Netflix does Personnel Strategy

Occasionally someone assembles a set of ideas that you wish you put together. The thoughts are crisp, relevant, and different. Well, that’s what the team at Netflix has done (the CEO Reed Hastings mainly). They have a 128 page slide deck that explains their salaried personnel strategy. And I have to say that its really good. They took a Blue Ocean approach and defined their own rules. I would call it blunt and fair. My only criticism is that I could see their internal work environment getting very competitive.

But this reminds me of a few years ago (2004) , the CEO of Raytheon, William Swanson,  published a booklet called “Swanson’s Unwritten Rules of Management.” In it are 33 rules that are both straight forward and useful i.e. “If you are not criticized you might not be doing much.” Unfortunately for Swanson, he lifted these rules from an engineering book. I don’t anticipate that happening with this, just that it will create the same amount of buzz.

Here are some blurbs I pulled out (slide show below):

Seven Aspect to Our Culture:

  • Values are What We Value
  • High Performance
  • Freedom and Responsibility
  • Context, Not Control
  • Highly Aligned, Loosely Coupled
  • Pay Top of Market
  • Promotions and Development

But unlike many companies, we practice “adequate performance gets a generous severance package.”

The Keeper Test Managers Use:

Which of my people if they told me they were leaving in two months for a similar job at a peer company, would I fight hard to keep at Netflix

Insightful Interview Done by Tony Tjan with Dick Harrington

Anthony Tjan is one of favorite bloggers over to HBR.com. His entries are usually to the point and insightful. Recently he did an interview with a partner of his Dick Harrington. Oh yeah, Dick used to be the CEO of Thomson Reuters too. I excerpted a few segments of the exchange:

Tony Tjan (TT): Dick- attempt the impossible and give us the top three business lessons learned over three decades!

Dick Harrington (DH): First, you have to have an
“approximately correct” strategy — you have to know where you are
going, but directionally correct is the key. Two, you have to be highly
focused and intensely execute that strategy by motivating and aligning
the troops you have. And three, it always comes back to the customers
and the fact that you have to manically know your customers and drive
everything from that.

TT: Nicely done. So let’s start with the first point. People
often worry about architecting a perfect business plan or strategy and
then get lost in the minutia. How do you know when you are
“approximately correct,” as you say?

DH: You want to be approximately correct instead of
precisely incorrect. There is a point at which additional information
or research will not change the basics of your strategy. When you get
your strategy there, you have to “Nike it” – you just do it. If you
continue to refine and refine, you’ll never get into action, and the
incremental value of research just won’t be worth the time and money.
Schedule time frames and be religious about them to launch, get
feedback, and see if the strategy is acceptable to the customer or if
you need to adjust.

TT: Your second point is about execution focus. What’s the best way to rally people and spread that intensity?

DH: First, you have to communicate what you are
trying to accomplish. And you need to know the team members who are
going to make it happen and those who are going to keep it from
happening. It’s important to have time with them so they have an
opportunity to discuss and debate what’s critical.

At the same time, you have to draw the line at some point and say
“Okay, we have everyone’s input. These are the five most important
things we need to accomplish and they are the only things we are going
to work on.” You want everyone – probably 4-5 key people, maybe 10-15
at larger organizations — in the same boat so you can accomplish those
things on a timely basis.

TT: Can you use operating metrics or dashboards to help imbue people with a sense of ownership?

DH: Absolutely. When you think about executing a
strategy, you need operating metrics to see how you are doing. But keep
them simple, so folks can easily see if they are being successful and
adjust along the way as needed. This is the key, the dashboards or
metrics a company uses should be simple and frequent enough so that all
key members on the team can use them to keep score and see how their
actions translate into performance (or not). Most companies don’t
internally communicate their metrics frequent enough, or if they do
they are often measuring too many things or, even worse, the wrong
things.

A Few Quick Thoughts about the Brain

I’ve been really into the brain lately. Throughout the two plus years of doing this blog I’ve fairly routinely eschewed the norm and written about different elements of the brain. Well, my wife bought me a wonderful magazine from Time called Your Brain: A User’s Guide. It also inspired me to buy an audio book about the brain and how it works. Its call The Brain: A Very Short Introduction and its by Brian O’Shea.

