Dorie Clark & Erin Meyer - No Rules Rules

Hi friends, this is Dory Clark. I am here on behalf of Newsweek, and I am here with my good friend Erin Meyer. Erin is a professor at INSEAD. She is the author of The Culture Map, and most recently, and what she's primarily going to be talking about, she is the author with Reed Hastings, the founder of Netflix, of No Rules Rules, a New York Times bestseller about the culture at Netflix. Erin, I'm so glad to have you here.

So nice to see you, Dori.

This is fantastic. We're gonna have a great chat. And so to viewers that are here, we'd love to hear who you are. We'd love to see where you're coming in from. So please type into the chat box where you're coming in from so we can give you a shout out. And so Erin, I'd love to actually get started with an initial question here for you. So, okay, first of all, I think people probably just wanna know, how did you connect with the Netflix people? Like, how did this even happen? You're a business school professor in France. So how did this all happen that you ended up writing this book?

Yeah, well, actually, that was a little bit crazy. So my first book, The Culture Map, came out in the spring of 2014. And, you know, it was kind of a slow starter. So eventually a lot of people started reading it, but not at the beginning. So I was quite surprised when one morning I woke up and I looked at my email and there was an email. The headline was Peace Corps. And it said, hi, Erin, I was in the Peace Corps near where you were in Southern Africa. My name is Reed. I'm the CEO of Netflix.

You just got like a cold call email from Reed Hastings? Is that what you're saying?

I actually didn't think it was real. I remember I showed my husband, I was like, I don't think that's real, do you? But I started then doing work with Netflix on getting ready for their globalization because they were getting ready to move into a bunch of countries. So that's how we started working together. And then, then And then I became aware of this really crazy, provocative, and super successful corporate culture that they have at Netflix. And I guess I was just so interested. I just kept at it until he agreed to write the book with me.

That is amazing. I really love that. And yeah, I'm wondering, like, wow, when am I going to get, like, my cold call email from Oprah Winfrey? Like, geez, let's bring it. I love this. Oh, fantastic. Well, so Erin, we're so glad to have you here, and, uh, you can check out more about Erin's work at erinmeyer.com. And we also want to greet the great friends who are tuning in here. We have Tricia from Pennsylvania, we have, uh, Stephen from New York, Mustafa from Denmark, Diana from Rhode Island. Oh my gosh, we have Maria from Moscow. Wow, Cindy's here from Chesapeake, Virginia. We have Santa Cruz, Feryan from Sweden. Oh, I love this, this is great. Giovanna from Zurich. We have Adrian from North Macedonia. Oh my gosh, we're so happy to have here all these great people. And of course, it's appropriate because Erin is the author of The Culture Map. She's an expert in cross-cultural communication. And it sounds like that was part of the original interest that Reed Hastings had in connecting with her was around the globalization of Netflix. I'm actually curious. Tell me more about that. How did you apply the intercultural communication work that you did in actually working with Netflix and translating their super unique culture across the globe? What did that process look like?

Yeah, well, the first thing I was trying to figure out was how this corporate culture could actually work. And, you know, one thing I have to tell you is that when I first learned about the culture at Netflix, I really did not like it. And I couldn't figure out how a company could be operating like that and be so successful at the same time.

So why did you not like it? What were the sticking points for you?

So some of the people on the call probably know about this famous Netflix culture deck, which are these slides that have been downloaded about 20 million times. And one of the slides says, at Netflix, adequate performance gets a generous severance. And that really startled me because at INSEAD, the business school where I teach, we'd been doing all of this research and teaching around the idea of psychological safety, right? If you want your employees to innovate, make them feel safe. But here was this company that was saying instead, you know, you want your employees to innovate, kick them out if they're not super successful. So that was puzzling. And there were other things in there like our vacation policy is take some, or our travel policy and expense policy is act in Netflix's best interest. And that sounded interesting, but I just couldn't figure out how a real organization at that size could operate that way. So, so that's how I got started and curious about this whole project.

That's super interesting. And I have a million questions, but we would love to take yours. So please type in your questions for Erin. We would love to hear what's on your mind. And we have lots of new friends. We have, we have our friend, you probably know him, Erin, Thomas Vedel Vedelsborg from Denmark tuning in. Hi, Thomas. We have Lisa from Atlanta. Oh, it's so great. Sandra from— she's a German staying on the Canary Islands. All right. I love it. So please type your questions for Erin into the chat box. And if you're enjoying this conversation, please hit like, please hit share so that your friends can benefit from it as well. So, Erin, a question that I have. So it's at first you didn't like, you know, what you saw of the culture. What, what ultimately won you over? I'm assuming that you, you did eventually come to see the merits of this. So What are the redeeming features? What is it that makes Netflix successful and not just a hard-ass place where there's no psychological safety?

