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Netflix: Terror at the Top?

Fear-based Management as a Business Worst Practice

Background
Yesterday I wrote of Netflix’s arrogance, their apparent disregard for the needs and priorities of their customer base, and their seemingly bizarre obsession with unnecessarily making their own problems (i.e., a changing shift in technology and market demand from physical media to streaming media) a problem for their customers by forcing two websites, two billing systems, and a 60% price increase on them.

A Customer Respect Issue?
Except for the 60% price increase, nearly everything that Netflix needed or wanted to do could have been done more or less transparently to their customer-base. Instead, Netflix demonstrated what many people believe is a lack of respect and an absence of concern for their customers.

Total Market Misread
As I wrote yesterday, they brazenly predicted a windfall of profits - anticipating an increase of 400,000 subscribers. Instead they’re on track to lose 600,000 customers this quarter. That the company could be SO out of touch with their customers that they would “miss” by a whopping 1 million customers is breathtaking. The first sign of corporate narcissism is a complete and total misread of how the market reacts to your decisions. Their decisions have cost them dearly, as their stock has dropped by 57% this year, wiping out some $9 billion in market capitalization.

How Could This Happen?
Along with most of the nation, I shook my head at Netflix’s recent announcements and thought “what were they thinking?” Netflix has a reputation of paying well above average, and they can afford the best and brightest. How could they commit what appears to be such clumsy ham-handed blundering?

After I wrote my article yesterday, I got a Tweet from Julie, otherwise known as @nihonmama. I had Tweeted about a “culture of arrogance at Netflix”. She asked me if I had ever taken a look at employee/ex-employee comments on GlassDoor.com. I went to GlassDoor, and within 60 seconds it hit me like a cast-iron skillet in the face – "people at Netflix are terrified...they literally work in a culture of terror and fear", I thought to myself.

A Culture of Terror and Fear – A Business Worst Practice
Don’t get me wrong. I’m not a socialist who believes that companies should be run by some sort of democratic process. I’m not the most warm-and-fuzzy “there’s a place for everyone no matter how many times you screw up.” I believe in capitalism, and risk taking and accountability. What we are talking about here is something completely different.

Accountability and high standards are normal. A fear-based culture is aberrant and dysfunctional. If companies were people, then companies with fear-based cultures would be diagnosed with severe personality disorders and referred to a doctor for medication and therapy.

Describing a Culture
An excellent article from Ethikos and Corporate Conduct Quarterly by Ed Petry advises companies to be aware of their culture, as legally they are being increasingly held accountable for it.

The very first step he recommends is assessing the existing culture. “Begin by setting aside your values statement and your preconceptions. You need to hear directly from employees throughout your organization...your goal is to determine what people really think about the organization, what motivates them, what behaviors do they believe are rewarded and punished, what are the “unspoken rules” that everyone knows….examine the stories that currently travel on the corporate grapevine. Is there a pattern to the type of stories that survive the longest and travel the furthest?”

The closest I can come to this is to view the comments on GlassDoor.com left by current and former employees. There are well over 200 comments. What is striking is the similarity across a broad swath – the majority of respondents. Broadly speaking – people stated that they are/were working in fear, and in a lot of cases, they didn't/don’t feel respected. A feeling of one mistake, the wrong word to the wrong person, the wrong opinion, being perceived as not 100% in agreement, sudden terminations without warning.

From the Horses’ Mouths
I encourage you to read the comments yourself. I’ve selected a few that I believe reflect the opinions of the majority of respondents. Note that I'm focusing on the corporate culture. There are other themes such as high pay levels that I didn't bring out. Indeed, on the average, the respondents gave Netflix a 3.2 / 5 as a place to work, so there must be positive aspects to working there.

But getting back to "corporate culture" - selected comments from current/former employees of Netflix on GlassDoor.com:

  • It's only a matter of time before you're asked to go to a conference room and find yourself staring at a red Netflix packet. Advice to Senior Management: Wake up and start treating people right...what goes around, comes around.
  • You *will* get fired. It's just a question of when. There will be no warning, and you will be gone. Advice to management? Take a long hard look in the mirror.
  • Everyone is afraid to make a mistake or be perceived as making a mistake.
  • When it comes to people, Netflix is a throw-away culture. There is a price to pay for treating employees as easily replaceable commodities. Netflix goes to a lot of trouble to hire great people. It puts very little effort into keeping them. Employees live with a lot of stress and some fear knowing that they could be fired at any time no matter how hard they work, no matter how long they worked there, and no matter what they accomplished for the company.
  • Extremely high involuntary (and voluntary) turnover that puts everyone on edge and lowers morale; people are afraid they might say/do one undesirable thing and get fired. People are very afraid of making any mistakes for fear of being fired because it happens so often.
  • You are always on the tightrope...
  • Constant fear of being let go. Advice to Senior Management: your company is a revolving door and you continue to lose brilliant people because you don't treat them like human beings.
  • Cons: Read other reviews of former employees. Out of all people that I worked with at the time more than 80% were kicked out. Most of them are bright engineers. My advice - if you are offered a position in Netflix fight for the highest salary possible. In any case expect to be fired soon.
  • Constant fear of unreasonable dismissal. Open and honest feedback is only acceptable when it is in agreement with management's
  • Look at the comments on this site around turnover, treating people poorly, sick culture, and weak senior leadership. These are all very accurate.
  • The culture has serious problems. a. You will see countless references on this site to a “culture of fear”. This is widespread in every department and division. Even executives laugh that their time is numbered. A company that functions on fear is not a place for the long term. When everyone in a room is asked do they fear being fired and everyone says yes, that is a big problem. b. A culture of watching your back and stabbing others in the back. Many employees, including C level people, participate and have learned that tossing others under the bus keeps them safe. They see this as a way to protect themselves from scrutiny from above.
  • Employees and managers are all too comfortable talking about what is not working with a person. The 360 review process reinforces this. Those who have been there the longest are almost soulless with regard to firings. They have fired or seen so many people let go that they don’t really care anymore.
  • You can be fired without warning, feedback, or any coaching.
  • Most employees don’t bring any personal belongings to work as they could be let go at any moment. It is often a surprise.
  • Do not move for a job with Netflix. If your partner or spouse doesn’t work, you could be risking your families financial health.
  • There is no job security regardless of how good you are. Performance does not equal security at Netflix. Managers have a one-year shelf life before they get shown the door. Directors and VPs are constantly evaluating managers, so anytime you make a mistake, are perceived not to be cutting edge, it could be your turn.
  • Managers main role is making their team better through constantly looking for their weaker employees. Leaders are asked could they hire someone better. Of course the answer will always be yes. It’s incredibly stressful and life-shortening for you and your loved ones.
  • Why work at a place where people, including your hiring managers, treat you as completely disposable?

