And those are the people who are making often the multimillion dollar decisions on a daily basis. Right. Keeping in mind all of the context that's been set by leadership below them. Right. Now, I just want to mention high performers. They want to work for trees, not for pyramids. Right. Those top performers, they like trees. Especially the younger generation coming into the workforce, they want to work for trees, not for pyramids. In addition, trees are a lot more flexible. If COVID hits out of nowhere, they can change direction a lot more quickly than a pyramid can. And plus, a tree can grow a lot faster than a pyramid. In fact, it can grow as fast as the roots desire. It doesn't have the bottleneck that the pyramid presents. And I'm just going to wrap up then. Then we'll take these questions by saying that if we go back to Sheila, you know, what if I had told you that Sheila was a top performer?

56:28 What if I had told you that she had really really good judgment, and that you knew she was the best person you could possibly have in that role. Maybe in that case, you would say, you know what, Sheila, I don't believe in this, but why don't you go ahead and give it a try, right? Maybe you would feel ready to give her that level of empowerment. And I'm just going to end with this last quote, and then we'll take a couple of questions. As we gave employees more control over their lives and jobs, it began to dawn on me. Freedom is not the opposite of accountability, as I had previously considered. Instead, it is a path towards it. If you treat your employees like adults, they will act like adults. If you give employees control over big decisions, they will become increasingly responsible and conscientious. In other words, give freedom to get responsibility. Okay, so that's a lot of very provocative ideas. You hate them, you love them, you think I'm never going to do any of that, or I'm going to get right to work.

57:31 My goal is simply to get you thinking, right? And I hope that you may have found some of that at least useful to think about. Okay, so let's go ahead and take a few minutes of questions here. It looks like we have some coming in. So I'm going to start with this first one. The first one says, okay, great question, whoever put this in, thank you. This type of culture that you've described seems like it would work great for some types of teams and organizations, but be disastrous for others. I agree. Okay. Can you please clarify? Yeah. So let me just kind of, as we're getting to the end, I think it's a great moment to say this. I think my biggest learning from all of this was that The large majority of organizations today are still being run with this hangover from the industrial era. And what I mean by that is during the industrial era, we were all obsessed with error elimination and with consistency and replicability, right?

58:39 And of course, if you are leading a manufacturing plant today, or you are working in a safety critical or an operational part of your business, then please forget everything that I've said and stick to the methods from the industrial era, right? But in a growing number of teams and organizations, the primary goal is no longer to maximize efficiency and to eliminate error. The primary goal is now to be fresher thinking, to innovate faster, and to be more flexible. And if that's the case in your organization or in your team, then that's when really we can find that these new principles apply. Okay, let's just take one more. It looks like I have just maybe a minute and a half. So let's see. Here's a good one. All right. So here's. So someone says, it almost seems too aspirational to be practical, right? My organization does not look anything like this.

59:40 I would like to do some of these things. Can you suggest a few small practical steps? Yes. Okay, let's wrap up with that. Let's try to be practical. Okay, if you are leading a pyramid, of course, you can't just wake up one day and say, oh, today I'm a tree. But instead, if you desire to have more innovation and flexibility in the long run in your company, you can try to just take one step today towards talent density. Maybe you're not ready to use the keeper test, but maybe you're ready to say, you know what, instead of hiring three people for that new initiative, I think I'm just going to hire one, but pay them up to three times as much in order to get the best, right? Maybe that's what you're ready to do. Or maybe you have a Fritz around that you're ready to move on, right? Whatever step opens, whatever door opens, take one step towards talent density.

1:00:43 Maybe, and then candor, maybe you're not ready to do live 360 feedback dinners, but maybe you are ready to simply start scheduling feedback meetings more often. Whatever it is, whatever door opens for you, take one step towards candor, right? And once you've taken those first two steps, now one step towards freedom. Maybe you're not ready to get rid of the vacation policy, but maybe you're ready to say, you know what? Now I really trust the people on my team. I think everyone on my team is fantastic. So I'm going to stop making decisions myself. I'm going to tell them they can always hear my opinion, but they're the decision maker, not me. Whatever you're ready for, one step towards freedom. And then you need to. Do it again. One step toward talent sensitivity, one step toward candor, one step towards freedom. And gradually then the pyramid starts to turn into a tree. Okay, I really, really enjoyed being with you today. I wish I had a little more time to get to more questions, but let's continue the discussion.

1:01:48 Please join me on LinkedIn if you'd like to talk more. And with that, I wish you a great day, and I think we've got a short video for you here. Thank you.