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.
| How to Hold Employees Accountable Hastings uses the unconventional practices at Netflix to drive the message that great freedom comes with great responsibility, but he doesn’t explain how companies that don’t have Netflix’s unusual culture can create enough accountability to make the risky move of abolishing limits on vacations or expenses. To foster more accountability in your workplace, experts say you should be clear about the following: Expectations—discuss the results you expect from your employees, strategies for getting those results, and how you’re going to measure outcomes. Then, ask them to summarize what you’ve talked about to ensure you’re on the same page. Skills and resources—give them the tools to set them up for success. If you can’t provide them with skills training and the right resources, it might be best to farm the tasks out to someone else. Milestones—don’t wait until it’s too late to find out if your employees can meet your expectations. Set up milestones and regularly check in with them to see if they’re on track. Feedback—let them know how they’re doing based on your agreed milestones. Then, ask if there’s any way you can help. Consequences—react appropriately. If they succeed, reward them. If they fail despite all the support you’ve given them, you should let them know that they missed the mark and decide on a response that corresponds with the offense. For example, you could issue a verbal or written reprimand, give them a low score on their performance appraisal, or—in extreme cases—fire them. |
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.
| How to Manage Employees’ Vacation Time Fairly While employees may understand that they can’t all take time off at once, it may put you in an uncomfortable position if two employees happen to block off the same dates. To avoid conflict within the team, experts give the following tips for managing vacation requests: Discuss vacations as a team. That way, they can work out schedules among themselves prior to finalizing vacation plans. Emphasize that vacations are important and that you want everybody to have the opportunity to rest. Have a rota system. Have a rotating list so that people get a chance to pick their vacation dates ahead of everyone else each year, making sure that each employee gets their chance to be first. Close shop. It can be especially difficult to decide who gets to take a vacation around the holidays, so in the spirit of fairness, consider letting the whole company take a break at the same 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.
| How to Encourage Employees to Take Time Off Aside from using your vacation time yourself, which may not always be practical—for instance, if you’re in the middle of closing an important deal, or if your company is experiencing a major transition—there are other ways to encourage employees to take time off: Systematize processes. Some employees are hesitant to go on leave because they’re worried that things will go wrong without them. Encourage them to build systems that can run even without them around. Remind them. Send out announcements to encourage them to use their leave credits, especially around the holidays. Be supportive. When they ask for time off, ask them questions about their plans and be excited for them. Get rid of disincentives for use. Some vacation policies reward employees for not taking time off. For example, your company might applaud when a new parent returns to work earlier than expected. Evaluate whether such unintended messages are keeping your employees from using their allotted vacation time. |
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.)
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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
