Freedom & Responsibility Culture

8/14/2019 Freedom & Responsibility Culture

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Reference Guide on our

Freedom & ResponsibilityCulture

These slides are meant for reading,

rather than presen


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Freedom & Responsibility

Applies to ourSalariedEmployees

Our hourly employees are important,

but have more structured job roles

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Culture: what gives Nelix

the best chance of

con


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Seven Aspects of our Culture

Values are what we Value High Performance Freedom & Responsibility Context, not Control Highly Aligned, Loosely Coupled Pay Top of Market Promo


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Lots of companies have

nice soundingvalue statements

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Enron Had A NiceSounding

Value Statement with 4 Values

Integrity Communica/on Respect Excellence

Enron headquarters

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Their 4 values were chiseled in

marble in the main lobby, but

had liXle to do with the real

values of the organiza


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The realcompany values,

as opposed to the

nicesounding values,are shown by who gets

rewarded, promoted, or let go

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Real company values are the

behaviors and skills

that we par


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We Par


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You make wise decisions(people, technical, business, and

crea


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Communica


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Impact

You accomplish amazingamounts of important work

You demonstrate consistently

strong performance so

colleagues can rely upon you

You focus on great results rather

than on process

You exhibit biastoac


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Curiosity

You learn rapidly and eagerly

You seek to understand our

strategy, market, subscribers,

and suppliers

You are broadly knowledgeableabout business, technology and

entertainment

You contribute effec


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Innova


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Courage

You say what you think even if itis controversial

You make tough decisions

without excessive agonizing

You take smart risks

You ques


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Passion

You inspire others with yourthirst for excellence

You care intensely about Nelix'

success

You celebrate wins

You are tenacious


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Honesty

You are known for candor anddirectness

You are nonpoli


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JudgmentYou make wise decisions (people, technical,

business, and crea


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You ques


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Values reinforced in hiring,

in 360 reviews, at comp review, inexits, and in promo


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Imagine ifeveryperson at Nelix

is someone yourespect and learn from

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Great Workplace is

Stunning Colleagues

Great workplace is notdaycare, espresso, health

benefits, sushi lunches, nice offices,or big compensa


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Like every company,

we try to hire well

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But, unlike many companies,

we prac


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Were a team, not a family

Were like a pro sports team,

not a kids recrea


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TheKeeper Test Managers Use:Which of my people,

if they told methey were leaving in two months

for a similar job at a peer company,would I fight hard to keep at Nelix?

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TheKeeper Test Managers Use:Which of my people,

if they told methey were leaving in two months

for a similar job at a peer company,would I fight hard to keep at Nelix?

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The other people should get a generous severance now,so we can open a slot to try to find a star for that role


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Honesty Always

To avoid surprises, you should periodicallyask your manager: If I told you I were

leaving, how hard would you work to changemy mind to stay at Nelix?

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Loyalty is Good

Loyalty is good as a stabilizer People who have been stars for us, and hit a bad

patch, get a near term pass because we think

they are likely to become stars for us again

We want the same: if Nelix hits a temporarybad patch, we want people to s


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Hard Work Not Directly Relevant

Its about effec


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Brilliant Jerks

Some companies tolerate them For us, the cost to teamwork is too high Diverse styles are fine as long as personembodies the 9 values

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Why are we so manic on

high performance?

In procedural work, the best are 2xbeXer than the average.

In crea


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Why are we so manic on

high performance?

