A Leadership Analysis of Netflix CEO, Reed Hastings

A Leadership Analysis of Netflix CEO, Reed Hastings

By Victor J. Goncalves September 21, 2018

Society is presented with a vast array of theories related to the leadership success, the ability to effect positive change upon the workforce and ultimately help foster best-in-class results through the use of transforming, influencing and intelligence. How does Transformational Leadership, Triarchic Theory of Intelligence and Social Influence (i.e. reciprocity) come together to shape the ideas and actions of current Netflix CEO, Reed Hastings?  Let us take a closer look at how these theories remain at the forefront of Netflix’s strategies, culture and employment practices.

Who is Reed Hastings?

Reed Hastings is an American entrepreneur, cofounder and current CEO of the media rental service Netflix. In 1997, Hastings had the idea of a subscription-based movie-rental service (after incurring a large late fee when he failed to return a store-rented videocassette); he and business partner Marc Randolph incorporated Netflix in California in 1997 and started mail-order DVD operations in 1998.

Hastings’ Leadership Methodologies

For Reed Hastings transformational leadership, creative intelligence and reciprocity come together to best describe his leadership abilities. Hastings’ approach to personal time off, travel policies, formal reviews and compensation packages are far from the mainstream (and often tiresome) Corporate America practices…a snap-shot into some of Netflix’s creative practices can be seen here:

a.  Personal time – employees are given the autonomy to take as much time off as they feel is necessary; employees and managers work it out together.

b.  Travel policy – employees are expected to act like adults; solidified in five words, “Act in Netflix’s Best Interest” and spend money as if it were their own.

c.  Formal reviews – eliminated, instead managers and employees are asked to have conversations about performance as an organic part of their work interactions.

d.  Compensation – no bonuses; employees are offered market-based pay and can select how much (if any) compensation would be in the form of equity; those with stock options have their salaries reduced accordingly.

Hastings empowers his workforce, believes they are sophisticated enough to manage an autonomous-driven work environment and will ultimately do what is right for Netflix, themselves as employees and their families. To reinvent the company’s human resource policies so radically can be viewed as a testament to Hastings creative intelligence and transformational leadership abilities. Hastings believes that creating a company culture at Netflix centered on traditional corporate practices would not work and negatively impact motivation, attitudes, behavior and performance. The positive company culture created by Hastings has fostered reciprocity where employees feel obligated to repay the company by performing well. Today the company culture and their performance are well revered. Since being founded in 1997, the company is worth an estimated $23 billion with stock increases rising more than 200%.

Hastings is a leader that prides himself on making few decisions; his aim is to allow his employees to take ownership of generating new products and initiatives. Take for instance the hit series, “House of Cards”. It took only 30-minutes for Hastings to give the green-light for production. He credits the company’s culture of freedom and empowerment as the leading contributor (not only to the success of the show) but for just how quickly the show was approved. He admits the decision came quick because it was the employees who laid the ground work to make it happen.

Together, Hastings and the employees at Netflix have redefined how we watch cable television today. The idea of “cutting the cable cord” is no longer a far-stretched notion. Even in its infancy, Netflix was a transformational pioneer as seen with its initial mail-order DVD service (surpassing the likes of Block-Buster). Hastings’ ability to see a need, design a plan and introduce it to the market-place again remains testament to his creative intelligence and transformational abilities as a leader.

No leader regardless of how successful they are can be without flaws. In 2009 Hastings realized this when he announced Netflix would separate the mail-order business from the streaming business and charge customers separately for each service. The company raised consumer cost by nearly 60% and fielded distain from stock market and consumers. While this was short-lived (Netflix immediately retracted the policy) the fact remains it hurt the company and since 2010 DVD membership has fallen from 20 million to 5.3 Million subscribers. Why such an unlikely and perhaps irrational move by Hastings? The answer is simple and ultimately centered on his creative intelligence and transformational foresight; he became obsessed with not being the next Kodak or AOL; he did not want to be the next big company that clung to its roots and failed.

We are witness today to a generation with nearly endless leadership based theories and design that offer significant value-add benefits to leaders and followers alike. It takes exceptional leaders to make such impact as Hastings has eloquently demonstrated.  In the end Hastings mindset and actions help support the validity in Transformational Leadership, Triarchic Theory of Intelligence and Cialdini’s Social Influence/Reciprocity.

References

Cialdini, R. (1984). Influence: The Psychology of Persuasion, New York: Quill

Copeland, M.V. (2010).  Reed Hastings: Leader of the Pack.  Retrieved from

http://fortune.com/2010/11/18/reed-hastings-leader-of-the-pack/

Hibler, Joan (2016). Reed Hastings, American Entrepreneur.  Retrieved from

https://www.britannica.com/biography/Reed-Hastings Ma

McCord, P (2014). How Netflix Reinvented HR.  Retrieved from

https://hbr.org/2014/01/how-netflix-reinvented-hry 2016

Northouse, P. G. (2019). Leadership: Theory and practice (8th ed.). Thousand Oaks, CA: SAGE.

Pennsylvania State University. (2018 Aug. 20). Unit 01 Lesson 1 Looking at Leadership through

Many Lenses. Retrieved from https://psu.instructure.com/

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Intelligences. Retrieved from https://psu.instructure.com/

Pennsylvania State University. (2018 Aug. 20). Unit 01 Lesson 5 Social Influences. Retrieved

from https://psu.instructure.com/

Steel, E. (2015). Netflix Refines Its DVD Business, Even as Streaming Unit Booms. Retrieved

from https://www.nytimes.com/2015/07/27/business/while-its-streaming-service-booms-netflix-streamlines-old-business.html

Sternberg, R. J. (1985). Beyond IQ: A triarchic theory of human intelligence. New York:

Cambridge University Press.

Sternberg, R. J. (1997). The concept of intelligence: Its role in lifelong learning and success.

American Psychologist, 52(10), 1030-1037.

Synder, B. (2014). Netflix Founder Reed Hastings: Make as Few Decisions as Possible.

Retrieved from https://www.gsb.stanford.edu/insights/netflix-founder-reed-hastings-   make-few-decisions-possible

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