What can tech businesses learn from Netflix?

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Netflix. The streaming television giant has firmly embedded itself in people’s daily routine, is a verb in its own right and, even now, has its own idiom. However, what doesn’t get as much mention in the press is their fresh approach to people management. Something many tech companies should take note of.

Of course, some of Netflix’s approaches to HR may raise eyebrows, such as the ‘keepers test’ that managers use. Essentially, they have to ask themselves ‘which of my people, if they told me they were leaving for a similar job at a peer company, would I fight hard to keep at Netflix?’ If the answer is no, the employee will be asked to leave. This was rolled out to create a professional environment where everyone was respected. However, its Netflix’s focus on their people, as opposed to gimmicky perks such as free sushi and Ping-Pong tablets, that I think many businesses should learn.  

As let’s face it, HR is widely undervalued – especially in SMEs. Businesses dedicate fewer resources to it: either they absorb it into more general business administration and add it to the work-load of non-qualified individuals; or they simply pile it on the desk of an HR professional, restricting further their ability to deliver real value. 

In the early stages of a business, there are greater priorities than HR. In fact, recent research shows that business development and client satisfaction are ranked as the top priorities for small business owners. As such, it is no surprise that HR is being lumped into the ‘laborious but necessary’ business admin section and placed into the hands of busy senior staff.     

This attitude is reflected in a survey from consultants at McKinsey, who found that SMEs generally underestimate the positive impact that a strong HR strategy can have when it is closely aligned to their wider business ambitions. Instead, the role of HR leaders is seen to be less critical than other senior team leaders. Not surprisingly, HR professionals have noted this lack of enthusiasm: as two-thirds said that they are undervalued by their CEO.    

And yet, thanks to companies such as Netflix, there is plenty of evidence to show that strategic HR delivers real dividends – especially among disruptive companies that are challenging the status quo. 

Netflix’s pioneering approach with no holiday policy, no annual employee reviews and flexible working hours are tied to the organisation’s ethos of ‘freedom and responsibility’. This relies on employees to make reasonable judgments about their working lives. This innovative culture has been a key factor in the company’s success.   

In addition, the CIPD is calling for a £13 million investment from the government into HR support for small businesses which reiterates the importance of HR and has highlighted where SME’s are lacking focus.    

Key learnings 

It’s worth noting that Netflix worked on its people strategy from the company‘s inception. It developed the right processes that became the fundamental foundations of its HR strategy – and recognised the difference between these processes and tasks, and the strategic role of forward-thinking HR managers and consultants. 

Having established which tasks and activities are necessary but not a source of value, and those that add value to the organisation, SMEs can start to allocate them more appropriately. Should the CEO be managing holiday requests? Probably not. Yet we found they are spending a fifth of their working week on HR admin. But equally, there’s not much value in an HR manager or external consultant getting caught up in the paperwork either.    

These kind of process-oriented tasks can be better performed by dedicated HR software. Our research has shown just how much time can be freed up by smart use of technology: four hours a week.   

Small businesses often point out that the pricing of HR software is the biggest hurdle in finalising a purchasing decision given the number of competing demands for investment at a crucial stage in their business development.  

But automating these processes save a significant amount of time and moneyresources that could be spent putting HR at the centre of the business to uncover its true potential.   

Many also link the need for a more advanced HR function with the number of employees. Smaller companies and start-ups often claim that they are ‘too small’ to do HR and rely on professional employee organisations (PEOs) to support their people-management requirements.   

However, this attitude often lingers long after the company has grown. And although economies of scale mean that larger companies spend proportionally less time on HR admin than their earlier, smaller incarnations, it still amounts to 22 hours a week. That time, surely, is better spent on supporting staff, planning celebrations of milestones achieved – and propelling the business forward to the next phase of growth, and sustainable long-term success.     

The danger is that as holiday requests pile up in a CEOs inbox, HR increasingly becomes seen as a box ticking exercise, therefore undermining the positive impact that a strong HR strategy, closely aligned to business ambitions, can have. As a result, these non-strategic HR tasks are negatively impacting the ability for organisations to successfully navigate the different stages of company growth.   

Think about Reed Hastings, Jeff Bezos and Ginni Rometty – it’s unlikely any of these CEOs spend their precious time approving holidays manually. By denying the value of HR to a business, you deny the value of the people who work there. And it’s those very people who can help drive the growth of the company forward.  The best leaders are focused on the company’s vision, ensuring the business is on the right track and growth – make sure you’re one of them. 

Jonathan Richards, CEO and Founder of breatheHR

Image Credit: Denys Prykhodov / Shutterstock