Larry S. Persons, PhD
Here’s the first lesson Thai organizations can learn from Netflix: to become truly innovative you must pursue the highest levels of ‘talent density’ possible.
If you’re not familiar with that term, it’s okay. It simply means this: the amount of talent per employee in any organization, including yours.
In other words, if your goal is innovation, you don’t want good employees. Trust me, you don’t. You don’t even want great employees. What you want is to fill your ranks with stellar employees, people who are absolute stars at what they do.
Netflix stumbled upon this lesson by chance in 2001 when the first internet bubble burst, dozens of dotcoms failed and disappeared, and venture capital funding dried up. Morale was low, especially when management had to lay off a third of the company’s workforce in a single day. The employees who departed that day were not failing at their jobs. They were doing adequate work, maybe even good work. They were conscientious and deeply loyal to the company. But financial realities dictated that they must go.
As you can imagine, the office on that fateful day was rife with raw emotions. People were wondering, “Why me? And why not you?” It was painful. It seemed unfair. In the quiet aftermath of that storm the remaining employees braced themselves for a somber mood and a dip in productivity. But in just a few weeks, something astonishing happened. The entire office atmosphere improved. Morale was higher than ever before. The office was buzzing with passion, energy, and ideas. As Reed Hastings, the founder of Netflix, describes it: “The entire office felt like it was filled with people who were madly in love with their work.” And that skeleton crew began getting more work done than ever before.
This watershed experience was Reed’s turning point in understanding of the role of talent density in organizations. It ushered in “the first and most critical dot” of Netflix culture: a fast and innovative workplace made up of “stunning colleagues.”
For over 20 years now, Netflix’s goal has been to build a nimble, high-performance culture that can meet the challenges of the rapid pace of change in business. How have they done it?
By facing an inescapable reality: highly innovative companies know that their field of competitors is continuously and rapidly evolving. You don’t dare blink—not even for a second—or a competitor may surge ahead of you. This relentless pace demands that any serious player must master of the art of anticipation. You can’t possibly let the future come to you. You must proactively create your own future. You must match the ruthless pace of change with a highly talented workforce that tackles projects in ways they think will produce the best results in the shortest amount of time.
In this streamlined approach, the most important task of management is to focus on building great teams. Hire the talented people you need, provide them with the tools and information they need to get you where you need to go, then step aside and let them do outstanding work.
Netflix learned some valuable lessons by going after high talent density. Superior performers don’t appreciate seeing mediocre colleagues rewarded for their performance. Outstanding performers are attracted to environments of high talent density, and they thrive there. They don’t wait around to be told what to do. They inspire one another to excel.
To achieve that kind of density, you have to believe in the concept that you truly can do more with less.
“It’s a misconception that more people make better stuff,” says Patty McCord, former Chief Talent officer of Netflix. “A small team of brilliant engineers will do better work than a large team of hardworking ones.” In other words, lean, unencumbered teams are simply more powerful.
This first step to becoming a highly innovative organization—increasing your talent density— demands great courage. You must dare to get rid of all employees who display undesirable behaviors or who aren’t performing at exemplary levels. In other words, it’s simply not good enough to be “good enough.” Companies that retain mediocre employees send a message that mediocre performance is acceptable, bringing down the performance of everyone. And there goes the speed necessary to excel through innovation.
As Thai companies attempt to fold into a 4.0 economy, many of them will need a complete overhaul of their hiring and firing standards.
They will need to learn the art of saying necessary goodbyes. To state it simply, Thai companies will have to overcome their strong aversion to letting employees go. This won’t be a comfortable experience, not in the slightest. It may even feel unethical and heartless. But if Thai companies are to ever see the light of day in terms of remarkable innovation, they must learn the unavoidable lesson of pruning back less productive sectors of their workforce.
They will need to recruit a new breed of employees, people who are willing and eager to break from tradition. Instead of hiring followers and ‘yes-men,’ businesses are going to have to recruit fearless, inventive leaders whose high levels of confidence are matched by their talent.
Now, just a reminder. I am not talking about all Thai companies. I’m talking about companies that know that if they do not become highly innovative very soon, they stand a good chance of becoming irrelevant and insolvent in the near future.
I can think of a few reasons why talent density will be a high hurdle for many Thai business leaders to clear. Two traditional Thai values stand squarely in the way: ‘group’ and ‘grid.’
Collectivism (group) and hierarchy (grid) are two dimensions that powerfully define the contours of pretty much everything that happens in Thailand on any given day. To say, “Oh, well, let’s just push those little guys aside,” is akin to an ant telling himself that his path forward is guaranteed as long as he lifts that million-ton boulder standing in his way.
Let’s consider ‘group.’ Confucian values in Thai society dictate that, above all else, harmony must be maintained. Many, many Thai companies still embrace the metaphor of being “one big family.” This is reinforced when employees address each other with familial pronouns like phi and nong, terms meaning “older sibling” and “younger sibling,” or mae and luk, meaning “mother” and “child.” These pronouns communicate both relational warmth and power distance. Spend any amount of time in a Thai workplace and you will hear these pronouns flying around like it’s the latest fad. Except it’s not. This is a tradition of social smoothing so deeply buried in daily workplace conversations that you’re not likely to expunge it any time soon.
