Executive Summary
Netflix has unique staffing practices that enable it to hire experienced and dedicated employees. The company believes in hiring, rewarding, and retaining qualified and mature workers. The staffing practices are in line with Netflix’s primary business strategy. The business seeks to dominate the digital content industry globally. Recruitment of experienced workers enables the company to produce quality digital content that promotes competitiveness.
Netflix’s organizational structure comprises the chief executive officer and six chief officers who report directly the former. The chief talent officer heads the human resource department. Even though Netflix’s staffing practices enable it to hire skilled workers, their skills become obsolete after some time, forcing them to leave. The company has lost many valuable workers since inauguration. Netflix should review staffing practices to enable it to hire young and tech-savvy workers who can quickly adapt to changes in demand for digital content.
Introduction
In the contemporary market, organizations compete for top tech talents to boost their competitive edge. Cases of companies poaching experienced workers from rival firms are common across industries. Demand for skilled employees makes it difficult for small startups and businesses to recruit and retain a workforce that can guarantee success. The human resource team is required to be innovative to enable companies to source the right employees (Slocum, Lei, & Buller, 2014). One of the mistakes that human resource managers commit is outsourcing recruitment activities to third parties.
Even though recruiting firms may reach many potential candidates, the most priceless sourcing emanates from searching within a company’s network. Referrals from employees can assist business to hire experienced and dedicated workers. One of the companies with the best staffing practices is Netflix. The company’s cultural values dictate staffing procedures. The chief talent officer is responsible for hiring staff.
Organization Background
Netflix is an American multinational corporation that specializes in the entertainment industry. The company was established in 1997 and has its headquarters in Scotts Valley, California. It is renowned for offering video-on-demand online, streaming media and DVD via mail. In 2013, the company diversified its services by venturing into online distribution, television production, and the film industry. Netflix has grown its television production and film series since 2013.
Allen, Dorothee, and Holly (2014) aver that it runs an online library comprising television shows and films. It enables Netflix to distribute original content. In 2014, the company released “Numerous original series and films, more than any other network or cable channel” (Allen et al., 2014, p. 139). The goal of the company is to expand services to as many countries as possible. Currently, the company serves over 190 countries and is in the process of introducing services to additional states. Netflix works in liaison with local media companies to enable it to distribute its content. The company’s goal is to make sure that 50% of its library comprises original material by 2019 (Allen et al., 2014). Netflix has already embarked on a program to produce original anime and film content.
Business Strategy
In about ten years, Netflix has grown its market share from seven million to over 110 million subscribers across the globe. Netflix’s growth is an exceptional achievement. Not many businesses can expand their market share to such an extent within a short period. Ryan (2013) avers, “Netflix does not try to offer content geared to a single audience with a specific interest” (p. 397). Additionally, it does not target a mass audience.
If the company does not use these strategies, one wonders how it has managed to grow its market share and increase subscription. Netflix uses a “conglomerated niche” strategy to grow subscription and expand its market share. The company understands the needs of diverse market segments. Thus, it develops numerous programs that meet the interests of different audiences. They include action series such as Daredevil, complex serial dramas such as House of Cards, unique films, and horror movies.
The company utilizes the internet to distribute its content. Internet distribution enables Netflix to collect sufficient information regarding the interests of target customers and subscribers (Ryan, 2013). Moreover, the company uses the distribution channel to evaluate behaviors of the subscribers. Information gathered via internet distribution helps the organization to organize its library. Netflix does not share information regarding the data it collects from customers.
Nonetheless, the company’s ability to obtain viewing data from an international market base helps it to detect changes in viewer interests and identify micro-genres. Netflix’s customers have different opinions regarding the company’s brand. They do not view the company as a unit. Instead, they see it as an expansive library comprising numerous rooms and nooks. Subscribers do not have to scan through the entire library to get what they want. They understand exactly where to go once they log into the company’s library.
