Creative Reaction

Managing Space to Foster Networks over at Blogging Innovation offers some great insights on fostering culture, many of which have a direct application in creative businesses.

The post first provides some context by stating that “the foundation of innovation is what people believe, say and do” as an organization. In other words, the foundation of innovation is culture – creating the conditions for brilliant talent to share and manage ideas and knowledge. This is admittedly difficult.

“A lot of people say that knowledge management is like herding cats”,

says one manager, who prefers a different analogy,

“I say that it’s really like herding butterflies. You can’t make butterflies go anywhere – if you want them around you have to create a garden that attracts them.”

While job design and business processes which “encourage the generation and execution of ideas” are important to fostering  a creative culture, an often overlooked aspect is that of the workspace architecture. The “gardens”.

Does your workspace architecture feature “gardens” – oases to refresh frazzled minds? Perhaps games and areas of temporary distraction to allow creatives to step away from their challenges and see things from a different perspective? The means for various departments to congregate and cross-polinate?

Pixar, for example, is famously designed to create spontaneous encounters; it’s mailroom, meeting rooms, cafeteria and restrooms are all centralized.

Best Buy’s corporate headquarters’ most popular feature is an in-house café.

Patagonia’s offices are located on a beach and employees are encouraged to grab their boards whenever the surf is up.

What kind of gardens can we create?

Need some inspiration? Review some of our other posts on this topic.

At first glance, it would seem odd that a culture of creativity would have to be designed within a large advertising firm. An ad agency should be teeming with creativity, right? Culture, however, takes years to develop, and advertising is no different.

James Shuttleworth, Chief Strategy Officer at Draftfcb Chicago recently made a presentation, which, while targeted to Agency Planners, offers excellent advice to managers and HR as well. Some of his (heavily paraphrased) points:

• Culture and Corporate Values can only be codified by observing how people behave. (Translation: a Mission Statement by itself is empty)
• Dreaming is not enough. It must be based on research and leveraged to provide innovative solutions.
• HR and Planning should work together to make smarter hiring decisions, enabling digital and traditional teams to become better integrated.
• There is a need for well-rounded people who can connect the skill sets and strengths of various teams.

A Winning Culture is rewarding work, and is often the basis of success and profitability.

HBR’s What Happens When You Really Meet People’s Needs, explains the mechanics of Ritz Carlton’s excellent customer service, which starts with its commitment to its employees and extends to its guests. (This is a perfect follow-up to Monday’s post, Marketing is HR, HR Marketing.)

Half a dozen examples detail how the Ritz Carlton culture is reinforced, the most astonishing of which is the fact that each employee may spend up to $2,000 on a guest without managerial approval. This Forbes interview goes into even more detail and clarifies that $2,000 is merely a guideline and that the money spent is not necessarily to solve a problem, but to create an “outstanding experience” for a guest. The hotels’ General Managers often find about about these expenditures after the fact; further evidence of the trust they place in their teams. (The Forbes article describes its recruiting and training methodology as well.)

The results?

• The company’s turnover rate is a fraction of the industry average.
• Employee engagement scores are significantly above other “best in class” benchmarks.
• An increase of one per cent in employee engagement measurements translates into as much as $10M in additional revenue.

Hey, Economist: do you still think engagement is a “popular management fad of the moment“?!

In Brand Is Culture, Culture Is Brand, Mavericks at Work author Bill Taylor discusses the importance of “personal identification between employees and customers”.

Success is not just about marketing differently from other companies… It is also, and perhaps more important(ly), about caring more than other companies — about customers, about colleagues, about how the organization conducts itself in a world with endless opportunities to cut corners and compromise on values. (Emphasis mine.)

Taylor explains this giving two examples. One, a banking executive who is VP of both Marketing and Human Resources. Another, an insurance and financial-services company serving the U.S. military and their families, which trains its employees by putting them through “boot camp”.

You can’t be special, distinctive, and compelling in the marketplace unless you create something special, distinctive, and compelling in the workplace.

This starts by codifying your culture, aligning management, then the workforce, making personnel changes as necessary. Harsh, perhaps; but this is not hiring and firing to line someone’s pockets. It is hiring and firing to create the best possible team to best serve your clients, who alone determine your success.

