Netflix

Netflix has nice, fancy offices in Los Gatos. They have good snacks. They pay a pretty high cash salary. You get to claim that you're in the movie business.

Netflix makes a big deal about their hiring policies.

They claim that they regularly evaluate employee performance and let the lowest performers go. To me, this sounded great! In contrast to many other companies where lazy and incompetent people hang around for years, Netflix tried to retain only the best and brightest people.

Unfortunately, that's not what it was like in reality. A week after I started at Netflix, the recruiter who hired me was unceremoniously dismissed. Then the tech support guy in our office was released. Then an engineer on my team.

In each of these cases, it wasn't clear what these folks had done wrong. They had all been technically competent, friendly, and hard-working.

This promoted a culture of fear where no one felt that their job was secure.

It turns out that there were several things going on.

Managers were given incentives to regularly purge employees. So, managers developed antagonistic relationships with employees.

In most normal companies, a key responsibility of a manager is to defend their team in front of senior management. At Netflix, this just doesn't happen.

Additionally, Netflix doesn't have adequate mechanisms for providing feedback and review to employees. (In the year I spent at Netflix, I didn't receive a single review, positive or negative.)

Without a formal system for employee evaluation, managers resort to picking favorites: they hire in their friends and fire people who they aren't friends with. I saw this happen to many different people while I was at Netflix.

It's allowable by law (everyone is an "at will" employee), but it does not lead Netflix to hire and retain the best people.

Netflix has had the good fortune to be in an easy business. They moved early into online DVD rentals and have large cost advantages over potential rivals. Their competitors (Blockbuster, Walmart, etc.) took major missteps and were not really able to compete.

Netflix doesn't have to be the best at anything they do: operations, marketing, movie recommendations, etc. They just have to be OK at these things to run a profitable business, and they are only OK at them.

The key problem with Netflix is in their HR policies. Netflix needs to establish formal job responsibilities for all employees, establish goals for individuals, and measure employee performance against those goals.