Leadership Essay: Netflix CEO Reed Hastings

Questions

1. How did Hastings change his use of communications in sending and receiving messages from Pure Software to Netflix?

2. How did Hastings change his use of feedback from Pure Software to Netflix?

3. How did Hastings change his use of coaching guidelines from Pure Software to Netflix?

4. Which conflict management style did Hastings tend to use at Pure and Netflix?

5. In making a deal with Epix, which conflict management style was most likely used by Netflix?

6. How would you improve Netflix’s product offerings (i.e., what things can’t you watch that you would like to watch) or processes (i.e., how can it improve its delivery or service)?

7. Which level or levels of analysis and leadership paradigm are presented in this case, and did Hastings use the management or leadership paradigm?

8. How did Hastings Big Five model of personality leadership traits change from Pure Software to Netflix?

9. Which University of Iowa leadership styles did Hastings use at Pure Software and Netflix?

10 Explain how power, organizational politics, networking, and negotiation are, or are not, discussed in the case?

In a competitive environment, leadership is one such attribute which defines the personality of a person, and to a large extent drives the overall future of an organization. Leadership often defines the way an organization functions and organizational strategy is made. Case study on Netflix clearly underlines this fact through example of Reed Hastings-CEO, Netflix. Hence, through analysis of this case study, various aspects related to leadership will be discussed and how his leadership style can be mapped with existing leadership styles.

Leadership is one of the most sought after attribute in an individual in present time. However irony is that not every individual has leadership traits. Due to this reason, there have been several organisations which either fail to grow or climb the ladder of success and growth just because of their leadership (Doughty, 2013). Purpose of this report is to understand the concept of leadership and governance through case study of Netflix’s CEO Reed Hastings. This report will also elaborate various aspects related to leadership as a personal attribute, and how it can impact the organisation in future.

1. Based on the case study of Netflix, it can be clearly derived that during Pure Software not only Reed Hastings followed an autocratic style of leadership, but his communication was also not employee friendly (Licata et al, 2014), Which meant, that he was not appreciative of new suggestions from other employees. Even though his autocratic behaviour was not verbal in nature, but his body language did reflect his behaviour of being strict, and non-receptive to new suggestions (Keller, 2011).

At Pure, Hastings was primarily just sending messages to get things done his way. But at Netflix, he changed to being much more receptive to receiving messages by listening to others. He is also more honest and direct with employees, and this is conveyed through communications.

Overall, his communication in Pure software was dominating, and one sided. On other hand in Netflix he completely transformed his way of communication, and was receptive to suggestions from others, and didn’t criticize it if he found the suggestions totally out of place, in fact he focused more on being employee friendly by listening and discussing their inputs, such scenario clearly reflects the change in the way Reed Hastings transformed his communication style. From being assertive, he became more receptive in nature and the entire flow of communication was bi-directional in nature, which means that he not only instructed his employees, but was equally open to their inputs and suggestions. Reed Hastings in Netflix focused more on employee friendly environment which impacted his communication as well as leadership style. Such situations are always beneficial for employees and organisation’s growth as it fosters an environment of mutual respect and camaraderie.

Answers

2. In Pure Software, Hasting’s approach was more in-the face of employees, and there was hardly any acceptance of suggestions. Even though it is not mentioned explicitly in the case study, but it can be clearly assumed that work environment in Pure Software must have been negative and full of anxiety due to leadership and communication style (Lussier & Achua, 2012).  Such organizations might function smoothly on surface and perform well; however in long run it becomes difficult for such organisations to face problems such as attrition etc. In case of Hasting’s tenure in Pure Software it can be clearly seen that he never appreciated any out-of-box or unconventional ideas and always shot it down, behaviour like this might impact the employee motivation. However, hasting himself realised the shortcoming of his approach and took it as a feedback for his new venture in form of Netflix. Essentially, he went from not using feedback to using it. At Pure, Hastings was not open to feedback (Dess et al, 2006). He couldn’t take criticism. At Netflix he used to actively seek out ideas and advice from his employees—feedback. Also, instead of putting others down for ideas that seem silly to Hastings, he asked questions to dig deeper for more information and to see if that idea was of any benefit to organisation. It can be said, that for an effective leader, one of the most important attribute is the ability to accept his shortcoming, and rectify it quickly. In case of Hasting same was the case as he used the feedback from Pure Software effectively to improve his relationship with employees of Netflix and created an employee friendly environment.

