Netflix Human Resource Management

Compensation (Reward Management).

Holiday/Vacation schemes (Work life balance: organisation policies and individual choices).

Conclusion

Potential Problems?

They got rid of time off for salary professional employees keeping track of the work they did as opposed to paying attention to policies about how many days you can take off.

People can work from home more efficiently at

times.

Dont distrubute performacnce pay based, but rather a market based pay is emphasized.

They pay top of the market, as it is a core element of their high performance culture.

Their goal is to keep each employee at top of the market so they pay more than anyone else likely would, pay them as much as a replacement would cost and pay them as much as we would pay to keep them if they had a higher offer from elsewhere.

Burnett and Van Glinow (2011) - in designing international reward systems, the role of HR reward manager typically becomes combining global data to develop appropriate compensation packages. Through Netflix’s HRMS schemes it is evident that they have fulfilled the objectives of they system by maximising recruitment and retention of the appropriate staff, develop cost effective reward policies, develop global reward practises that are fair and consistent, and ensure consistency with business strategy.

• An obvious problem would be if too many people were taking the stime off at the same time.
• However people within their work teams would manage and co-ordinate time off, an example of decentralising power.
• "Act in Netflix's best interest"

Recruitment and selection/Performance Appraisal.

Three tests:

NETFLIX STATISTICS :-

• During 2013 their stock more than tripled, won 3 Emmy awards and U.S subscriber base grew to nearly 29 million.
• Since going public in 2002, they have substantially increased talent density and employee freedom.

• What could the person get elsewhere?
• What would we do for a replacement?
• What would we pay to keep that person if they had a bigger offer elsewhere.

Their overruling policy is to hire, reward and tolerate only fully formed adults.

This test is done annually where the managers have to answer the three tests for the personal market for each of their employees.

Managers own the job of creating great teams.

They hire people based upon 9 values:-

- communication

- impact

- curiosity

- innovation

- courage

- passion

- honesty

- selflessness

Three particular issues that require attention includes:-

• A mismatch of employees.
• Employees lacking knowledge of what drives the business.
• Split personality start up.

Why they introduced their holiday schemes.

"If you are careful to hire people who put the company’s interest first, 97% of your employees would do the right thing, which makes it unnecessary for a HR department to carry out schemes and adjustments to correct the mistakes of the minority"

According to Paddy McCord (2014) Paid time off, nothing changed, took same amount of time off but felt better and more in control.

She quotes “You don’t empower people, you allow them to have their own control”.

Amount people work is driven by their own circumstances and lifestyles.

Introduction

Compensation

No administered 'raise pools' each year, instead each manager aligns their people to top of the market each year.

Freedom & Responsibility.

”If you want to build a ship, don’t drum up the people to gather wood, divide the work, and give orders. Instead, teach them to yearn for the vast and endless sea”.

How they recruit?

The compensation that Netflix offer is not dependent on their success.

3 Human Resource Strategies

Netflix strive to hire “A” players to work alongside each other, with the belief that excellent colleagues trump everything else. The recruitment tools that Netflix primarily use are headhunting to ensure the best talent is acquired.

Evaluation

• Wilensky (1968) states “a career is a succession of related jobs arranged in a hierarchy of prestige through which persons move in an ordered sequence”.

• Don’t worry about turnover/retention however if morale was happy and things were working, Netflix was happy.

• As part of their HRMS, they encourage senior staff to take time off as they serve as role models.

• This typifies the freedom and responsibility they offer, while most companies have complex policies around vacation and what consequently have whole departments to administer compliance with these policies.

Through processes like this it is easily identifiable how Netflix go through constant renovation and a cycle of employees by letting the right people go when technology shifts whilst attracting talent from other big tech firms such as the likes of Google and Facebook.

-Hire, Reward and tolerate only fully mature adults (Recruitment and selection/Performance Appraisal).

- Holiday/Vacation schemes (Work life balance: organisation policies and individual choices).

- Compensation (Reward Management).

• Through headhunting, Netflix can attract top of the market employees with the perfect competencies to match the job role proving a high degree of creativity and coherent work. A problem with this however is that people need to be lured away from a good job with heavy financial incentives.

Evaluation (2)

Keeper Test

Armstrong (1996) - reward management recognises that the motivation to improve must extend to all employees as opposed to just the high flyers. As well as this they must be flexible and not tied to rigid structures and job evaluation schemes. There is an assumption that all employees are key drivers in meeting organisations goals, thus reducing disparity between people in the organisation.