In the global arena, Netflix endeavors to produce content that meets the needs of the local customers. For instance, it translates original content into local languages. In cases where the company cannot provide sufficient amount of material in local languages, it liaises with other media companies. Netflix buys content from local producers through loyalties or upfront fee. The distribution of local content has enabled Netflix to assert its influence in many countries across the globe.
The sale of local content allows Netflix to compete with networks or media that specialize in local language entertainment. Localization of content enables Netflix to compete even in the home markets. For instance, in Canada, there are many immigrants of Indian origin. Netflix purchases content from India and sells it to immigrants living in Canada.
Organizational Structure
Netflix has an operational, organizational structure that is ordered based on the company’s functions and objectives. The organizational structure does not reflect regions or customer segments. According to Yoon-Kyung (2014), the company’s structure is centralized, and the chief executive officer (CEO) has direct influence over all the departments. Netflix comprises six units that are headed by chief officers (see appendix 1).
Organizational structure at the department level does not follow a particular order. Chief talent officer heads the human resource department. The officer is a member of the top executive team. Currently, Jessica Neal is the chief talent officer for Netflix. She oversees multiple functions attributed to human resource management. Her principal responsibility is to facilitate recruitment and retention of skilled employees.
Netflix values corporate culture, which contributes to its success. Thus, the chief talent officer is responsible for inculcating the culture into the company’s operations. As aforementioned, the structure of the human resource department does not follow a distinct order. Thus, the chief talent officer works with a team of 33-member human resource staff that helps to recruit and retain veteran workers.
Human Resource Strategy
Netflix’s success is derived from its unique human resource strategy. The company’s human resource management practices defy common beliefs. The corporation is innovative regarding talent management. According to McCord (2014), Netflix uses two approaches to human resource management. The company hires only experienced people. Additionally, Netflix allows employees to leave whenever it feels that their skills are no longer required. The company employs, compensates and tolerate just skilled employees. The chief talent officer holds that employees’ errors come as a result of recruiting staff that is not devoted to company’s interests. Many companies spend a lot of time and resources formulating policies to guide human resources. There would be no need for the systems if a company hired the right employees.
Netflix believes in telling employees the truth about their performance. As a result, the company does not trust in the effectiveness of performance reviews (McCord, 2014). The chief talent officer encourages employees to discuss their performance in the course of operations. The company uses unconventional 360-degree reviews to evaluate performance. Employees are encouraged to share opinions regarding practices that their workmates ought to uphold, abandon or change. Workers feel motivated when they know the truth about their performance. At Netflix, the chief talent officer is responsible for establishing high teams.
The company pays employees based on the offer in the market. Employees are allowed to have interviews with rival companies like Amazon and Hulu. It makes them understand the market value of their skills. The company does not prevent workers from leavening whenever they are not satisfied with employment terms. McCord (2014) alleges that Netflix does not evaluate managers based on their mentorship or coaching skills. Instead, they are assessed according to the ability to establish great teams in their respective departments.
Netflix is one of the best-paying companies in the world. The leadership believes in paying employees according to their services. McCord (2014) maintains that the company’s principle is “hire the best and pay top dollar for it” (p. 5). The business does not issue bonuses to employees. It argues that workers who trust in a company’s values do not require rewards to work hard. The company allows workers to convert part of their salary into stock. It gives them an opportunity to own part of the company, therefore devoting their energy to the realization of its goals.
Netflix’s business strategy centers on global integration, innovation, and business value. The human resource function plays significant roles in promoting the company’s business strategy. The human resource hires only dedicated and experienced employees. One of the factors that inhibit organizational growth is employee errors and lack of commitment. Hiring experienced and devoted workers enable Netflix to minimize costs attributed to negligence.
The company does not have human resource policies to govern employee activities. Workers are encouraged to make independent decisions in their workplaces. It goes a long way towards invoking ingenuity amid employees, which translates to enhanced organizational performance. Netflix has managed to assert its influence in the digital content industry due to hiring the right employees. It has a pool of skilled workers who identify and address interests of different subscribers. Retaining employees at a time when they need to leave affects their productivity and overall organizational performance. Allowing employees to go whenever they feel that their services are no longer required avoids confrontations.