Yeah, OK, we can go into all of that stuff. But let me first just say that my overarching learning from this, which really was a total paradigm shift for me, was that most of the paradigms that we were teaching in business school and that are really taught and used throughout most companies are hangovers from the industrial era. I mean, so of course, the industrial era powered our economies for 300 years. So it's no surprise that we are still obsessed with things like error reduction and maximizing efficiency, focusing on consistency and replicability. And if you are running a manufacturing plant where you're producing automobiles, then yeah, those are still your goals. But in a growing number of organizations today, The main goal is no longer error prevention and replicability. The goal now is, how can we innovate faster and be more flexible? And if you want those things, you have to totally change the way that you're thinking about culture in your workplace and management paradigms. So it was when that kind of clicked in my mind that I really started to see that I also had to start thinking about this differently.

That's super interesting. And a great question, Erin, came in from Mia. She wants to know, have you found that Netflix's unconventional culture has had an impact one way or another on diversity issues? That's certainly on a lot of people's minds these days. How has that played out?

Yeah, so, I mean, that's a really interesting question because one of the attributes at Netflix is the importance of candor. And of course, there's a lot of companies, especially in the US today, that are thinking and talking about developing a feedback culture. feedback culture, right? And I think we can say at Netflix that their feedback culture is actually their superpower, right? So candor is their superpower. And what I mean by that is that people give one another and even their bosses feedback, like, on a daily basis. But I was really concerned when I started working with them about how that was going to play out as they moved into countries like Japan and Singapore and Brazil, where the focus is really on, like, relationships and group harmony. So that It was very interesting. One of the things I learned— so one of the crazy things they do at Netflix, and when I first heard this, I was really taken aback, but I came to see it was actually quite valuable, which is that they do these, these live 360 dinners. So they get together as a team in the evening, they sit around the table, right? And like, I'm up first, right? So if I'm up first, we go around and everyone tells me one by one what they think I should do differently in order to improve my performance. And when I heard that, I was like, well, what's the point? What's the point of, like, dragging my weaknesses through the group? Right? But it turns out that this creates this performance mechanism where everyone knows, you know, this is what she's working on and this is what he's working on. So people aren't, like, whispering behind one another's back. And we also know, oh, that guy gave me feedback, but then the rest of the team didn't agree with that. So that's not something I need to focus on. But this kind of thing, I was like, how is that going to play out in Tokyo? But what I found is that actually, in these other offices, like Brazil and Singapore and Japan, that the ad hoc feedback wasn't working very well. But when they had an opportunity to prepare, they knew what the expectation was, and they understood it was in order to help the group, that they were actually better at it than the Americans. So, so yeah, they've been really focusing on trying to take this culture and figure out how to allow it to grow in diverse ways across the world. It's a fascinating journey.

That's really interesting and something that obviously it looks like in our chat, the listeners are really interested in. Veronica wants to know, how difficult was it to implement the culture in other countries? And I'll just sort of add on, were there any countries that were particularly hard for some reason? Or I guess, conversely, A place where you thought it would be hard, but actually it was like, oh, no big deal. This is totally fine here.

Well, the culture that it works great in is the Netherlands. So for example, I was talking about—

Oh yeah, they are blunt, man. They are really blunt.