Great Workplace is

Stunning Colleagues

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The Rare Responsible Person

Self mo


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Responsible People

Thriveon Freedom,and are Worthy of Freedom

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Our model is to increase

employee freedom as we grow,

rather than limit it, to con


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Most Companies

Curtail Freedom as they get Bigger

Bigger

Employee Freedom

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Most Companies Curtail Freedom

As They Grow to Avoid Errors

(sounds preXy good to avoid errors)

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Desire for Bigger Posi


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Growth Increases Complexity

Complexity

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Growth Shrinks Talent Density

in Most Firms

% High Performance Employees

Complexity

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Chaos Emerges


Chaos and errors spikes here business

has become too complex to run

informally with this talent level Complexity

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Process Emerges to Stop the Chaos

ProceduresNo one loves process, but

feels good compared to the

pain of chaos

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Processfocus Drives More Talent Out


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Strong NearTerm Outcome

A highlysuccessful processdriven company With leading share in its market Minimal thinking required Few mistakes made very efficient Few curious innovatormavericks remain Very op


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Then the Market Shis

Market shis due to new technology or newcompe


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Seems Like Three Bad Op


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A Fourth Op


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The Key: Increase Talent Density faster

than Complexity Grows

Busines

sComplexity

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Increase Talent Density

Top of market compensa


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Minimize Complexity Growth

Busines

sComplexity

Few big products vs many small ones Eliminate distrac


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With the Right People,

Instead of a

Culture of Process Adherence,

Culture of

Freedom and Responsibility,

Innova


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Is Freedom Absolute?

Are all rules & processes bad?

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Freedom is not absolute.

Like free speech

there are somelimited excep


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Two Types of Necessary Rules

1. Prevent irrevocable disaster E.g. Financials produced are wrong E.g. Hackers steal our customers credit card info

2. Moral, ethical, legal issues E.g. Dishonesty, harassment are intolerable

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Mostly, Though, Rapid Recovery is

the Right Model Just fix problems quickly

High performers make very few errors Were in a crea


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Good vs Bad Processes

Good processes help talented people get more done Web site push every two weeks rather than random Spend within budget each quarter so dont have to

coordinate every spending decision across departments Regularly scheduled strategy and context mee


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Rule Creep

Bad processes tend to creep inPreven


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Example: Nelix Vaca


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Meanwhile

Were all working online some nightsand weekends, responding to emails at

odd hours, and taking an aernoon nowand then for personal


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An employee pointed out

We dont track hours worked per day

or per week, so why are we tracking

days of vaca


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Nelix Vaca


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Nelix Vaca


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Another Example of Freedom

and Responsibility

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Nelix Policies

for Expensing, Entertainment,

Gis & Travel:

Act in NeLlixs Best Interests

(5 words long)

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Act in Nelixs Best Interests

GenerallyMeans1. Expense only what you would otherwise not

spend, and is worthwhile for work.

2. Travel as you would if it were your own money.3. Disclose nontrivial vendor gis.4. Take from Nelix only when it is inefficient to

not take, and inconsequen


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Freedom and Responsibility

Many people say one cant do it at scale But since going public in 2002, which is

tradi


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Summary of

Freedom & Responsibility:

As We Grow, Minimize Rules.

Inhibit Chaos with Ever MoreHigh Performance People.

Flexibility is More Importantthan Efficiency in the Long Term

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Values are what we Value High Performance

Freedom & Responsibility Context, not Control Highly Aligned, Loosely Coupled

Pay Top of Market Promo


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"If you want to build a ship, don'tdrum up the people to gather wood,

divide the work, and give orders.

Instead, teach them to yearn for thevast and endless sea."

Antoine De SaintExupery,

Author of The LiXle Prince

76*transla


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The best managers figure out how to

get great outcomes by seng the

appropriate context, rather than bytrying to control their people

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Excep


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Managers: When one of your

talented peopledoes something dumb,

dont blame them.

Instead,

ask yourself what context

you failed to set.

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Managers: When you are tempted

to control your people, ask

yourself what context you could setinstead

Are you ar


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Good Context

Link to company/func


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Why Managing Through Context?

