Reed Hastings’ Leadership Style: Netflix CEO’s Strategy

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Reed Hastings, the co-founder and CEO of Netflix, is recognized as a visionary leader in the entertainment industry. His leadership style, characterized by a focus on innovation and a willingness to take risks, has been a leading strategy in the company’s remarkable success. This essay examines Hastings’ leadership style of Netflix, his strengths and weaknesses, as well as explores the key principles that underlie his approach to management.

Table of Contents

Overview of the Theories
Areas of Good Practice
Traits
Skills
Areas Requiring Improvements
Recommendations
Conclusion
References

The modern world of highly competitive economies and businesses sets high benchmarks for organizations thriving for competitive advantages. The core of competitiveness is the ability of leaders to generate new ideas and implement them through effective relationships between the employees of a company. Since the work of a leader is crucial for the performance of the whole enterprise, it is essential to analyze the leadership style of a particular business leader through the perspective of his or her strong and weak sides. For this report, the leadership of Reed Hastings, the CEO of Netflix, is chosen. The overall success of the streaming company implies a strong and well-defined leadership framework. In this report, Reed Hastings’ areas of good leadership practice, the areas requiring improvements, and some recommendations will be presented. The analysis of the leader’s role will be carried out through the application of two theories, including traits theory and leadership skills.

Overview of the Theories

The choice of the leader is determined by the overall success of the Netflix Company that implies good leadership. From the academic point of view, Reed Hastings’ leadership style is of great value due to the continuous growth of his streaming enterprise and its emerging competitiveness among other entities of the entertainment business. For a good leader, it is crucial to develop an appropriate set of skills and have personality traits that will contribute to and make a solid basis for sustainable business growth, the company’s profitability, and competitiveness.

Different realms of expertise in leadership imply differentiating between human, technical and conceptual skills. Therefore, a good leader needs to be able to manage and communicate with people in an effective manner, deal with technical issues, and perform as a decision-maker. According to Mumford, Todd, Higgs, and McIntosh (2017), effective leadership as a complex phenomenon requires significant consolidation of critical specifically-developed skills that can guarantee one’s devotion, creativity, and performance perfection. In the researchers’ opinion, such cognitive skills as problem definition, constraint analysis, planning, idea evaluation, wisdom, and some others are the stepping stones of a good leader in any type of business organization (Mumford et al., 2017). Thus, high-quality leadership demands appropriate skills development for better business outcomes.

Another essential issue that predetermines effective leadership is personality traits, which cannot be overestimated when it comes to dealing with managing business affairs. According to traits theory, the personality of a leader is crucial to the success of an entity. Unlike skills that can be trained and developed, traits are inherent and cannot be significantly changed (Oladeji & Ayinde, 2018). A good leader must have a set of traits, including intelligence, responsibility, insight, self-confidence, sociability, and others to manage an organization and the human resources in it. Moreover, a set of personality traits become a determinant of the choice of a leadership style due to the individual inclinations of a person to act and behave in a particular way (Romager, Hughes, & Trimble, 2017). This assumption implies that only people with a particular set of personality traits might become strong leaders. However, the combination of kills and traits allows for the emergence of specific leadership styles capable of leading a company to success. Therefore, to analyze the performance of a leader, one should apply the theories of traits and skills and verify the strengths and weaknesses.

Areas of Good Practice

The indicator of a good and successful business is the continuous growth of the company in competitive circumstances. According to Olutade, Liefooghe, and Olakunle (2015), many new innovative businesses terminate their operations within five years, thus demonstrating poor strategic planning that results from inadequate leadership. Therefore, it is implied that long-term development is rooted in qualified employees led by a sophisticated and skilled leader. Since 1997, Netflix has been growing into the world’s leading streaming company (“About Netflix,” n. d.). Under the precise guidance of the founder, Reed Hastings, Netflix now has “over 158 million paid memberships in over 190 countries” (“About Netflix,” n. d., para. 1). Over these years, the company has accumulated a definite set of values and formed its specific culture that allows the entity to grow and attract the best employees for further development.

