Netflix has long been a notoriously secretive company, with no Nielsen ratings surveys, little feedback on why shows are canceled and no reported box office takings for the rare movies that actually get released in theaters.
But the streaming giant known for its external opacity has long been proactively transparent internally, a philosophy immortalized in 2009 when co-founder and CEO Reed Hastings first presented the company's mission statement in a 125-slide presentation, introducing new buzzwords like “great coworkers,” “keeper test” and “always honest.”
The presentations, always insisting on a blunt, no-frills approach, stood in stark contrast to Hollywood's usual business practices, and came across as brutal. Unfortunately for former employees and current competitors, this may be the blueprint that has enabled Netflix to thrive while its rivals stumbled.
Three more culture memos were released over the next few years. Before being made public, the memos were vetted and analyzed by senior management for months, while any employee could access the Google Doc where the memos were kept and leave their thoughts and comments.
The latest version of the document, which was released internally on May 8 and will soon be made available to the public, went through eight months of scrutiny and received 1,500 comments from employees, according to Netflix Chief People Officer Sergio Ezama. It's five pages long — half the length of Hastings' final 2022 memo — and includes subtle changes to some of the company's fundamental principles.
Hastings titled his 2009 presentation “Netflix Culture” with the subtitle “Freedom and Responsibility.” The idea was that Netflix trusted its employees to act in the best interest of the company. If you want to take time off, take time off. If you have a child and need time off, take time off. The document was shared widely throughout the company without fear of being leaked.
While these principles are being put into practice, the new memo first emphasizes Netflix's “people over process” philosophy: “We hire exceptionally responsible people who thrive on this openness and freedom.”
The keeper test, defined as “If X wants to leave, would you fight to keep them?”, now includes a disclaimer like this: “The keeper test may sound scary. In reality, we encourage everyone to have regular conversations with their manager about what is and isn't working.”
“Not all voices are created equal,” reads one line from the latest memo, because as the organization has grown to more than 13,000 employees, it's no longer practical to have everyone involved in every decision. “It doesn't scale,” said Elizabeth Stone, the company's chief technology officer.
The company has never been one to shy away from restructuring; critics say it has happened so often that many employees worry they might be laid off at any moment. Hastings has become chairman of the board; with Ted Sarandos and Greg Peters as co-chief executives, change is constant. And yet the latest culture memo feels more like an explanation of how employees should behave than a treatise on what the company aspires to be.
“The key to Netflix's culture is that we try to think systematically about what creates long-term excellence,” Hastings said in a video interview from his home in Santa Cruz, Calif. “And, of course, we try to attract and develop talent that is creative, that has freedom, that is focused on innovation and that is self-reliant.”
When you talk to people who work at Netflix, you get the impression that cultural beliefs permeate their lives in unexpected ways. Many employees came to the company skeptical of the memo, thinking it was a PR stunt to make the company stand out. But some employees now say the memo was 80 to 90 percent accurate.
Stone, who married a few months after joining Netflix in 2020, said she and her husband “now have specific phrases, like, 'Do you have any feedback?' He'll be the first to say at cocktail parties that he's really good at receiving feedback and that he's still working on giving it.”
This document is written as an aspirational document, and there is always room for improvement.
“Are we always completely upfront? No. Are we completely politically abstaining? No,” says Spencer Wang, Netflix's vice president of finance and investor relations, who has been at the company for 9.5 years. The company is “not perfect on all these fronts, but I would say it's a very accurate representation of who we aspire to be and how we operate in general,” he said.
Reflecting on the initial presentation, Hastings acknowledged that “putting freedom at the forefront was attractive,” adding that “it was good bait.”
But as the company grew, the concept of freedom and responsibility (often shortened to “FNR”) was weaponized by some employees as a justification for doing whatever they wanted: One year, a company executive said, an assistant wrote off $30,000 in expenses because there were no rules against it.
“We value freedom, not for its own sake, but when it produces excellence,” Hastings said. “In retrospect, this is a conscription system I wish we had 15 years ago.”
From the start, Netflix was never intended to be a place where most people spent their entire lives: There were no employment contracts, and employees could be fired at any time, regardless of rank.
While few people leave voluntarily (voluntary attrition rates have ranged from 2.1% to 3.1% over the past two years), about 9% are asked to leave each year. That may come as a relief to some who say the pace is all-consuming and that the company's “uncomfortably stimulating” guiding principle is unsustainable. In a memo, the company warned that the concept could lead “many people” to choose “more stable or less risky” places to work elsewhere.
Some employees, including the company's two co-chief executives, have been with the company for more than 15 years, but many consider five years a major achievement.
Still, some say the pressure is energizing. Brandon Reeg, Netflix's vice president of nonfiction and sports, says he often felt stifled when he worked at a traditional entertainment studio. He calls Netflix's culture a “lifeline,” allowing him to make an impact he wouldn't have been able to at a traditional studio. Five years ago, he persuaded his bosses to release the first-ever episodes of his reality show, “Rhythm + Flow,” in bulk, a formula he's since repeated for other reality shows, like “Love is Blind,” and scripted shows like “Bridgerton” and “Stranger Things.”
He said the strategy goes against what Netflix has done in the past, but executives were willing to try it.
Reeg said their approach was, “We hired you, and if you think this is the best thing to do, and you've gathered the opposition, taken all the feedback, and arrived at this, then let's do it.”
Hastings seemed relaxed during the video interview, perhaps because he's free from the jet lag and “insane” schedule that once consumed him as chief executive. (His new life of philanthropy and ski resort ownership might also help.)
Or maybe it's because they no longer receive the constant feedback Netflix is known for, which has been jarring for many employees who have jumped into the Netflix fray, especially those from outside Silicon Valley.
Wang said she doesn't mind receiving honest feedback, but as an Asian American, it was initially difficult for her to offer it because it “goes against my cultural background.” More recently, she said she's been told she's “too blunt,” so she now tries to be more sensitive.
Stone, the chief technology officer, recalled a recent happy hour event in New York City when an engineer introduced himself and said, “I'm the engineer who wrote the bug in the code that took down the service two weeks ago.”
“He knew that by introducing himself to me like that, it would start a good conversation about culture around improvement,” she said. “It wasn't like, 'Why is this person still here? This person should be fired.'”
As for Hastings, he may not need to receive any more feedback, but he can give it: He said he was grateful that Sarandos and Peters waited a year after his departure to rewrite the culture memo as their own.
“It's 10 percent better,” he said. “Not dramatically better, but it's better than anything I've done before, so I take that as a compliment.”