Read Taylor’s entire post.

This provocative article in The Economist, Down with Fun, takes direct aim at empowerment, engagement and creativity, deriding them as “popular management fads of the moment”.

They write, “surveys show that only 20% of workers are “fully engaged with their job”. Even fewer are creative” with which few will argue.

They state that “as soon as fun becomes part of a corporate strategy it ceases to be fun and becomes its opposite—at best an empty shell and at worst a tiresome imposition”. Again, no argument with “compulsory ‘fun’”. It’s reminiscent of the “pieces of flair” scene in “Office Space“.

While The Economist is mostly correct, the danger lies in what is left out.

A glaring omission is that The Economist has removed “fun” from the context of corporate culture. Re-read the previous quote. They misunderstand culture as strategy.

In a purpose-based company with a strong corporate culture, the hiring, operations, markerting, customer service, and the “fun” environment are completely aligned, making the motivation intrinsic, not compulsory. This alignment leads to breakthrough products and breakthrough customer service, both of which lead to profits.

Clearly, there are “managers (who) hope that ‘fun’ will magically make workers more engaged and creative.”, but this is not proof that the premise of culture is wrong. While a Truth (capital “T”) is shown to be right by those who follow it, the converse, is untrue.

So what kind of “fun” does The Economist support?  Heavy drinking, chain smoking, and workplace promiscuity. Hyperbole, perhaps, but it panders to our base motives. This more extreme “fun” ranges from mere self-destruction to socially and morally irresponsible behavior, adversely affects the lives of entire circles of people, and is clearly counter-productive. Surely we’ve learned something from Mad Men.

So what kind of “fun” is our ideal?

When empowerment, engagement and creativity all spring naturally from a carefully cultivated corporate mission, happily espoused by everyone starting with the CEO, through the management, to the employees. That, my friends, is something magical. It appears The Economist has never witnessed that magic – and it’s a shame.

This really interesting article by CCL popped up in the newsreader today, explaining the hidden costs of companies which insist on over-managing their employees. These are the companies which feel they need to tell their employees (grown adults, mostly) exactly how their jobs should be performed. While “process” plays an important role in certain industries, not leveraging the experience of employees is shortsighted.

Anybody who does a job eight hours a day is going to see ways in which that job could be improved or simplified…

This is particularly true for Professional Knowledge Workers, where the costs are huge:

At best, it limits growth and innovation. At worse, it solidifies inefficiencies, undermines company goals and creates an environment where employees are unmotivated and disengaged.

So be sure to give some thought to employee engagement and motivation. It is far better for everyone to be working together toward the same vision. It could very well mean the difference between success and failure.

When leaders give people control over their work, stop telling them how to do their jobs and focus on the goals, the hidden costs are replaced with numerous benefits. Employee stress goes down, absenteeism decreases and engagement goes up. Productivity improves and innovation is possible.

The ink was barely dry on This Ain’t No Disco – Now in Book Form, when we came across the equally fascinating book, I Wish I Worked There! thanks to Amazon’s suggestive selling robots. I don’t know how I missed this book.

Quoting the book’s Website,

I Wish I Worked There! reveals the world’s most inspiring and innovative places to work, investigating twenty famous brands that place innovation at the heart of their culture.

It’s now on the Wish List. If you get your hands on a copy before we do, be sure to leave a comment and tell us what you think.

Last week I posted my transcription (with some editing) of Netflix’s HR Reference Guide, which was quite a project. Today I’d like to explain what I love and what I’d love to see. Maybe we’ll see some of the slides get updated one of these days.

(To follow along, you may want to open my transcription in another browser window)

I love that Netflix starts off by stating the importance of culture, something that most folks don’t even think about. Netflix stakes its future on it!

“Culture gives Netflix the best chance of continuous success for many generations of technology and people.”

This is completely true. A business’ strategy, goals, or mission will not last very long unless everybody in the company, from the leadership down, espouses them. However, the presentation doesn’t actually define culture. Creating and Sustaining a Winning Culture at Harvard Business Publishing offers this definition:

“Culture (is)… the values, mindsets, and behaviors that constitute an environment conducive to success. (It is) what holds an organization together and motivates the people within it to do the right thing rather than the easy thing.”

