CNA-2
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.huffi ngtonpost.com/entry/netflix -unlimited -maternity -paternity -
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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 m others 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 di sability pay." 1
Netflix alr eady 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 t o
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 Pap ua New Guinea are the only countries that do not have government laws mandating paid
maternity leave, a ccording 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 se ctor. 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 w ould indeed be proud of Netflix. In his artic le “ 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 man agement practices for success.
The first of these recommended practices is “ employment security ”, with a commitment by the
emplo yer to providing job security generally being reciprocated with enhanced emplo yee 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 commi tm ent 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 developm ent 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 tru sted 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. T he unlimited paid parental leave for one year is really a natural extension of that philosophy,
wit h workers coming ba ck to work when they are able. Netflix trusts, respects and values their
workforce. P feffer ci tes evidence that such empowerment increases both employee satisfaction and
productivity. Indeed Netflix has been a very su ccessful and prof itable company with this philosophy. Pfeffer also recommends “ symbolic egalitarianism ” to break down barriers betwee n management and
labor. I t is true that there may be considerable wage dispersion among Netflix’s employees, with highly
skilled software e ngineers obviously earning more money than c ustomer 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
coura geous and enlightened decisions. T o make these decisions, Netflix would have had to overcome
the formidable “ status -quo tr ap ”. As discussed by Hammond, et al in “ The Hidden Traps in Decision
Making ” ( Harvard Business Review , September -October 1998), t his heuristic leads to a stron g bias to
perpetu ate 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 c ost to Netflix . Yet Netflix selected that very alternative.
We do not know exactly what data and i nformation 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 Pfeff er and others. It can be
difficult capturing such “people” advantages in measurable and reportable metric s, 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 fr aming the same issue in terms of avoiding po ssible losses leads to more risk accepting decision -
making. Perhaps Netflix consid ered what they might lose by not implementing a more generous
parental leave policy (e.g. good employees), rather tha n 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? A s we learned in Professor Perry’s
marketing class, the concept of “ corporate social respons ibility ” (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 parent al 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 thes e new employee benefits, making it even more attractive for
ethically motivate d 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 “pe ople”
initiative will ideally help them gain a long -term competitive advantage with secure employees who are
more involved, enga ged and committed , in a more ega litarian 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 gro wing 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?
