Netflix Organizational Structure

1 Netflix Organizational Structure Company Description Netflix is an entertainment company initially founded in California back in 1997 by Reed Hastings and Marc Randolph. It started as a movie rental service and has grown to become one of the leading entertainment platforms in the world (Shattuc, 2020). it started as a DVD rental organization, where they would sell or rent DVDs by mail and was soon launched as an online DVD rental store, making it a worldwide trailblazer in such an industry It has a mission and vision statement that guides its achievements in higher performance and guides its development direction, respectively. Its mission statement is, ‘To entertain the world’, which describes its operations and shows that its main focus is entertainment and worldwide scope. Its vision statement is, “To continue being one of the leading firms of the internet entertainment era”, which ideally focuses on three areas. They are; continued leadership, internet and entertainment. Netflix has a wide and tantalizing product and service portfolio. Some of the major products it offers include; original content, latest and old TV shows, original series, single movies, specials and documentaries. Its main service is its streaming service which can be categorized into three; standard definition, high definition and platinum definition, differentiated by the number of devices allowed to stream (Shattuc, 2020). Other services, however, include film production and film distribution. Competition in the technology and entertainment industry has been there for a while now, getting stiffer by the day because it is highly innovative. Initially, Netflix had to worry about 2 Blockbuster as its sole competitor. Over the years, new companies have entered the market and resulted in a decline of Netflix’s dominance caused by the gaining ability of new entrants. At the moment, it faces stiff competition from Disney+, Paramount+, HBO Max+ and Apple TV+ who have managed to cut Netflix’s viewer’s attention. Organizational Structure Organizational structure refers to systems that dictate how an organization’s activities are directed, looking to achieve its stipulated objectives. These activities are main roles, responsibilities and rules encompassing all organisation members (Joseph & Gaba, 2020). Organizational structure also dictates the flow of information within an organization because it clearly defines the organization's levels, differentiating between the decision-makers and the decision followers. There are seven main organizational structures, the first being the hierarchical organizational structure where the chain of command is vertical, going downwards from the top. The second is a functional organizational structure where employees' specific skills determine how they are organized. Horizontal organizational structure comes next and is applicable where the gap between top-level management and first-line employees is minimal. Divisional structure comes in fourth, where an organization is divided into divisions that essentially operate separately but within a single business unit (Joseph & Gaba, 2020). The fifth structure is the matrix organization structure. It depicts a cross-functional team where employees may have more than one leader as their supervisors. As a sixth option, the team-based organizational structure mainly focused on increased employee freedom, cooperation, and problem-solving. Network organizational structure is the last and is suitable for open communication within an organization rather than hierarchy. These structures have been continuously modified to fit organizational 3 needs, thanks to the increasingly digital nature of the marketplace, team-based structures in organizations and decentralization. Netflix Organizational Structure Netflix Inc utilizes a hierarchical organizational structure that is highly modified to allow for business flexibility due to the unpredictable nature of the global market (Wagener, 2020). The online entertainment industry is a rapidly changing industry characterized by changes in consumer preferences. The structure adheres to the organization’s mission and vision statements mentioned earlier because it facilitates the continuous evolution of Netflix into offering exciting entertainment content on a worldwide scope. This structure means an entity at the top of the organization, the CEO Reed Hastings, and subsequent levels of power beneath him. Directly reporting to him are several chief officers who perform overseeing duties. One of these officers is the chief marketing officer, Kelly Bennett. He is responsible for overseeing all advertising and marketing initiatives at the planning, development and execution stages. Second is the chief communications officer responsible for company objectives and strategies to all stakeholders, including employees and shareholders (Wagener, 2020). The chief talent officer, Jessica Neal, is charged with identifying, recruiting, and managing talents that will benefit Netflix and all other human resource activities. Next in line is the chief product officer, whose main function at Netflix is overseeing all product-related activities and recommending product development strategies. Another c-class level manager at Netflix is the chief content officer, Ted Sarandos, who works hand in hand with the chief marketing officer by overseeing the quality content marketing, mainly triggering positive customer behaviour and retaining customers. The chief financial officer at Netflix is 4 charged with overseeing all financial actions that the company engages in and ensuring that the company adheres to