How Netflix builds a culture of excellence | Elizabeth Stone (CTO)

Elizabeth’s background (00:00:00)

• Netflix's culture is founded on high talent density, which enables candor, learning, excellence, improvement, freedom, and responsibility.
• Elizabeth Stone, the first economist to be named CTO at a Fortune 500 company, has held various leadership positions in data and technology.
• Netflix's culture is characterized by:
  • High talent density: Netflix prioritizes hiring and retaining top talent.
  • Radical candor: Employees are encouraged to provide honest and direct feedback, even if it is critical.
  • Freedom and responsibility: Employees are given the freedom to make decisions and are held accountable for the outcomes.
• Netflix's data and user research teams are structured to:
  • Ensure close collaboration between data scientists, researchers, and product teams.
  • Enable rapid experimentation and iteration based on data-driven insights.
  • Provide centralized support for data analysis and decision-making across the company.
• Elizabeth draws parallels between her experiences in biking and triathlons and her approach to work:
  • Setting clear goals and working consistently towards them.
  • Embracing challenges and setbacks as opportunities for growth.
  • Maintaining a balance between effort and recovery.

Life as CTO vs. VP of Data (00:04:36)

• The biggest change is the amount of context switching and the need to learn more.
• The engineering organization is much larger and more complex, with more people to get to know and more technical expertise to learn.
• There are more meetings, many of which are higher stakes.
• The role has more consequence, which is exciting.

The role of economists in tech companies (00:05:57)

• Elizabeth Stone's background as an economist is unusual for a CTO of a Fortune 500 company.
• Economics is a flavor of data science and a useful perspective to add to many different challenges, especially in a business context.
• Stone believes that economists can be valuable on teams in tech companies and that their value has become more recognized in recent years.

Using economics to understand incentives (00:08:32)

• Economics can help understand incentives and unintended consequences.
• It can be applied to internal leadership, such as clarifying priorities and motivating the company.
• It can also be applied to external factors, such as understanding Netflix's position to consumers and competition.
• Economics can help predict how people might behave given certain incentives, even if it's not the optimal or expected outcome.
• This type of framing is useful for thinking through cause and effect and has been applied in various roles at Netflix.

Success and career growth (00:10:07)

• Elizabeth Stone, CTO of Netflix, emphasizes the importance of dedication, collaboration, and effective communication in building a culture of excellence and achieving career success.
• Stone highlights the value of translating technical concepts into non-technical terms and vice versa, which has been a key advantage in her career.
• She stresses the significance of setting a high bar for oneself and striving for world-class quality in all aspects of work and life.
• Netflix is venturing into live content, requiring close collaboration between content, product, and technology teams. Stone's role involves translating content strategy into technical solutions that align with business goals.
• Netflix learns from failures, such as issues with the Love is Blind reunion stream, and uses those lessons to improve future live events.

Setting expectations (00:20:15)

• Setting expectations is part of Netflix culture.
• To help people level up in this skill:
  • Set an example by demonstrating the desired behavior.
  • Give feedback when expectations are not met.
  • Be direct and specific about what needs to be improved.
  • Help fill the gap by providing support and guidance.
  • Collaborate on tasks to help people learn and improve.
• Giving feedback is a crucial skill for setting high expectations.
• Consider how to deliver feedback in a way that feels supportive and helpful.
• Provide feedback in a safe space, such as one-on-one meetings, to allow for better absorption and learning.

Advice for how to avoid burnout (00:25:02)

• Netflix's culture of excellence doesn't necessarily mean working long hours.
• It's important to focus on the outcome rather than spending excessive time on unnecessary details.
• Instead of aiming for perfection, prioritize thoughtful iteration to achieve the desired results.
• Setting clear expectations and providing specific feedback helps team members understand what is expected of them and avoid unnecessary work.
• Open communication and asking questions about expectations can help align team members' efforts with the company's goals.

Netflix culture: high talent density (00:27:44)

• Netflix has a unique culture that emphasizes high talent density and a focus on high performers.
• High talent density is essential for maintaining the company's culture of candor, learning, seeking excellence and improvement, freedom, and responsibility.
• Hiring is a crucial aspect of maintaining high talent density, as it ensures that the people joining the team are capable of meeting the company's high standards.

Netflix culture: candor and directness (00:30:31)

• Candor and directness are essential for maintaining high talent density at Netflix.
• Employees are expected to give and receive feedback openly and honestly, even if it is uncomfortable.
• Netflix has a practice of making timely decisions about employees who are not meeting the company's standards, either by moving them to a different role or letting them go.

