When most people think about Netflix’s success, they think of its game-changing technology, binge-worthy content, and global reach. But according to Netflix co-founder Reed Hastings, the company’s greatest competitive advantage isn’t its algorithms or licensing deals—it’s its culture.
Hastings has long believed that culture eats strategy for breakfast, and he designed Netflix’s work environment around one core principle: only the best stay. In his conversation with Tim Ferriss on The Tim Ferriss Show, Hastings pulled back the curtain on the radical hiring philosophy that helped Netflix scale into a billion-dollar empire.
In this post, we’ll break down Netflix’s unique approach to hiring, firing, and fostering excellence—and the lessons entrepreneurs can apply to build high-performance teams in their own businesses.
1. The Netflix Philosophy: Culture Over Everything
When Hastings started Netflix, he quickly realized that a company’s performance is only as strong as its people. Instead of focusing on rigid processes or bureaucratic rules, he wanted Netflix to be a place where top-tier talent thrives.
He saw company culture not as a side effect of hiring good people, but as the foundation of Netflix’s success. Hastings explained that while many companies put strategy at the forefront, the real differentiator is how well employees work together.
His goal?
To create a company where employees feel like they’re part of a championship team, not a family.
2. The ‘Keeper Test’: Only Retaining the Best
One of Netflix’s most controversial but effective policies is the Keeper Test. Hastings challenges managers to regularly ask themselves:
“If this employee told me they were leaving, would I fight to keep them?”
If the answer is anything other than an enthusiastic yes, Netflix lets the person go—with a generous severance package.
This simple question ensures that only high performers remain at Netflix. Instead of tolerating employees who are just "good enough," the company maintains a team of A-players who push each other to be better.
For entrepreneurs, this test is a game-changer. Imagine how much more effective your business would be if every team member was someone you’d fight to keep.
3. Why ‘Adequate Performance’ Gets You Fired at Netflix
At most companies, employees who meet expectations are safe. But at Netflix, Hastings introduced a radical idea:
“Adequate performance gets a generous severance package.”
Why? Because talent density matters.
Hastings believes that when employees work alongside exceptional colleagues, they rise to the occasion. But when mediocre performers stick around, they create friction and slow progress.
Rather than letting underwhelming employees coast, Netflix invests in their departure—giving them generous severance so they can find a role where they’ll thrive.
This policy isn’t about being cutthroat—it’s about building an environment where only the best ideas and execution survive.
Key takeaway for entrepreneurs:
If you want to scale efficiently, don’t let mediocrity drag your business down. Regularly assess whether your team members are truly exceptional or just “good enough.”
4. Team, Not Family: Why Netflix Rejects the ‘Work Family’ Mentality
Many companies brand themselves as a “work family.” But Hastings strongly disagrees with that mindset.
“A family sticks together no matter what. But a company should be a high-performance team.”
In other words, while loyalty is admirable, it shouldn’t come at the cost of performance.
Think of it like a professional sports team:
- If a player isn’t performing at the highest level, they don’t stay on the roster out of loyalty.
- The team finds someone better suited for the role.
Netflix applies this exact philosophy to its hiring process, ensuring every role is filled with the best possible talent.
For entrepreneurs, this is a crucial mindset shift:
- Your job isn’t to create a family—it’s to build a team that wins.
- Keep employees who elevate the business and move on from those who don’t.
5. Context Over Control: Empowering Employees Instead of Micromanaging
Another defining aspect of Netflix’s culture is its lack of strict rules and processes.
Hastings learned from his first company, Pure Software, that too much process stifles creativity. At Netflix, he took the opposite approach:
Instead of controlling employees, he sets the context.
This means employees are given freedom to make decisions—but they also bear the responsibility that comes with it.
For example:
- Instead of endless approval chains, employees are trusted to make calls on their own.
- Instead of rigid policies, teams are given clear goals and expected to figure out how to achieve them.
How entrepreneurs can apply this:
- Hire people you trust, then give them ownership over their work.
- Minimize bureaucracy to encourage innovation.
- Focus on results, not micromanagement.
6. How Entrepreneurs Can Apply These Lessons to Their Business
Reed Hastings built Netflix’s culture with a simple but bold philosophy: only the best stay.
Here’s how you can apply Netflix’s high-performance principles to your own business:
✅ Use the Keeper Test. Regularly ask yourself: Would I fight to keep this person? If not, it may be time to make a tough decision.
✅ Raise your hiring standards. Build a team of A-players who push each other to be better.
✅ Embrace tough calls. Holding onto mediocre employees slows down growth. Prioritize excellence over comfort.
✅ Trust your team. Set the vision and context—then give them the freedom to execute.
✅ Ditch the ‘work family’ mindset. You’re building a championship team, not a family. Focus on performance, not loyalty.
By following these principles, you can build a high-performance culture—one that attracts top talent, fosters innovation, and drives long-term success.
The Future of Work Is High-Performance
Reed Hastings proved that a strong culture isn’t just a nice-to-have—it’s a business advantage.
Netflix’s hiring philosophy may be unconventional, but it has enabled the company to scale and dominate the entertainment industry.
For entrepreneurs, the lesson is clear: your company is only as strong as your team. If you want to build something great, it’s time to raise the bar.