This definition ties in well with other elements of the presentation, though they may need to reframe things in terms of “mindsets” and “behaviors”.

To me, the most thought-provoking concept in the reference guide had to do with growth, rules, creativity, performance, freedom, and responsibility, where they took concepts that tend to be antithetical and rearranged them in a way that work together in a system of checks and balances. It goes something like this:

Most companies – Great Idea>Great Culture>Success!>Growth>Mistakes>Knee-jerk Reaction>Rules & Procedures>Beaurocracy>Brain Drain>Mediocrity>Crappy Culture>Murky Vision>Slow Death

Netflix – Great Idea>Great Culture>Success!>Growth>Mistakes>Recovery>Post Mortem>Fewer Rules>Flexibility>Better Talent>Better Company>More Great Ideas>More Success!

It’s brilliant!

I love their stress on personal responsibility as well. Responsible people deserve more freedom. They shouldn’t be punished (with Rules and Procedures) when someone acts irresponsibly. Responsible people own up to their mistakes, then have an opportunity to wow a customer by making things right.

Another awesome idea – basing compensation on market value. Wow. You want a raise? Don’t work harder; make yourself more valuable. You want to keep your head down and not be noticed? Here’s a nice severance plan for you. Buh-bye! There’s no tolerance for dead wood. And if you salary goes down a bit, it’s because the market as a whole went down. So learn a new skill. That is so refreshing.

A few things I’d like to see?

• Some mention of the importance of good physical health (diet & exercise), which boosts performance. (See Brain Rules and The Power of Full Engagement)
• Some mention of the importance of proper rest and vacations, which boosts performance.(See The Power of Full Engagement)
• Some mention of the importance of workplace friendships, which boosts performance. (See Vital Friends)
• Some mention of the importance of  healthy family life, which boosts performance. (See Brain Rules)

Bravo, Netflix! Let me know if you’d like to compare notes.

Let’s see some other companies step up to the plate!

I’ve been spending a lot of time thinking about the importance of companies’ cultures and came across this excellent Fortune Small Business article by entrepreneur Jay Goltz.

Goltz speaks from experience and doesn’t lay down hard and fast rules; he asks us to determine for ourselves what is important.

• “How far should we go to provide excellent service?”
• “How should employees treat one another?”
• “What kinds of errors are acceptable?”
• “How should we handle a conflict between the need to serve a customer and an employee’s needs?”

I love that he shows how much he values his own company’s culture and mission by placing it above his own ego. He sets quite an example! Check it out.

Back in August, I wrote that Netflix’s HR Guidelines Could be a Covert Recruitment Pitch when I read TechCrunch’s commentary on the slides and browsed through them myself. (“Reference Guide on our Freedom & Responsibility Culture” can be found here.)

Over the past weeks, not only did I read all 128 slides, I also transcribed them because I found them to be so inspiring. I then edited the resulting text quite a bit so it would make better sense to me, made some of the grammar a little more consistent, and added a few notes of my own, especially in the “Development” section, with which I have some issues. It was quite a project and it really opened my eyes. I’m a fan of Netflix and admire the company, but until now I did not realize what an outstanding culture they have.

The slides were intentionally uploaded by Netflix and contain no copyright. One important purpose of codifying a company’s culture is to attract talent which can self-identify with a company, so it is my hope that Netflix  continues to attract high-performance talent by posting my edited  and notated transcription below.

(PLEASE NOTE: Many of the notes are my interpretation. They clearly do NOT represent official Netflix policies, OK? Links to the original slide deck are above.)

—————————————————————————–

A Reference Guide for our Culture of Freedom & Responsibility

This Guide is for our salaried employees, as hourly workers have more structured jobs.

Q:
What gives Netflix the best chance of continuous success for many generations of technology and people?

A:
Culture.

Culture is how a firm operates.

Culture gives Netflix the best chance of continuous success for many generations of technology and people

For Netflix, continuous success = continuous growth in revenue, profits, and reputation.

Netflix needs a culture that supports rapid innovation and excellent execution, which are both required for our continuous growth.

There is often tension between rapid innovation and excellent execution, similar to the tension between creativity and discipline.

