Reed Hastings is the CEO of Netflix, a movie-rental service based on subscriptions. The Idea of establishing Netflix was born after Reed incurred hefty fees for returning a rental movie late (Goncalves,2018). He started his career as a software developer before quitting his job and starting Pure Software. Hastings is an engineer by profession and he found the idea of running the rapidly growing company daunting. The company went public and merged with another software company to form Pure Atria corporation which was later sold due to issues with the merger. This experience was an important lesson in Reed’s entrepreneurship journey.
In 1997, Netflix was started in partnership with Marc Randolph. The company started as a rental-mail delivery service at a flat fee. In 1998, the Mail-order system was introduced where customers rented a DVD for seven days (Goncalves,2018). In 1999, a monthly flat fee subscription service was introduced for renting the desired number of DVDs. Netflix has grown steadily over the years and Reed has become well known for innovative management which has fueled the company’s growth.
Reed’s leadership is transformational and is based on four policies. They include a personal time policy, a flexible travel policy, performance reviews and compensation (Goncalves,2018). In his personal time policy, employees can take as much time off as they need. The managers and staff work it out. In changing from a system of formal-time off monitoring to an informal one when the company was going public, Reed gave employees the autonomy to make the decision on how much personal time they needed. Senior employees were urged to be an example of the policy by taking paid vacations. The flexible travel policy is based on adult behavior. Employees are expected to act with Netflix’s best interest in mind. This meant that they had to spend the company’s money in a responsible way as though it was their own. eliminating an expense account shifted responsibility to the frontline managers as it should be. As such, travel agency costs were eliminated as employees could book their own travel online. By creating a clear expectation of adult behavior, the employees were complied.
Managers are expected to conduct performance reviews on their teams. Reed is known to
value performance. He offers high compensation packages for the best talent and also quickly fires underperforming employees. The need to eliminate formal reviews is to enable honest conversations between managers and staff on performance as part of normal work interactions. Most employees see formal reviews as a way of creating a paper trail to get rid of them (McCord,2014). This does not foster open conversations on performance. His compensation policy is based on existing market rates and there are no bonuses for employees. The employees can choose to be paid in form of equity or stock options. By giving equity and stock options, Reed achieved the sense of responsibility in employees. They do not feel like they are working for their bosses but feel a sense of ownership which fosters performance.
Reed Hasting is highly rated as a revolutionary leader by both employees, stakeholders and business experts. His PowerPoint presentation explaining how he shaped the business culture at Netflix and motivated performance has been reviewed over five million times on the internet. Sheryl Sandberg, the Chief Operating Officer at Facebook has named this presentation among one of the most valued documents to be made in Silicon Valley (McCord,2014). This review shows just how revolutionary Reed’s Leadership is. Some of his concepts such as flexible travel policy for employees has been adopted by other companies even after they were deemed a little crazy at first. His style of leadership is setting the context and letting employees do their work without micromanagement.
Goncalves, V. J. (2018, September 21). Retrieved from psu.edu:
McCord, P. (2014, January-February Issue). Retrieved from Harvard Business Review: