Monday, August 30, 2010

Hire Trustworthy People . . . Then Trust Them

"Every knowledge worker in a modern organization is an 'executive' if, by virtue of his position or knowledge, he is responsible for a contribution that materially affects the capacity of the organization to perform and to obtain results." - Peter Drucker

What would happen if you offered your employees an unlimited number of vacation days?  Could you trust that people would not take advantage of your generosity?  Would work still get done?  As crazy as it may seem to some, DVD and movie rental company Netflix did just that and, by every indication, it's working just fine.

According the a story in the August 14 edition of the Telegraph [LINK], Netflix stopped counting vacation days for its salaried employees back in 2004.  Reasons given for the decision include the fact that employees regularly spend personal time (e.g., nights and weekends) handling company-related issues and responding to email.  Also, since hours worked per day were not tracked, leaders decided it didn't make sense to track vacation time either.  These are logical reasons, but I believe it comes down to something much simpler:  Netflix hires trustworthy people and trusts them to do their jobs.

It's About Company Objectives, Isn't It?

Many managers forget that it's more about quality of work than quantity of hours that determines the value of an employee.  If an individual is getting his or her job done, and is successfully contributing to the company's objectives, it doesn't matter how many hours or days is spent in the office.  For some reason, though, we tend to think that if people are not putting in 40+ hours per week, they are not valuable to the company.

If a company is effective in recruiting talented and trustworthy team members who fit into the culture, it does not need tight policies and controls.  In fact, the tighter the controls, the less effective creative and energetic people tend to be.  When expectations are clear and barriers to success are removed, people regularly surpass objectives.

The Importance of Culture

Netflix developed a presentation to describe their culture that is widely available on the internet.  As I read through the presentation - all 128 pages of it - it became clear that Netflix leaders understand the type of company they want to be and work tirelessly to develop - and protect - their culture.  The presentation, titled Reference Guide on our Freedom & Responsibility Culture, is worthwhile reading for anyone in business.

It's the Overall Approach - Not the Perks

Applying the Netflix formula for success does not mean copying what is in the presentation.  Unlimited vacation days only works because it is a component of the company's total approach to business.  It means taking care of the things that give direction and inspire people to act.  These include:
  1. Understand the Purpose:  Clearly understand why the company exists - i.e., who the customers are and what value customers get from doing business with the company.  Make sure that decisions and actions support the purpose;
  2. Set Direction:  Establish a vision for the future that inspires and excites people to make the company successful;
  3. Develop the Culture:  Don't let the culture happen by accident.  Create an environment that will make people, customers, and suppliers proud to be associated with the company and want to make it successful.  Once the culture is established, vehemently protect it from the internal and external forces that can change its characteristics;
  4. Hire Correctly:  Recruit the type of person who will thrive in the company.  Put more focus on finding someone with the right cultural fit than the correct technical qualifications and consider every hire from the perspective of bringing in someone who will be personally successful while contributing to the long-term success of the company;
  5. Develop Individuals & Teams:  Improve the ability of individuals and teams to be successful.  Provide learning opportunities for everyone to assure that organization continually develops.  When possible, develop future leaders from inside the company rather than hiring from the outside;
  6. Get Out of the Way:  Stay visible, but let people do their jobs.  Get involved when situations call for coaching and development and remain focused on leading, rather than managing, people.
Virtually every company wants an innovative and energetic workforce but very few know how to make it happen.  It comes down to taking care of the basics (above) and trusting the people you've hired to do their jobs.  You can hire highly talented and qualified people but micromanagement and tight controls shows a lack of trust and leads to a group of people who are uninspired and indifferent about the company's success.

Back in 1997, very few would have thought that a tiny startup from Los Gatos, California had a chance to supplant the mighty Blockbuster in the movie rental business.  As the people at Netflix have proven once again, though, the ability to unleash the talents of people is the most significant competitive weapon a company can have.

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