Is the Netflix Leave Policy a Gift to Workers or Ill Conceived?

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Peter Cappelli and Lotte Bailyn on Netflix's Leave Policy

Netflix’s announcement last week that it would allow employees who are new mothers or fathers take unlimited paid leave in the first year after a child’s birth or adoption has created a renewed focus on the factors employers must consider to implement such benefits successfully and the real motivations for companies in doling out such incentives.

The Netflix incentive covers about 2,000 full-time employees. The Los Gatos, Calif.-based Internet streaming media services company said the move is part of its effort to foster a culture of “freedom and responsibility” among its employees. “[It] gives our employees context about our business and the freedom to make their own decisions along with the accompanying responsibility,” wrote Netflix’s chief talent officer, Tawni Cranz, in a blog post. “We’ll just keep paying them normally, eliminating the headache of switching to state or disability pay.”

But Lotte Bailyn, management professor emerita at the MIT Sloan School of Management cautioned that there could be several roadblocks to successfully implementing an unlimited leave policy. “It’s too broad, too uncertain and doesn’t explicitly guarantee a job when coming back, though I assume that’s implicit,” she noted. “I don’t think people will come anywhere near to taking it if there aren’t better guidelines on how should be structured.” Also, for such policies to work effectively, she added, they must involve the employee’s work group and not just the immediate managers.

According to Wharton management professor Peter Cappelli, whenever an employee takes off for two or three months, most companies do not replace that person with somebody else; instead, other workers take on extra work. “That means it is not really the company providing the benefit; it is my co-workers who are basically doing my work for me,” said Cappelli, who is also director of Wharton’s Center for Human Resources.

Bailyn and Cappelli spoke about how the Netflix move offers an opening for U.S. employers to rethink work practices and work-life policies for employees on the Knowledge@Wharton show on Wharton Business Radio on SiriusXM channel 111. (Listen to the podcast at the top of this page.)

The policy is “too broad, too uncertain and doesn’t explicitly guarantee a job when coming back.” –Lotte Bailyn

The Netflix move comes against the backdrop of a global trend where the U.S. is an outlier in paid maternity leave. “The U.S. is just about the worst industrial country in the world” when it comes to providing paid leave, said Cappelli. According to a May 2014 report by the International Labor Organization, the U.S. and Papua New Guinea are the only two out of 185 countries surveyed that do not provide legally mandated cash benefits to women during maternity leave. The U.S. is also a laggard worldwide in other areas, offering employees “the least vacation time and least holidays, and the hours of work have gone way up,” added Cappelli.

In absence of a broad federal policy, a small but growing number of U.S. companies have announced more liberal employee incentives. Netflix already allows employees to take an unlimited amount of vacation each year, as long as they complete their work and related obligations, as a company guide explains. Consumer electronics company Best Buy also offers its employees unlimited vacation time. Two years ago, Facebook and Apple said they would finance egg freezing for their female employees so that they can postpone having children.

The Real Motivations?

Cappelli noted that those and other such practices “have bubbled up from Silicon Valley-type companies,” but he questioned the employers’ ultimate motivations. “They’re tone deaf in some ways; they are also trying to pitch to the Silicon Valley workforce and trying to do things that seem like they are worker friendly,” he said. “Whether they are serious about this, or whether they are tossing out policies in an effort to attract this month’s group of workers, or trying to look like they are doing the right stuff — that is not very clear yet.” He agreed that some of those moves might be a response to criticism that Silicon Valley companies don’t hire or retain enough women.

Bailyn noted that some of the incentives “are there implicitly, in a way, to allow people to work more. The egg-freezing [incentive sends the message that] ‘You don’t have to have the child now. You can work. Just keep working.’ Some of their fancy stuff like providing dinner, etc., is to make it easier for you to work [more].”

Cappelli attributed some of those disconnects to the fact that people running many companies today tend to be a generation or two older than their employees. The employers did not enjoy liberal child leave policies when they were younger, he explains. Some of them find it difficult to imagine what it takes to run a family with many kids or to be a single parent, he added. “Part of the issue is people at the top often feel that they have achieved their position because they sucked [it] up and therefore [feel that employees] should suck it up as well.”

Companies are “trying to pitch to the Silicon Valley workforce and trying to do things that seem like they are worker friendly.” –Peter Cappelli

Netflix’s latest move will be effective only with specific guidelines, according to Bailyn. “[Netflix must] get to the point where the emphasis is not only on the work, but also on people’s lives and what they really need,” she said. Before an employee takes off for two or three months, he or she must sit down with co-workers to determine what tasks need to be taken care of in the employee’s absence and how that work can be best structured, she added. Bailyn suggested that employers review those practices to ensure that others aren’t burdened with unnecessary work when a colleague goes on leave.

Bailyn said she is encouraged by examples where such collaboration between management and employees has worked out well. She cited Best Buy’s program, ROWE (Results-Only Work Environment), as a success. That program gave employees the freedom to work on their own time and terms. (Best Buy ended the program two years ago, citing a need for greater accountability.)

A Blended Approach

The Netflix incentive also needs demonstrated top-down buy-in to work well, said Cappelli. “If nobody takes it, do you want to be the first person to do it [and] look like … a slacker?” he noted. “You could have a formal policy, but the proof is in what happens on the ground.”

Here, Cappelli referred to research by Carnegie Mellon University professor Denise M. Rousseau, who studied organizations to see the extent to which people inside the workplace had cut special deals with their immediate supervisor that didn’t necessarily conform to company policy. “In most cases, [the deals] were either in violation of the company’s policy, or the company’s policy didn’t necessarily affirm them and they happened anyway.” Drawing from that, he said it is important to have supervisors who are sympathetic to an employee’s need for time off.

For companies to make such collaborative decision-making work well, they must have a culture that allows for it, said Cappelli. “But [many employers] haven’t changed how they operate and they haven’t thought about what it would mean to operate differently,” he said. “And I don’t think they particularly want to [think of operating differently] or that it has crossed their mind that this would require a different way of operating. As with most of these things, the change has to come from the top. We don’t see any evidence of those things happening as yet.”

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Is the Netflix Leave Policy a Gift to Workers or Ill Conceived?. Knowledge@Wharton (2015, August 10). Retrieved from http://knowledge.wharton.upenn.edu/article/is-the-netflix-leave-policy-a-gift-to-workers-or-ill-conceived/

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