financial and accounting rules. Another chief officer at Netflix is the business development officer, Bill Holmes, who oversees the organisation's growth based on different aspects such as financial stability, productivity and revenue generation. Lastly, there is a general counsel position at Netflix held by David Hyman, who gives legal advice to the Netflix fraternity (Wagener, 2020). He also represents the organization in court or appoints those who will. He is always present at key organizational transactions to ensure the company makes the right decisions. After the chief executive officers, subsequent power levels such as junior managers and departmental heads align themselves vertically. This structure is mainly aimed at maintaining executive control and direction within the whole organization. In the case of Netflix, the hierarchical structure is much more flat compared to others because it has few layers of middle management; therefore, the chain of command is quite short. Netflix Organizational Design Netflix has adopted a Unitary form organizational design that defines the organization as a single unit but divides it into three aspects that include: Functional groups that manage all operations be they online or non-online, Geographical divisions that manage regional markets, and Divisions for products and operations that keeps track of various types of products and operation types. Functional groups at Netflix are formulated based on business functions like human resource management, otherwise called talent. Other resulting functional groups at Netflix include legal, finance, content, product, communication and the CEO (Wagener, 2020). This 5 design is fundamental to the organization’s success because it facilitates efficient communication and cooperation despite adopting the hierarchical organizational structure. Geographical divisions is another aspect of design implemented by Netflix that enables the management of specific regional markets exhibiting different market characteristics. This division plays an important role in growing the organization’s customer base and member base as well. This is mainly because it shows different multinational market trends within different regional markets, therefore, aids in developing effective advertising campaigns. It enables the marketing team to align marketing strategies with consumer preferences successfully. Division for products and operations represents the two major classifications of outputs offered by Netflix, the original programming and other content. Original programming entails original TV series and movies produced by Netflix (Wagener, 2020). Other content entails other series and shows that are not produced originally by Netflix. Both of these subdivisions are meant to facilitate effective content production, content management and content distribution. Effect of Organizational Culture Design on Organizational Culture Despite adopting a hierarchical organizational structure, its traits have been greatly reduced by the unitary organizational design, making the structure flatter than normal hierarchical structures (Lubis & Hanum, 2020). As a result, the culture is characterized by five main traits highly influenced by a combination of the two. The first trait is autonomy, where the organization prioritizes people over organizational processes, allowing employees to make decisions by themselves. This trait is essential to Netflix’s success because it motivates employees, optimizing employee turnover and promoting efficiency within the organization thanks to quick decision-making. The second trait is the open 6 and deliberate sharing of information. The flatness of its organizational structure is set up to allow for the effective distribution of information throughout all departments within the organization. The third trait is extraordinary candidness which is directly related to open communication. It refers to the act of openness and sincerity among employees. The organizational design allows for collaboration between different departments, facilitating interaction among employees, making this trait even more effective. The fourth trait is high effectiveness which is strongly supported by its organizational structure and design (Wagener, 2020). They both indicate thigh productivity as an organizational norm, which triggers employees to adopt highly effective job techniques. The last trait is rule avoidance which aims to eliminate rigidity. This aspect is influenced by its organizational design, which aims to adapt to the dynamic online entertainment industry. Effect of Organizational Culture Design on Internal and External Influences Other than corporate culture, other internal organizational influences related to Netflix include communication and interpersonal relationships. Netflix’s organizational structure and design influence communication to facilitate open and candid communication throughout all departments and their constituents. Another affected internal factor is leadership. The organizational structure and design determine how employees at Netflix are led, whereby it groups them according to different approaches such as functionality and geographical approaches (Shattuc, 2020). The last internal influence affected is learning which determines the rate at which employees become efficient. Netflix organizational design and structure allow for coordination between various departments, allowing employees to better themselves by picking up new skills from other departments. 