The culture must support effective teamwork of high-performance people, which can also provide tension, as high-performance people are very passionate.

The culture must avoid the rigidity, politics, mediocrity, and complacency that infects most organizations as they grow.

7 aspects of Netflix’s culture (a work in progress as we continue to refine it)

1. Emphasis on Values
2. High-performance (Employees)
3. Freedom & Responsibility
4. Context, not Control
5. Highly aligned, Loosely Coupled model of organization
6. Top of the market Salaries
7. Promotion & Development

VALUES
Nine behaviors and skills we value in fellow employees.

Judgement:

• Making wise decisions despite ambiguity
• Identifying root causes
• Thinking strategically and articulating what you are and are NOT trying to do.
• Knowing what must be done well now
• Knowing what can be improved later

Communication

• Listening to better understand, and not immediately reacting
• Being concise and articulate in speech and writing
• Treating people with respect regardless of status or agreement.
• Showing poise in stressful situations

Impact

• Accomplishing amazing amounts of important work
• Performing in a consistently strong manner so that others can rely on you
• Focusing on results (rather than process)
• Showing bias-to-action (rather than over-analyzing)

Curiosity

• Learning eagerly and rapidly
• Understanding our strategy, market, subscribers and suppliers
• Being broadly knowledgeable about business, technology and entertainment
• Contributing effectively outside of your specialty

Innovation

• Re-conceptualizing issues to discover practical solutions to difficult problems
• Challenging the prevailing assumptions when warranted and suggesting better approaches
• Creating new ideas that prove useful
• Keeping us nimble by minimizing complexity and finding time to simplify.

Courage

• Saying what you think even when it is controversial
• Making tough decisions without excessive agonizing
• Taking smart risks
• Questioning actions inconsistent with our values.

Passion

• Inspiring others with your thirst for excellence
• Caring intently about our success
• Celebrating wins
• Being tenacious

Honesty

• Being known for candor and directness
• Not being political when you disagree with others
• Only saying things about others that you would say to their faces
• Being quick to admit mistakes.

Selflessness

• Seeking what is best for the company, rather than yourself or the group
• Putting your ego aside when searching for the best ideas
• Making time to help colleagues
• Sharing information openly and proactively

Judgement. Communication. Impact. Curiosity. Innovation. Courage. Passion. Honesty. Selflessness.

We want every employee to embody these nine values.

A characteristic of Courage:
Questioning actions inconsistent with our values.

This one is especially important.
Akin to the honor code pledge, “I will not lie, nor cheat, nor steal, nor tolerate those who do.”

We are all responsible for consistency in our values.

Values are reinforced in our rewards, promotions and even how we fire.

HIGH PERFORMANCE
Imagine if every person you work with was someone you respect and learn from…
Imagine if all of your colleagues were stunning.

This is how we define a Great Workplace.

We do not define a Great Workplace by having benefits such as day-care, espresso, health care, sushi lunches, nice offices, or big compensation. We only do what efficiently attracts and keeps stunning colleagues.

We practice the art of hiring well.

We also have another practice:
(Merely) Adequate performance results in a generous severance package.

We are like a professional sports team (not a family).

Like a Professional Sports coach, managers must recruit, hire, develop and cut smartly to have excellent players in every position.

Who makes the cut?

This is the Keeper Test:
“Which of my people, if they told me they were leaving in two months for a competitor, would I fight to keep?”

Any people who you would not fight hard to keep need to be offered a generous severance package to make room for an excellent colleague.

You are responsible for your job security.
Ask your manager from time to time, “If I told you I were leaving, how hard would you work to change my mind?”

Q:
“Isn’t Loyalty good?”

A:
Loyalty is good; it is a stabilizer. As individuals and as a company, we will all hit rough patches. Star employees will be given an opportunity to prove themselves again. Loyalty however must have its limits.

Q:
“What about Hard Workers?”

A:
Hard work is about effectiveness, not effort. It is not about working long hours. Measurements can be based on how much, how quickly, and how well work is done, especially under a deadline.

Q:
“How do we handle brilliant jerks?”

