Netflix CEO, Reed Hastings, has described his hiring rules as following the ‘rock-star principle’: paying a significantly higher salary to hire one rock-star software engineer, than hiring 10 less outstanding engineers.
Hastings says: “In the first few years of Netflix, we were growing fast and needed to hire more software engineers. With my new understanding that high talent density would be the engine of our success, we focused on finding the top performers in the market.
In Silicon Valley, many of them worked for Google, Apple, and Facebook - and they were being paid a lot. We didn’t have the cash to lure them away in any numbers. But, as an engineer, I was familiar with a concept that has been understood in software since 1968, referred to as the “rock-star principle.”
The Rock-Star Principle
The rock-star principle is rooted in a famous study that took place in a basement in Santa Monica, California. At 6:30am, nine trainee programmers were led into a room with dozens of computers. Each was handed a manila envelope, explaining a series of coding and debugging tasks they would need to complete to their best ability in the next 120 minutes.
The researchers expected that the best programmer would outperform his average counterpart by a factor of two or three. But it turned out that the most skilled programmer far outperformed the worst. He was 20 times faster at coding, 25 times faster at debugging, and 10 times faster at program execution than the programmer with the lowest marks.
This study has caused ripples across the software industry since it was published, as managers grapple with how some programmers can be worth so much more than their perfectly adequate colleagues.
Hastings goes on to say: “With a fixed amount of money for salaries and a project I needed to complete, I had a choice: hire 10 to 25 average engineers, or hire one “rock-star” and pay significantly more than what I’d pay the others, if necessary.
The reason the rockstar engineer is so much more valuable than his counterparts isn’t unique to programming. The great software engineer is incredibly creative and can see conceptual patterns that others can’t.
But for all creative jobs we would pay one incredible employee at the top of her personal market, instead of using that same money to hire a dozen or more adequate performers. This would result in a lean workforce. We’d be relying on one tremendous person to do the work of many. But we’d pay them tremendously.
I’ve also found having a lean workforce has side advantages. Managing people well is hard and takes a lot of effort. Managing mediocre-performing employees is harder and more time consuming. By keeping our organization small and our teams lean, each manager has fewer people to manage and can therefore do a better job at it.
When those lean teams are exclusively made up of exceptional-performing employees, the managers do better, the employees do better, and the entire team works better - and faster.”
Arguably it’s an approach which lends itself more to US values. Nonetheless at Richard Wheeler Associates we’ve had some involvement in hiring rock-star engineers, the remit following a similar pattern: an individual with a light bulb design idea seeking to turn this into a marketable product rather than build a company around this. Equity isn’t an option, so a highly skilled engineer is brought in to realise this rapid, fast turnaround, project.
More typically however we have focused on identifying exceptional people within equally exceptional teams. No prima donnas; no risk of outsized salaries within finely tuned groups; no dilution of the value that 20 heads, hearts and minds bring, over (say) just 2; no risk of placing all the projects’ eggs in a single basket (health, burn-out); no removal of the opportunity for ‘lesser rock-stars’ with their own unique abilities to contribute, learn and be part of something life affirming.
Rather, for our clients, we build exceptional software engineering teams on behalf of exceptional companies, often from the ground up - and where these core, business-critical, engineers are indeed rewarded very well.
Source: NO RULES RULES: Netflix and the Culture of Reinvention, Reed Hastings and Erin Meyer.