Netflix: Dream Job?

We have already seen that Netflix’s unique services, like HD instant streaming and hit shows like “Hosue of Cards”, help the company thrive. What about the way in which it rewards its employees?

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In an article published in the New York Times entitled “Netflix Incentives Figure in Success”, author Jeffrey Goldfarb and Reynolds Holding suggest that a large factor in Netflix’s success, in addition to the quality service it offers to its customer base,  is due to how it treats its staff and runs its company from the inside.

Part of the success may stem from the uncommon way Netflix rewards its people. Employees eligible for stock options can tailor the mix of salary and equity in their compensation packages. The amount of options used to be restricted, but the cap was lifted last year. Mr. Hastings took only about 9 percent of his $5.5 million pay in cash. Equally unusual is how Netflix doles out options. They are granted monthly instead of annually, as is typical.

This quote gives us one example of Netflix’s treatment of their employees. As a sort of incentive for working hard and continuing to maintain the company’s high standard for TV streaming, Netflix offers a wide array of flexible options in terms of stock and salary packages. Further, the CEO of Netflix, Hastings, takes of his multi-million dollar pay only 9% in cash. A job at Netflix is hugely enticing, therefore those who work there have incentive to keep working hard to produce new, creative ideas to perpetuate the company’s unbelievable success.

This can help smooth volatility and reduce some frustration that might discourage managers. To wit, on Nov. 1, the shares were at about $167. A month later they were up to $200. And they opened 2011 at just over $178. Because of the dollar-cost averaging afforded employees, they can worry less about underwater options and more about how to keep Netflix a step ahead of the competition.

By offering their employees such great options, Netflix is essentially guiding their focus to their work. They are able to devote more of their time and attention to producing innovative ideas and keeping Netflix “ahead of the competition”, as Goldfarb and Holding put it, because they don’t have to worry about their financial situations or weak stock options.