A:
Some companies tolerate them; not us. The cost to teamwork is too high. Everyone must embody all nine values, and being a brilliant jerk contradicts many of them.

Q:
Why do we place such a premium on high performance?

A1:
For procedural work, the best perform at 2x average.
For creative work (“knowledge work”) the best perform at 10x average.

Q:
Why do we place such a premium on high performance?

A2:
We define a Great Workplace as having stunning colleagues.

FREEDOM AND RESPONSIBILITY
Characteristics of the rare responsible person:

• Self-motivated
• Self-aware
• Self-disciplined
• Self-improving
• Behaves like a leader
• Proactive
• Considers everything “his job”
• Picks up trash
• Behaves like an owner

Responsible people thrive on freedom and are therefore worthy of freedom.

Our model is to increase employee freedom, rather than limit it, to continue to attract and nourish innovative people, to have a better chance of continued long-term success. (Most companies restrict freedom as they grow.)

The relationship between growth, chaos, and restrictions:
Growth increases complexity and shrinks talent density, which leads to errors and chaos. Often rules and procedures (process) are created to avoid chaos. Procedures drive the talent away. Process inhibits innovation.

A better option.

• Ever-increasing performance, rather than rules, to fight chaos.
• Ever-increasing performance, which outpaces complexity.
• Running informally, utilizing self-discipline to fight chaos.
• Minimizing complexity.
• Valuing simplicity.
• Enabling and attracting creative talent by running informally, high compensation, and offering the freedom to make a difference.

Two types of necessary Rules;
Those that prevent disaster

• e.g. Incorrect financials
• e.g. Hackers steal CC data

Those that spell out immoral, unethical, and illegal behavior

In a safety-critical or manufacturing industry, preventing errors through procedures is mission-critical (or at the very least the most cost-effective)

In knowledge work/creative environments, “rapid recovery” is the best model.
Besides, high-performers make fewer mistakes.
If mistakes happen, high-performers fix them quickly!

Is a Process Good or Bad?
Good processes help talented people get more done.

• Updating a web site at regular intervals instead of randomly
• Keeping spending within budget
• Having regularly scheduled strategy meetings

Bad processes try to prevent mistakes which are easily recoverable.

• Pre-approvals for spending
• Multiple required sign-offs, projects
• Permission needed to hang a poster

Bad processes tend to creep in because preventing errors is so attractive.
(They often result from knee-jerk reactions to embarrassing mistakes)

Rules and procedures should be questioned and eliminated whenever possible.

Our culture is Results-Oriented

• No 9-5 work days.
• No vacation policy.

Netflix’s Expensing, Entertainment, Gift & Travel Policy is five words long.
“Act in Netflix’s Best Interests”

This generally means:

• Expense only what you would otherwise not spend, and is worthwhile for work.
• Travel as you would if it were your money.
• Disclose non-trivial vendor gifts.
• Take from Netflix only when it is inefficient and inconsequential to not take.
• To avoid using the company phone for personal reasons may be an inefficient use of time.
• To avoid using the company printer for personal reasons may be an inefficient use of time.

Summary:

• Minimize Rules while growing.
• Fight chaos with ever more high-performance people.
• Stress flexibility more than efficiency for long-tern success.

CONTEXT. NOT CONTROL
High-performance people will do better work when they understand the context.

The best managers set the context, rather than resorting to control.

Control-driven means:

• Top-down decision-making
• Management approval
• Committees
• Planning and process are valued instead of results
• (Do it because I say so.)

Context-driven means:

• Strategy
• Metrics
• Assumptions
• Objectives
• Clearly-defined roles
• Communication of what is at stake
• Transparent decision-making
• (Do this because it aligns with company objectives)

Control can be important under the following circumstances:

• In an emergency (procedures and commands must be followed.)
• When someone is in training (they need to learn context)
• When a colleague is temporarily in a position that is ill-suited.

If a talented employee does something dumb, a good manger will question the context (conditions) he set.

Instead of giving into the temptation to control, a good manger will put the desired results in context.

Managers must articulate goals and strategies.
Managers must inspire people to meet goals and follow strategies.

