The Locksmith

Early in his career, a young and inexperienced locksmith used to take over an hour with most of his jobs. He frequently encountered difficulties on call-outs, such as picking a new type of lock, resulting in him having to break the lock just to get the job done. Although he would take a long time and struggle with the task, he would still more often than not achieve the desired outcome, and the customer would be grateful for his effort – with this sometimes even resulting in good tips, as the client felt he had put in a lot of time and effort to complete the task.

As the locksmith grew older and gained experience, however, people’s attitudes to his work began to change. Where it used to take him upwards of an hour to complete a job as an apprentice, the locksmith could now pick almost any lock within ten minutes. Through years of practice and specialisation, he was now a master of his trade, and yet, customers now seemed less appreciative of his work than before. The locksmith’s company had always charged the same price for a job, at R500 per call-out, yet customers seemed disgruntled when expected to pay that rate for only ten minutes of work.

What the case of the locksmith reveals is a bias towards effort (input) as opposed to results (output). A type of fairness bias, where a fair effort is compensated with a fair reward. For many companies this has long been the norm, with it seeming only fair to pay for time rather than just results, even if that time is not being used in the most productive and effective manner possible. For Netflix, however, this simply did not make sense. The company created a framework that instead incentivises excellence by creating a culture of freedom and responsibility – a radical idea that all started with a PowerPoint presentation.

In the early days of Netflix, Patty McCord used to carpool to work with the CEO Reed Hastings. As the Chief Talent Officer, she loved going to work every day, although she was working much harder than ever before. The company had recently gone through hard times and was forced to lay off a third of its workforce – an uncomfortable job that was tasked to McCord – but this left a core team of very talented people achieving more than they were before. Despite the gruelling hours, McCord could not help feeling that they were doing something special, and after expressing this to the CEO on one of their trips to work, he told her to go and find out why the situation seemed to be working so well. What she came up with was a 124-slide PowerPoint presentation, outlining the key principles at the heart of the Netflix culture.

This slide deck was to become a catalyst for a revolution in the HR world; viewed by millions, and still to this day, changing the way companies think about their own culture. So influential was this set of ideas crafted by McCord that it even prompted Sheryl Sandberg, COO at Facebook, to call it possibly the most important document to ever come out of Silicon Valley. Amongst the elements that make the Netflix culture different are concepts such as no yearly performance reviews or annual bonuses, no formal leave structures in the sense of dictating a set amount of days, and no strict travel or expense policies. These decisions were made, according to McCord, with the mentality that employees should be treated like adults who could be trusted to not exploit these freedoms and to be responsible enough to act in the best interests of the company.

Central to this ideology is that a business is not a family, but rather that it should be thought of like a professional sports team – where only the results matter and only the top players make the team. But with this mindset comes the expectation of excellence. Netflix only wants the best people, and they only want them for as long as they are needed to reach a certain target. As the best at what they do (and in lieu of annual bonuses), these employees expect to be paid the very highest salaries in the industry, but it also means that they could be let go as soon as they are no longer critical to the team’s goal – although always with a very generous severance package, McCord explains.

Patty McCord would argue that the HR department should not simply fulfil a hand-holding role, and that in a perfect world, a company should only seek to hire fully-formed adults who can handle freedom and responsibility at work, as in life. And while this is certainly an ideal situation for the company, the relationship created by this ideology is deeply asymmetrical, with the detrimental consequences for an individual becoming clear when we look at how these “freedom and responsibility” based policies play out in real life. While Netflix theoretically gives employees unlimited leave, nobody dares take too much, or even any at all, in fear of seeming a weak link in a cut-throat environment. And even after eulogising the brilliance of the Netflix model, McCord was herself fired, just as the company started really evolving into the hyper-capitalistic megacorporation it has become today, highlighting with some cruel irony the ruthlessness of the system that McCord helped to create.

If we were to take the core idea of the Netflix model to its logical conclusion, it represents the perfect manifestation of the pure capitalistic sentiment, but as we can see, this ultimately results in the elimination of any consideration to treat talent as human beings. As the example of the locksmith illuminates, we are caught in a conflict between a purely output-driven mindset – as the purest form of capitalism that maximises shareholder value, but that can also effectively dehumanise workers – and an hourly or time-based model, created by centuries of trade union intervention and government policy to protect the common worker from exploitation. And a company such as Netflix is an extreme force on the one side of this dichotomy – between capital and labour – especially considering the advancement of technologies emerging from Silicon Valley, such as artificial intelligence (AI) and robotics, that will exert even further pressure on this delicate balance. Forces that threaten to unravel the very fabric of our current socio-economic condition.