High performance people will do

beXer work if they understand the

context

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Inves


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Freedom & Responsibility Context, not Control Highly Aligned, Loosely Coupled

Pay Top of Market Promo


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Three Models of Corporate Teamwork

1. TightlyCoupled Monolith2. Independent Silos3.

Highly Aligned, Loosely Coupled

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TightlyCoupled Monolith

Senior management reviews and approvesnearly all tac


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Independent Silos

Each group executes on their objec


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The Nelix Choice

1. TightlyCoupled Monolith2. Independent Silos3.

Highly Aligned, oosely Coupled

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Highly Aligned, Loosely Coupled

Highly Aligned Strategy and goals are clear, specific, broadly understood Team interac


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HighlyAligned LooselyCoupled

teamwork effec


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Freedom & Responsibility Context, not Control Highly Aligned, Loosely Coupled Pay Top of Market Promo


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Pay Top of Market is Core to

High Performance CultureOne outstanding employee gets more done

and costs less than two adequate employees

We endeavor to have onlyoutstanding employees

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h f f k


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Three Tests for Top of Market

for a Person

1. What could person get elsewhere?2. What would we pay for replacement?3.

What would we pay to keep person?

If they had a bigger offer elsewhere

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Takes Great Judgment

Goal is to keep each employee at top ofmarketfor that person

Pay them more than anyone else likely wouldPay them as much as a replacement would costPay them as much as we would pay to keep them

if they had higher offer from elsewhere

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Titles Not Very Helpful

Lots of people have the


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Annual Comp Review

Hiring is marketbased at many firms, but atNelix we also make the annual comp review

marketbased

Applies same lens as hiring Essen


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No Fixed Budgets

There are no centrally administered raisepools each year

Instead, each manager aligns their people tomarket each year the market will be

different in different areas

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Annual Comp Review

Some people will move up in comp veryquickly because their value in the marketplaceis moving up quickly, driven by increasing skills

and/or great demand for their area Some people will move down or stay flat

because their value in the marketplace hasmoved down or stayed flat

Depends in part on infla


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Compensa


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Bad Ideas

Manager sets pay at Nth percen


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When Top of Market Comp

Done Right...

Nearly all exemployees will take a step downin comp for their next job

We will rarely counter with higher comp whensomeone is voluntarily leaving because we

have already moved comp to our max for that

person

Employees will feel they are geng paid wellrela


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Versus Tradi


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Employee Success

Its preXy ingrained in our society that the size ofones raise is the indicator of how well one didthe prior year but at Nelix there are otherfactors too namely, the outside market

In our model, employee success is big factor incomp because it influences market value In par


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Good For Each Employee to

Understand Their Market Value

It a healthy idea, not a traitorous idea, tounderstand what other firms would pay you,

by interviewing and talking to peers at other

companiesTalk with your manager about what you findMinor excep


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Efficiency

Big salary is the most efficient form of comp Most mo


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High Performance Values are what we Value Freedom & Responsibility Context, not Control Highly Aligned, Loosely Coupled Pay Top of Market Promo


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In some


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Baseball Analogy: Minors to Majors

Very talented people usually get to move up, butonly true for the very talented

Some luck in terms of what posi


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Nelix Doesnt Have to be for Life

In some


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Two Necessary Condi


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Timing

If manager would promote employee to keepthem if employee were thinking of leaving,

manager should promote now, and not wait

Both tests s


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Development

We develop people by giving them theopportunity to develop themselves, by

surrounding them with stunning colleagues

and giving them big challenges to work onMediocre colleagues or unchallenging work is

what kills progress of a persons skills

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Development

Formalized development is rarely effec


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Individuals should manage their own

career paths, and not rely on a

corpora


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Individuals economic security is

based upon their

skills and reputa


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Why is culture important?

What is our culture trying to

support?

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Culture is How a Firm Operates

What prac


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Con


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Need a culture that supports

rapid innova/on and

excellent execu/on

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rapid innova/on and

excellent execu/on

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Both are required forcon/nuous growth

There is tension between these twogoals; between crea/vity and discipline


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effec/ve teamwork of

highperformance

people

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effec/ve teamwork of

highperformance

people

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High performance people and effec/ve teamworkcan be in tension also stars have strong opinions


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Need a culture that avoids the

rigidity, poli


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This slide deck is our current best

thinking about maximizing our

likelihood of con


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Our culture is a work in progress

Every year we try to refine ourculture further as we learn more

Documents

Freedom & Responsibility Culture