In this interview on The Interview, organizational behavior professor Erin Meyer discusses the core principles behind Netflix’s high‑speed innovation, as described in her co‑authored book No Rules Rules. Meyer explains that Netflix’s success stems from hiring only top‑tier talent ("talent density") and then granting those employees extensive freedom—no formal vacation, expense, or approval processes. To sustain this freedom, Netflix uses mechanisms such as the "keeper test" (managers constantly assess whether they would fight to keep an employee) and a culture of radical candor, where feedback is given openly and frequently, even to bosses, and leaders publicly model receiving criticism. Decision‑making follows the principle “lead with context, not control,” pushing responsibility to the edges of the organization rather than a hierarchical pyramid. Meyer also describes how Netflix adapts this culture across different national contexts (Japan, Singapore, the Netherlands, France), noting challenges around candor in more hierarchical cultures and the need for localized guidance. The conversation concludes with a broader reflection on how many companies still operate under Industrial‑Revolution‑era paradigms focused on error‑elimination and consistency, and how Netflix’s model may be applicable to firms whose primary goal is rapid innovation.
Chapters
Hello and welcome to The Interview. Our greatest asset is our people. How often have we heard that corporate cliché? As most of us know, the reality is frequently different from the slogans. But one company where that's definitely true is Netflix, and it's the main reason why the company grew from a humble DVD rental service to a global media giant. DVD rental service 20 years ago to one of the world's most successful entertainment corporations. My guest today, Erin Meyer, has spent many hours with Netflix employees around the world and with its founder to find out exactly what makes the company tick. The result is a book she co-authored with the firm's CEO, Reed Hastings, entitled No Rules Ruled: Netflix and the Culture of Reinvention. Well, Erin Meyer is a professor of organizational behavior at leading business school INSEAD outside Paris. Welcome to the program, Erin.
Nice to be here.
Yeah, it's so great to have this inside track on Netflix, which so many people have been watching in lockdown, haven't they? So in a nutshell, how does Netflix innovate?
Well, it's actually quite simple, even though it's the opposite of what most companies are doing. So what they do is try to hire like only the best people, and then they give They give them huge amounts of freedom by giving, like, no rules, no procedures, no processes. The idea is that then that freedom breeds this incredible innovation. At most companies, I've seen that they're treating their employees like children. Right? If you want to buy a computer or go on vacation or start a new initiative, you have to ask permission. Right? Mm-hmm. But, at Netflix, with all this freedom, they treat their employees like adults. That's what really gets this kind of speed and innovation going.
Right. But before you can release controls like, you know, not have to do expenses forms, not have to apply for vacation, you first have to get very— the very best people. And so the key is actually talent density, isn't it, as you describe in the book?
Yeah. So that's the word they use at Netflix, talent density. And talent density— they have their own buzzwords, right? Talent density basically means instead of hiring like 100 medium employees and paying them a medium amount, you try to hire maybe only 10. And you really, you know, pay them top of market, up to 10 times what you would pay your medium employees. And once you get that talent density, then you'll see— so few employees, lots of talent— then you see that performance is contagious and that performance, that high performance, just cycles up into this kind of incredible speed.
Yeah. There's a slightly scary side to this as well. I want to show a little graphic. From something called the Netflix Culture Deck, which by the way was described by Facebook as perhaps the most important document to come out of Silicon Valley. And this is one of their Culture Deck sort of key phrases: Unlike many companies, we practice adequate performance gets a generous severance package. So is this kind of pretty scary? Because everyone thinks, well, when am I going to be fired if I'm less than Absolutely brilliant all of the time, every day, every night, every weekend. How does this actually work?
Yeah, well, it takes a certain kind of person to work there. I mean, you have to be ready to work for a high-performing team, like a sports team. And they say we are a team, not a family. So there's no job security. And their managers are asked to use something that they call the keeper test, which is that I need to think to myself, you know, on an ongoing basis, like if you came to me and you told me that you were leaving the company, would I fight to keep you? And if I would, I know you're a keeper. But if you're not, well, I need— I better find some other plans.
Yeah. And so this is something that managers are trained to essentially ask themselves all the time about their employees, the keeper test as sort of a permanent— at least it's part of the mindset, basically.
Yeah. So it's pretty easy to know that your employees are really not the best people for that spot, but to keep them on, of course, because we love our employees. It was hard to hire them. It's hard to let them go. So that keeper test is just a mechanism for encouraging managers to kind of do the hard work.
One of the most startling things in the book is when you write about the feedback that employees give to each other and also to their bosses in public. Yes. What's that about?
OK, so the first step to freedom is the talent density. And the second step is what they call candor, right? And I have to tell you, I was a little surprised when I came across this also. I'm from Minnesota. We don't like candor very much in Minnesota. But the idea is that if you really want this high-performing work environment, then you need to give one another, you know, a lot of thoughtful, caring, and honest feedback on an ongoing basis, not just to your employees, but to your colleagues and also your boss. So we should give that feedback whenever we think would be best. Even in the middle of a presentation would be okay if I thought that that would be the moment that would help you. Mm-hmm. And if I'm the boss, then I should, you know, solicit this feedback. And when I get honest feedback about my own performance, I should talk about it widely so that other people see I can take it and I'm working on it.
Right. And there's an image you use, which is the boss is at the roots of a tree supporting managers, and then the decisions get taken at the outer branches of the tree.
Yeah. Well, this is where really I think we can see the success of the organization, which is once you've got all of this talent density, And then you've got this ecosystem of feedback and you've got the performance kind of cycling up. Now you can really get rid of all of the management controls. And that's not just things like getting rid of vacation. At Netflix, they say the vacation policy is take some, right? Right. But it also really has to do with our fundamental way we make decisions. And at most companies, we make decisions like a pyramid. Right. You've got the CEO at the top, the employees who are lower level, and low-level employees, they can make small and unimportant decisions.
But it's, it's obviously subjective what makes a top employee. They have to have social intelligence because you can't have the whole accounts team leaving the week on holiday the week that the accounts are meant to be done.
Oh, yeah. And they— so they say at Netflix 2 things. One thing they say is lead with context, not control. And what that means is that although we don't have a vacation policy, I still have to set context for my team frequently about, you know, what's appropriate for taking vacation. Right. when we can take it and how we can take it.
Erin, you're an expert on culture mapping, as you call it. So it's essentially seeing how certain values in different cultures compare or don't compare, if that's a fair summary. How does Netflix actually build a culture that works in Japan, Singapore, the Netherlands? Maybe give us an example.
Yeah, well, when I started working with Netflix, they mapped out their corporate culture on my culture map, and they to the various countries that they were moving into. And I can tell you that candor was a little bit startling when they moved into Japan and Singapore. Yeah. So, but they didn't change the culture. They just worked locally to get them working in different ways. There was this story about this woman from Silicon Valley giving feedback to one of her Jap— trying to get her Japanese employee to give her feedback. And when she asked her employee for feedback, the woman started crying. And she said, you know, I really want to be Netflix. But I've never given feedback to a colleague before, let alone my boss.
So they need a lot of guidance to bring them to that point.
Takes a while.
I'd like to ask you about what Netflix— how you could situate Netflix within the corporate universe. And just before we do that, let's play you a quote from the book. And this is how we're all really under the spell of the Industrial Revolution 300 years later. And you say, most companies are still following the paradigms of the Industrial Revolution. But the biggest risk isn't making a mistake or losing consistency. It's failing to attract, attract top talent to invent new products or to change direction quickly when the environment shifts. What kind of other companies can realistically get away from the industrial revolution? I mean, if we're talking about the public sector, right, you've got employment laws that a company has to apply that are date from that period. What is the company going to do?
Well, really, you have to ask yourself the question, what's my principal goal? Is my main goal to eliminate error and to create consistency? If you're running a factory, that's your goal, right? Is my main goal to innovate faster and be more flexible? If so, this is a methodology for you. I've seen, like, let's think about the vaccines that came out of Johnson& Johnson coming from Janssen Pharmaceutical. Parts of that organization, clearly, innovation is what they needed to come up with those vaccines. There, no rules rules. But in other parts of that company where they're doing the productivity, eliminating error is their fundamental goal. And there they can stick to the traditional methods.
What do you think of it? I mean, France is obviously a sort of traditionally a country run by engineers. So it is that kind of culture of not making mistakes and consistency, the very thing that we just played the quote about, right? Can you imagine a sort of cultural revolution in France, in corporate culture, particularly in the public sector, or is that very, very unimaginable?
Oh, well, you know, I can imagine it. So I've been living in France for 20 years, and one thing I can tell you, French people like freedom. So it's true, of course, that in the most— in most French companies, there are a lot of these procedures and rules, processes that are kind of fixing or tying the company to today's situation. But I do believe that most French employees would like to have more freedom. And that freedom in France also will breed more flexibility and innovation. I expect to see a lot more of that right here in Paris in the future.
Right. Well, on that very uplifting note, we'll have to end. But thank you so much, Erin. And just to remind everybody, Erin is the author— co-author with Reed Hastings, who's the founder and CEO of Netflix, of No Rules Rules: Netflix and the Culture of Reinvention. Thank you so much for watching the interview, and we'll see you again on the program very soon. Goodbye. Thank you.