I skipped over to TED.com for some light listening and thought this video was insightful.

http://video.ted.com/assets/player/swf/EmbedPlayer.swf

A View from College, A View of College, and a Job

I ran across three lists that I found interesting the last couple of days:


The Beloit College Mindset
list is a run down of perspective. The list highlights life experiences, i.e. a freshman entering college this fall doesn’t know Magic Johnson without HIV. Here is an excerpt they prepared:

If the entering college class of 2013 had been more alert back in 1991 when most of them were born, they would now be experiencing a severe case of deja vu. The headlines that year railed about government interventions, bailouts, bad loans, unemployment and greater regulation of the finance industry. The Tonight Show changed hosts for the first time in decades, and the nation asked “was Iraq worth a war?” 

Each August since 1998, Beloit College has released the Beloit College Mindset List. It provides a look at the cultural touchstones that shape the lives of students entering college. It is the creation of Beloit’sKeefer Professor of the Humanities Tom McBride and Emeritus Public affairs Director Ron Nief.  It is used around the world as the school year begins, as a reminder of the rapidly changing frame of reference for this new generation. It is widely reprinted and the Mindset List website at http://www.beloit.edu/mindset/ receives more than 300,000 hits annually.

As millions of students head off to college this fall, most will continue to experience the economic anxiety that marked their first two years of life just as it has marked their last two years of high school. Fears of the middle class–including their parents–about retirement and health care have been a part of their lives. Now however, they can turn to technology and text a friend: “Mom dad still worried bout stocks. urs2? PAW PCM”.

Members of the class of 2013 won’t be surprised when they can charge a latté on their cell phone and curl up in the corner to read a textbook on an electronic screen. The migration of once independent media—radio, TV, videos and CDs—to the computer has never amazed them. They have grown up in a politically correct universe in which multi-culturalism has been a given.  It is a world organized around globalization, with McDonald’s everywhere on the planet. Carter and Reagan are as distant to them as Truman and Eisenhower were to their parents. Tattoos, once thought “lower class,” are, to them, quite chic. Everybody knows the news before the evening news comes on.

Thus the class of 2013 heads off to college as tolerant, global, and technologically hip…and with another new host of The Tonight Show.

Here are some examples from the list:
01. For these students, Martha Graham, Pan American Airways, Michael Landon, Dr. Seuss, Miles Davis, The Dallas Times Herald, Gene Roddenberry, and Freddie Mercury have always been dead.
04. They have never used a card catalog to find a book.
05. Margaret Thatcher has always been a former prime minister.
06. Salsa has always outsold ketchup.
44. There have always been flat screen televisions.
52. They have never been Saved by the Bell
75. There has always been blue Jell-O.
——————————————————–

US News and World Report each year come out with their somewhat controversial rankings of colleges and universities. It is fun to look at and provides a particular point of view, but for the most part I wouldn’t use them to factor into my higher education decision. Here is what they say this year:

For the second year in a row, Harvard University tops the U.S.News & World Report rankings of America’s Best Colleges, but this time it has company. By edging up slightly in the 15 indicators of academic excellence that U.S. News uses to compile the rankings, Princeton University tied Harvard for first place on the list of national universities. Among the liberal arts colleges, Williams CollegeAmherst College. Last year, those two Massachusetts schools tied for first place in that category.

Here are a few I pulled out:
1a: Harvard
1b: Princeton
04: California Institute of Technology
12: Washington University in St. Louis
28: UNC Chapel Hill
28: Wake Forest
35: University of Rochester
102: University of Missouri
——————————————————-

UBS every few years does a survey to baseline the amount of time worked and the pay in those areas. They call this Prices and Earnings. Here is some of their findings for this year:

UBS’s “Prices and Earnings” study has dubbed Oslo, Zurich,Copenhagen, Geneva, Tokyo and New York as the world’s most expensive cities based on a standardized basket of 122 goods and services.

“When rent prices are factored into the equation, New York, Oslo,Geneva and Tokyo emerge as especially pricey places to live. The basket costs the least in Kuala Lumpur, Manila, Delhi and Mumbai. The study was based on data collected in 73 cities around the world between March and April of this year,” UBS reports.

