Netflix’s co-CEO explains why its famous culture memo needed to change

Netflix CEO Ted Sarandos addressed changes to the company’s famous culture memo in an interview at WSJ’s Tech Live conference.

Netflix updated its famous culture deck in June after 12 months and 1,500 employee comments.

On Tuesday, co-CEO Ted Sarandos said during an interview at The Wall Street Journal’s Tech Live conference that he received pushback from the update and defended the move. “We are constantly working on improving the culture,” Sarandos said. “And so when anyone says, ‘Hey, the culture is changing.’ Yes, of course it needs to. We definitely change the culture. We wanted to reflect how we work, not dictate how we work.”

In the June update, Netflix ditched the freedom and responsibility section of its culture deck and added a new one called “People Over Process,” which focuses on hiring “unusually responsible people” who thrive on openness and freedom.

It also added a line to its controversial “Keeper’s Test,” which managers use to determine when it’s time to let an employee go by asking themselves if they would fight to keep an employee if they wanted to leave. The new version includes a disclaimer about how everyone is encouraged to speak to their managers regularly about what is going well.

Netflix’s “Keeper’s Test” was introduced to the public in a more than 100-page memo published in 2009. Sarandos said Netflix founder Reed Hastings created the culture memo when the company had under 300 employees and said it was “perfectly suited” for the company’s needs at the time. However, Netflix has since grown its staff and become the largest streaming platform in the world.

“I do think it was one of those things where we didn’t take lightly the evolution of the document,” Sarandos said. “But it actually reflects much more today our 14,000 employee business culture.”

Sarandos said the original version probably placed a bit “more emphasis on freedom than responsibility.”

“And we think you have to have both. So it’s ways of re-crafting some of those things,” Sarandos said. “But the core values in the new document are all in the old document, right?”

The memo, once referred to by former Meta COO Sheryl Sandberg as possibly being “the most important document ever to come out of the valley,” aims to preserve a culture that attracts top talent and an environment of high-performers at the company.

The company has previously updated the memo, including a 2022 rewrite that exalted “representation” and “artistic expression” while keeping the document’s focus on meritocracy. In the 2022 update, Netflix suggested employees could quit if they didn’t want to work on content they disagreed with.

Representatives for Netflix did not immediately respond to a request for comment from B-17.