That was one of the most important learnings for me from the recent and critically acclaimed business book "No Rules Rules: Netflix and the Culture of Reinvention" by Reed Hastings and Erin Meyer. It describes how Netflix created a truly bottom-up decision making culture, what it means for their business and how it contributes to their enormous success.
My goal was to make employees feel like owners and, in turn, to increase the amount of responsibility they took for the company’s success. However, opening company secrets to employees had another outcome: it made our workforce smarter. When you give low-level employees access to information that is generally reserved for high-level executives, they get more done on their own. They work faster without stopping to ask for information and approval. They make better decisions without needing input from the top.
In most companies, decision making is done top-down. Imagine a tree, on the top you have senior executives who define high-level business goals and priorities. A few branches down, departmental leads break down those goals for their teams. Even lower, middle managers are there to help individual contributors decide. Such structure usually results in very little context available to individual contributors, and therefore, their decision-making is severely restrained. Any decision that is outside one's immediate responsibility requires a chain of escalations that could go as far as senior executives.
But according to the book, Netflix works differently. Their tree might look the same but works in reverse to the common way. At the bottom branches, they have highly skilled individual contributors that are empowered to make any decisions to reach their objectives. How do they know their objectives? No, those are not given from above by their managers. Instead, objectives emerge naturally based on the context and the company's vision individual contributes have at their disposal. Netflix has committed to giving its employees as much context as possible so they can make and own decisions on how to best do their jobs.
The advantages of such an approach are faster execution, increased autonomy for employees on all levels and an accelerated rate of learning. It also means that a lot of traditional controls could be let go. Stuff like expense or vacation policy, saving company substantial money and time.
Among the disadvantages are the mistakes while making decisions, sometimes costly mistakes, but also extremely high demands to competencies of employees and a constant need for managers on all levels to communicate context across the company.
Why would you want such a culture at your organisation?
You cannot plan or mandate innovation, unfortunately, it doesn't work like that. What you can do is to create an environment where innovation is possible. When your employees know the whole context of your business - they can come up with ideas you'd never get from a structured, controlled process.
To move fast
In a "classical top-down" management structure - it could take a lot of time for decisions to be made. Anyone who worked in such places knows about the tedious, long "approval cycles". It makes decremental effects on the speed of working and producing. If you want to move fast - your individual contributors need to be able to make decisions on how to best achieve their goals.
To learn quickly
Learning is an active process, or it should be. You need to try things, see how they end up and then try some more. When you have to get an approval for every learning attempt - chances are high soon you'd not be learning. Or you'll be elsewhere where people understand the crucial role rapid learning plays in modern successful businesses.
To build ownership
It's hard to overstate the importance of ownership for product success. It's the difference between "mercenaries" and "visionaries" that Marty Cagan writes about. And ownership starts with making your decisions, and your mistakes. We say product management is accountability without authority, that's often the case. However, and here we need to be honest with ourselves, if you don't own your product decisions - you're not a product manager.
What do you need to build such a culture?
The success of the ownership culture depends on the quality of decision-makers. That sounds obvious but what does it mean in practice? A lot of things, a lot of work and a lot of money. You need to hire the best talent, pay above market so they wouldn't leave, provide them with context and means to do their jobs and then leave them alone. If it sounds terrifying - that's fine, this way of working is not for everyone. It requires a massive leap of faith and ongoing, continuous dedication to making it right. That's why we have a very few best and then the rest.
To give the context for your individual decision-makers, you need to start with your vision. Getting back to the tree metaphor, a good vision is like a juice that is in every root, branch and every leaf of your tree. A good vision is the most helpful device in your decision-making toolbox. But coming up with a vision is hard. You'll not get it right on the first attempt and it's way too common to give up after a few attempts. But if you're a manager that wants to build an ownership culture - you'll have to make vision your number one job.
Not a safety-first industry
Making mistakes and learning quickly is great unless people are dying. There are some industries where such a culture would not be ethical or permitted. Even if you work in a heavily regulated, "safety first" place - it never is a bad idea to give your employees more context.
Netflix is an outlier in the business world. Not only they're enormously successful, but they also disrupted themselves numerous times. All that while working differently to most of the other companies. Netflix has built the culture of ownership that distributes decision power to individual contributors who are best placed to use it in order to achieve the company's vision. They did it by hiring the best talent, providing them with a clear vision and all the necessary means to do their best work. And then they let go of control. This made Netflix one of the most innovative, fast-moving learning organisations allowing it to become a "verb", which is the biggest honour in the product world.