Is Your Human Capital Strategy Old School?

It’s rare that you read about management principles that are so counter to everything that you believe in, that you just shudder in disbelief.  Such was the case for me recently when I read about How Netflix Reinvented HR.

Many entrepreneurial businesses, especially in stodgier industries, cast off Silicon Valley innovation as impractical or inapplicable.  But in the case of the war for human capital, we should all take notice. Consider the nontraditional approaches employed by Netflix in their HR policies:

• There is no vacation policy.
• There is no travel expense policy.
• Every employee is paid at the top of the pay scale (for their position).
• There are no annual performance reviews.

Danger Will Robinson, danger!

While the policies may be highly controversial, the lesson learned from the Netflix experiment is beyond debate. Netflix focuses on culture, not HR policies. The result is a dynamic company this is disrupting entertainment, and whose stock price tripled in 2013.

At the root of the Netflix human capital strategy is a big idea; if you hire only the best, and retain only the best you don’t need to waste time and money on arbitrary rules and procedures.  Some structure is required at Netflix, financials have to be accurate and on time, there is no harassment tolerated, etc. All companies need minimum standards for certain things (I am not suggesting otherwise).

But really people, do we really care what time people come to work? Do we care about anything other than results and how they play with others? Which do we appreciate more, employees who just do what needs to be done to serve customers, or those who arbitrarily knock off at 5:00?

Perhaps these Silicon Valley wonderings are not that far off. What I take from Netflix (and is completely applicable to all of my clients), is that companies have way too many B & C players. Employers tolerate B players because they find it too painful to replace them.  Many of our systems (which are built to protect companies from lawsuits and the like) actually reinforce poor performance.

The market for talent is heating up and employers are shifting their paradigm. Some view the headquarter office as limiting in terms of the geographies from which they can recruit.   Also, the recruitment model based on subjective one hour interviews is just completely broken. It is time for companies to rethink how they are acquiring talent and retaining their best people.

So in an effort to reduce any potential hate mail from HR executives (some of whom are my clients and friends), I would recommend the following middle road approach. Employers should:

• Take the time to evaluate their culture and what kind of company they want to be.
• Hire experienced, talented human resources executives who can think strategically about how HR can enable growth and competitive advantage.
• Create an approach for developing people with the aim of only employing A players.
• Take steps to purge the rest.
• Promote the appropriate structure for the circumstances. Of course HR needs to protect the corporation from labor and hour issues, harassment and the like, but with balanced, logical methods.
• Give the employees the freedom to succeed in whatever environment promotes their success.

It is time for us to reevaluate the fundamentals of how we approach human capital. Let’s move from defense to offense and be solely focused on hiring the best!

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