1. AUSTRALIAN INSTITUTE OF BUSINESS
Strategic Human Resource Development at Netflix
What is Strategic Human Resource Development?
Gareth Noble - Student Number A001321289
April 2014
Netflix has achieved significant success since it was founded in 1997. Whilst Netflix is famous
for its approach to human resources management, its approach to strategic human resources
development has received little attention. Netflix takes a resource based view of competitive
advantage and has achieved success through learning and innovation. Whilst Netflix takes no
direct responsibility for employee’s development, this assignment evaluates Netflix’s approach
highlighting the innovative manner in which Netflix has fostered individual and organisational
learning and development, using an approach to SHRD that attracts and retains clever people,
encourages self-directed, generative learning and enables internal and external development
through its Netflix Award.
Assignment submitted for MBA subject
‘Strategic Human Resource Development’

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1. Table of Contents
1. Table of Contents..................................................................................................................... 2
2. What is Strategic Human Resource Development?................................................................. 3
3. Who are Netflix?...................................................................................................................... 4
4. An introduction to Strategic Human Resources Development at Netflix................................ 5
5. Learning at Netflix................................................................................................................... 6
5.1 Innovation – Using SHRD to Attract & Retain Clever People............................ 7
5.2 Innovation – Self-directed and Generative Learning ......................................... 10
5.3 Innovation - Outsourcing Learning.................................................................... 11
6. Discussion & Conclusions..................................................................................................... 12
7. References.............................................................................................................................. 13

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2. What is Strategic Human Resource Development?
Leonard Nadler is generally accredited with introducing the term ‘human resource
development’ (HRD) and formally defined HRD as ‘organized learning experiences in a
definite time period to increase the possibility of improving job performance growth’.
(Nadler 1970 cited in Yorks 2005, pp. 6).
Some view HRD as lifelong learning, preferring not to constrain HRD by specified
timescales. Many definitions do not focus on the need for organized activities, although
it is often implied. However, the ‘most fundamental division’ in HRD relates to the
performance versus learning debate (Yorks 2005, pp. 14). For Nadler, HRD did not need
to ‘promise improvements in job performance’ (Yorks 2005, pp. 6). Others are more
definitive in their emphasis on performance improvement. Chalofsky (1992, pp. 179)
proposed a broader ‘unifying’ definition of HRD, which emphasised ‘learning-based
interventions for the purpose of optimising human and organizational growth and
effectiveness’. Similarly Yorks (2005, pp. 20-21) provided a definition that identifies the
fundamental purpose of HRD, as being to:
‘contribute to both long-term strategic performance and more
immediate performance improvement through ensuring that
organizational members have access to resources for developing their
capacity for performance and for making meaning of their experience
in the context of the organization’s strategic needs and the
requirements of their jobs’ ‘both an organizational role and a field of
performance practice’
Porter (1996, pp.16) defined strategy as the ‘creation of a unique and valuable position’
which provides a ‘sustainable competitive advantage’ and Yorks (2005) asserted the
importance of HRD in crafting an executing effective organisational strategy. Yorks
(2005, pp. 43-44) expressed the view that learning needs to ‘develop capable strategic
and tactical leaders… ensure that the potential lessons from tactical actions are indeed
learned…and at the operational level, HRD needs to focus on giving members of the
organization the competencies necessary for meeting performance expectations and
implementing strategy and tactics’.

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Strategic human resource development (SHRD) can therefore be considered a process of
organisational learning that enhances strategy creation and leads to effective strategy
execution. Yorks (2005, pp. 63) explained that ‘the entire strategic process can be
conceptualised as a cycle of organizational learning’.
This assignment evaluates Netflix’s approach to strategic human resource management.
Netflix has achieved significant success by maintaining a competitive advantage over its
competitors in a rapidly changing industry. Clearly learning and development has been a
key component in the company’s success. This assignment will analyse the innovative
approach Netflix has taken to SHRD, an approach which challenges some of the
traditional HRD philosophies.
3. Who are Netflix?
Netflix Inc. (Netflix) is the world’s largest movie and television DVD and streaming
subscription service, with over 40 million subscribers and 2500 employees (Business
Source Complete 2014, pp. 3-4). Netflix Earnings Before Interest, Taxes, Depreciation
and Amortization (EBITDA) has increased by an average of 55% over the last 4 years
(Market Watch, 2014). Netflix’s long term strategy has been to ‘deliver a comprehensive
library of movies and TV episodes’, acquire new and exclusive content, provide ‘easy-to-
use movie selection software’ delivering these services around a ‘subscription-based
business model’ (Thompson et al 2014, pp. C-140 – C-141). Netflix have achieved
significant growth at the expense of several major companies over the past decade.
Blockbuster in particular struggled following Netflix’s development of a new approach to
entertainment. Chussil and Gilad (2012) attributed Blockbusters decline directly to the
growth of Netflix. The Netflix ‘blue oceans strategy’ invented and captured new
demand, ‘offering customers a leap in value whilst streamlining costs’ (Kim &
Mauborgne 2004, pp. 3-4).
In order to succeed, Reed Hastings, Netflix’s CEO, recognised the need to attract and
develop the company’s human capital. Taking a resource-based approach to strategy,
Hastings identified the need to attract the best people to Netflix and to provide a culture
that supported the company’s development. Whilst there has been significant focus on