Earnings highest in Switzerland, Denmark and the US

The survey of 73 international cities found that employee
s in Copenhagen, Zurich, Geneva and New York have the highest gross wages.Zurich and Geneva – the two Swiss cities in the study – top the rankings in the international comparison of net wages. By contrast, the average employee in Delhi, Manila, Jakarta and Mumbai earns less than one-fifteenth of Swiss hourly wages after taxes.

Zurich and New York: nine hours of work for an iPod nano

One vivid way to illustrate the relative purchasing power of wages is to replace the abstract basket of goods and services with a specific, highly uniform product that is available everywhere with the same quality, and then calculate how long an employee would have to work to be able to afford it in each city. The study determined that employees have to work a global average of 37 minutes to earn enough to pay for a Big Mac, 22 minutes for a kilo of rice and 25 minutes for a kilo of bread. For the first time, a non-food product was used in the study to compare working hours.

The iPod nano with 8 GB of storage is an ideal example of a globally uniform product. An average wage-earner in Zurich and New York can buy a nano from an Apple store after nine hours of work. At the other end of the spectrum, workers in Mumbai, need to work 20 nine-hour days –roughly the equivalent of one month’s salary – to purchase an iPod Nano.

Long working hours in the Middle East and Asia – shortest in France

People work an average of 1,902 hours per year in the surveyed cities but they work much longer in Asian and Middle Eastern cities,averaging 2,119 and 2,063 hours per year respectively. Overall, the most hours are worked in Cairo (2,373 hours per year), followed by Seoul (2,312 hours). People in Lyon and Paris, by contrast, spend the least amount of time at work according to the global comparison: 1,582 and 1,594 hours per year respectively.


Working Thoughts 08/20/08

Chinese Hiring of Graduates is Down

Working Thoughts 08/20/07

Migrant Workers and the State Department

Job Losses and the Self Employed

The July 2009 Jobs Report was relatively positive. That means the job losses, although still huge, are subsiding. I checked the U-4, U-5, and U-6 reports as well – both season adjusted and not adjusted – and there wasn’t anything there that stuck out.

So now it is time to look at the oddities that can be pulled from numbers. The NY Times has a guy named Scott A Shane who did some research earlier this year and recently about the self employed segment. He compared their job loss rate against the corporate job loss rate. Here is his chart, taken from his post called Job Loss Abating Among the Self-Employed:

                      

What this graph is showing is a year over year growth/loss comparison for the Self Employed and the Wage Employed. In other words, in the July/August 2008 time frame the Self Employed segment was 102% larger than it was in July/August of 2007.

What I find most interesting about this is how the dramatic decline for red (self employed) coincides with the months of September, October, November, and December of 2009. These were anxious months for just about everyone. What I surmise happened is that the consumer quit spending (ok, we know they did) and many self employed people looked to the credit markets to finance this slump, but they were frozen, and still pretty much are. Without any type of income coming in many self employed people lost their jobs.

But now things appear to be leveling off. The special skills or niche abilities of the self employed are sought after. But why? Well, if the tide has changed then it is probably because of comments like this from Jeffrey Immelt:

“I don’t need that to be part of your presentation,” he told them. “I already know the market’s slow.” As Immelt puts it, “The presentations had to go from ‘The market’s slow’ to ‘There’s an 80-locomotive order in Egypt — let’s go get it.'”

This was taken from The new (recovery) play book and article in Fortune. Good leaders don’t throw up their hands in defeat. They keep looking. They fundamentally believe there is a market for goods and services of value. And that is why the self employed statistic has flattened. Next month I expect it to turn up slightly.

Working Thoughts 8/17/07
At What Point Does It Stop Being Education?

Productivity is Strong. Sleep Might Not be Needed.

Some interesting stats came out from the Bureau of Labor Statistics this past week. First it was the better than expected Jobs Report last Friday. But now its the Productivity numbers, the wage numbers, and the consumer Price Index (inflation) numbers.