I’m sure the readers get the point. Again, read for yourself.

Ten Signs You Work in a Fear-based Workplace
I’d like to refer readers to an excellent article by Liz Ryan from Bloomberg Businessweek.

It starts off with an anecdote that reads in part “I tell my boss exactly what he wants to hear. People who tell my boss what he doesn't want to hear are people who get laid off at the end of the quarter." To me, that echoed much of what I had just read on GlassDoor about Netflix, except that I got the impression that things happened faster at Netflix.

Ryan comments that the principal signs of a fear-based culture are “preoccupation with looking out for No. 1, a clampdown on consensus-building conversations, and the shunning or ousting of anyone so bold or naive as to tell the truth about what he or she believes”.  Hello...Earth to Los Gatos?  Does this sound like you?

A summary of Ryan’s excellent “ten signs” list:

1) Appearances are everything

2) Everyone is talking about who’s rising and who’s falling

3) Distrust reigns

4) Numbers rule

5) Rules number in the thousands

6) Management considers lateral communication suspect

7) Information is hoarded

8) Brown-nosers rule

9) ‘The Office’ evokes sad chuckles rather than laughs

10) Management leads by fear

You make the call – read the 200+ positive and negative comments.

What’s Up with Netflix Executive Management?
Liz Ryan mentions in her article that fear-based CEOs surround themselves with “yes-people” and tend to promote those who are the least-knowledgeable but the most fawning (a nice way of saying “brown nosers”).

As a result, the top executives lose touch with reality. They never hear real opinions or participate in real discussions. They lose touch with their customers, and with reality. It becomes a bunker mentality – the leader (no longer "in touch") shouting out orders to fearful lackeys too afraid to speak out. And it continues down the command chain.

It’s this kind of situation that I believe lead CEO Hastings to completely lose touch with the customers and his market. To make decisions that enraged his customer base. To completely miscalculate the customer reaction to his decisions.

There is a special kind of blindness or even obliviousness that you see take over when some people become CEOs, especially after they've had some success. Aside from demonstrating being “out of touch with the customer”, they seem incapable of admitting that they might be wrong, and lack the ability to formulate a believable apology, or recover from mistakes.

For whatever reason, this class of CEO seems to believe that the way to recover from a mistake is to double or triple-down on that mistake.  I've got nothing against doubling down when I'm holding an 11.  But to double-down when you're holding a 5 doesn't seem like a great idea to me.

What to do Next?
Sadly, for the fear-driven enterprise, the next step rarely happens.

The next step involves doing a REAL assessment of the situation. They need to admit that “something is wrong” and acknowledge that the blame falls squarely on the very highest levels of leadership.

The C-suite needs to man-up or woman-up and take ownership of the monster they created. In an attempt to create the very highest performing of organizations, they went too far and created something else.

They made a mistake. It happens. Admit it, fix it.

Of course, arrogance at the top means that the likelihood of doing any of that is… well, don’t go holding your breath waiting for this to happen. Even odds as to whether this or single-payer healthcare in the United States happens first....

More Stories By Hollis Tibbetts

Hollis Tibbetts, or @SoftwareHollis as his 50,000+ followers know him on Twitter, is listed on various “top 100 expert lists” for a variety of topics – ranging from Cloud to Technology Marketing, Hollis is by day Evangelist & Software Technology Director at Dell Software. By night and weekends he is a commentator, speaker and all-round communicator about Software, Data and Cloud in their myriad aspects. You can also reach Hollis on LinkedIn – linkedin.com/in/SoftwareHollis. His latest online venture is OnlineBackupNews - a free reference site to help organizations protect their data, applications and systems from threats. Every year IT Downtime Costs $26.5 Billion In Lost Revenue. Even with such high costs, 56% of enterprises in North America and 30% in Europe don’t have a good disaster recovery plan. Online Backup News aims to make sure you all have the news and tips needed to keep your IT Costs down and your information safe by providing best practices, technology insights, strategies, real-world examples and various tips and techniques from a variety of industry experts.

Hollis is a regularly featured blogger at ebizQ, a venue focused on enterprise technologies, with over 100,000 subscribers. He is also an author on Social Media Today "The World's Best Thinkers on Social Media", and maintains a blog focused on protecting data: Online Backup News.
He tweets actively as @SoftwareHollis

Additional information is available at HollisTibbetts.com

All opinions expressed in the author's articles are his own personal opinions vs. those of his employer.

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