Well, I mean, just like relatively Americans or Japanese in comparison to the Netherlands, right? And it's actually funny when I was doing the research at Netflix Amsterdam because they were like, oh yeah, Those guys in LA and Silicon Valley, they're on and on about radical candor, but they don't know how to be candid. So, that was a riot. But I think in order to start actually answering the last question, we have to kind of think about what the tenets of the culture are, right? And maybe I can just tell you a little bit, kind of a story about this. So, when I first met Reid, he told me a story about his first company, which was an organization called Pure Software. And when he started that company, it was just a small group. were operating kind of fast and loose, and they had no rules. But then as the company started to grow, some people took advantage of the freedom that was allotted to them, and some people did stupid stuff, right? So like there was this guy, Jim, who used to fly from San Francisco to LA every week. And because there was no travel policy, he started flying first class, right? And there was this woman, Charlotte, who used to bring her big dog to work every day. And because there were no policies, this was fine. But then the dog chewed a big hole in the carpet, right? So as these things happened, Reed noticed this was expensive. So they created a really detailed travel policy and, you know, an employee handbook, no dogs allowed at work. But then what happened as the company grew and these rules and processes took place is that the really creative, like, innovative thinkers, they left the organization. Because they're really mavericky people, they don't want to work in places places like that. They want to work at places they can run free. So then the company stopped innovating. And the people who are really good at following the processes, they were promoted. So then when the environment shifted from C++ to Java, they weren't the most flexible people running that company and they were unable to adapt. So Reed's goal with Netflix was to create an environment that as it grew, didn't put more rules and process in place. So, that was like his overwhelming kind of idea. But he recognized that if they didn't put rules and process in place, the company could easily descend into chaos. So, he tried a couple of thoughts. He said, you know, if we have only really great employees, they probably don't need those rules. So, let's try to have an environment that's really like only top performers. And then let's try to have an environment where we're giving one another a lot of feedback, which will create a co-accountability. So we'll need less rules. And then in that case, we can try to get rid of kind of all management processes. So that's the, that's the basis of the whole structure at Netflix and what we describe in No Rules Rules.

Wow. It's fascinating and so different from so many places. It really, it really is an outlier, which is what makes it exciting to study. And so I just want to mention, we are here with the Newsweek Better Interview Series every single Thursday, 12 Eastern, 9 AM Pacific, 6 PM CET, because Erin is in Paris. So you can tune in with your dinner if you're in Europe. If you would like to never miss an episode, make sure you sign up for my mailing list. You can do that and download a free self-assessment at doryclark.com. You'll be notified about upcoming interviews. You can also follow me on LinkedIn. Just go to dori-clark.com/linkedin and you'll get all the 411. And of course, if you want to learn more about Erin Meyer, you can go to her, erinmeyer.com. So, Erin, a great question came in that I'd love to tackle. We have innovative leaders on this call who are interested in this. Vanessa is one of them. She says, well, OK, I'll bite. You know what? What if somebody wanted to implement these policies? How do you get started? How might you do this?

Yeah. So, I mean, it's actually, it's not so complicated, especially if you're in a smaller environment. I think if you're, like, thinking about a big company, you really have to kind of take it off, just think about your own department, right? I mean, you can't, like, change the whole culture of, I don't know, like, Johnson& Johnson in a week, right? But if you're starting an organization or you have a small team yourself or even a large team that you're managing, I mean, there are a number of things you can think about. And the first thing that I really think we all can start thinking about is this idea of what they call talent density at Netflix. So talent density is the idea that top performers love working with top performers. So if you keep only high performers on the team, that the performance will spiral up. And on the other hand, if you let, let's say, medium performers stay on the team, that they'll drag the performance down. There's— this is a Super interesting concept because we've seen this in research. And I have this, this colleague whose name is Professor William Phelps. So he's also kind of in the same area of research that I am. And he did this, this study where he invited 4 MBA students into his lab at a time. And he gave them a task, 45-minute task, and he rewarded them financially based on how, how well they did the task. And unbeknownst to them, in half of the groups, there was an actor who was this guy named Nick. And Nick pretended to be a real MBA student, but he was hired to do things like act not great, right? Like sometimes he would act kind of bored or like text his girlfriend during the time, or sometimes he would act kind of jerky. And he might say things like, Dory, have you ever even attended a business school class before. But what happened is that in these 45 minutes, you could see, first of all, the groups with Nick on them performed worse at about a 45% worse rate, right? Even when the other 3 people were excellent. But more interestingly is that in these 45 minutes, you could see that the other, the real MBA students, they start behaving like Nick. So when he's acting bored, right, they all start acting kind of bored too. One, he's acting kind of depressed in one of the videos. One of the other MBA students, she puts her head down on the table. She starts to look so depressed. And then when he's jerky, they're jerky to one another also. So I think a lot of managers, they think an individual performance problem is an individual problem. But actually, we know from a lot of research that an individual problem is a systemic And that's why I think this idea at Netflix of adequate performance gets a generous severance, or what they call the keeper test, which is that you need to ask yourself as a manager frequently, you know, if Justin came to me and told me he was leaving the company, would I fight hard to keep him? Right? That we need to ask ourselves these questions in order to get those teams that spiral up and not down.