The Keeper Test (00:31:45)

• Netflix uses the "keeper test" to ensure they maintain a culture of excellence by regularly asking managers if they would do everything they can to keep a team member if they expressed their intention to leave for another opportunity.
• Netflix does not have formal performance reviews but instead relies on an annual cycle of 360-degree feedback and an annual compensation cycle to assess employee performance, aiming to create a culture of ongoing, timely feedback.
• Netflix's culture of excellence and high expectations can create stress and anxiety among employees due to the "Hunger Games" mentality of constant competition and fear of being fired.
• Open and regular conversations about performance and expectations can help alleviate stress and uncertainty by providing employees with a clear understanding of where they stand and what is expected of them.
• The combination of a culture of excellence and transparent performance conversations can help reduce stress and create a more positive work environment.

Maintaining a high bar for excellence (00:39:01)

• Netflix pays personal top of market salaries to attract and retain talent.
• Netflix focuses on hiring people who can identify and solve problems, rather than those who simply have the required skills.
• The company looks for people who will raise the bar for the whole team and bring in new perspectives.
• Netflix believes that having gaps in the team's skill sets or behavior can be toxic for other team members.

Netflix culture: freedom and responsibility (00:43:54)

• Netflix's culture emphasizes freedom and responsibility, allowing employees to explore, question, and experiment without strict processes or prescriptions.
• This approach is possible due to the company's high talent density, which ensures that employees have strong judgment and can make impactful decisions.
• The lack of process and prescriptiveness hinges on the assumption that employees are smart and have strong judgment.

Unconventional processes at Netflix (00:46:18)

• Netflix has unconventional processes, such as unlimited vacation time and no formal performance reviews.
• Innovations at Netflix often come from individual contributors rather than being driven by leaders.
• The company has succeeded by creating space for employees to contribute and explore, leading to numerous product features and innovations.
• The challenge now is to maintain this culture while operating efficiently at a large scale.

Examples of candor (00:47:55)

• Elizabeth Stone shares examples of candor in Netflix's culture.
• Stone practices transparent leadership by sharing information freely and openly with the organization.
• She takes notes in leadership meetings and shares them with the entire organization, including reflections on issues and problems.
• Netflix introduced individual contributor (IC) levels two years ago, which was a significant change as the company previously didn't have a leveling system.
• Stone describes the challenges and discussions surrounding the implementation of IC levels.
• She recently held a postmortem or retrospective to reflect on how the introduction of IC levels has gone.
• Stone believes in being candid about changes and challenges rather than pretending everything is perfect.
• She sees candor and reflection as essential for building a sense of community and trust within the team.

Data and insights team structure (00:51:44)

• Netflix employs "chaos monkeys," a program that randomly terminates processes, to ensure the stability of its infrastructure.
• A centralized data and insights team, including a consumer insights team, conducts various research types to improve title discovery and accessibility.
• Netflix combines different teams and expertise to build a culture of excellence, with the Consumer Insights team playing a crucial role in ensuring a consumer-oriented approach.
• The company's data and research expertise enable them to tackle complex problems like recommendations by combining different skill sets.

Staying close to teams (01:00:12)

• Preserves opportunities to connect with people.
• Holds bi-weekly office hours where people can sign up for 20-minute slots to meet and discuss their work.
• Conducts "Ask me anything" sessions with teams of different sizes to foster open communication and build rapport.
• Makes an effort to respond to messages quickly to maintain a flow of communication.
• Sends an email to everyone after every leadership meeting to keep them informed.

Advice on being present (01:02:31)

• Elizabeth Stone, Netflix's CTO, stresses the significance of being fully present in conversations, particularly one-on-one interactions, prioritizing genuine and curious discussions.
• Stone believes in fostering personal connections and building a community, considering many of her closest friends and connections as professional acquaintances.
• She advises treating others well, focusing on what energizes her, and capitalizing on those strengths.
• Stone reflects on her emotions, excitement, and enjoyment to stay grounded and be a better manager and leader.
• Netflix's culture of excellence is built on three pillars: hiring the best talent, empowering them to make decisions, and using data and analytics to drive continuous improvement.
• Netflix invests in cutting-edge technology to maintain its competitive edge.

Lightning round (01:07:40)

• Elizabeth Stone recommends the books "What I Talk About When I Talk About Running" by Haruki Murakami and "A Fine Balance" by Rohinton Mistry.
• Her favorite recent movie is "Triangle of Sadness" and her favorite recent TV show is "Beef".
• Her favorite interview question to ask candidates is "What would be your priorities and what would you do differently if you had my job?"
• Her favorite recent product is a Fellow pour-over coffee maker.
• Her favorite product overall is her Peloton bike or treadmill.
• Her life motto is "Something good happens every day", which encourages her to be more mindful and enjoy the small things.
• Stone believes that endurance sports like cycling and triathlon have taught her mental resilience and the ability to recover and bounce back from challenges.
• These skills are universally applicable and have benefited her in her career.