The difference is the decision-making freedom we provide. If your employees are excellent and you give them freedom to implement the bright ideas they believe in, innovation will happen. Netflix does not operate in a safety-critical market, like medicine or nuclear power. In some industries, preventing error is essential. We are in a creative market. Our big threat in the long run is not making a mistake, it’s lack of innovation. Our risk is failing to come up with creative ideas for how to entertain our customers, and therefore becoming irrelevant.

But with our culture of candor at Netflix, people get loads of feedback every day. Before any employee is let go, he should have heard clearly and regularly what he needs to do in order to improve.

Experts have found that if you stare at what you are desperate to avoid, you are actually more likely to paddle into it. Similarly, at Netflix, we tell all employees it is best to focus on learning, teamwork, and accomplishment. If a person gets obsessed by their risk of being let go (or an athlete becomes obsessed with the risk of being injured) they can’t play light and confident, and this can bring about the very troubles they were trying to prevent.

We’ve looked at over a dozen policies and processes that most companies have but that we don’t have at Netflix. These include:

Vacation Policies

Decision-Making Approvals

Expense Policies

Performance Improvement Plans

Approval Processes

Raise Pools

Key Performance

Indicators Management by Objective

Travel Policies

Decision Making by Committee

Contract Sign-Offs

Salary Bands

Pay Grades

Pay-Per-Performance Bonuses

These are all ways of controlling people rather than inspiring them. It’s not easy to avoid chaos and anarchy as you remove these controls, but if you develop every employee’s sense of self-discipline and responsibility, help them develop enough knowledge to make good decisions, and develop a feedback culture to stimulate learning, you’ll be amazed at how effective your organization can be.

In select instances like these, where error prevention is clearly more important than innovation, we have loads of checks, processes, and procedures to ensure we don’t screw anything up. In these moments, we want Netflix to be like a hospital where there are five people verifying the surgeon is operating on the correct knee. When a mistake would lead to a disaster, rules and process isn’t just nice to have, it’s a necessity.

With this in mind, you can consider your objective carefully before deciding when to opt for freedom and responsibility and when rules with process would be a better choice. Here are a set of questions you can ask in order to select the right approach:

• Are you working in an industry where your employees’ or customers’ health or safety depends on everything going just right? If so, choose rules and process.

• If you make a mistake, will it end in disaster? Choose rules and process.

• Are you running a manufacturing environment where you need to produce a consistently identical product? Choose rules and process.