Climate Control: Netflix on Corporate Culture & Innovation

“Our model is to increase employee freedom as we grow, rather than limit it, to continue to attract and nourish innovative people, so we have a better chance of long-term continued success.”

— Netflix CEO Reed Hastings

To become more innovative, companies need to cultivate the key elements necessary for innovation— one of which is an innovation-friendly culture. To build a corporate climate that truly fosters innovation, you must be able to encourage smart risks and energize your workforce. Netflix, one of Fortune Magazine’s 100 fastest growing companies of 2010, does exactly this by promoting a culture of freedom and responsibility from the top down. The company’s commitment to these principles goes far beyond just a values statement chiseled in marble.

• Freedom — Netflix does not have a vacation policy and doesn’t track vacation time. Employees may take as many vacation days as they feel they need. When it comes to expenses and business travel, the only rule is to “act in Netflix’s best interests.”

• You Have to Believe — Netflix also requires that all employees take responsibility for contributing to the company’s success. High performers are substantially rewarded and the merely adequate are quickly let go.

Sound harsh? According to Hastings, “We need a culture that supports rapid innovation and excellent execution. Both are required for continuous growth. There is tension between these two goals: between creativity and discipline.”

How has balancing creativity and discipline paid off for Netflix? The company’s net income rose to $116 million in 2009, an increase of 40% over 2008. Netflix’s stock price climbed 116% in 2010 — even as competitor Blockbuster was delisted from the New York Stock Exchange.

Netflix isn’t sitting back and declaring victory just yet. The company is staking its future on streaming video as it prepares to compete with giants like Amazon.com, Wal-Mart, and Apple to dominate the digital entertainment market.

It is more crucial than ever before to foster creativity. To get a closer look at how Netflix drives creativity, read their 128-slide presentation, “Reference Guide on our Freedom and Responsibility Culture.”

Share what you and your organization are doing to build a thriving work environment that drives innovation across your organization and supports quality execution?

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