What should a company’s relationship to its employees be? In April, I spoke to Bob Chapman, CEO of a 12,000-person manufacturing technology company, who made the case for Why Companies Don’t Need to Lay People Off to Survive. Chapman describes how taking extreme measures to prevent layoffs during the 2008 recession helped his company rebound strongly during the recovery. “You need to think of your people not as employees fulfilling functions, but as each one being somebody’s child who has been placed in your care,” he says.
Embodying the opposite approach is Netflix founder and CEO Reed Hastings. In an excerpt from his recent book No Rules Rules [update 12/3: the article and author account have since been deleted], Hastings describes how layoffs he was forced to make following the 2001 dot-com crash led to an unexpected burst of productivity, causing him to rethink how a company should relate to its employees. He outlines the culture Netflix since developed around managing talent, which include the maxims “We are a team, not a family”, and “Adequate performance gets a generous severance.” These principles, he argues, create a high degree of “talent density”. He may be on to something: The Economist calculated that Netflix earns a staggering $2.6 million per employee per year, nine times more than Disney employees.