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Hastings’ approach to human resources management, there has been little analysis of
Netflix’s approach to SHRD.
4. An introduction to Strategic Human Resources Development at
Netflix
Recognising the importance of human resources to Netflix’s competitive advantage,
human resources professionals serve on the top management team. Despite this, the
approach Netflix has taken to human resources management has been far from traditional.
In 2009, a slide pack was circulated on the internet outlining Netflix’s culture and talent
management strategy. The slides went ‘viral’ and as a result, the Netflix approach has
been scrutinised, criticised and held up as an example to be followed. However, despite
the attention there has been little focus on Netflix’s approach to SHRD.
Netflix describes its approach to ‘development’ by emphasising that ‘individuals should
manage their own career paths, and not rely on a corporation for planning their
careers’. (Netflix 2009, pp. 116). Formal training that is organised by Netflix is limited
to training required by law. Netflix is clear that ‘formalised development is rarely
effective’ (Netflix 2009, pp.115). On first impressions it would appear that senior
management at Netflix are ‘sceptical of the importance of learning and development as a
business imperative, hampering, rather than effectively positioning the HRD function’
(Yorks 2005, pp. 69).
Netflix’s approach appears to be incongruent with its focus on learning and innovation.
Indeed, in a Harvard Business Review article in January 2014, Patty McCord (the former
Chief Talent Officer at Netflix) recalls a decision she made to end the services of a
‘bright, hardworking and creative’ member of the team whose initially attractive skills
cease to be ‘adequate’ (McCord 2014). There was no question of assisting the employee
to develop her skills so that she can continue to be a valid member of the Netflix team. It
appears Netflix have no time for directly assisting their employees development,
expecting individuals to identify their own development needs in order to remain in
gainful employment. In setting out the conditions for effective organisational
development, Popper and Lipshitz (2002, cited in Yorks 2005, pp. 127) emphasised the

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importance of ‘promoting safety through job security’. It appears that job security is only
apposite for Netflix employees who continue to have the relevant skills, irrespective of
their broader skills, enthusiasm or work ethic.
Only after a more detailed evaluation of the Netflix’s approach does it become evident
that Netflix acknowledge the benefits of SHRD. Netflix has developed clear
organisation values and a holistic human resource management strategy that encompasses
a carefully thought out approach to SHRD. Netflix’s approach is innovative and founded
on a unique strategy that has enabled continued development of employees and the
organisation.
5. Learning at Netflix
Netflix’s approach to human resources management is founded on a resourced based
view of competitive advantage. Reed Hastings, the company’s founder and CEO, adopts
the view of Hamel and Prahalad, in recognising that the ‘source of competitiveness lies in
an organization’s core competencies’ (Hamel and Prahalad 1989, cited in Yorks, L 2005,
pp. 30).
Netflix has no official published mission statement or vision. However, in October 2011,
Reed Hastings expressed a clear vision for the future of Netflix (Farfan 2014):
• ‘Becoming the best global entertainment distribution service
• Licensing entertainment content around the world
• Creating markets that are accessible to film makers
• Helping content creators around the world to find a global audience’.
In order to achieve the company’s strategic objectives it is clear that Reed Hastings and
his core management team developed an organisational strategy which focused on
attracting the best people to Netflix and then developing those people to deliver a
competitive advantage. Netflix acknowledged the importance of organisational culture in
the delivery of strategy and recognised the need for attention to be focused on developing
a culture and formulating what Yorks (2005, pp. 95) described as an ‘ideological

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consensus’ and ‘agreement among managers and employees regarding the lifestyle and
values that are appropriate for approaching tasks in the organization’.
5.1 Innovation – Using SHRD to Attract & Retain Clever People
In order to deliver upon the company objectives, Netflix focused on developing an
organisational culture congruent with the company vision. Goffee & Jones (2007, pp. 74)
identified that in order to be competitive ‘you must not only attract talent but also foster
an environment in which your clever people are inspired to achieve their fullest potential
in a way that produces wealth and value for all your stakeholders’. Netflix set out to
deliver a culture that clearly distinguished them from other Silicon Valley companies; a
culture that could act as an advert to attract the right people, and a vehicle for keeping
hold of the best talent. With experience in a company that was engulfed by bureaucracy
as it grew, stifling creativity, Hastings recognised the need to establish a culture free from
unnecessary rules. The approach taken by Reed Hastings was one described by Goffee &
Jones (2007, pp. 77) as protecting ‘his clever people from organizational rain’ and
‘minimizing the rain by creating an atmosphere in which rules and norms are simple and
universally accepted’. Famously, Netflix developed a ‘freedom & responsibility culture’
presentation outlining the core philosophies of the Netflix approach. The ‘seven aspects’
of the Netflix culture are outlined in Table 1 with comments regarding the associated
SHRD approaches.
Netflix developed an innovative human resources philosophy based on empowerment and
holding people accountable for adherence to that philosophy by setting, communicating
and enforcing the company’s values. The Netflix values are core to the company’s
success, and a significant part of SHRD at Netflix centres on fostering the Netflix culture.
This includes the Netflix college, where new starters at Netflix are taught the Netflix
approach. Netflix’s innovation was to remove all bureaucracy, creating an environment
where individuals develop themselves, surrounded by similarly brilliant people.

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Table 1. The seven aspects of the Netflix Culture (from Netflix 2012, pp. 4) and associated
SHRD approaches
Aspect Netflix SHRD approach
Values are what we
value
Encouraging learning and development of core values, through
communication feedback and reinforcement. Empowering
everyone to ‘question actions inconsistent with our values’
(Netflix, 2009, pp. 20)
High Performance
Encouraging learning and development through fostering a
focus on learning as a process: experience, reflection, abstract
conceptualization and active experimentation (Kolb1984 cited
in Yorks, L 2005, pp. 113-166)
Freedom &
responsibility
Empowerment. Recognising that clever people need the
opportunity to experiment and freedom to develop (Goffee &
Jones 2007, pp. 77)
Context, not control
Setting clear objectives based on strategy, clearly defining roles
and encouraging low level decision making. Developing
knowledge of strategy. ‘New employee college’ based on the
understanding of context freedom and responsibility (Netflix,
2009, pp. 84)
Highly aligned, loosely
coupled
Developing a clear understanding of strategy, objectives and
values. Supporting service delivery in line with strategy.
Encouraging but do not forcing cross-functional interaction.
Freedom to interact as necessary without imposition. High
performing people know when to interact.
Pay top of market
Attracting and keeping the best, recognising that ‘clever people
require a peer group of like-minded individuals’ (Goffee &
Jones 2007, pp. 77). Develop recruiters to identify fit.
Promotions &
Development
Development based on values, strategy and objectives.
Developing people by encouraging experimentation and by
surrounding employees with clever people. Encourage
individual development through ‘experience, observation,
introspection, reading and discussion’ (Netflix, 2009, pp. 115).

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Netflix’s approach to SHRD focused on many of the components of a ‘learning
organisation’ recommended by Senge (1990) and Hitt (1995) (cited in du Plessis, du
Plessis and Millett 1999) and summarised in Table 2. Notably, Netflix have shared
values focused on excellence and organisational renewal, a management style based on
facilitation and coaching (as opposed to control), a flat structure, an environment where
mistakes are tolerated and where generative learning is central to the learning approach.
Netflix’s approach to self-directed and generative learning is outlined in section 5.2.
Table 2. Senge’s Five Disciplines of Generative Learning (in Chiva, Grandio & Alegre
2000, pp. 117-118) and their Relationship to Netflix’s approach to SHRD.
Discipline Netflix SHRD approach
Personal Mastery
All employees are encouraged to learn about themselves in the
context of the organisations values, encouraging people to challenge
their views and beliefs as well as the organisations processes and
approach.
Mental Models SHRD approach is to focus on developing deep seated mental models
aligned with values. Encouraging thinking and action in line with
organisational values.
Shared Vision SHRD approach is founded on organisational values and a degree of
consensus, whilst enabling inspiration and motivation.
Team Learning SHRD approach is to encourage team development by bringing
together brilliant people, empowering them to develop each other and
improve organisational performance. Emphasising the importance of
communication and creative thinking.
Systematic
thinking
SHRD encourages the evaluation of the interrelationships between
parts of the organisation, whilst not imposing structured interactions.
Focus is on the organisation being highly aligned but loosely
coupled.

