Ted Sarandos, co-CEO of Netflix, is standing by his decision to change the company’s renowned culture memo earlier this year. “We definitely changed the culture. We want it to reflect how we work, not dictate how we work,” said the streaming executive yesterday (Oct. 22) while speaking at the WSJ Tech Live conference, adding that the company didn’t take the evolution of the document “lightly.”
Netflix’s original memo was first published by Reed Hastings, the company’s co-founder, as a 125-page PowerPoint in 2009 and quickly made a splash for its blunt principles and flashy sayings. It was subsequently described as what “may well be the most important document ever to come out of the [Silicon] Valley” by former Meta executive Sheryl Sandberg.
Netflix’s culture memo has changed over the year
The memo has been revised four times in the years since. The most recent change took place in June after a year of research that took some 1,500 comments from Netflix employees into consideration. One of the most significant impacts of the revision affected its “Freedom and Responsibility” heading, which outlined the liberal policies offered to Netflix workers. The company’s vacation policy, for example, is simply “take vacation,” while its expenses policy is “act in Netflix’s best interest.”
Netflix’s newest memo no longer contains this heading, instead placing the “Freedom and Responsibility” principles under a section called “People over Process” that places more emphasis on the need to employ “unusually responsible” employees able to “thrive on this level of freedom.” Previous iterations of the document probably had “a little more emphasis on freedom than responsibility. We think you have to have both,” explained Sarandos during WSJ Tech Live.
The co-CEO also tinkered with the memo’s controversial “Keeper Test” section, which has for years maintained that Netflix managers should consider whether they would fight to keep an employee if they wanted to leave. If the answer is no, those workers are let go. The streamer’s new policy now contains a sentence conceding that the test “can sound scary” and encouraging employees to speak with their bosses on a regular basis. “It is often written about as being this cold and cutthroat thing, and it’s really not,” said Sarandos.
The culture document’s core values have remained the same, according to the co-CEO, who said that these principles were a part Hastings’ philosophy back in the late 1990s. The company actually began referencing its culture memo long before it was publicly available, teaching it to new hires on a monthly basis back when Netflix had less than 300 employees, until Hastings “one day pushed a button and put the culture memo on the internet,” said Sarandos.
The executive admitted that the recent changes have received pushback from employees, which he described as an inevitable due to the document being “such an iconic thing.” Regardless, he maintains the updated memo better suits the company’s now 14,000 employee-strong business model. “One thing that we have to really help employees understand all the time is that we put no energy in preserving the culture. We’re constantly working to improve the culture.”
Why does Netflix have two CEOs?
Netflix’s unique business culture isn’t limited to its famed memo. The streamer also boasts an unusual leadership structure, having been led by two co-CEOs since 2020 when Hastings, who helmed the company for 25 years, promoted long-time lieutenant Sarandos as his equal. After Hastings stepped away from his CEO role in 2023 to become Netflix’s executive chairman, the company’s former chief operating officer Greg Peters became co-CEO alongside Sarandos.
Sarandos praised the set-up as working “uniquely well” for Netflix, which he described as focused equally on entertainment and technology. Sarandos oversees content and marketing, while Peters is in charge of areas like product technology and finance. “We’ve got two very distinctly different things that we have to accomplish,” said Sarandos. Despite his satisfaction with the model, the co-CEO isn’t so sure he would recommend it to other companies like The Walt Disney Company, which is expected to announce a CEO replacement in 2026. “I don’t know that it works everywhere,” he said. “If your business culture is more politically charged than ours is, it might not go so well.”