DAVID GREENE, HOST:
Earlier this week, Netflix announced what it calls unlimited paid parental leave for new moms and dads at the company. A day later, Microsoft announced it was dramatically expanding its leave policies. Steve Henn joins us now from NPR's Planet Money podcast to talk about the economic logic that might be driving a lot of these decisions. Steve, good morning.
STEVE HENN, BYLINE: Good morning.
GREENE: Well, let's start with what exactly unlimited paid parental leave means. What is Netflix doing here?
HENN: OK, so it announced an unlimited leave policy. And really, what that means is that parents can take as much time off as they want during the first year of their child's birth or adoption. But to understand this policy, you really have to understand something about Netflix's corporate culture. They made a conscious decision early on to only try to hire and retain the highest-performing employees possible. And the way they want to do that is by giving these employees a lot of freedom but also a lot of responsibility. So for example, Netflix already has been offering most of its employees unlimited vacation time for years.
GREENE: So unlimited vacation, now unlimited parental leave - I mean, I'm getting the sense what you're saying, this is not just to be nice to employees. They feel like these kinds of employees they're recruiting will be more productive if they have this freedom.
HENN: Yeah, so Netflix's theory is that if you want to have incredible employees, you should treat employees like adults. And, you know, they actually put it in terms that is really almost that blunt, and that means giving your employees a lot of freedom, a lot of responsibility. And then if they fail to live up to that trust or if they fail to perform - and not just perform adequately but perform exceptionally - the company says you should get rid of them. So they make a practice of firing people. There's this legendary slide deck that the CEO, Reed Hastings, shared publically about this philosophy. And in one slide, you know, it says, like every company, we try to hire well. Unlike most companies, average performance gets a generous severance package. So you know, early on, Netflix decided that working hard, putting in long hours, that actually didn't matter much. What mattered was doing great work. So if you're measuring and tracking great work, why would you track vacation? You track the output, not the input.
GREENE: So, Steve, what did Microsoft then announce yesterday, a sort of a similar thing that Netflix does?
HENN: Yeah, so Microsoft sort of followed suit. You know, this is a really competitive labor market for highly-talented technology workers. So Microsoft's now offering three months of paid leave to men and women who have kids, up to five months for moms who give birth. And a lot of these companies - Google, Facebook - offer really generous policies. The question really at Netflix will be will people take advantage of these policies? Because, you know, as I said earlier, if you don't perform exceptionally well, the expectation is that you get fired. And that might make taking advantage of some of these policies more difficult.
GREENE: Well, but if Netflix finds this is successful, this focus on outcome, and offering this kind of policies that people may or may not actually take advantage of, I mean, are we going to see this approach start rippling to other parts of the economy?
HENN: You know, honestly, I don't think so. You know, I think Netflix is doing this because it's trying to attract talented employees in a really competitive labor market. But it doesn't offer these benefits to everyone. It still runs distribution centers for its DVD-by-mail business around the country, and the employees who work there don't get this benefit.
GREENE: Steve, thanks a lot.
HENN: My pleasure.
GREENE: That's Steve Henn from NPR's Planet Money team.
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