Proper context involves:
- Linking to functional and company goals
- Articulating importance and time-sensitivity
- Describing the desired level of precision and completeness

• No errors are permissible
• Errors can be corrected later
• Draft quality

- Pointing out the key stakeholders
- Explaining the metrics
- Defining a successful outcome

Investing in context is exemplified in:

• Training
• Openness to better strategies
• Focus on results

HIGHLY ALIGNED, LOOSELY COUPLED MODEL OF CORPORATE TEAMWORK

This is contrasted with the following models:
1) Tightly-coupled, Monolithic Model, where

• Sr. Mgt reviews and approves most tactics
• There are lots of cross-departmental buy-in meetings
• Keeping groups in agreement becomes as important as pleasing customers
• (which is dangerous and inefficient)
• Mavericks burn out
• Centralization allows for high degrees of coordination at the expense of agility

2) Independent Silo Model, where

• Each group executes its objectives with little central coordination
• Work requiring coordination suffers
• Alienation and suspicion between departments takes root
• Success occurs only when a conglomerate has companies in disparate markets

The Highly Aligned, Loosely Coupled Model

Goal: to be big, yet fast and flexible.

Teamwork effectiveness is dependent upon
1) high-performance people and
2) proper (good) context

Highly Aligned

• Strategy and goals are clear, specific, and broadly understood
• Team interactions are about strategy and goals rather than tactics.
• A large investment in management time is required to be transparent, articulate, perceptive and open

Loosely coupled

• Minimal cross-functional meetings except to get aligned on goals and strategy
• Trust between groups on tactics without previewing/approving each one – groups can move fast
• Leaders reaching out proactively for ad-hoc coordination and perspective as appropriate.
• Occasional post-mortems on tactics necessary to increase alignment

TOP-MARKET COMPENSATION
A core value of a high-performance culture.

Financial incentive from an Accounting perspective:
One outstanding employee gets more done and costs less than two adequate employees.

Instead of only making the hiring process market-based, Netflix also applies the same principles to its “Annual Compensation Review” (essentially re-hiring each high-performance employee for another year for the purposes of compensation.)

Top-Market Compensation Goals:
1) Every employee is an outstanding employee.
2) Every employee is paid his or her top-market rate.

(By the way, titles are not helpful when determining compensation.
Not every “Major League Pitcher” is equally effective or equally compensated.)

Three-part Compensation Test for an outstanding employee
1) How much would this employee be paid elsewhere?
2) How much would we have to pay to replace this person?
3) How much would we pay to keep this person if another company was “head-hunting”?

Three Corollaries:
1) Pay him more than anyone else likely would
2) Pay him (at least) as much as a replacement would cost
3) Pay him as much as we would pay if another company was “head-hunting”

Corporate Guidelines:

• There are no centrally-administered budgets.
• Each manager must use the above guidelines to align each team member’s compensation to “top-market” for his market and for his area each year
• Compensation is based on market value, not Netflix’s Success
• Managers should not use “fairness” or formulas such as percentiles or across the board raises

Therefore:

• Some team members’ compensation could rise dramatically based on their value in the marketplace (Also driven by their skills)
• Some team members’ compensation could remain flat or even decrease, while still remaining top-market

If managers use the three-part Compensation Test accurately, the following will be true:
1) Any employee leaving Netflix for another company will not be compensated as well
2) We will rarely need to counter an offer from another company for one of our high-performance employees
3) Employees will know they are being paid well relative to other options.

This compensation model is better than the traditional model, where employees automatically receive a raise each year based on good performance, for the following reasons:
1) Employees can become grossly over- or under-paid over time
2) Under-paid otherwise satisfied employees will seek employment elsewhere
3) Overpaid, unsatisfied employees become trapped.

(These conditions also contribute to low morale and “poisonous” employees)

In our model, employee success is a major factor in compensation because it influences an employee’s market value.

(This also motivates an employee to improve his skill set and grow personally in ways that increase his value)

By the way, Netflix considers it to be a healthy idea, and not a traitorous one, for an employee to understand his value in the marketplace, by talking to peers at other companies and even interviewing with them. (An important exception is interviewing with direct competitors who may be trying to gather information that is confidential.)

