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Following the burst of the dot-com bubble and a challenging period where Netflix had to downsize its workforce, Reed Hastings, the company's co-founder, braced for a slowdown. However, to his surprise, the opposite occurred. With fewer employees, productivity soared.
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“[Without the bottom third of the company] there was no more ‘dummy-proofing’ necessary. Everyone was going fast and everything was right. We realized that with the right density of talent, there is very little process needed.”
Moreover, individual drive, passion, and enthusiasm skyrocketed. Working alongside top performers proved to be energizing and uplifting.
In his revealing book, "No Rules Rules," Hastings delves into how this realization led Netflix to prioritize talent density. The company set out on a mission to assemble a "dream team" comprising exceptional individuals.
In their quest for top-tier talent, they offer salaries that align with top individual market value. To sustain a high talent density, managers implement what Reed Hastings terms a "keeper test" for each team member: if an employee were offered a similar role elsewhere, would their manager fight to retain them? Those who don't meet this criteria (i.e., their manager wouldn't advocate for their stay) receive an ample severance package equivalent to four months' salary, allowing the company to recruit an even stronger replacement. Listen to Reed Hastings himself: