Excellent Companies Hire and Retain Only Excellent People: The Netflix Case

Organizational culture is functional to achieving a company’s strategic objective. And yet, this topic has been progressively abandoned by business culture. Even major universities have quietly withdrawn from the development of organizational thinking, and today it is difficult to find original and recent contributions on this subject, including from major consulting firms.

The organizational role has effectively been entrusted to functional managers and included among their objectives. Since the end of union tensions in factories, the role of Human Resources has been reduced to little more than payroll and contributions management, coordination of personnel searches, and holiday scheduling. This downsizing has been aided by a “misunderstood” cultural climate that oscillates between superficial goodwill and inclusiveness at any cost, making serious debate difficult. The widespread perception is that the Human Resources function is a role endowed with significant power but lacking measurable responsibilities.

The aim of this deliberately polemical article is to provoke reflection on business models and on the central and strategic function of organizational culture.

In the mid-1980s, John McArthur, then dean of Harvard, argued:

“Good managers kill companies. If you want excellence, you must have only extraordinary managers, true entrepreneurs.”

This statement seems to effectively summarize the organizational philosophy of the Netflix case described below.

The Netflix Case

There has never before been a company like Netflix.

When Reed Hastings founded Netflix in 1997, initially as a mail-order DVD sales and rental service, he immediately introduced a radical and, in many ways, unconventional organizational model based on individual responsibility, freedom of expression, and high individual performance.

In 2009, the company made this vision public through the famous Netflix Culture Deck, a presentation in which the company explicitly described the values, organizational principles, and behavioral expectations required of its employees. The Culture Deck placed excellence at the center, making it clear that merely adequate results would not be sufficient to remain part of the company.

During a phase of rapid growth, Netflix found itself facing a problem common to many expanding organizations: employees with average performance tended to settle, while managers struggled to manage the situation. The response was clear-cut and, for many, unsettling. Even someone competent and loyal could be invited to leave the company if they did not demonstrate an excellent level of performance. Netflix preferred to rely on a few top performers rather than on a large organization made up mainly of people who were “good enough.”

This approach gave rise to the so-called Keeper Test, which is still currently in force.

Managers are asked a very simple question: “If this person told you they were about to move to another company, would you do everything possible to keep them?” If the answer is no, then that person is not considered suitable for the team. In that case, Netflix chooses to let them go, directly and with an excellent severance package. Reed Hastings summarized this philosophy with a phrase that became famous: “The reward for adequate performance, but not excellent performance, is a generous severance package.”

This culture has often been criticized as excessively harsh, if not outright cruel. Netflix, however, has continued to defend it by defining it as freedom with responsibility. According to the company, the result is an environment capable of attracting excellent talent: people able to work under pressure and take on real responsibility, while discouraging those who are mainly seeking security and stability. At Netflix, freedom is not an automatic right: it is something earned every day. And performance is the price to pay in order to stay.

The idea that Netflix’s success is the direct result of a culture founded on extreme excellence and continuous talent selection is fascinating, but not without critical issues. Indeed, for many observers it represents a deeply questionable model, difficult to sustain and impossible to replicate.

The absolute centrality of performance, as understood by Netflix, risks reducing work to a purely functional exchange, in which a person’s value coincides exclusively with the immediate result they are able to produce. In this context, skills such as collaboration, continuity, organizational memory, and growth over time are systematically undervalued, if not sacrificed. An organization made up exclusively of “top performers” is not necessarily a good organization: without stability and a sense of belonging, even the brightest talent can become fragile.

The principle of freedom with responsibility, moreover, can easily turn into a sophisticated form of permanent pressure. The absence of formal rules is not always advantageous because it shifts the entire burden of managing work onto the individual, generating performance anxiety, internal competition, and a constant fear of not being “enough.” In an environment where one’s permanence is continuously questioned, freedom risks becoming a conditional privilege rather than a real tool of autonomy.

The Keeper Test also raises many questions.

Entrusting a person’s professional fate to a single question introduces a high level of subjectivity, exposing decisions to power dynamics and individual preferences. Furthermore, the idea that “adequate” performance deserves no space ignores a fundamental reality: in an organization there are roles in which continuity, precision, reliability, and knowledge developed over time are more important than a constant search for exceptional performance. In these cases, demanding continuous excellence is not only unnecessary, but may even be counterproductive.

Moreover, in the start-up phase or during periods of strong innovation, competition and the drive for excellence can help. But in consolidation phases, extreme competition can slow things down, increase errors, and wear people out.

Finally, attributing Netflix’s success almost exclusively to its internal culture risks oversimplifying a complex story. The company’s competitive advantage was strongly influenced by external factors: technological timing, access to capital, market context, and the decline of traditional competitors.

Many companies claim that “people are our most important asset.” Netflix replies that only excellent people are. Instead, it would be useful to highlight that “ordinary” people, when placed in the right conditions, can build extraordinary results over time. Because the real challenge for companies is not to retain only the best, but to create systems in which talent can emerge, grow, and endure.

Ultimately, the Netflix model represents a high-pressure, not very inclusive, and potentially fragile organization. Its organizational model may prove effective only in certain contexts, but deeply problematic in many others.

But are we really sure that national champions, those born from unicorns, those that did not exist thirty years ago, do not share the same culture as Netflix?

Are the competitive pressure and team selection that gave rise to companies such as Moncler, Dallara, Technoprobe, or Bending Spoons really so far from the model described?

It is clear that we are talking about completely blue ocean companies, where survival is linked to the inventiveness of every department and where there are no pockets of bureaucratic processes. In these contexts, creativity is not an accessory value, but a condition of existence.

When competitive tension weakens, however, a different organizational model emerges: Nestlé, P&G, Kraft Heinz, Autostrade, ENI, ENEL, Intesa Sanpaolo, Unicredit. In these organizations, bureaucracy, process, political alliances, belonging, and cultural homogeneity become the systemic rule. The goal is no longer excellence, but the minimization of problems and a calm journey toward retirement, with guaranteed holidays and sick days.

Those who bring ideas outside the box are labeled disruptive: an elegant definition used to indicate behavior perceived as abnormal, to be quickly brought back to the norm.

The system of Italian SMEs that occupy the world and grow without limits in new technologies and markets all resembles Netflix. In these cases, the entrepreneur who wins is the one who rewards entrepreneurship around them and the quantity of ideas produced. Better one hundred wrong ideas than no ideas at all.

The reassuring bureaucratic process, made paradoxically iconic by Checco Zalone’s “permanent job,” entrusted to people who are simply good, faithful, capable, and loyal, is not enough. It never has been.

Moreover, the inclusiveness misunderstood by critics of the model certainly does not mean accepting just anyone. Inclusiveness means giving everyone the opportunity to work, to play the game, and to excel regardless of gender, ethnicity, or other discriminatory factors.

“Complacent mediocrity kills companies,” as John McArthur argued.