The corporate culture of an enterprise is a reflection of the ideals and principles of the CEO. This idea is relevant to the reviewed case of Netflix since Reed Hastings confirmed it in one of his interviews (“Netflix’s founder on building an iconic company,” 2015). Therefore, the values articulated in Netflix’s culture description apply to the professional behavior of the company’s CEO. The most important values that the company seeks in its prospective employees include judgment, communication, curiosity, courage, passion, selflessness, innovation, inclusion, integrity, and impact (“Netflix culture,” n. d.). Consequently, all these values determine the personality that resembles Netflix and its founder. Some of the specific traits that are regarded to be strong sides of Hastings’ leadership are analyzed below.

Traits

Responsibility is a crucial trait in Reed Hastings’ leadership style. Netflix CEO is determined to make difficult decisions being led by the interests of the enterprise under any circumstances (“Netflix’s founder on building an iconic company,” 2015). According to the publically available corporate culture code, the ultimate priorities vastly valued in the company are responsibility and freedom (Netflix, n.d.). Thus, as a strong transformative leader, Hastings sets a standard of being highly responsible for delivering results for the company.

Self-confidence is another character trait specific to the analyzed leader. His ability to take risks and to behave confidently while making important decisions determines the process of the rapid development of his enterprise. Confident risk-taking has led Netflix to the transformation from a DVD-renting entity to the world’s best streaming company (Taylor, 2017). The overall self-confidence is based on the ability to think outside the box and apply analytical skills.

Finally, one of the most important traits for any leader is intelligence, which is demonstrated through the ability to analyze complex concepts and think creatively. Hastings is a well-educated intellectual person, his decisions and ideas are validated by facts and strategic planning. A strong basis of the experience of working in the sphere of business has contributed to the scope of his knowledge, thus providing a solid intellectual foundation for Netflix’s development.

Skills

According to skills theory, leaders develop the required skills to be able to solve problems at the company level and manage the issues of a business’s sustainable growth. As Amanchukwu, Stanley, and Ololube (2015) state, effective leadership “is developed through a never ending process of self-study, education, training, and the accumulation of relevant experience” (p. 6). Thus, the achievements of Hastings are the result of extensive work and experience that he has mastered throughout his education and business activities.

Creativity is one of the major conceptual skills that have contributed to the effectiveness of Reed Hastings’ leadership. According to Gerstein and Friedman (2017), creative thinking is thought to be “the most important leadership quality” (p. 181). Such a level of significance is determined by the specifications of the digital era that the modern world has entered. The highly competitive world of intellectual technologies develops fast and requires new approaches, the novelty in business ideas, and effective leadership decisions. In this respect, Hastings demonstrates a very high rate of adherence to this tendency. Since his primary field of performance is digital space, in general, and video streaming, in particular, the creative approach is crucial for the growing success of Netflix.

Such human skills as communicating and decision-making are the strong sides of the Netflix CEO’s leadership style. Being a philanthropist, Hastings demonstrates a high level of sociability skills by effortlessly engaging in interpersonal relations (“Netflix’s founder on building an iconic company,” 2015). The decision-making process, from Reed Hastings’ transformation leadership point of view, is inherently collective endeavour which requires employee’s active participation, although the ultimate choice of action is up to the leader. At the beginning of his career, when Hastings was the CEO of his prior company, Pure Software, his leadership style was autocratic. However, when managing Netflix, the leader considered that a more participative style would bring better outcomes (Lussier & Achua, 2015). As Netflix’s founder says, he tries to make “as few decisions as possible” by attributing the work of identifying and choosing the ideas to his workers (Snyder, 2014, para. 2). Thus, the ability to communicate the company’s needs and priorities with the aim of implementing its strategic goals by means of thoughts of the employees is one of the strengths of Hastings’ leadership.

As for the technical skills, they are demonstrated in Hastings’ ability to use digital space in innovative ways by introducing a revolutionary method of video distribution. His expertise in the area of information technologies allows the company to implement new initiatives and try radical and sometimes revolutionary ideas. The worldwide success of the company depends on a great variety of its leader’s qualities, only a few of which are analyzed in this report.

Areas Requiring Improvements

Despite high standards of leadership in their overall beneficial outcomes for the company and its employees, there are several areas where the leader’s performance might be improved. As the analysis shows, particular incidents in Hastings’ career indicate some difficulties in conflict management inside the company. Radical decisions of firing employees as the outcome of conflict were undertaken (Denning, 2018). Such a tendency is beneficial in a way that only the people who strictly adhere to the company’s values stay inside (“Netflix’s founder on building an iconic company,” 2015). However, it is much less risky to develop strong conflict management skills to retain valuable employees.