Evaluation

Employers can deliberately shelter employees from what the effects of the labour market, Netflix believe however that it is a healthy idea, not a traitorous one to seek out what other firms would pay, however whilst staying mindful of company confidential information.

Netflix offer a mix of reward packages as they allow their employees to decide how much Netflix stock they want, versus cash, thus a mix of rewards can make up the employees pay package that may not be solely monetary based, which acts as an incentive for people who aren’t as concerned with rigid monetary gains.

Honest policy influencing their performance appraisal.

A market based pay in the contemporary world differs from more traditional models where employees can get materially under-paid, thus resulting to them switching to market based pay. Netflix offer a consistent market based pay, which avoids these ramifications.

They use a Keeper test, where managers create a hypothetical situation as a proxy to see who is valuable to the company, they do this by ‘which of my people, if they told me they were leaving, for a similar job at a peer company, would I fight hard to keep at Netflix’. This helps with the constant renovation process as it establishes who is vital to the company at that point of time. The other people get a general severance so they can open a slot to find a star for that role.

Taylor. c (2005) 'How Netflix Reinvented HR'. Available at: http://www.hcamag.com/hr-news/how-netflix-reinvented-hr-202049.aspx (Accessed at: 20th November 2015).

Baer. D (2014) 'Netflix's Major HR Innovation: Treating Humans Like People’ Available at: http://www.fastcompany.com/3027124/lessons-learned/netflixs-major-hr-innovation-treating-humans-like-people (Accessed at: 20th November 2015).

Develop a Market Based Pay Structure (2015) Available at: http://hrpeople.monster.com/education/articles/99-develop-a-market-based-pay-structure (Accessed at: 20th November 2015).

Smith. C (2015) By the Numbers: 50 Amazing Netflix Stats and Number.s Available at: http://expandedramblings.com/index.php/netflix_statistics-facts/4/ (Accessed at: 20th November).

Netflix (2015) Wikepedia Available at: https://en.wikipedia.org/wiki/Netflix#Cultural_effects

McCord. P (2014) How Netflix Reinvent HR. Available at: https://hbr.org/2014/01/how-netflix-reinvented-hr (Accessed at: 20th November)

Netflix (2015) Netflix. Available at: https://www.netflix.com/gb/ (Accessed at: 20th November).

(2014) Available at: https://www.quora.com/Is-Netflix-the-current-high-paying-company-in-the-bay-area (Accessed at: 21st November).

Huffpost Live (2014) ‘How Netflix Revolutionised Human Resources’, 19 March, Available at: http://live.huffingtonpost.com/r/segment/netflix-employee-perks-third-metric/530cf3e902a7606378000114 (Accessed at: 21st November).

360 degrees Performance Appraisal (2012) Available at: http://www.whatishumanresource.com/360-degrees-performance-appraisal (Accessed at: 21st November 2015).

Evaluation

Netflix eliminated formal performance reviews as it was deemed too ritualistic, and they therefore introduced a face-to-face 360-degree review instead allowing employees to identify what colleagues should stop, start, or continue.

Bad compensation practises:-

• Managers care more about internal parity instead of external market value.

However Netflix dont do this as they use their three tests.

Evaluating Performance Appraisal

• The 360 review based system they use offers many advantages compared to Performance Improvement Plans as it is an all encompassing direction feedback. Research from Dugdill (1994) military researchers found that peers opinions were more accurate indicators of a soldier’s ability than were those of superiors.
• On the other hand, Grint (1993) argues that it replaces the subjectivity of one appraiser with the subjectivity of many appraisers thus implying that a 360 review based system is not effective in obtaining objective productive feedback.
• Pink (2011) critiqued it by saying that it extinguishes intrinsic motivations, diminishes performance, crushes creativity and fosters short term thinking.

• Boushey et al (2008) stated that nearly half of all employees in the USA report conflicts between jobs and other responsibilities, more than a generation ago.

Evaluation (2)

• Technological advancements have facilitated the flexibility of work arrangements, allowing people to work from home and/or the workplace thus allowing them to account for work/life balances.

Netflix Human Resource Management

• Parent-Thirion et al (2007) states that workers with fixed, regular, day time work hours tend to report the greatest work-life balance satisfaction as imposed flexibility undermines the predictability of working hours which is generally disliked amongst employees.

• However it could also be argued that with the advent of technological advancements, peoples personal lives may be impinged by emails, internet, mobile phones thus making it difficult for them to differentiate between personal and work life as they once could.

• However as Netflix incorporate freedom and responsibility into their corporate culture they endeavour to minimise rules as they grow by inhibiting chaos with high performance people, thus linking this reward management aspect of their company to hiring the right people in the first place that match their competencies.