The leadership of Netflix regards employee appraisals as ritualistic and of no value to the business. Thus, the company does not conduct performance reviews. Instead, employees are encouraged to learn from one another. As a result, workers remain motivated and strive to develop their careers. McCord (2014) claims that self-motivated employees dare to take challenging projects. Encouraging employees to build their jobs independently enables Netflix to grow the volume of its digital content. Employees are not afraid of taking challenging projects. The chief talent officer has to make sure that new employees understand and embrace Netflix’s corporate culture. It goes a long way towards ensuring that the workers adjust to the company and work towards the realization of its business strategies.
Many organizations fail to realize their goals because they do not involve human resource in strategic planning. Netflix appreciates the contribution of human resource to organizational success. Consequently, human resource staff plays a critical role in the strategic planning. It helps in identification of desired skills to meet specific corporate goals. Netflix cannot realize its strategic goals without the right employees.
Involvement of human resource in strategic planning helps the chief talent officer to understand the direction of the company. The officer assists in resolving challenges that arise due to disparities amid company’s objectives and what is feasible in human resource terms. Participation of human resource in strategic planning enables Netflix to lay workable plans, thus avoiding potential hold-ups.
Netflix formulated its human resource plan at an awkward moment. McCord (2014) alleges that the company formed its strategy after the 9/11 attack. The terror attack forced the corporation to defer the launch of its initial public offering (IPO). According to McCord (2014), Netflix learned a significant lesson after releasing one of its valuable employees whose skills were no longer required. The company expected to make losses after losing the employee. To the contrary, Netflix enjoyed immense success. The administration realized that it was imperative to release employees who did not add value to the organization.
Today, the company has a human resource plan that seeks to assist it in retaining only experienced employees. It offers severance packages to employees who try to exit. The kit enables the employees to reorganize themselves and look for jobs in organizations that require their skills. The company does not have operation policies. Instead, employees are invited to make decisions based on logic and prevailing conditions. McCord (2014) argues that allowing workers to rely on logic enables Netflix to make invaluable choices at low cost.
Staffing Practices
Netflix’s corporate culture influences recruitment process. The company has recruiters who help to identify potential employees. Nevertheless, the decision to hire lies with the chief talent officer. The company lacks a structured recruitment process. Neither does a hiring committee or consensus drive the hiring process. According to Ojer and Capape (2013), Netflix does not use any specific rules to build rapport with candidates.
Ojer and Capape (2013) state, “Our guiding lens is not: ‘What does my company or boss say we should do?’” (p. 579). Instead, the company focuses on informing candidates about its culture. The recruitment process is organized in a way that the hiring team gives applicants a picture of their future life in the company. Netflix hopes to hire experienced employees in every recruitment drive. The firm structures the recruitment process such that it reflects its fundamental values. It enables the applicants to determine if Netflix’s culture matches their motivation. The move helps the company to attract the right candidates.
Three pillars govern staffing practices at Netflix. They are transparency, collaboration, and feedback. The company encourages collaboration between chief talent officer and recruiters. The chief talent officer attends recruitment drives and interacts with candidates. Netflix values transparency in recruitment practices. Villarroel, Taylor, and Tucci (2013) claim, “Netflix gives the chief talent officer full access to the company’s applicant tracking system to increase understanding between them and recruiting staff” (p. 24).
The system enables the officer to access information about the number of applicants and their competences. Moreover, they know the applicants that recruiters turn down and the reasons for the same. The interaction between recruiters and the chief talent officer promotes cooperation and trust.
Analysis of Staffing Practices
Managers and human resource staff view Netflix’s staffing function as an efficient way of recruiting the right employees. They are not afraid of hiring inexperienced team because the exercise attracts only the most qualified candidates. On the other hand, employees value the company’s recruiting practice because it does not discriminate against a candidate. All potential applicants get equal chances of being hired. Netflix encourages referrals from employees.