Here is a breakdown of the numbers (Second Quarter 2009):

Productivity (2Q 2009):
6.3 in the business sector – which is a function of worked hours falling faster than output

Year Q1 Q2 Q3 Q4 Annualized
1999 3.9 0.3  3.3 7.1 3.3
2000 -1.5 9.4  0.1 4 3.4
2001 -1.3 7.4  2.5 2.5 2.9
2002 8.8 0.5  3.8 -0.3 4.6
2003 3.7 5.3  9.7 1.5 3.7
2004 0.9 3.7 0.7 0.8 2.8
2005 3.9 -0.6 2.9 -0.4 1.7
2006 2.8 0.6 -1.9 2.4 0.9
2007 1.2 2.8 5.5 2 1.8
2008 -0.1 3.1 -0.1 0.8 1.8

2009 0.3 6.4

Wage (2Q 2009):
After deflation by the CPI-W, average weekly earnings increased by 3.5 percent.  Before adjustment for seasonal change and inflation, average weekly earnings were $612.87 in July 2009, compared with $607.27 a year earlier. An increase of over $5.

Inflation (July ’09):
It was -2.1 as energy prices have weighed it down. Its thought that this is the bottom for prices

Side Bar:
Mutation Tied to Need for Less Sleep Is Discovered
I just think this is a hilarious headline considering productivity, wages, and inflation.


Working Thoughts 08/14/07

Tipping Point Leadership

Statistically Speaking

Coincidences seem to happen in threes. Last week I was talking to an intern and we were discussing his last semester in college. He was disappointed because the course load he originally planned for was disrupted. For some reason, perhaps there was a lack of enrollment, a class was dropped. And it fulfilled a requirement. There are several options for him to pick up to meet the requirement, but they are less desirable – most of them are Statistics.

As we spoke I tried to encourage him about the math based class. I highlighted its alignment to six sigma and how it could potentially lead to some certification or something. I provided a business strategy to him. I said, take a look at the six sigma tools and see when and where statistics helps, then when you have class make sure you get those answers. Make sure you can apply it. When the conversation ended I know I felt better about it

The next day the NY Times ran an article called For Today’s Graduate, Just One Word: Statistics by Steve Lohr. The point of the writing is to show that data and analysis is so valuable these days. Especially as the rate of its availability is increasing. The story follows a few people (an anthropologist for example) that use the math field to improve their understanding and execution of their jobs. Each narrative explains how without the data evidence their findings wouldn’t happen or would lack credibility or the real benefit wouldn’t be known.

Speaking of benefits, my wife and I got a little free time this past weekend and went to the movies. We saw The Hangover. There is a scene in the movie where the main characters imitate Dustin Hoffman in Rain Man. They make $80,000 at blackjack by counting cards. Well, counting cards is only useful because of the statistics. When you count cards you are adjusting the probabilities of certain results off of the baseline. Normally Casinos operate at favorable percentage and just let time play out to the profits. But Black Jack is one of the few games that has a very small house advantage. Its almost 0 when played perfectly. However, counting cards correctly tilts the scales in favor of the card counter and not the casino. But the funny thing is, card counting isn’t against the law. And here is another reason why the casinos are smart. Most people aren’t good enough at statistics to really make money off of the potential advantage. They end up making errors anyway and paying the house. Movies like The Hangover do make it seem easy though.

The problem with statistics is that its fairly joyless. As Dan Pinkwould say its left brain. Its charts and graphs. Your right brain likes music and art. Getting over the education hump of statistics is tough,but once you do, well, you have a high probability of financial success.

Working Thoughts 8/12/08
Individualism versus Collectivism

Ten Years and Basically No Private Sector Job Creation

It is common knowledge that the employment situation is at one of the worst states ever for the US (illustration below shows the last 5 years). But it has now reached an apex. Private sector job creation for the last decade is at a virtual 0%. This makes me think three things.

  • The first is that the world is flat and anything that can either be automated/made routine will be.
  • The second thought is there hasn’t been any employment game changers since the internet. For instance, in the early part of the decade the automobile changed the US. Then science took over with nuclear energy and bombs. Then computers. Health care and energy each have the potential, but they are so political that organic ideas get choked off.
  • And finally, the third is that leadership is no longer bold. Many leaders simply protect what they have, they play it safe. JFK wanted a man on the moon before the 1960s ended. And it happened. Ask yourself when the last time you were inspired?