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5.2 Innovation – Self-directed and Generative Learning
Yorks (2005, pp. 124-127) outlined the different positions and debate regarding
organisational learning. One of the main areas of debate relates to whether organisations
can ‘truly learn or if individuals can learn on behalf of the organization’ (Yorks 2005,
pp. 124). The distinction is important for Netflix’s approach to learning which focuses
on improved organisational performance. Netflix recognises the role that individual
learning takes in organisational development, by emphasising individual’s responsibility
for their own development and that ‘adults have a deep need to direct their own learning’
(Artis & Harris 2007, pp. 10). Clever people resent imposed training regimes and formal
training, preferring to seek their own development opportunities. As recommended by
(Artis & Harris 2007, pp. 18), Netflix have harnessed the tendency for ‘adults to manage
their own learning to achieve organisational objectives’. Netflix encourage self-directed
learning by empowering employees to learn and then supporting them as they pursue
their specific course of action.
Another important distinction in classical organisational learning is the distinction
between adaptive and generative learning (Chiva, Grandio & Alegre 2010, pp.114). This
distinction referred to as single and double loop learning by Argyris and Schon (1974,
cited in Yorks 2005, pp. 111), is summarised by Chiva, Grandio & Alegre (2010, pp.
114):
‘Single loop learning permits an organization to maintain its present
policies or achieve its present objectives by adjusting or adapting their
behaviours. Double loop learning involves the modification of an
organization’s underlying norms, policies and objectives’.
While both types of learning are required for organisational development, in order to
implement effective strategic tactics and develop emergent strategy, generative (double
loop) learning is required (Senge1990, cited in Chiva, Grandio & Alegre 2010, pp. 117).
Senge identified five disciplines required for generative learning, each being core to
Netflix’s approach to SHRD. The five disciplines are shown in Table 2 with an
explanation of how each is relevant to Netflix’s approach to SHRD.

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5.3 Innovation - Outsourcing Learning
In order for Netflix’s business model to be successful, its strategy required Netflix to be
able to differentiate itself from other copy-cat subscription movie providers. Netflix
needed to maintain a significant market share. It was clear to Reed Hastings (CEO) that
Netflix had to develop movie selection software that was far superior to competitors. In
order to develop superior algorithms, ‘Hastings had augmented his software engineers
with mathematicians’ (Keating, 2012, pp. 185). By 2006, Hastings had recognised that
bringing in more resources to collaborate and develop internal capabilities was not going
to lead to the step improvements he required. Hastings had already hired the ‘best people
he could find’ (Keating 2012, pp. 185). The approach Netflix took was to outsource
learning by setting up a prize for the development of superior algorithms. Netflix would
‘attract machine-language scientists to [its] contest by offering a real-world data set
larger than that community had ever seen’ (Keating 2012, pp. 185), alongside a US$ 1
Million cash prize for the first team who could improve Netflix’s predictive powers by
10%.
The approach was a massive success. The competition encouraged significant
participation, achieving and then exceeding the initial target set. In addition, with Netflix
employees being able to oversee the algorithms developed by external teams, there was
considerable development of Netflix personnel and organisational knowledge. The
approach extends the synergist learning approach described by Kasl, Marsick & Dechant
(2007, cited in Yorks 2005, pp. 121) beyond the creation of knowledge within a group, to
the development of knowledge across multiple groups competing against, but learning
from, each other. Much has been written about the positive development opportunities
presented by competition. Netessine & Yakubovich (2012) evaluated the benefits of
internal competition and determined that appropriately administered competition can lead
to increased organisational learning. Netflix harnessed this through an approach to
SHRD that enabled both internal and external competition. The additional benefits were
organisational development within Netflix as the internal team learnt from external teams
with whom they were competing. The competition also enabled Netflix to identify

