Netflix performance appraisal: No more annual reviews

Being a leader in the market doesn’t come easy. Netflix - the go-to online streaming platform of them all, has done a phenomenal job creating a high-performing culture. From reinventing HR to implementing a growth-focused performance appraisal system, Netflix has a lot more to it than it meets the eyes. Let's find out.

Over the years, Netflix has grown vastly. With the growth, managing a team of more than thousands has not been a cakewalk. But they have certainly done justice to it.

You may ask, what is their secret? Well, the HR system at Netflix encourages employees to talk honestly about performance and believes in context over control. While valuing their employees, they give them the freedom that brings in good results. 

As rightfully said by Former Chief Talent Officer Patty McCord: “The best managers figure out how to get great outcomes by setting the appropriate context, rather than by trying to control their people.”

Coming to performance management, Netflix has a unique 360-degree review process that outbids the old-school formal evaluations. It is undoubtedly a bold move and seems to be working for them.

About Netflix

With its digital footprints, in 190 countries and in over 30 languages, Netflix is a giant in the online streaming industry that gives you access to best-in-class TV shows, movies, and documentaries.

While excelling amongst its customers, Netflix has left no stones unturned for its employees. Their take on the human resource management system for building a transparent and high-performance culture has been extraordinary, and it got them both good and bad critiques. 

To create an excelling and engaging company culture, Netflix emphasizes freedom & responsibility amongst employees, decisions based on core values, constructive criticism with honest opinions as well as transparency. They hire the best and train them to be the better version of themselves.

Their unique approach - 360-degree reviews

Ditching the annual performance reviews, Netflix encourages employees to take part in a real-time performance review by freely writing feedback in a text box to anyone, from interns to chief executives in the company. The 360- degree review usually takes place in March and April.

The other way is the ‘stop, start or continue’ template that many employees use. It is a common performance management approach that highlights things a person should start, stop, and continue doing on a regular basis.

The 360-degree review system can be a little intimidating at first, but soon you get accustomed to it, as a former Netflix employee said. Adding to this, he mentioned that feedback is not anonymous, and the 360-degree reviews have no direct effect on any employee's pay. Netflix usually holds the annual compensation review around October or November, and it is the core determining factor in monetary compensation.

There are other HR-related approaches used for the performance review of an employee. The “Keeper Test” is another approach that managers use to evaluate an employee’s performance. In this approach, the manager asks themselves - Would you fight for that employee?

Depending on the answer achieved, it is decided whether to keep or let go of an employee. There is a difference of opinion for this test as employees find it a ground for work politics while managers say they feel the pressure to fire people or risk looking soft.

In a conversation with HBR, Patty McCord mentions: “If you talk simply and honestly about performance on a regular basis, you can get good results—probably better ones than a company that grades everyone on a five-point scale.”

Why does it work?

The main reason for Netflix performance appraisal to work is the results it brings to the table. Transparency levels and room for personal growth without worrying about an effect on pay have encouraged employees to accept positive criticism that improves their work. 

While the Netflix performance appraisal approach may seem unpleasant to some, it has proven to be highly effective, giving rise to a high-performance culture within the company.

Don’t take our word for it, but listen to the 70% of Netflix's employees that leave Glassdoor reviews stating they would recommend working at Netflix.

How to apply Netflix’s performance appraisal approach?

Did the Netflix performance appraisal approach resonate with you and do you want to try it for your company? If yes, implement these things to achieve those mentioned above

Teamwork is key

Taking inputs from everyone in the team helps in creating a better outcome. This can be done at a small to large capacity depending on your company and its structure. Every employee has a different opinion and when you work as a team, there are chances of exploring things that otherwise wouldn’t have been possible. 

Emphasize real-time feedback

It is wise to give employees feedback and reviews in real-time. Waiting for the annual evaluation period can make you miss out on points that are more important than meets the eye. Adding to that, tracking performance on a regular basis can cut down on time and efforts by the employee and lead them on the right track.

Encourage high-performance culture

Everybody wants to work in a company that brings out the best of them. To achieve that, create a high-performing culture within your company that boosts creativity, personal growth, challenges and motivates employees to come to work.

Invest in high rewarding HRM systems

HR has undergone a vast change, and it is no longer related to just hiring. A company’s success depends on it as it helps you understand employees and their needs better. Having HR software will not only make day-to-day activities easy but also track employee performance and much more.

• Hire quality employees and invest in them

There is a very thin line between a good and a poor employee. As a company, choosing the former gets you one step closer to creating a high-performance culture. In addition, it is a must to have employees that are well-trained and familiar with the recent developments of the industry. So, invest in your employees and train them to reap benefits in the long run.

Build an efficient company culture that motivates employees and drives success

Employees fear talking honestly about performance, the simple reason being an effect on compensation. But Netflix solved this issue by differentiating the compensation review from the performance review.

If an enormous company like Netflix can do it, you can too!