How Netflix does Performance Management

Netflix's no-holds-barred approach to HR has gained the attention of many. They’ve not only succeeded in retaining prime talent, but also in achieving a high-performance culture.

The methods Netflix applies could be called radical, but they address challenges that all organizations face. 

Below we’re sharing four common performance management challenges and how Netflix has overcome them.

Challenge #1: Do as We Do, Not as We Say

According to Netflix, leaders and managers need to live and breathe company values into everything they do. Your mission statement and company values are not supposed to just sound nice, they’re supposed to be displayed throughout the work of your employees.

Netflix wants to strictly reward and promote employees that demonstrate its values and let go of those who don’t. It’s that simple, but it’s a big deal for reducing turnover rate.

This strategy works well for Netflix because of its strong, well-defined company culture. Netflix’s famous culture doc clearly outlines what the organization’s values are. 

If you want to set expectations around living company values and modeling behaviors at your organization, make sure your values are well-defined and communicated clearly to every employee.

» Interested in performance management software? Compare Lattice vs Culture Amp vs PerformYard.

Challenge #2: Feedback Is Given Too Late

Several years ago, Netflix revamped its performance management by completely doing away with annual performance reviews. Instead, Netflix opts for a 360 degree review process. 

With this new structure, employees are advised by their colleagues on what they should stop doing, start doing, or continue doing. The reviews are frequent and informal. 

At first, the reviews were anonymous to avoid awkwardness. Netflix has since shifted to signed feedback, and most recently, face-to-face 360 reviews. Opting for full transparency, Netflix believes people can handle anything as long as they’re told the truth.

While this approach works well for Netflix’s employees, it may not be effective for certain organizations and specific job types. But there are several other feedback strategies to consider.

Many companies combine 360 feedback with traditional performance appraisals to ensure that participants receive the developmental feedback they need to flourish. Others write down 360 feedback, rather than delivering it in-person. Some don’t use 360 reviews at all, but provide frequent feedback using other methods. 

Ultimately, the most effective strategy for giving feedback will depend on the needs of your employees and organization.

Challenge #3 - Needing the Dream Team

Netflix believes that in order to build a dream team, an organization must “foster collaboration, embrace a diversity of viewpoints, support information sharing, and discourage politics.” 

The company’s goal is to have one large dream team full of highly effective collaborators who are incredible at what they do, rather than a few small groups spread throughout the company. This can’t be done without hiring well.

Managers use what they call a “keeper test” to build their team. Essentially, they’re asked the question: “Would you fight for that employee?” The end goal is to give ownership of building great teams back to managers.

Netflix itself acknowledges that being on the dream team isn’t for everyone. This approach isn’t right for companies whose orientation is more about stability, seniority, and working around inconsistent employee effectiveness.

Challenge #4 - Understanding the Full Context

Netflix wants its employees to think independently and make decisions on their own. 

At every level, the leader’s main job is to provide clear and complete context to create autonomous thinkers. With the right information, employees are given the confidence to make great decisions.

Former Chief Talent Officer and co-author of Netflix’s culture doc Patty McCord said, “The best managers figure out how to get great outcomes by settling the appropriate context, rather than by trying to control their people.” 

Netflix believes it is most effective and innovative when employees throughout the company make and own decisions, but that doesn’t work for every organization. Steve Jobs’s micromanagement is what made the iPhone a great product. 

Top-down models work for many companies, depending on what they’re working to accomplish. But at Netflix, managers provide a framework for employees to make their own decisions.

How Do Employees Feel About Netflix's Approach?

If you work at Netflix, it seems that getting fired is never really far from your mind. 

The keeper test in itself is not always a source of comfort for employees. Managers also say it makes them feel pressured to fire people or risk “looking soft”. 

According to Glassdoor, the culture of fear is actually one of the most frequent cons. Many employee reviews mention the highly competitive environment makes work-life balance difficult to achieve. 

Other cons focus mostly on the transparency of the 360 review process: learning the details about why someone was let go or watching the politics carried out after uncomfortable feedback is made public.

So how does Netflix maintain a seemingly average score? What are the pros that make working at Netflix a positive experience? 

Most reviewers seem happy about the perks: free lunch, free coffee, and flexible schedules. However, the most resounding pros listed repeatedly are compensation, freedom, and responsibility. 

Netflix’s theory of responsible people thriving on freedom really works here, and employees seem to love it.

Can the Netflix Approach Work for You?

Netflix holds strong to the belief that if you talk simply and honestly about performance on a regular basis, you can get good results. 

Opting for full transparency is certainly not for everyone, however. Employees chime in on the company’s path, price increases, logos . . . literally everything. 

But can Netflix’s approach work for other organizations? 

Ultimately, creating the best performance management strategy isn’t about copying Netflix. It’s about understanding the needs of your employees and organization.

McCord’s own advice would tell managers to think like business people and ask: “What’s good for the company?” 

If you’re ready to figure out what’s good for your company, check out our Guide to Creating a Modern Performance Management System. You’ll get a step-by-step plan that shows you how to diagnose your organization’s needs, and then how to build a performance management process that’s specific to your organization.

» Using ADP Performance Management? Try This Alternative.

More Inspiration

Netflix is not the only organization creating its own performance management process. These days, many organizations are thinking critically about performance management and coming up with innovative processes. 

Here are a few more examples to inspire your own strategy:

Google’s Performance Management Playbook: Inspiration for Your Organization

How Does Uber Do Performance Management?

Deloitte's Radically Simple Review

How Does Amazon Do Performance Management

How Does GE Do Performance Management Today?

3 Approaches to Performance Management: Google, Betterment and IBM

How Does Facebook Do Performance Management?

Performance Management at Tesla: What We Know

How Regeneron Build their Performance Management System

How Does Asana Do Performance Management?

And if you're ready to take the next step, check out our guide to creating your own modern performance management process.