3. Hastings completely transformed his coaching guidelines from Pure Software to Netflix. Hasting initially founded Pure Software and followed an autocratic style of leadership. In autocratic style of leadership, the coaching guidelines are not follower friendly. Hence the coach is generally pushing his thoughts and ideas on his follower making the entire communication unidirectional. Similar was the case with Hastings. He not only pushed his idea on to his employees of Pure Software, but also embarrassed them, if by any chance they came up with certain unconventional or silly idea. Such kind of coaching environment mainly restricts the scope of innovation and hinders growth of a friendly environment where both employee as well as owner of the organisations are equally participative in the process of coaching. However, after Hastings sold Pure Software and founded Netflix he clearly realised this gap in the way he coached his employee (Rothaermel, 2013). That is why, in the case study also it is mentioned, that his heart was not actually in continuing Pure Software. After realisation of the gaps, he made his coaching style more follower friendly where there was a two way communication and followers (employees) were also allowed to come up with new ideas, and if an idea didn’t have any outcome then Hasting instead of reprimanding that employee, asked the possible solution, which is a commendable leadership attribute (Shadraconis, 2013). Overall, it can be said that Hasting, focused on making his coaching guideline more towards a mentor-mentee format, rather than leader-follower style. This helps the organisation in a major way, as employee feel more connected with its leadership and contribute more towards the organisational growth. 

4. According to Thomas, K.W., and R.H. Kilmann there are five conflict management styles. These styles are accommodating, avoiding, collaborating, competing and compromising. Based on the case study it can be clearly seen that Hastings used avoiding style of conflict management. When avoiding type of conflict management strategy is applied, then the person simply avoids the issue, however it is important to know that by doing this he doesn’t helps the other party to reach its goal. Thus, in Pure Software, Hastings simply avoided the suggestions or issues rose by his employees and didn’t pay much attention to other’s opinion. Issue with this strategy is that it is not beneficial from long term perspective, as it can lead to ignorance of some critical issue which might appear to be trivial initially.

In Netflix however, Hastings realized the shortcomings of his approach, due to which he transformed his conflict management style from avoidance towards collaboration. This style promotes a ‘win-win’ scenario where both parties involved in any particular issue or argument look towards a solution which might be beneficial for both the sides. Similarly, Hastings in Netflix stopped embarrassing people for giving any random suggestions, instead he sat with them and discussed about a possible way to achieve the suggested method. Such collaboration helps the employees by boosting their confidence (Jeyakumar, 2014). Hence it can be said that being participative at Netflix implies a more negotiating or collaborating conflict style.

5. Epix is mainly a three-studio venture formed by top three studios of Hollywood namely Paramount, Lions Gate and MGM. Considering the fact that every year these three studios movies which do a business of billions of dollars across the world, it is easy to understand that in such deal Epix had an upper hand on Netflix, as it is Netflix which needs Epix more than other way around. In such scenario, it becomes obvious that out of five types of conflict management style, Netflix must have opted for accommodating style. This is the style when one party cooperates to a high degree, and at times at its own expense. Important point to understand is that this style is applicable in a scenario when any one of the party is either expert or has a better solution. In case of Epix deal, it can be clearly seen that Epix had an advantage, as it had the content which Netflix can use for its customer, and due to important of this association, this type of conflict management style becomes even more relevant, as it helps in preserving the future association among both parties (Puccio et al, 2010).

Hence based on case study, it can be concluded that accommodating type of conflict management style was used by Netflix in case of deal with Epix.

7. In terms of services and product, Netflix is already offering host of services from DVD delivery via mail, to streaming of content through internet (Latham & Piccolo, 2013). Currently Netflix’s streaming services are extremely popular. However, there is still scope of improvisation in this service. For example, in order to avail streaming services one has to be connected through the internet. In future Netflix can further create innovation in this service by introducing a new concept of time based recording (Buckingham, 2012).  Hence, as part of this service, if user streams a movie of online TV show then he can have the option to download it simultaneously. Important point in these new services will be its pricing. Streaming in current form can remain as it is, however in case if user wants to download it, then he might have to pay extra cost, almost equivalent to cost of DVD or Blue-Ray disc. In coming future, trends are clearly indicating that internet based streaming and storing content in digital format is the future. Which means more and more people will move away from physical devices such as DVD etc. towards use of internet to consume digital content. In such circumstances, it becomes logical for Netflix to find an alternative for its DVD line of business as well; this will help it in safeguarding its future business strategy.

