Answer

SHRM Case Study: Netflix

Performance Management Issues

Laying-off of employees due to unfavorable economic environment caused by the dotcom bubble, and the 9/11 terror attacks were some of the performance management issues that Netflix faced in 2001. During this period, the organization fired a third of its employees, and put their much hyped IPO on hold. However, business picked in 2002 due to the growing of the DVD- by- mail subscription sector, and the few employees that remained were overwhelmed. While the management worried about the workload of the remaining employees, they were shocked to learn that some of them were actually happy working alone for long hours because those laid off were dragging the team down. From this, it is clear that a company might be worrying about the small number of employees versus the workload, sometimes overlooking the efficiency and productivity level of this small team.

Another management issue that came out from the Netflix case study is letting go of redundant employees, especially when they are hard working and have contributed immensely to the success of the organization. When a business changes operations, such as going public with its shares; it must comply with all the stipulated laws. In majority of cases, the firm will carefully analyze the skills of the existing employees and retain the ones that are competent. Although it is tempting to retain those with inadequate skill, it is advisable to talk to them in person and offer them an excellent severance package to avoid any litigation. Redundant employees will only lower the productivity of the company because their skills no longer fit the current environment. However, an excellent package will make them feel appreciated and they can use the finances to retrain and better their skills.

Telling the truth pertaining to performance is also a critical issue as shown by the case study. Netflix eliminated the formal reviews that are normally carried out at the end of every quarter. The reason behind this is that they were too sporadic and infrequent. Instead, performance review became a part of the daily working routine where managers sat down with employees and discussed issues concerning productivity. It is usually not very difficult to determine how well departments are doing in terms of performance by simply looking at their daily output. In most cases, the elaborate bureaucracy that is developed around measuring performance only complicates the matters.

Organizations use traditional methods to review performance so as to avoid litigation. It is believed that documentary evidence is needed to show that an employee was fired due to persistent poor performance. Organizations even formulate Performance Improvement Plans (PIPs) for such a worker.  However, PIPs are dishonest because they outline some unreachable targets that the employee cannot achieve within the stipulated period. In the end, they are just a waste of time and resources for the company due to the endless meetings held between the parties to discuss the targets. The final outcome is that the employee will feel demoralized and they will be fired from the firm. Instead of putting an employee through this rigorous and heartbreaking process, it is easier to talk openly with the employee. If their skills have become redundant due to technology, the organization is better off letting the employee go. In essence, the employees should regularly know about their performance so that they can make the necessary adjustments.    

Cultural Issues

From the case study, it is clear that most organizations elaborately define their company culture to the employees. However, employees rarely follow these guidelines because the leaders are not very keen on enforcing it. In most cases, they create a work environment that does not support the company culture.  The mismatch between the behavior modeled by leaders and the firm’s cultural values leads to non-compliance. For instance, most tech start-ups encourage a culture of casualness while at the same time they envision high performance. Casualness may extend to time management and efficiency and this will negatively affect productivity. A solution to this problem is ensuring there is no mismatch between the corporate values and the business operating environment.

Employees always look up to their leaders for guidance. It is hypocritical for a manager to keep on emphasizing on the importance of handing in reports on time, if they are always late with theirs. Workers will always pick a cue from their leaders and emulate them in their daily operations. Leaders that are always preaching company values yet their behavior is not aligned with them rarely motivate employees to perform. From the Netflix case study, the solution is simple: lead by example and the workers will follow suit.

Another strategic cultural issue is ensuring that employees fully understand the wheels that drive the business. Workers must appreciate how a business generates its revenue and the behaviors that drive its success. If employees fail to understand this concept, it might lead to blowing up of expenses even if the revenues are growing. In the long run, employees will tailor their behavior to enhance productivity. A firm also needs to understand the prevalent subcultures that exist in varied departments. One prevalent problem is having a one-fit corporate culture that might cause conflict in some departments.

Compensation

Compensation is a critical factor that determines whether a company is able to hire the best from the market. Of course, employees want to work for the companies with the best remuneration packages. For Netflix, a shift from DVD to streaming required the expertise of personnel who had worked for giant companies, such as Google and Facebook to provide cloud services. It was their compensation philosophy that set them out from these huge competitors.  Unlike other companies, Netflix didn’t give employees performance bonuses because they believed they had hired the right people. In essence, they knew that their employees valued the company, and paying out bonuses would not them to work hard.

