CNA-1

Netflix Offers New Parents One Year of Paid Leave 1

Wall Street Journal, 5 Aug 14: http://www.wsj.com/articles/netflix-offers-new-parents-one-year-of-paid-leave-1438735806 2

Huffington Post, 4 Aug 15: http://www.huffingtonpost.com/entry/netflix-unlimited-maternity-paternity- leave_55c12b26e4b0138b0bf44b98

Facts: Netflix announced on 4 August 15 that it would offer its employees unlimited paid parental leave for the first year of a child’s life. The policy applies to mothers and fathers, and to adopted children as well. "We want employees to have the flexibility and confidence to balance the needs of their growing families without worrying about work or finances. Parents can return part-time, full-time, or return and then go back out as needed," said Tawni Cranz, Netflix’s Chief Talent Officer in a statement. "We’ll just keep paying them normally, eliminating the headache of switching to state or disability pay."

1

Netflix already allows employees to take an unlimited amount of vacation time each year, as long as they get their assignments done and fulfill other requirements of their jobs. Netflix’s philosophy is to treat employees “like adults”. They don’t even have to submit expense reports. "We ask our employees to make the best decisions for Netflix everyday," company spokeswoman Anne Marie Squeo said in an email to The Huffington Post. "This frees them to do the same for their expanding families with the company's full support."

2

The US and Papua New Guinea are the only countries that do not have government laws mandating paid maternity leave, according to the International Labor Organization.

1 Indeed Netflix is leading the way in

the US with its new parental leave policy, even among the benefit generous tech sector. Advocates lauded Netflix for this move, hoping that it will pressure other employers to provide improved benefits.

2

Connection to Course Material (including Comprehension of Material): Jeffrey Pfeffer would indeed be proud of Netflix. In his article “Producing sustainable competitive advantage through the effective management of people” (Academy of Management Executive, 2005, Vol. 19, No. 4), Pfeffer argues that successful companies achieve a long-term competitive advantage through their employment practices, and he offers thirteen specific management practices for success. The first of these recommended practices is “employment security”, with a commitment by the employer to providing job security generally being reciprocated with enhanced employee involvement and engagement. It creates a long-term relationship enabling both parties to earn high return on investment in each other. By providing unlimited paid parental leave for an entire year, Netflix is making a generous and significant commitment to the job security of employees who have children. Netflix benefits with less employee turnover, and they achieve greater return on the training and professional development of their employees who come back to work at Netflix after having children. Another recommended practice is “participation and empowerment”, which encourages broader employee participation in controlling their own work. This is an overriding philosophy of Netflix, to treat their employees “like adults”. Employees are already trusted to take as much time off from work as they want, as long as they get their job done. They are not required to waste time submitting expense reports. The unlimited paid parental leave for one year is really a natural extension of that philosophy, with workers coming back to work when they are able. Netflix trusts, respects and values their workforce. Pfeffer cites evidence that such empowerment increases both employee satisfaction and productivity. Indeed Netflix has been a very successful and profitable company with this philosophy.

Pfeffer also recommends “symbolic egalitarianism” to break down barriers between management and labor. It is true that there may be considerable wage dispersion among Netflix’s employees, with highly skilled software engineers obviously earning more money than customer service-representatives

1 ;

however, making benefits like unlimited paid parental leave equally available to all employees signifies Netflix’s commitment to a more egalitarian workplace. This helps promote a more unified workforce. Netflix would not be able to achieve these “people” gains identified by Pfeffer without making some courageous and enlightened decisions. To make these decisions, Netflix would have had to overcome the formidable “status-quo trap”. As discussed by Hammond, et al in “The Hidden Traps in Decision Making” (Harvard Business Review, September-October 1998), this heuristic leads to a strong bias to perpetuate the status quo. Providing such generous parental leave benefits to their employees goes well beyond the status quo of any legal requirements or industry standards for parental leave, at fairly significant cost to Netflix. Yet Netflix selected that very alternative. We do not know exactly what data and information Netflix analyzed in making this decision to provide such generous parental leave benefits, but they may very well have considered the long-term competitive advantage created by treating employees well, as espoused by Pfeffer and others. It can be difficult capturing such “people” advantages in measurable and reportable metrics, but it is interesting to note that the day Netflix announced their new parental leave policy (4 August 15), their stock closed up 7.6% to $121.15. Another Hammond, et al heuristic potentially at play here might be the “framing trap”, whereby framing inherent risk in terms of achieving possible gains actually leads to risk averse decision-making, while framing the same issue in terms of avoiding possible losses leads to more risk accepting decision- making. Perhaps Netflix considered what they might lose by not implementing a more generous parental leave policy (e.g. good employees), rather than what they would actually gain? That in turn may have helped them accept more risk in moving beyond the status quo to implement the new policy. Will Netflix actually gain profits with this new parental leave policy? As we learned in Professor Perry’s marketing class, the concept of “corporate social responsibility” (CSR) is an important component of building brand image, equity and loyalty in today’s market, and it generates considerable “free” advertising and goodwill when companies like Netflix implement socially responsible policies such as liberal parental leave. This can lead to increased profits as ethical consumer culture gains wider acceptance, especially with the highly lucrative millennial generation of consumers. In Netflix’s case, they did not raise prices to pay for these new employee benefits, making it even more attractive for ethically motivated consumers to purchase their products/services. CSR also internally “markets” companies to their own employees, an often overlooked but critically important component of any good marketing plan. See Corporate Social Responsibility, Investopedia, accessed 18 September 15: http://www.investopedia.com/terms/c/corp-social-responsibility.asp Conclusion: Netflix has emerged as the leading parental leave employer in the US. Their investment in this “people” initiative will ideally help them gain a long-term competitive advantage with secure employees who are more involved, engaged and committed, in a more egalitarian and unified work force. To arrive at this decision, Netflix had to step away from the status quo and assume some risk, financial and otherwise. Framing the issue in terms of loss avoidance may have helped them assume greater risk. Moreover, there is growing CSR sentiment that consumers want companies to treat their employees well, and that’s good for business. Did I mention Netflix stock closed up 7.6% the day they announced this?