Additional information about our compensation model:

Netflix focuses it’s compensation on the highest possible salary in the following ways:

• No free stock options
• No bonuses
• Great Health Plan options with intentionally higher Co-Pays (to keep the premiums lower)
• No company matching of specific benefits

This compensation model is most efficient the following reasons:

• Salary offers the highest motivation of any other form of compensation
• It simplified by not offering bonuses (saving the company labor)
• Paying for stock options (with pre-tax salary) is another form of motivating an employee to participate in the company’s future success.

In addition, the employee has more freedom to spend his salary as he sees fit.

• The mix of stock (or Stock options) is the employee’s choice
• Since there is no company matching of specific benefits, the employee is not pressured into a means of compensation he does not want or need.
• Since there is no company matching of specific benefits, the employee does not feel that others who want or need those benefits are better compensated

(On the other hand, the employees may want benefits that are not offered. Pre-tax medical accounts and pre-tax retirement accounts, for example, offer financial advantages that an employee could not otherwise obtain on his own, negating a top-market salary. In this case, his peers at another company would have a financial advantage.)

(It might also be that the health and financial stability of employees, conditions that improve physical and mental well-being, are possibly not being encouraged by offering benefits. A lack of physical and mental well-being will adversely affect a person’s work and the company. It is in the company’s interest to promote physical and mental health.)

Employees choose the degree to which they want to link their financial future to Netflix’s success or failure by choosing for themselves the amount of Netflix stock (or stock options) they would like as a component of their compensation.

PROMOTIONS AND DEVELOPMENT

Promotions
At times, and within certain groups,there will be opportunities and growth. Some people, due to timing and talent, will have the opportunity for extraordinary career growth.

Baseball Analogy: Minor & Major Leagues

• Only the very talented play in The Show. (The Majors.)
• Even the most talented are subject to timing and opportunities
• Some players move to other teams when opportunities arise.
• Some Minor League players keep playing because they love the game.

There may not be enough growth opportunities for everyone who deserves a promotion, in which case we should celebrate when someone leaves the company for a bigger opportunity elsewhere.

Two conditions necessary for promotion:
1) The job has to be big enough
2) The person has to be a superstar in the current role and talented enough for the new position

If a talented employee meeting the above criteria needs to be promoted to keep them from leaving, the manager should look for opportunities to promote him now, rather than wait.

Development
We develop people by giving them the opportunity to develop themselves, by surrounding them with stunning colleagues and giving them the opportunity to work on big challenges.

Mediocre colleagues and unchallenging work kills the progress of a person’s skills (as well as his morale)

Because formalized development is rarely effective, we do not pursue it. No courses, mentors, working in multiple depts.

(Sorry. I’m not going along with this! Any broadening of skills, better understanding of others’ roles, personal development is completely helpful, enriching all of a person’s life, not just his career! Take a look at Pixar University, as an example.)

High-performance people are generally self-improving through experience, observation, introspection, reading and discussion, as long as they have stunning colleagues. (OK, but give them some opportunities to do this at work, too!)

Individuals should manage their own career paths, and not rely on a corporation for planning their careers. Similar to retirement planning – largely a matter of individual responsibility. (Still, both should be encouraged)

(Yet many people would benefit greatly from career planning, mentoring, financial planning, marital counseling, first baby counseling, all of which would make for better employees and many of which would reduce health care costs and absenteeism. Read Brain Rules by John Medina)

An Individual’s economic security is based upon his skills and reputation. We try hard to consistently provide opportunities to grow both. (Maybe these opportunities should be listed. The above statements seem to contradict this.)

As I was writing the previous post, The Power of Happiness, I noticed Harvard Business Publishing’s Discussion Leader Blog was also linking to the same research. They add a managerial perspective to the discussion in Why You Need to Be a Happier Manager.

The post links to other articles on the contagious happiness study from NYT and Time Magazine, and then offers these tips for managers (which I’ve summarized):

• Resolve to cheer - It is a leader’s obligation to spread confidence.
• Pick your moments - Especially when people need encouragement.
• Keep on doing it - Persevere.

“A happy workplace… (makes) coming to work a more pleasant experience. Productivity even improves, and so too does engagement.”

Happiness does not make up for an organization’s shortcomings, though along with a great product and excellent service, it is clearly an ingredient for success.