Consequently, workers have an opportunity to refer their family members or friends to the company whenever there are vacancies. There exist numerous human resource objectives associated with Netflix’s recruitment practice. The company’s primary goal is to recruit, reward, and retain only qualified and fully-developed employees. It helps to boost organizational performance as the company hires individuals who are willing to give precedence to its interests.
Netflix’s human resource endeavors to build a team of committed staff. It underlines the reason the HR department continues to look for potential candidates even when there are no available vacancies. The objective of communicating corporate culture during recruitment is to ensure that candidates understand the customs of the organization that they are about to join. The staffing practice supports Netflix’s business strategy as it provides the company with experienced and committed workers who facilitate its growth. The method enables the company to develop quality digital content, thus boosting its competitive edge.
Despite the company recruiting experienced employees, the rate of turnover is high compared to other technology companies like Facebook, Amazon, and Hulu. An analysis of the firm shows that many employees have left the organization since its inception. Indeed, some employees regard Netflix as “firing machine” due to the high number of workers who leave the company.
Recommendations
Technology changes rapidly. Therefore, organizations should hire employees who can adapt to the transformations without difficulties. One of the reasons why Netflix allows invaluable employees to leave the company is because their skills are no longer required. The company would not lose such workers if they were able to adapt to the changing environment. Netflix needs to review its recruitment practices to ensure that it hires young, tech-savvy candidates who can adapt to changes swiftly. Recruitment of experienced employees saves Netflix the cost attributed to training. Nevertheless, recruiting young and dedicated candidates would minimize turnover.
Moreover, it would accelerate the rate of innovation, thus enhancing competitiveness. Netflix’s most significant market share comprises the youths. Hiring young workers would enable the company to anticipate and exploit changes in consumer demands as the employees would interact with customers efficiently. Changing the staffing practices would result in Netflix incurring costs associated with employee training. Moreover, the company would have to introduce working policies to regulate employees. Competition in the digital content industry does not allow Netflix to continue relying on flawed recruitment practices. The company requires reviewing the practices within three months. Otherwise, the organization will continue to witness high turnover as more employees become redundant.
Conclusion
Netflix believes in recruiting, rewarding and retaining experienced workers. The company hires employees with vast experience in technology and digital content industry. Moreover, it allows employees to leave once their skills are no longer significant. The company has aligned human resource practices with its business strategy. Recruitment of experienced workers enables Netflix to produce quality digital content and grow its market share worldwide.
The chief talent officer works in liaison with recruiters to identify and hire the right employees. Even though Netflix’s recruitment practices enable it to employ experienced workers, it does not help to reduce employee turnover. The company has lost many valuable employees since its establishment. Some candidates are enthusiastic to join Netflix only to realize that it was not the right company for them after working for few years. The firm requires changing staffing practices to hire young employees who can adapt to changes in technology easily. It will help to build a team of experienced workers who do not have to leave the company after few years due to their becoming redundant.
References
Allen, G., Dorothee, F., & Holly, D. (2014). The rise and fall of Netflix: What happened and where will it go from here? Journal of the International Academy for Case Studies, 20(1), 135-143.
McCord, P. (2014). How Netflix reinvented HR. Web.
Ojer, T., & Capape, E. (2013). Netflix: A new business model in the distribution of audiovisual content. Journalism and Mass Communication, 3(9), 575-584.
Ryan, L. (2013). Leading change through creative destruction: How Netflix self-destruction strategy created its own market. International Journal of Business Innovation and Research, 7(4), 393-413.
Slocum, J., Lei, D., & Buller, P. (2014). Executing business strategy through human resource management practices. Organizational Dynamics, 43(2), 73-87.
Villarroel, A., Taylor, J., & Tucci, C. (2013). Innovation and learning performance implications of free revealing and knowledge brokering in competing communities: Insights from Netflix prize challenge. Computational and Mathematical Organization Theory, 19(1), 2-77.
Yoon-Kyung, C. (2014). Analysis of Netflix and Hulu for online video content distributors’ business model comparison in N-screen era. The Journal of the Korea Contents Association, 14(5), 30-43.
Appendix
Appendix 1: Netflix Organizational Chart
