This article is an excerpt from the Shortform book guide to "No Rules Rules" by Reed Hastings. Shortform has the world's best summaries and analyses of books you should be reading.
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How does Netflix’s vacation policy of unlimited time off work? How can managers prevent employees from taking too much time off?
One of the non-policies Netflix is known for is its “no vacation policy.” This means that all employees can take as many vacation days as they want without being tracked. Of course, they had to put some safety measures into place to prevent bedlam.
Let’s go over how Netflix’s unlimited vacation policy works.
Abolish Vacation and Expense Policies
With a highly motivated staff and a culture of candor and accountability, Netflix CEO Reed Hastings was able to give Netflix employees more freedom and empower lower-level employees to make decisions that most companies delegate to managers and executives. This also enabled Hastings to implement another unconventional measure at Netflix: He abolished the vacation policy.
Giving employees so much freedom is unorthodox and can be risky. To safeguard against abuse, Hastings says you should remove controls strategically to ensure that employees understand the weight of responsibility and the context to make good decisions. If done well, this creates a culture in which autonomy and accountability spiral up: As employees enjoy more freedom, they act more responsibly, and as they act more responsibly, management can feel confident offering more freedom.
First, let’s look at how Hastings strengthened this culture of autonomy and accountability when he removed Netflix’s vacation policy.
Abolish the Vacation Policy
Even before launching Netflix, Hastings believed that the quality of employees’ work mattered more than the quantity of time they spent producing it, especially in creative industries. So, since 2003, Netflix has neither allotted vacation time nor tracked days off.
(Shortform note: If you’re not able to implement an unlimited vacation policy in your organization, there are a few alternative policies you can try to encourage employees to take enough time off: First, you can implement a minimum vacation policy, which relieves employees of the pressure of determining what’s considered an acceptable amount of vacation time. Second, you can impose mandatory time off—employees have to take one week off every four months (or any other specified time period). Third, you can reward employees who go on vacation with spending money.)
Addressing Vacation Time Issues
Despite the benefits of abolishing the vacation policy, Hastings had to implement the change strategically to avoid two potential problems:
Problem #1: Workers take too much vacation time. If too many people take off at once, or they leave while their team is pushing to meet a deadline, this could cripple workflow, especially with a small staff (as Netflix had when the policy went into effect).
Solution #1: Managers must give employees enough relevant information to make sound decisions about when to take vacations and for how long. This may include telling employees that they can’t take time off within two weeks of a deadline, or that no more than one team member can be out at a time.
Problem #2: Workers take too little vacation time. Some workers don’t want colleagues to think they’re not carrying their weight. Under normal vacation policies, the threat of losing unused vacation days often motivates employees to take time off if they wouldn’t otherwise.
Solution #2: Hastings and Meyer assert that leaders must set an example by taking big vacations, talking openly about them, and encouraging employees to do the same. Regardless of what managers say, workers will follow what they do—if they say that everyone should feel free to take plenty of vacation, but they only take a week off all year, employees won’t feel comfortable taking long vacations. Similarly, if the CEO takes five weeks’ vacation but a department head barely takes two, that manager’s team will follow her lead. In other words, all leaders—from the executive suite to the middle managers—must set a good example of work-life balance for their subordinates.
The Result: Increased Employee Productivity
Surprisingly, at Netflix, employees don’t take significantly more time off with no vacation policy than they would under a restricted vacation policy. Additionally, Hastings notes, the policy (or non-policy) brings significant benefits:
1) It gives employees more control over their lives to create a work-life balance, which improves their job satisfaction and performance. (Shortform note: If you can’t give employees an unlimited vacation policy, you can still help them achieve work-life balance and increase their job satisfaction, performance, and productivity by giving them a flexible work schedule.)
2) It makes it easier to attract and retain the industry’s top talent, especially millennials and Gen Z workers who favor less restrictive work settings. (Shortform note: Some argue that these perks may attract talented workers, but they may not be enough to make them stay. While unlimited vacation can be a useful factor in luring in employees, what will make them commit to your company is a collaborative working environment where their ideas are respected. So, focus on building cohesive, innovative teams instead of fringe benefits.)
3) It sends a message to employees that management trusts them, which inspires them to live up to that trust. (Shortform note: Abolishing the vacation policy is one way to show employees that you trust them, but make sure you don’t undermine your efforts with two cues that show you don’t trust them: first, having a risk-averse workplace that stifles innovation; and second, prioritizing profits over relationships and employee autonomy.)
Netflix’s Vacation Policy: They Don’t Track Time Off?
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- How Netflix achieved massive success in a short period of time
- The unusual business practices that have helped Netflix sustain its success
- Why Netflix fires adequate employees
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