As a transformational leader, Hastings inspires his followers by allowing for more freedom entailing more responsibility for the entity’s outcomes for the employees (Romager et al., 2017). However, since Netflix grows as an internationally dominant streaming service, it occupies more culturally diverse populations of employees worldwide. Therefore, the transformational approach to leadership might be less effective in some countries in comparison with others (Romager et al., 2017). Such a tendency imposes a risk for competitiveness on a global scale.

Recommendations

In response to the above-mentioned areas of practice requiring improvements, several recommendations might be introduced. The way Hastings masterfully manages talents should influence how he manages conflicts (Mullaney, 2017). To develop the skills of managing conflicts inside an organization, the leader should adhere to the idea of retaining experienced and valuable workers although their ideas differ from the preferred ones. Another recommendation deals with flexibility in leadership. The company should pay more attention to the cultural differences in people’s perceptions of leaders (Romager et al., 2017). It would be beneficial for the company’s global growth to ensure the flexibility of leadership style depending on the culture-specific features.

Conclusion

Summarizing the report, leadership as a complex phenomenon requires proper skills and traits. According to the theory of traits, one should possess a particular set of inherent character features to be able to manage a company and lead the business to success. Skills theory, on the other hand, views leadership as an issue that can be developed and trained through the process of acquisition of such skills as communication, decision-making, creativity, and others. The analysis of Reed Hastings’ leadership shows that a significant number of his strong leadership qualities led the company to global dominance in the world of streaming. Such traits as intelligence, responsibility, and self-confidence have contributed to the development of such skills as communication, decision-making, and creativity. However, there are areas for improvement in the future. They include the skills of conflict management and the flexibility of leadership approaches in response to cultural specifications worldwide. With the constant adherence to the ideas of improvement, Netflix will be able to maintain its continuous growth.

References

About Netflix. (n. d.). Web.

Amanchukwu, R. N., Stanley, G. J., Ololube, N. P. (2015). A review of leadership theories, principles and styles and their relevance to educational management. Management, 5(1). 6-14.

Denning, S. (2018). The Netflix pressure-cooker: A culture that drives performance.Forbes. Web.

Gerstein, M., & Friedman, H. H. (2017). A new corporate ethics and leadership paradigm for the age of creativity. Journal of Accounting, Ethics & Public Policy, 18(2), 179-230.

Lussier, R. N., & Achua, C. F. (2015). Leadership: Theory, application, & skill development. Boston, MA: Cengage Learning.

Mullaney, T. (2017). How Reed Hastings grew Netflix from zero to $60 billion in 20 years.CNBC. Web.

Mumford, M. D., Todd, E. M., Higgs, C., & McIntosh, T. (2017). Cognitive skills and leadership performance: The nine critical skills. The Leadership Quarterly, 28, 24-39.

Netflix culture.(n. d.). Web.

Netflix. (n. d.). Netflix culture: Freedom & responsibility. Web.

Netflix’s founder on building an iconic company.(2015). [Video file]. Web.

Oladeji, O. O., & Ayinde, A. T. (2018). Leadership styles and personality traits as predictors of job embeddedness among employees of Ibadan Electricity Distribution Company, Nigeria. Journal of Management Policies and Practices December, 6(2), 8-23.

Olutade, M., Liefooghe, A., & Olakunle, A.O. (2015). Influence of entrepreneurial leadership skills on employees’ motivation and job satisfaction: A leader member exchange (LMX) approach. International Journal of Academic Research in Business and Social Sciences, 5(9), 188-214.

Romager, J. A., Hughes, K., & Trimble, J. E. (2017). Personality traits as predictors of leadership style preferences: Investigating the relationship between social dominance orientation and attitudes towards authentic leaders. Social Behavior Research and Practice Open Journal, 3(1), 1-9.

Snyder, B. (2014). Netflix founder Reed Hastings: Make as few decisions as possible.Stanford Business. Web.

Taylor, B. (2017). How Coca-Cola, Netflix, and Amazon learn from failure.Harvard Business Review. Web.

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