That's great. So interesting, Erin. Thank you very much. And a question came in from, from one of the folks who's tuning in on LinkedIn, and they want to know, well, how does Netflix actually sustain this as they grow? I mean, obviously you've been talking about bringing, bringing Netflix to foreign countries, but this is a company that has been very successful, especially during the pandemic. So how do you actually take this kind of unique culture And scale it so that it can survive and thrive, even, you know, as we get to multiples of the size?

Yeah, well, this is the, I mean, the main question that people ask is this, like, I understand these concepts in a small company because small companies should act entrepreneurial. But once we act, once we get big, if we try to act entrepreneurial, we start having problems. But you know what Reed does, what they do at Netflix, the leadership does at Netflix, is they just talk about culture all the time. I mean, every quarterly business business review meeting, they have culture on the agenda. They're debating their culture continually. If you, if you go to interview at Netflix, you know, you'll get a big stack so you can read about the culture, see if you think you want to be a part of a place like that. And I think that most companies simply don't put enough emphasis on creating the kind of corporate, corporate culture that they need in order to succeed. But you can do this. You can do this even at a big company. If everyone's bought in and you're talking about it a lot.

Yeah, that's, that's really interesting. Thank you. We had a question come in, Erin, from Anna. She wants to know, she says, the move to a freelance model, I mean, especially with COVID people are working from home, remote work is, is a huge thing now. So how, how can you actually keep up with this whole no-rule situation when it seems like contractors Constant supervision is in some ways the order of the day when people are working in a distributed environment. Has COVID sort of changed things at Netflix or in terms of how you think about these things generally?

Well, I think what we've learned from COVID is that most companies suddenly had to give their employees freedoms that they didn't in the past. And these were freedoms that Netflix employees already had, right? So most people You know, most companies, they have to go to work in the morning, right? They have to be there around a certain time and stay till around a certain time. And when they want to take a vacation, they have to like fill out a little form and check their box. And when they need to order a new desktop, they have to do this and that and the other thing. And at Netflix, people, the employees don't have to do any of that because they're considered to be adults. And if you hire adults, you should treat them like adults is the idea, right? And because they only keep those top top performers and they're giving a lot of candor, it works. But it was, I think, very interesting because I've seen that during this, this pandemic time that many companies have been surprised to see that actually when you let their— let employees just work their own hours and work from home and schedule their, their time as they like, that they actually do fine without those management controls, maybe even better than they were doing in the office. There was this funny moment where one journalist asked Reed at Netflix what he felt the benefits of COVID and remote working had been on his company. And he said, there are no benefits. And I remember then it was like all over the Wall Street Journal and everywhere, CEO of Netflix says no benefits to working from home. But it was just a misunderstanding. Because at Netflix, those freedoms have always been there. What Reid said meant was there's no benefits because we can't come face-to-face when we feel like it. But I think other companies have learned, you know, freedom really does breed innovation.

Yeah, that's, that's a very great point. Thank you, Erin. And please feel free to type your questions for INSEAD professor and author of No Rules Rules, Erin Meyer, into the chat box. We'd love to take your questions. And if you are enjoying this conversation, hit like, hit share. So that everybody in your feed can see it and benefit from it as well. So, Erin, a question that I wanted to just dig into a little bit more was around the issue of, of not having a formal vacation policy. Now, you hear sometimes that, you know, on one hand, oh, how amazing, there's no vacation policy. I could, I could go to Australia for 3 months. But what you also hear is that sometimes that actually leads to people taking no vacation because they're maybe afraid to, or it's, you know, oh, I don't actually know if this is okay. How does Netflix think that through and prevent a situation where, you know, unlimited vacation actually means, sorry, pal, you don't get any?

Yeah, well, I think that this is actually much less interesting than one would think, because what I generally find at Netflix is that people take vacations just about as much as they do at other companies. So, you know, when there's no hard rules that are in place, people look for the soft rules around their offices, like what are their colleagues doing, what are their bosses doing. Because of that, they try to make a big emphasis at Netflix to do what they call lead with context, not control, which means that you as the leader should demonstrate and talk about the kind of behaviors that you hope to have instead of dictating them. But like we see, for example, at Netflix that Reed always takes at least 6 weeks of vacation a year. And he does that because he wants to make sure to demonstrate to those around him, you need to take vacation in order to be healthy and productive. So I don't think it's that wild. And people organize their time as they like. But that's really one of the more symbolic freedoms they have at Netflix. Much more interesting are things like that you don't need You don't need approvals at Netflix. Lower-level employees can sign off on million-dollar deals without getting the bosses' OK. And I think that's where we really start to see a different kind of working.