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additional resources who could be engaged to increase their internal capabilities, thereby
maintaining their competitive advantage.
6. Discussion & Conclusions
The approach Netflix has taken to SHRD does not rely on organised training. Netflix is
clear that ‘formalised development is rarely effective’. Some scholars would not consider
Netflix’s approach to constitute HRD at all, preferring to consider its approach part of a
broader human resources management discipline. Indeed, the approach taken by Netflix
does not reflect many of the core components of Nadler’s definition of HRD which
incorporates learning through organized activities during a specified timeframe (Nadler
1970 cited in Yorks 2005, pp. 6). However, it is clear that the approach taken by Netflix
has led to significant individual and organisational development, aligned with Netflix’s
strategy. Its approach has enabled Netflix to attract and retain highly skilled staff who
favour self-directed learning. Indeed it is clear by the continued development of
innovations at Netflix, particularly in relation to its movie selection software, that the
core values it espouses have encouraged generative learning. The Netflix prize has also
resulted in significant internal and external development.
However, the approach Netflix has taken is not beyond criticism. Netflix’s appears not to
take any responsibility for directly assisting in employee development. Where an
employee’s previously attractive skills cease to be ‘adequate’ there appears to be no
compulsion to assist the employee to develop their skills so that they can continue to
support the delivery of business objectives. Ignoring the obvious ethical questions this
approach raises, it also raises questions about whether the environment at Netflix is
entirely conducive to learning and development. It appears that job security is only
relevant for Netflix employees who continue to have relevant skills, irrespective of their
broader skills, enthusiasm or work ethic. Only certain types of individuals would thrive
in an environment where job security is based on current performance (irrespective of
past performance or future potential). Netflix however may argue that the type of person
who thrives in that type of environment is exactly the high level performer they require to
achieve their vision and a sustainable competitive advantage.

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7. References
Artis, AB and Harris, EG 2007, ‘Self-directed Learning and Sales Force Performance: An
Integrated Framework’, Journal of Personal Selling & Sales Management, vol. XXVII,
no. 1, pp. 9-24.
Business Source Complete 2014, ‘Netflix, Inc. SWOT Analysis’ 2014’, Business Source
Complete.
Chalofsky, N 1992, ‘A Unifying Definition for the Human Resource Development
Profession’, Human Resources Development Quarterly, vol. 3, no. 2, pp. 175-182.
Chiva, R, Grandio, A and Alegre, J 2010, ‘Adaptive and Generative Learning:
Implications from Complexity Theories’, International Journal of Management Reviews
(2010), Vol. 12 Issue 2, p114-129. 16p
Chussil, M and Gilad, B 2012, ‘The Importance of Left Field’, Training Journal,
November 2012.
du Plessis, D, du Plessis, M and Millett, B 1999, ‘Developing a Learning Organisation: A
Case Study’, Journal of Management Practice, vol. 2, no. 4, pp. 71-94.
Farfan, B 2014, ‘NetFlix Movie Rentals Mission Statement - A Vision, A Promise and
Nine Values’, viewed 18 April 2014,
http://retailindustry.about.com/od/retailbestpractices/ig/Company-Mission-
Statements/Netflix-Movies-Mission-Statement.htm
Goffee, R and Jones, G 2007, ‘Leading Clever People’, Harvard Business Review, vol.
85, no. 3, pp. 72-79.
Keating, G 2012, ‘Netflixed: The Epic Battle for America’s Eyeballs’, Portfolio/Penguin,
New York.
Kim, W C and Mauborgne 2014, ‘Blue Ocean Leadership’, Harvard Business Review,
May 2014, Kindle Edition, pp. 60-75.
Market Watch 2014, ‘Annual Financials for Netflix, Inc.’, viewed 13 April 2014,
http://www.marketwatch.com/investing/stock/nflx/financials
McCord, P 2014, ‘How Netflix Reinvented HR’, Harvard Business Review,
January-February 2014, Kindle Edition, pp. 71-76.
Netessine, S and Yakubovich, V 2012, ‘The Darwinian Workplace’, Harvard Business
Review, May 2012, pp. 1-4.
Netflix 2009, ‘Freedom and Responsibility Culture’, viewed 13 April 2014,
http://www.slideshare.net/reed2001/culture-1798664

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Porter, ME (1996) ‘What is Strategy?’ republished in HBR’s 10 Must Reads - On
Strategy (2011), Kindle reading position 16%, Harvard Business School, Boston.
Thompson, AA, Peteraf, MA, Gamble, JE and Strickland, AJ 2014, ‘Crafting and
Executing Strategy: The Quest for Competitive Advantage, Concepts & Cases’, 19th
edn.,
McGraw-Hill, New York.
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Mason, Ohio.