Netflix founder Reed Hastings on the importance of talent density and using a “keeper test”

After the dot-com bubble burst and Netflix had to lay off a third of its employees, Reed expected everything to grind to a halt. However, the opposite happened and the company actually got more done with fewer people:

“[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.”

Individual motivation, inspiration and excitement also increased—it’s invigorating to work with only A players.

In his book No Rules Rules, Reed explains that, after realizing this, Netflix made talent density a core company objective and set out to build a “dream team” of extraordinary people.

From Netflix’s culture doc:

“A dream team is one in which all of your colleagues are extraordinary at what they do and highly effective working together…. We model ourselves on being a professional sports team, not a family. A family is about unconditional love. A dream team is about pushing yourself to be the best possible teammate, caring intensely about your team, and knowing that you may not be on the team forever. Dream teams are about performance, not seniority or tenure.”

To attract the very best, they pay employees at the top of their personal market. And to maintain talent density, managers apply what Reed calls a “keeper test” for each of their people: if a team member was leaving for a similar role at another company, would the manager fight to keep them? Those who do not pass the keeper test (i.e. their manager would not fight to keep them) are given a generous severance package of 4+ months salary so that the company can find someone even better for that position.

Full video: Greylock “Blitzscaling 16: Reed Hastings on Building a Streaming Empire” (Nov 2015)