The book is undoubtedly one of the TOP5 new publications of management literature in 2020 that every manager should have on their reading list. The billion-dollar company Netflix is the setting and testing ground for a number of management principles that have made an important contribution to the company’s success. Co-author and professor Erin Meyer of the INSEAD Business School summarizes what makes the book so special as follows: “I [and this now also applies to all readers] had the chance to find out how a company whose culture contradicted everything else what we know about psychology, business management and human behaviour has been able to achieve such remarkable results.” (p. 22f)

The content of the book is undoubtedly valuable inspiration. On the other hand, any manager who has read the book will probably find that the rules are not as simple to implement as a recipe from an online collection. I will revisit this later.

“NO RULES RULES. Why Netflix is so successful”, authors: Reed Hastings, Erin Meyer, Econ Verlag, 26 euros, year of publication 2020, 400 pages

“NO RULES RULES” by Reed Hastings: Inspiration for Leaders

If you were to summarize the book by Reed Hastings in an elevator pitch, it would look something like this: In the first step, you have to increase the talent density in the company; Low and medium performers drag down the overall team performance and make the company less attractive to top talent. Second, establish a culture of permanent feedback; not only positive feedback, but also negative feedback that helps people overcome their pain points. And third, eliminating control mechanisms: The latter ranges from travel expense guidelines, vacation regulations to budget approval processes.

You could call this the “rule of three of Netflix’s corporate culture”. It is certainly no coincidence that the corporate culture is broken down into THREE central principles. This number is a constant of successful narratives, and Steve Jobs also based his lectures on this magic number.

The three principles have – as every manager should confirm – a highly explosive potential: Anyone who, as a manager with good intentions, initiates a Netflix cultural revolution at the beginning of next month – that is: cancels vacation regulations without replacement, suspends budget approval processes and demands permanent feedback from everyone across all hierarchical boundaries – is likely to reap a storm at first. This makes it all the more important to be able to understand the gradual process of introduction and the subtle set of rules that underpin the “NO RULES RULES” culture at Netflix.

“NO RULES RULES” by Reed Hastings: Putting it into practice

Increase talent density. Every manager will nod in agreement here. It is so much easier to make a company or a project successful with top performers. Do we need the book by Reed Hastings to learn this? –Of course not. Beyond this self-evident fact, the authors emphasize that weak team members can drag down the performance of an entire team. The authors also illustrate this with an interesting study, namely by Will Felps at the University of New South Wales in Australia:

”Felps found that the destructive behavior of a single person affected the performance of the entire team, even if the other members were extraordinarily talented and intelligent. In dozens of experiments over several months, it was shown that the results of the groups containing a low performer were a staggering 30 to 40 percent worse than those of other teams.”

Managers can certainly confirm these observations. I come from the software industry myself, and recently a manager told me an astonishing story: At a company where he worked a few years ago, 40% of employees were laid off the reason being the precarious economic situation of the company. The dismissals were completely based on the performance principle, so that the best-performing colleagues remained with the company. The outcome: The output of the development team has more than doubled [sic!!!]. The best developer was even 400% (!!!) more productive than before. The explanation provided by the team manager: The weaker colleagues had regularly asked the top talent for advice and help, which took up the greater part of the working time. Productivity then skyrocketed when these “distractions” disappeared after the wave of layoffs.

Netflix rigorously embraces this culture of talent density and top performers: This is achieved with the best salaries in the industry and no fuss about layoffs. This is reminiscent – some readers may remember – of the requirement of the legendary ex-manager of General Electric, Jack Welsh, who demanded that his managers cut 10% of their employees every (!!) year – which was similarly aimed at reducing the proportion of low performers.

As a matter of fact, most companies will not be able to implement such a culture. Not all companies can employ top performers only. For a very simple reason: There are simply not that many top performers. Incidentally, Netflix has an extraordinarily high profitability, which enables the top salaries for the top performers – here, too, there are limits for many companies that would like to implement the Netflix culture.

In addition, rigorous selection according to the meritocracy principle does not always work, and also reaches its limits from an ethical point of view. In Germany, for example, layoffs are determined and limited by social criteria; in companies with a works council a Netflix culture – to put it mildly – is unlikely to be feasible in its pure form.

The findings are no less valuable. In some areas, maximizing talent density may be possible; for decisive projects or business areas, for example. However, it would be unrealistic to assume that this strategy is possible in all areas / business lines / projects. The incomparably greater challenge is that managers must address weak points in a more targeted manner, for example with further education and training, a different design of tasks, roles, processes – in general: finding ways and means to increase the constructive contribution of low performers.

Feedback cultur, including negative feedback. While negative feedback may be desirable in the Netflix culture, in practice there are a number of rules and principles that draw a fine line between “acceptable negative feedback” and “deconstructive negative feedback”. It is an outstanding quality of the book that Reed Hastings himself and dozens of employees allow a deep insight into the day-to-day life of the company, so that these details become visible. And it is precisely these details that are eminently important in order to understand how this can be implemented in practice. To gain a thorough understanding of the crucial details for success, I highly recommend reading the book.


The author is a manager in the software industry with international expertise: Authorized officer at one of the large consulting firms - Responsible for setting up an IT development center at the Bangalore offshore location - Director M&A at a software company in Berlin.