Giving the workers a market-based remuneration was also an effective strategy. Netflix allowed its employees to go for interviews with other competitors so that they could get the best market rates for their skills. Whereas most firms are against their employers talking to competitors, it is an ingenious way of getting valuable information. In such a case, they can offer a better package that will definitely attract top talent. Netflix approached the issue of equity compensation in a different way. Most companies give employees a competitive salary and then add the stock option. However, Netflix gave its workers the choice of deciding the portion of their salary that would go to the stock options. It was an arrangement that enabled the employees to gauge their tolerance to risk and make an independent decision. Options to invest in stock were provided every month at a small discounted rate without any vesting period. In essence, employees could cash in their options immediately as Netflix was not using this strategy to try and retain them. In fact, they were free to move elsewhere with a guarantee that they would immediately get all the money they had invested.

Creating a great Team

During a war, a General will use the troops that they have in place and strive to achieve victory. It is not advisable to try and change the army when formulating a winning strategy. However, when management is trying to create a great team, the opposite of this concept is what works. Any organization hoping to formulate a great team, must envision what it will achieve in the next six months. Managers will outline the particular results they want to emanate from the team and decide what needs to be done differently over the stipulated period of time. Again, they will decide the skills that are required by the team to make the vision come true. By looking closely at the present skills and the ones needed for future endeavors, the manager can start improving the areas of weakness. Clearly, management cannot at any particular time think of the team they already have in place if they are aiming for greatness.

In the current dynamic world, managers may find a lot of mismatches between the capabilities their current team possess and what they envision to achieve in the future. A common mistake that majority of firms make is trying to retain those without the right skills in their team instead of letting them go. It is advisable to have an honest conversation with such people and place them in positions where they can effectively utilize their capabilities. Moreover, managers must recruit a team with the right skills to attain their vision. Overall, the role of creating a great team lies with the manager.         

Recruitment and Selection Policy

Traditionally, most firms have well established HR formal policies that require a lot of resources to formulate and write. Netflix does not use this archaic approach, but let’s its employees to use common sense to make logical decisions at work. Through this strategy, the firm saves a substantial amount of money and gets better results. During the recruitment period, HR should hire only those who put the company interest first because they will be keen on delivering their best. Such people understand the importance of high performance and will mostly do what is right.

It is also vital to hire people with adult behavior who are capable of holding open conversations with their bosses, colleagues and subordinates. In as much companies have written HR policies, most managers will usually skirt around them as they try to work out a specific case. In the long run, if a company manages to hire the right employees, all of them will strive to deliver the best performance. Also, it is easier to manage such employees using open communication and letting them to use common sense. In most cases, the written formal policies are only applicable to a small proportion of workers who have interests that conflict those of the firm. Overall, managers must only employ, compensate and put up with employees who exhibit adult behavior. In essence, they can accommodate the truth concerning their performance and are willing to make the necessary improvements.           

Role of HR in Netflix

Most HR initiatives are aimed at ensuring the firm is recognized by the external parties as the best. HR uses the benefits and perks tactics to try and build the name of their organizations. It rarely engages in programs that aim a improving the morale of the employees. If the organization products are not doing well in the market, it will be difficult for the HR department to successfully make the employees happy by simply throwing an office party. The fact is most of them will feel demoralized and de-motivated by the dismal performance.

The HR department must become more innovative instead of merely acting as cheer leaders. It must think in business terms and understand what is good for the organization. After understanding this concept, they must find ways to communicate this information to the employees to help in enhancing high performance. Instead of using archaic ideas that have been put into place for many decades, such as the bonus plan, the HR should come up with more innovative strategies that will positively impact on the productivity of employees. In Netflix, the HR department has understood the importance of aligning role of the HR department with the company’s vision. It has saved the company from falling into a pitfall whereby the HR assumes the role of marketing the firm as the best. Instead, the department is engaged in initiatives that aim at encouraging excellent performance among workers. Overall, their initiatives must aim at improving the morale of employees, thereby enhancing their productivity.