Check these job charts out (courtesy of the NY Times):


July 2009 Jobs Report and Wages

Here are the job market and compensation numbers for July 2009 (based on the job report):


Net
loss of 247,000 jobs in the month (revised to a final loss of 344,000)

  • Analysts expected a loss of 325,000
  • nineteen straight months of job losses
  • The total of unemployed person remained decreased to 14.5 million
  • June was revised to loss of 443,000 jobs (from a loss of 467,000, revised to a final loss of 504,000)
  • May was revised to a loss of 303,000 jobs (from 345,000 originally to 322,000 last month, revised to a final loss of 347,000)
  • Involuntary part time workers was unchanged at 8.8 million. This number has leveled off over the last four months
  • Since December of ’07, payroll employment has fallen by 6.7 million
  • Long term unemployed increased  to 5.0 million persons (people out of work longer than 27 weeks)

Unemployment rate declined to 9.4%

  • Analysts predicted a rise to 9.6%
  • This number is tempered by the fact that a large number of people dropped out of the pool since they quit looking for work
  • The average length for an unemployed person is now at 25.1 weeks
    • A year ago it was 16.3 weeks

Specific Segment Job numbers:

  • Manufacturing lost 52,000 jobs
  • Construction lost 76,000 jobs
  • Retailers lost 21,000
  • Leisure and Hospitality Services gained 9,000 jobs
  • Government sector grew by 7,000
  • Health care grew by 20,000 jobs

Wage:

  • The average weekly paycheck (seasonally adjusted) is $612.87
  • The average hourly earning (seasonally adjusted) is $18.56 – up 3 cents
  • The average hourly work week was up 0.1 to 33.1

Bureau of Labor Statistics

Job Report Stats Summary

The Value Twist

I knew a boy when I was younger. He was a candidate for braces when we got to high school and he tried hair styles that weren’t quite right. He was skinny and loafed a bit when he walked. But one summer day it was 90 degrees. Where we grew up that was a pretty hot day. Since we were young boys, it was completely normal for us to jump on our bikes and ride over to the ice cream parlor – the Eagle’s Nest. We scrounged around for our $1.25 and each ordered a medium soft serve twist. I like the twist the best because it’s chocolate and vanilla. We killed about 30 minutes hanging out there and enjoying our tasty treat on such a scorcher.

My reminiscing story is tied to this blog because its about value, and particularly thick value. Umair Haque wrote about thick value and thin value in a blog called The Value Every Business Needs to Create Now. Thick value is providing something that makes each transactor better for for doing the deal. Each party is in a better position because of it. Thin value is where one party benefits and the other deals with it because no viable alternative exists. My story about ice cream is an example of thick value. It was hot, I was 13 with time to kill, and a twist was within my price range. I got a treat and the Eagle’s Nest made a sale. Sadly, examples of thin value abound now-a-days. As Haque points out, the cell phone industry loves thin value. It might be the 15 seconds it takes to leave a voicemail (I know how voicemail works and they know I know how voicemail works, but 15 seconds used listening is 15 seconds closer to the overage charges) or the fees associated with every nuance. Competition is supposed to address these unneeded expenses, but for some reason, there seems to be more of them everyday.

Today Paul Krugman discussed something similar to thin value in his Op-Ed piece titled Rewarding Bad Actors. The main point of this entry is that two factions on Wall St are making money by gaming the system. In one case you have Goldman Sachs issuing trades based on data that’s milliseconds faster than what other investors is getting. This technological advantage provides a window into the trading market that both protects as well as directs the future of different securities. It segregates this world even more into haves and have nots. But as Krugman points out, the point of these trades isn’t to better allocate funds to those that can generate the greatest return (thick value), its to profit from these slight timing discrepancies in knowledge and then to scale it up to maximize the profit. The actual company, the one that the securities represent, is irrelevant. They could make a revolutionary diaper, a non-polluting pesticide, or semiconductor chip designs, it doesn’t matter. The point of these trades is to make money on the bid and  the ask.

The optimist in me thinks that there is always a place for thick value. If you can create something of value at a reasonable price, there will be a market for it. Go forth entrepreneurs.
The pessimist in me is very scared. There are just so many special interests and a real breakdown of what’s right.

These are things I didn’t think about with my friend at the ice cream parlor.