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Tuesday, August 04, 2009


Reed Hastings and I had a conversation in April to catch up. I was reminded of it again when his presentation on corporate culture came to circulate around various social networks. One of the questions Reed asked me at the time we had the discussion was whether I had any thoughts about management in the valley, having worked at more startups than he had (and also being in the less enviable position of not being the CEO at any of the startups).

One thing that conversation did was to get me thinking about the academic model of management that Google espouses. When I say management, I'm really talking about promotions, because that's how company culture reinforces its values (slide 7 in Reed's presentation). In 2004, I was an enthusiastic supporter of the academic peer-driven model. It felt much better than having a manager evaluate an individual contributor --- that model, I felt, always risked the problem of having a manager that was susceptible to brown-nosing. By the end of last year, however, I was seeing weaknesses in the academic model, many of which are articulated better than I ever could in The Trouble with Physics. In particular, what I saw was that certain types of problem-solvers and approaches were systematically under-valued --- and in many ways it's better to be someone who puts out fires than someone who prevents them from happening in the first place (note that it's not just the academic model that has this problem --- the top down model also does this --- in many large organizations, it's far better to quietly prepare a fire-fighting scheme if you see a fire happening than to try to prevent fires). The problem was that I couldn't see a better model, despite all the weaknesses of the peer-driven model. Like Democracy, I thought, the peer-driven model was the worst one in the world, except for all the others.

Reed told me he was a big fan of the traditional top-down model well done. The problem was that at startups (or even most big companies), I had yet to see the traditional top-down model well done. I frequently saw yes-men type middle management who couldn't say no to senior management, and all too frequently talent ignored in favor of hiring yet another manager from outside (something that startups do all too frequently). So I started asking around. I was struck by an insider's explanation of how Silos were broken down at Microsoft: the top 50 or so managers were called "partners", and their compensation was not at all related to their areas of influence, control, expertise, or title. Their compensation was tied completely to how the company performed, which basically made it so that all partners would help each other out if it was important to the company. That's a fascinating approach to solving the Silo problem, and to me, anyway, it provides an alternative to the academic peer-driven model that I saw as being imperfect. The problem is that the top down model still depends very much on having good managers. Even having had the luck to have exceptionally good managers at Google and elsewhere, I still run into enough poor managers at otherwise high quality places to believe that management hiring is anything but a crap-shoot at best --- no amount of interviewing will tell you that this guy who's a super-star on his resume is actually going to lead all your good people to leave over the next 5 years because of the way he plays favorites amongst his reports. This is why I believe that startups should grow managers from inside if at all possible. As Andy Grove once wrote: "People often complain that when you turn a great engineer into a manager, you get a mediocre manager and lose a great engineer. But think about the alternative? What message do you send if you pass over the smartest folks on your team in favor of someone from outside?"

In any case, I see the Netflix culture document as Reed's expression of his ideal approach to management --- it's another data-point in how to approach the fundamental problem of how a company organizes itself. There're also many ways of doing it wrong --- the worst of which is to pick a model that doesn't fit your management style and then coming across as hypocritical to all employees.

Ultimately, however, one must bear in mind that these discussions are moot if the business is unsuccessful --- that Google, Netflix, and Microsoft have to contend with these organizational headaches is a good sign --- failed businesses never have to worry about scale.


pieter m.s said...

nice post..I like this..

Jim Ausman said...

Netflix has a reputation for being full of prima donna slave drivers, so I am not really sure that this is a place to hold up as a good model for management.

Piaw Na said...

Jim: I've worked for Reed personally. He wasn't a slave driver. He was the kind of person you would follow off a cliff if you had gotten to know him well. Netflix might very well deserve that reputation, but I think you'd have to come up with better evidence than hearsay.

Jim Ausman said...

I am glad that Reed is a good guy to work for personally and think it is great that you have such a high opinion of him. But Netflix doesn't really have that great a reputation as a great place to work. Perhaps a little back story is in order: Netflix recruited me to work there in a pretty senior management role, which was flattering. So I started asking around and found a few friends who work there. The staffer told me that everyone there works 60+ hrs/wk, management more and that burnout and turnover was high. The contractor who worked there told me that everyone there was well paid and constantly told how only the best of the best worked at Netflix, so they tended to big egos.

This is all heresay, certainly. But log into Glassdoor and look at the comments there:

"Began to feel like a revolving door after working there for a couple years. Turnover is very, very high."

“Three works can summarize the culture at Netflix. : Culture of Fear.”

"People aren't machines and they aren't expendable. If you don't spend some effort nurturing them, then you will lose them, and the people at Netflix are hard to replace"

“Good Developers but bad Company Culture”

“I loved my co-workers, but spent a year fearing my management.”

I could go on, but you get the point. I ignored posts from people who rated Netflix as a 1 (lowest rating) but if I had included them, remarks would have been much more negative! I also skipped posts from the Customer Service Reps (call center) but these are of the same general kind. There are certainly some people who praise the "pressure cooker" environment there. They also got some accolades like Employees’ Choice -50 Best Places to Work, Glassdoor, 2009 and America's Top Companies, Forbes, 2009 and these are no small things.

I know you agree with me and the authors of Peopleware that enforced overtime should be discouraged, but it looks like this is not the case at Netflix. The pay and quality of the staff is very good, but the hours are long and burnout and turnover are high.

Not my kind of place, at least not at this point of my life. It might have been fine when I was young and single.

Piaw Na said...

There are two parts of Netflix. One is the hourly wage segment, and the other is the salaried segment. It would not surprise me to hear that the former sucked. It wouldn't surprise me to hear that the latter sucked as well, but one would think it would show in the product.

It's also not unusual for people (even Reed) not to be able to live up to their ideals. My favorite line from Reed's presentation still holds, however:
The real company values, as opposed to the nice-sounding values, are shown by who gets rewarded, promoted, or let go.

Unknown said...

Hi Piaw,

I know you worked for Reed before, but I was wondering if you've kept up with what is happening inside Netflix as of late. You probably knew that most of the Ops staff left when the last VP departed. And the CTO, Andy, is on a termination binge that puts Caesar to shame. This has created a serious innovation problem at Netflix (just take a look at how bad the iPad interface came out, try searching for movies called Test and you'll see what I mean, the recommendations are laughable). Its an interesting case study in what happens when you literally have no rules. Check out my blog for a more indepth post on the topic.

Piaw Na said...

Sounds like a disaster has over-taken Netflix. Silicon Valley companies don't do a good job when growth slows. That's what I've noticed over the years.