Yeah, that's a really great point. Excellent. And I have a great question that came in from Robin. She wants to know, well, OK, let's see, you know, let's say there's a company where where, you know, we want to have fewer rules and more employee autonomy, but maybe, maybe the leaders there are not fully on board. How can we get the leaders to see that a little bit more? Do you have advice for people to maybe help convince their leadership of a more Netflix-style of arrangement?

Oh, yeah. Well, you know, I think you have to work within your own, with your own departments on this. I know People always used to ask me this with the Culture Map too, like, how can I get my boss to act in a way that's more culturally appropriate? Like, OK, you have to act within your realm of control, right? But I do think, OK, like that vacation policy, maybe that's something that has to be more at a whole company level. But a lot of these things can really just be at a team level. I mean, for example, if you want to get this kind of candor going, right, in your organization, then you can set up systems where you have feedback on the agenda in every one-on-one meeting, right. And as you do that, people start giving more and more feedback to one another. Or if you want to have a different leadership style in your own team, you can think about leading like a tree and not like a pyramid. And what I mean by that is that at most companies, on most most teams, we have decision-making that's like a pyramid. So you have like the big boss on top, right? And then you have like the low-level employees who are on the bottom. And the low-level employees, they can make small, inexpensive decisions. But for the bigger decisions, they have to push them up for approval, right? But at Netflix, the leadership is like a tree with the more important, like, OK, the CEO or the head of the department is like down in the roots of the dirt of the tree, setting the context. So if we're going to look on a departmental level, that would be, you know, as a department, these are our goals. Here's how we're going to try to get there. These are the things we need to keep in mind. And then, you know, the outer branches are the lower-level employees who are actually making the decisions, keeping in mind all of the context that's been set for them. Now, if this makes your heart, you know, race when you think about it, Remember, this only works if you have only high performers on your team and if you're giving one another a lot of feedback, right? So I know if you don't have the right employees, there's no way you can give them that level of power. But when you've got the right employees, you can really have this crazy growth, freedom, and innovation like a tree, right?

Really interesting. And this actually ties in. We have probably time for one more question here. Thank you so much to all the great folks who have who have tuned in and joined us again every Thursday. Actually, technically not next Thursday, mostly every Thursday. Next Thursday is Thanksgiving here in the United States, but mostly every Thursday we are here noon Eastern, 9 AM Pacific, 6 PM CET with the Newsweek Better series. Come back in 2 weeks. We're going to be interviewing Seth Godin, marketing legend and author of The Practice. And to make sure that you always are up on the interviews, you can subscribe to my email list and make sure that you are getting notifications at dori-clark.com. If you want to learn more about our friend Erin Meyer, go to her website, erinmeyer.com. And if you're enjoying the conversation, hit like and share one more time so people can see it. And the last question, which I think is really important, Erin, you've said this can really only work if you have a culture of high performers. And so Anna wants to know, well, you know, how do you manage the hiring process then? Is it about finding the right people and being very meticulous, or is it, is it actually about training them afterwards? How do you actually get this, you know, super high-quality pool of talent?

Yeah, well, I wouldn't say that I learned anything unusual about hiring when I worked at Netflix. I mean, they do what everybody does, trying to find the best people out there. They pay top of market, and they have a very unusual pay, pay structure. But I think what we can learn from this is a lot of people then think, oh, well, I, we don't have that kind of money at my company, right? Netflix, they can pay a lot, but we can't pay a lot. But they follow something that's called the Rockstar Principle, which is something that has been proven in the software industry. And Reed's a software engineer, so he applies it to all creative thinkers in the company. And he considers most people in his company creative thinkers, right? Which is that it's better to have 1 employee and pay them like a rock star than to have 10 to 25 employees and pay them less, right? And that's based on this software engineering research that shows, you know, if you really want like top-level, like super innovative thinking, go for those rock stars and pay them rock star amounts. So I guess the lesson is, if you only have like this much money, right, and you're planning on going out and hiring, I don't know, 8 people or 20 people, that for a high-performing environment, you might start to say, you know, I'm just going to go out and maybe hire 2, right? And really make sure to get those, those top people. And, you know, that'll get you started really well.

I love it. Erin Meyer, thank you so much for this great conversation. It's been wonderful speaking with you. Her book is called No Rules Rules, co-authored with Reed Hastings from Netflix. And tune in 2 weeks from today, December 3rd, for Seth Godin. Erin Meyer, thank you so much.

Thanks, Tory. Such a pleasure to be here with everybody.