Posted by Matt Perez on 02/18/2010 in workplace democracy , Reed Hastings , Netflix , Michael Eisner , command-and-control , Churchill Club
Last night's Churchill Club's event turned out to be great on many dimensions. Even the chicken dinner was remarkably good. Most striking to me was the contrast in culture between Hastings and Eisner. I hope the video is made available soon because it really illustrates the chasm between traditional and modern business culture.
Workplace Democracy vs Command-and-Control
In this post, I just want to remark on the huge cultural chasm between Reed Hastings, Netflix' CEO and Michael Eisner, ex-CEO of Disney. They're both accomplished, well-respected people. There's nothing "wrong" with either of them. They were both funny and entertaining and they both showed up as very smart, strategic people. But there's a huge difference on how they perceive the world of business that showed on the questions Eisner asked and, even more so, in how he dealt with Hastings' answers.<>
I'll attempt to illustrate with two examples.
This is the canonical Netflix question due to the highly publicized fact that the company's policy on tracking vacation time is "there's no policy or tracking" for salaried employees (starting in slide 63). This is just one example of a culture that values treating employees as adults. But this also happens to be a savvy business practice for modern businesses (at least for businesses that want to thrive for a long time). Eisner was befuddle by this way of thinking. Here's what he said to Hastings,
Every company that I've worked at where it's been successful, it's been… structure is essential. There is an absolute vacation plan, there is an absolute bonus plan, there is an absolute "mammy and daddy" structure so that the kids can play in a confined playroom.
The last sentence really frames the command-and-control culture: a "mammy and daddy" structure so that the kids can play in a confined playroom. I could not have said it better.
In answer to Eisner's question, Hastings explained that they don't have bonuses for executives. Eisner was surprised. Although I don't have the exact quote, he basically invoked the trickle down theory and said something along the lines that paying a bonus to an executive has a beneficial effect the organization.
This seems to show that Eisner believes the executive suite is the core of the organization. They are the "deciders." Technology companies like Netflix understand that to sustain a culture that supports rapid innovation and excellent execution they need to keep people focused on just that, and not vying for the next big bonus.
As an example, Hastings described a situation where one year they had a bunch of extra cash and thought of throwing it at marketing programs to get more subscribers. Their VP Marketing argued against that on the basis that the growth in subscribers would be minimal and not the best investment for the company. If she had been bonused on "subscriber growth," then she would have fought foot and nail for any chance to the subscriber base, even if by an insignificant amount. Instead, she pushed for putting the money into programs with a bigger bang for the company.
Crazy as a Fox
If Hastings is crazy then we, at Nearsoft, are as crazy as can be. We are constantly on the look out for "rule creep" and removing obsolete practices. We share all financial information with everybody in the company, even people's salaries.
For that and other "crazy" behavior we have won the Great Places to Work award two years in a row, placing as one of the top 20 companies in Mexico, among companies like HP, SAP, IBM and a bunch of other biggies. Nearsoft is also one of the Most Democratic Workplaces in the world, a list of 40 companies practicing democracy in the workplace.
UPDATE: We just got notice that for the third year in a row Nearsoft has ranked in the top 20 Great Places to Work for Technology Companies in Mexico in 2010!
For our business, and any other software businesses like Netflix, these practices are essential, not optional. Success for these businesses depends on continuous innovation, great innovations come from great people, great people are attracted to places where they can behave and be treated as adults, not worker bees in an assembly line.
Mind-numbing rules are too costly along many dimensions, to the company and to each employee. Getting rid of these rules actually make businesses more scalable and better prepared to face the future.
Please, let me know what you thought of the event.