How Netflix builds a culture of excellence | Elizabeth Stone (CTO)

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Elizabeth Stone is the chief technology officer of Netflix. She previously served as vice president of product data science and engineering, and as vice president of data and insights, at Netflix. Before Netflix, Elizabeth was vice president of science at Lyft, chief operating officer at Nuna, a trader at Merrill Lynch, and an economist at Analysis Group. In our conversation, we discuss:

• Elizabeth’s advice for career advancement

• Netflix’s unique high-performance culture

• How, and why, Netflix maintains a high bar for excellence

• Intentional leadership practices

• How to foster an “open door” culture within your team

• The Keeper Test and how it contributes to maintaining a high bar for excellence

• The power of transparent communication

• Much more

Some takeaways:

1. Netflix uses the Keeper Test to facilitate real-time conversations about employee expectations and performance. The test involves a leader asking themselves: “Would I fight to keep this employee if they were considering leaving?” If not, it may be time to have a tough conversation with the employee about why that is.

2. Maintaining a high bar for excellence requires ongoing feedback and open conversations. Netflix does not have a structured performance review system; instead it relies on ongoing conversations and the annual 360 feedback process. The annual cycle focuses on gathering feedback for the sake of improvement rather than assigning ratings.

3. Netflix’s bottom-up culture doesn’t work without high talent density. Operating a company with informal performance reviews and limited planning processes requires competent, driven, and trustworthy individuals. Continuously hiring people who raise the bar is crucial to their culture functioning at scale.

4. The company values transparency and open communication from everyone, including leadership. Leaders practice transparency by taking notes in meetings and sharing those notes with the whole organization. This includes reflections on challenges, problems to solve, and what is top of mind for the leadership team. This level of transparency helps build a sense of community and trust across the organization.

5. Netflix keeps its data and insights teams centralized. This structure allows the team to work on various problem spaces, collaborate effectively, maintain functional expertise, and provide objective insights and analysis for the organization.

Listen now on Apple, Spotify, Overcast, and YouTube.

Find the full transcript at: https://www.lennyspodcast.com/how-netflix-builds-a-culture-of-excellence-elizabeth-stone-cto/

Where to find Elizabeth Stone:

• LinkedIn: https://www.linkedin.com/in/elizabeth-stone-608a754/

Where to find Lenny:

• Newsletter: https://www.lennysnewsletter.com

• X: https://twitter.com/lennysan

• LinkedIn: https://www.linkedin.com/in/lennyrachitsky/

In this episode, we cover:

(00:00) Elizabeth’s background

(04:36) Life as CTO vs. VP of Data

(05:57) The role of economists in tech companies

(08:32) Using economics to understand incentives

(10:07) Success and career growth

(20:15) Setting expectations

(25:02) Advice for how to avoid burnout

(27:44) Netflix culture: high talent density

(30:31) Netflix culture: candor and directness

(31:45) The Keeper Test

(39:01) Maintaining a high bar for excellence

(43:54) Netflix culture: freedom and responsibility

(46:18) Unconventional processes at Netflix

(47:55) Examples of candor

(51:44) Data and insights team structure

(01:00:12) Staying close to teams

(01:02:31) Advice on being present

(01:07:40) Lightning round

Referenced:

• What to Know About the Netflix Cup, Today’s First-Ever Live Sports Event: https://www.netflix.com/tudum/articles/netflix-cup-live-event-date-news

• Ann Miura Ko interview | The Tim Ferriss Show (Podcast): https://www.youtube.com/watch?v=h2GO0Ks_VGg

• Netflix culture: https://jobs.netflix.com/culture

• No Rules Rules: Netflix and the Culture of Reinvention: https://www.amazon.com/No-Rules-Netflix-Culture-Reinvention/dp/1984877860

• Reed Hastings on LinkedIn: https://www.linkedin.com/in/reedhastings/

• Netflix’s “Keeper Test” and Why You Need It | Lorne Rubis: https://www.highlights.lornerubis.com/2015/08/the-netflix-keeper-test-and-the-courage-to-take-it/

• The Hunger Games: https://en.wikipedia.org/wiki/The_Hunger_Games

• Nan Yu on LinkedIn: https://www.linkedin.com/in/thenanyu/

• Work Life Philosophy: https://jobs.netflix.com/work-life-philosophy

• The Scoop: Netflix’s historic introduction of levels for software engineers: https://blog.pragmaticengineer.com/netflix-levels/

• Chaos Monkey: https://www.techtarget.com/whatis/definition/Chaos-Monkey

• Ali Rauh on LinkedIn: https://www.linkedin.com/in/ali-rauh/

• Keith Henwood on LinkedIn: https://www.linkedin.com/in/keith-henwood/

• Jeff Bezos’ Morning Routine of Puttering Around—How It Works: https://medium.com/illumination/jeff-bezos-morning-routine-of-puttering-around-how-it-works-9d73f359ac8d

• What I Talk About When I Talk About Running: A Memoir: https://www.amazon.com/What-Talk-About-When-Running/dp/0307389839

• A Fine Balance: https://www.amazon.com/Fine-Balance-Rohinton-Mistry/dp/140003065X

• Triangle of Sadness on Hulu: https://www.hulu.com/movie/triangle-of-sadness-f60937bd-45f4-469a-938f-db95026953a1

• Beef on Netflix: https://www.netflix.com/title/81447461

• Fellow pour-over coffee set: https://fellowproducts.com/products/stagg-xf-pour-over-set

• Peloton bikes: https://www.onepeloton.com/shop/bike

Production and marketing by https://penname.co/. For inquiries about sponsoring the podcast, email podcast@lennyrachitsky.com.

Lenny may be an investor in the companies discussed.