Reed Hastings, a co-founder of Netflix, said in his recent review of the company's early downsizing experience that business could be a team of close collaborations, but should not be described as “family”. In his view, such a statement could easily conflict with reality once the company needed to be laid off.

Retrenchment in 2001 brought about change

Netflix was once under considerable operational pressure after the Internet bubble broke. In 2001, the company, which at that time was still based on DVD leases, lost about one third of its workforce. Hastings said the experience had led him to rethink the relationship between the company and its employees.

In his view, if an enterprise defined itself as a family and was retrenchment under operational pressure, staff could easily lose trust in management. Family relations are not the same as employment, and enterprises need to adjust their staffing to the competitive environment and job requirements.

User standards around performance

Hastings said Netflix was more inclined to think of himself as a champion team than a family. Along these lines, management needs to continuously assess team formation and make staffing adjustments as necessary.

This idea is also reflected in Netflix's “keeper test”. The company requires managers to make periodic judgements as to whether they will do their best to retain an employee if he or she submits for separation; if the answer is no, the company believes that it would be more direct to both parties as soon as possible.

  • The evaluation focused on job matching and performance.
  • No core criteria of seniority and loyalty
  • Managers need to continue to judge whether they want to keep it.

Netflix also provides a high degree of flexibility in addition to high requirements. The company does not have traditional fixed working hours for some employees and provides for unlimited paid leave and parental leave arrangements.

More technology companies dilute the expression “family”

Similar views have emerged in other technology companies. The Chief Executive Officer of Airbnb, Brian Chesky, had previously recalled that the company was not a family when it was retrenchment during the outbreak, as it would eventually face dismissal and separation. Tobi Lütke, Chief Executive Officer of Shopify, has also publicly opposed the company as a family.

These statements show that some tech executives are making a clearer distinction between emotional attribution and employment. For enterprises, the focus is on maintaining competitiveness; for employees, the evaluation criteria fall more on job performance than on years of service.

Additional information:Hastings served as Chief Executive Officer of Netflix from 1999 to 2023 and was subsequently transferred to the position of Chairman and resigned earlier this year.