And here’s the point. You’re not supposed to be able to give the boot to a family member. Ever. Members of families always belong.
Now let’s consider ‘grid.’ This is the dimension that measures power distance in hierarchies. To become truly innovative, Thai companies will need to throw the notion of seniority completely out the window. (If you have grasped the essence of most Thai organizations—military, police, government, religious, and yes, business—you know how ridiculous that last sentence sounds.) But we’re being dead serious here. To pursue high talent density, the code of seniority must go. No more entitlement. (Yikes! But status is all about entitlement, isn’t it? Hierarchy oozes entitlement!) No more correlation between perks and the number of years you’ve put in with the company. Zero correlation between pay and your rank in the hierarchy. Just pure meritocracy. You get paid according to your true value to the company. Period.
And as if those two obstacles were not foreboding enough, we also have the specter of some very deeply rooted Thai ways. An overwhelming majority of the present Thai workforce is steeped in the stubborn Thai values of sanuk (fun), saduak (convenience), and sabai (comfort). These values have helped close-knit Thai families and communities bend and flex and endure over many centuries of time. They are guiding principles for living a contented life.
But “the three big S’s” also take a deep cut out of the pursuit of excellence in the workplace. Traditional organizations are full of people who care more about security than they care about high standards of performance. They want to show up day after day doing much the same thing as yesterday, knowing that tomorrow is secured. This is one of the reasons why many parents still encourage their children to become government workers. You may make less money, but you’ll have great job security. You (and yours) will be taken care of both now and forevermore.
These values have the effect of stifling creative change and innovation. Consider that in contemporary business, the word ‘disruption’ is used to describe major progress within an industry. It is no accident that ‘disruption’ also carries meanings that are essentially the exact opposite of sanuk, saduak, and sabai.
What to Do?
What’s a journey if you never take the first step? Yet the journey to greater innovation starts with a commitment to strive for the highest talent density possible for your organization.
It means letting go of average performers to make room for rock stars—people who excel at what they do and thrive being on teams of other highly talented colleagues. It means holding people accountable for what you ask them to do, for starters (no small order), but then expecting them to excel far beyond all expectations, both yours and theirs.
Is there a way forward for Thai organizations?
I would not be blogging if I did not believe there is. Thailand is blessed with a growing number of highly skilled, creative people. The booming business of private and international schools has helped that cause. I sense that there is a growing restlessness among ‘young gens’ to want to join organizations that aspire to be meritocracies. This group has great potential, but they are being sucked into stubborn organizational cultures that suppress their talents and ideas, cultures that invite them to fit in by selling their birthrights to the status quo of group and grid. By seeing the value in these natural misfits, welcoming them, and providing the right environment for them to thrive, businesses can begin to set themselves apart from their competitors.
If we want to build teams full of exceptional people, what decisions do we need to make? In light of the Netflix book, I can think of three:
- Paint a clear picture of what you want to see. If you don’t show your people how to act, they will fill in the gaps with patterns from their primary socialization. Use rewards and reminders to reinforce agile values like originality and experimentation, letting them know that these ideals represent the new bar for success.
- Filter out the ones who can’t perform. Swap out the metaphor of “family” for the metaphor of a professional sports team. You have a place on a pro sports team as long as your outstanding skills continue to help the team to excel. For a team to become exceptional, it needs to leave mediocrity behind. Letting go of employees may seem unkind, but we must keep the larger picture in mind: your new culture of bold risk-taking does not suit them, and they will be happier elsewhere.
- Tell the world what you are trying to achieve. By spreading the word about your new business direction and culture, you will have a much better chance of attracting the right kind of attention. Highly talented people working at uninspiring jobs elsewhere may jump at the chance to join your organization if they see that your team will put their talents to good use.
Leaving the Past Behind
Big changes like these can be scary at first—but you can’t set sail for a voyage while you’re still anchored to shore. Building your talent density is the first step toward setting up the kind of agile idea factory that has brought companies like Netflix such meteoric success in recent years.
Businesses will be taking an enormous step forward toward replicating this winning formula when they reorient themselves to bring in outstanding talent and make room for that talent to take bold risks in decision-making.
This is not, however, about flipping a switch. It’s an evolutionary process. It’s about making incremental adaptations: trying new things, making mistakes, beginning again, tracking results—pushing ever so surely towards exciting meritocracies. The greater goal is to unleash organizational cultures of freedom and responsibility that deliver new ideas and products with breath-taking speed—an open-ended journey that is as unnerving as it is exhilarating.
And only flatter, more demanding organizations will deliver that kind of speed.
The Thailand 4.0 model of economic development relies on innovation as an engine for growth. In this series of blogs, I argue that certain aspects of deep Thai culture must be transformed for this strategic shift to succeed.