8. There are several levels of analysis and leadership paradigm, which are presented in this case. This can be understood by example of Pure Software itself. Initially Hastings founded Pure Software and followed an autocratic style of leadership, due to which his behavior towards his employees was very unfriendly. During his stint as CEO Pure Software, Hastings didn’t welcome suggestions or inputs from his employees, and rather ridiculed their efforts. This autocratic leadership paradigm is not beneficial for employees of an organization, as they might feel demotivated.

When Hastings sold Pure Software and initiated Netflix as a new venture, then he realized that the management approach he adopted in Pure was rather hierarchical in nature and had potential of creating lots of conflict and unrest within organization. He himself didn’t like the kind of work environment he created (Bird & Wang, 2011). That is why in Netflix is started with an exactly opposite approach of leadership or management and that as democratic in nature. Hence unlike being an autocratic leader where leader tell his employees what to do and closely supervises them, in Netflix Hastings encouraged participation of employees in decisions, and worked in close association with them. Thus it can be said that Hastings intentionally shifted from autocratic to democratic style of management which not helped him as a leader, but also helped the new organization to grow rapidly (Evens, 2013).

9. According to Big Five model of personality, following are the attributes which are represented by below diagram.

Figure 1: The Big Five Model of Personality

Based on the Big Five Model, it can be clearly interpreted that there were subtle changes in traits in leadership attributes of Hastings from Pure Software to Netflix. In Pure Software Hastings had Surgency (dominance) as the major leadership trait, due to which he always closely supervised and monitored his employees, and hardly accepted any suggestions from them (Avolio & Yammarino, 2013). For urgency, Hastings level of dominance decreased as he went from an autocratic style at Pure to using a participative style at Netflix. For agreeableness, he became more sociable and sensitive (not putting employees down) as he improved his emotional intelligence at Netflix. For adjustment, Hastings was more stable as he had more patience in dealing with ideas that he thought were silly (Lüsted, 2012). For conscientiousness, he used more integrity as he was more honest and direct with employees at Netflix. For openness, Hastings was more flexible in seeking feedback at Netflix.

10. As per University of IOWA leadership styles, Hastings was an autocratic leader in Pure Software. Hence as an autocratic leader, Hastings had a complete control on his employees, and micro-managed all their activities. He also never welcomed their suggestions and feedback, and often ridiculed them. This kind of leadership style is not recommended in present organizational environment. Today in an era of tough competition, retention of skilled and valuable employee resources is extremely critical for an organization, but leadership styles like being autocratic is a big hurdle for organization. That is why it is never suggested in present scenario for a leader to follow an autocratic style of leadership (Mayson, 2012).

However, Hastings followed democratic style of leadership in Netflix, which was a complete change from Pure Software. Democratic style of leadership was more focused on participation of employees and avoided close monitoring of their activities. In a way it can be said that this style of leadership promotes an environment of harmony and collaboration, and also leads to a relatively flat organizational structure. Depending on the size of organization this leadership style can be applied. It is important to understand that such kind of leadership styles is generally more successful in smaller organization. That is why Netflix was able to successfully take advantage of this style of leadership

11. With context to case study, it can be said that power is surely discussed as at Pure, Hastings used his position power and coercive power with pressure tactics to get things done his way. But at Netflix, he changed to give more power to employees by using more personal power through participation in leadership with their tactics. Although Netflix does have organizational politics and Hastings is an effective networker, the case didn’t discuss these topics (DuBrin, 2013). In making a deal with Epic, and future deals to add more programming content, negotiation must take place. Also, there is no mention of organizational politics and networking in the case study, as the case study majorly focused on the aspect of Hasting’s leadership styles, his transformation from one particular style to another, and how he was able to innovate and foresee upcoming future changes in the industry he was active in (Wombwell et al, 2011). In a way it can be said that the case study is focused on analysis of facts which contributed to success of Netflix and Hasting’s leadership in general.

Conclusion

Based on the case study, and analysis of various aspects, it can be clearly seen that how leadership style plays a major role in success (or failure) of an organization. Even though it is not necessary that a tough leadership style like being autocratic might negatively impact the organization, but it can surely impact the long term prospect of the organization (Acar, 2012).  Hastings transformation between two different leadership styles indicates that good leaders are flexible in nature, and are capable of understanding and resolving their shortcomings.

References

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