To pick this month’s book was chosen through a very specialized process in which I Googled top management books and chose something that seemed fun. This month’s choice is “No Rules Rules” by Reed Hastings and Erin Meyer.
The book is basically about how Netflix created its renowned culture of freedom and responsibility – essentially empowering workers to act in the best interest of the company without the need for a lot of oversight but with heavy feedback loops and top talent. The TLDR (too long, didn’t read) is that the book has solid strategies for creating a high-performance culture but ultimately might not be the most applicable for everyone. Still, a solid read.
It starts with three basic principles: Build up talent density, increase candor and remove controls. The most interesting one and the one that allows everything else in a company to run as it does is the buildup of talent density.
Hastings’ basic theory is, why would you keep average performers who bring down the overall productivity and morale of the team when you can have rock stars? It was a lesson Hastings learned in the early days of Netflix after having to lay off a sizable chunk of staff. After that layoff, those who were still around were able to absorb the work and continue to grow. It’s something the company regularly revisits with “The Keeper Test.”
The test asks management, “If a person on your team were to quit tomorrow, would you try to change their mind? Or would you accept their resignation, perhaps with a little relief? If the latter, you should give them a severance package now, and look for a star, someone you would fight to keep.”
A wildly refreshing take.
The book breaks down the process of attracting and retaining top talent: It turns out just paying them top-of-market rates and surrounding high performers with other high performers does wonders for reducing turnover. More shockingly, Hastings and Meyer advocate for full transparency, including breaking down quarterly financials before they are publicly released, and removing a lot of common rules organizations have in place, such as expense policies. To keep spending in check, managers are encouraged to lead with context not control and maintain healthy audit practices to ensure no one is getting out of control.
The strategies in the book might not work out for everyone or every company, and it would be nearly impossible to implement them at some large companies that are wedded to a particular policy or rule. However, for the more creative and outside-the-box thinkers, it could help significantly with growth, morale and other areas.
Toward the end, Hastings even breaks down what types of companies would absolutely fail in this type of environment. Specifically, an organization that needs a strong culture of employee safety, like trucking companies. If a carrier ops for a more freedom approach instead of rules and processes it could result in significant losses to the company, not just financially.
Some of the thoughts and practices Netflix has in place sound absolutely wild when first presented in the book – such as allowing someone who isn’t in senior leadership or legal to sign off on a multimillion-dollar contract for the rights to a movie without necessarily getting approval. However, for each “There is no way this is sustainable or even feasible,” there is a real-life story, anecdote or scenario told from an employee that shows it is a possibility.
The best part was the emphasis on candor and feedback. Netflix’s culture prioritizes feedback for everyone in the organization – not just in the form of an annual review it calls Live 360 but constantly throughout the year. For example, if someone gets heated in a meeting and dismisses someone’s idea right away without hearing it out, the rest of the team is encouraged and expected to step up and say that was uncalled for and to be more open-minded – truly a novel concept in most organizations.
The biggest takeaway from the book is the emphasis placed on treating employees as adults, allowing them to make their own decisions and trusting that they’ll act in the best interest of the company; oversharing, communication and transparency aren’t the enemy, and if you pick the best people they’ll continue to pick you back.
The second book into this review series was solid. I’ll give it a four out of five stars. While it might not be applicable for every organization, there are some solid strategies to create the strongest team for an organization.
Market Check. This week’s market goes to Southern California, home of the ports of Los Angeles and Long Beach and most commonly considered the market to watch. With a heavy volume of imports coming through LA and Long Beach that are then shipped to the rest of the country, this market has been setting the pace for the rest of the U.S.
That said, this SoCal giant has seen some tightening capacity in recent weeks. With outbound tender rejections rising faster than outbound tender volumes, a slight capacity crunch lies in wait. There hasn’t been a significant crunch as outbound tender rejections are hovering around 5%, which doesn’t give much impact to spot rates. Rejection rates would need to climb closer to 10% to see an impact on spot rates.
Who’s with whom. The comment period on the Federal Motor Carriers Safety Administration’s proposed rule on broker transparency ends today. The rule comes at the urging of drivers, carriers and the organizations that represent them. It’s unclear which side of the argument the new administration supports, but if I were to wager a guess, I’d say the administration would come down on the side of the driver. If pressured, the administration could urge the FMCSA to hasten its decision on a final rule, though it’s not likely a top priority for a administration.
The proposed rule would require freight brokers to provide all financial and other supporting documentation digitally to a carrier within 48 hours of the request. Carriers are pushing for it following the freight recession, during which some rates had carriers losing money every time they hauled a load. There is a belief that freight brokers are making healthy margins that are causing financial strain to carriers.
“We’re not suggesting that broker transparency will set rates or guarantee certain rates,” the Owner-Operator Independent Drivers Association asserts. “We support the free market and are trying to even the playing field so that truckers aren’t systematically negotiating with one hand behind their backs.”
It’s the last day for comment on the rule, so it’s a last chance to make your voice heard, whatever side of the argument you’re on. Comments can be left through this link on regulations.gov.
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