Netflix has an excellent reputation as a business winner. The company’s first victory was that it beat Blockbuster at its own game. You may recall Blockbuster Video — it rented out DVDs and VCRs at retail stores. Then Netflix made it cheaper and more convenient for consumers to get the movies they wanted with DVD by mail. Blockbuster was unable to adapt and perished.
Netflix’s success was threatened however when video streaming became popular. With more people using smartphones and tablets, it became much more convenient for people to watch movies on these devices rather than sitting in front of their TV sets and loading a DVD into an attached player. Netflix had to change fast which it did by reengineering its business model. NetFlix began developing its own content, repositioning itself to become the next HBO in the process. This was all done in a few years raising the $64 million question: How did they do it? More importantly, how did they get their employees to change to a new and different environmen? In an excellent Harvard Business Review article, Patty McCord, Netflix former chief talent officer, discussed the company’s approach to talent management. I think that McCord can teach mortgage managers some important lessons as we face tougher marketplace challenges:
• Being committed to hiring only “A”players isn’t about going through the motions but is a basic element of Netflix’s business strategy. Netflix believes that the best thing you can do for employees is to hire only “A” players to work alongside them. Excellent colleagues trump everything else.
• Hire only people who have the talent but will also put the company’s interests first, who understand and support the desire for a high performance workplace. At Netflix, new hires who did not prove to be company-focused were terminated.
• Netflix believes in telling the truth about performance. If performance isn’t there, tell the employee. If the job has changed and the employee’s skills don’t apply, tell the employee. In McCord’s view, “people can handle anything as long as they’re told the truth.”
• McCord also says that “if you’re in a fast-changing business environment, you’re probably looking at a lot of mismatches. In that case, you need to have honest conversations about letting some team members find a place where their skills are a better fit. You also need to recruit people with the right skills.”
• McCord also states that establishing a company’s culture is the chief responsibility of company’s leaders. Most importantly, do the values talked up by senior executives match the behaviors that the company needs to be successful? Or, is it just cheerleading that the executives are giving with no substance? Employees need more than just a pat on the back; they need leadership from their managers.
• Do employees understand the levers that drive the business? Even if you have hired people who want to perform well, McCord states that you need to clearly communicate how the company makes money and what behaviors will drive its success.
As we look to the second quarter of 2014, does your sales organization have the right managers and originators who can deliver in the current business environment? If not, what steps are you taking to make this happen? Let’s talk.