7 External influences affecting Netflix are also subject to its organizational structure and design. External influences are usually beyond the organization's control, and therefore, the organization can only plan to mitigate the risks associated with these influences. They include political, economic, competitive and technological factors. Netflix's organizational structure and design affect its political influences because it determines which markets to operate in thanks to geographical divisions of the structure and a legal counsel position that ensures Netflix is not negatively affected by politics. It affects economic influences because it allows for changes and adjustments based on economic changes worldwide. It affects competition by giving Netflix a competitive edge thanks to motivated and highly productive employees who appreciate the freedom granted by the organizational structure and design in place. Effect of Organizational Culture Design on Change and Innovation The online entertainment industry is characterized by numerous changes and innovations thanks to technological advancements and accessibility. Compared to the beginning of the 21st century, more people can access the internet and make good use of it. One such use is entertainment. Netflix started by renting DVDs and currently operates a streaming platform where members access different entertainment content. Netflix's organisational structure and design flexibility have allowed for change and innovation at Netflix, making it a leading player in its respective industry. Factors Leading to Changes in Organizational Structure and Design Netflix has been subjected to numerous changes caused by several factors at the core of its success. It started as a fully hierarchical organization but has relaxed some aspects therein to incorporate changes throughout its existence (Wagener, 2020). An example of such change is 8 introducing the unitary frame organizational design, which divided the structure into functional divisions and geographical divisions to manage worldwide expansion. It also divided its products and services into two main categories to easier manage its product and service portfolio. The major factors that influenced these changes include increased demand, which was triggered by increased access to technology (Wagener, 2020). Another factor is increased competition from competing firms. It began with competition from only one firm, Blockbuster, but then technological advancements saw the entrance of new firms into the industry over the years. Lastly, online entertainment is highly innovative because it depends on the dynamic technological environment. Changes were therefore mandatory for Netflix to stay atop the organization. Covid-19 Pandemic-Related Challenges Facing Netflix With most of the population at home, there was an increase in demand for Netflix services straining the servers they had in place. Netflix had to acquire additional servers, which brought about the challenge as to how and from where it would get servers to deploy. It also had the challenge of transporting the servers, with movement being put on hold due to restrictions across the globe. With production and shooting disrupted due to various lockdowns across the globe, Netflix is anticipating a fall in output in the coming year due to the challenge posed by the lack of production. It will also be more costly to produce content with the restrictions and guidelines to provide a safe work environment, which will likely cost Netflix more money to provide original content. (Moon, S.,2020) 9 There has also been an increase in competition in the industry, which has brought about a challenge in securing exclusive rights to movies and series. The increased competition drives the prices of securing such rights high. Competition in the industry from new companies with unique attributes that compete for Netflix customers poses a challenge in retaining customers. Netflix experienced a growth in the number of subscribers when lockdown measures were put in place. Still, with the vaccine now in play and the steady but gradual reopening of the economy and free movement, Netflix faces the challenge of holding on to the new customers as they break away from lockdown habits. Once lockdowns and restrictions were imposed globally, Netflix had to close its offices down to comply with the regulations; this posed a challenge as to how to monitor operations from home. The reopening of the offices has posed a challenge to Netflix in determining which staff will come back and who can remain working from home, how to ensure those at work are safe and comply with the social distancing guidelines and how to keep the work environment clean and covid-19 free. This will require significant investment from Netflix. Gaps Covid-19 Has Created in The Internal Workforce at Netflix. The employment gap has increased due to the high number of jobs that have been lost due to the closure requirements that non-essential employees have faced due to the covid-19 pandemic. There has also been a hold-up in the recruitment process as most organizations are downsizing and not recruiting, therefore high levels of unemployment. Having employees work from home limits the training that senior employees can offer to junior staff; this creates a skills gap in the workforce. With the social distancing measures in 10 place in the work environment, this limits the interactions among colleagues, thus difficult to provide effective training to recruits and junior staff. (Akim et al., 2020) Covid-19 created a gender gap in perceived work productivity and job satisfaction. When working from home, women are expected to devote more time to housework and childcare. With children at home, it has been difficult for parents to fully concentrate on their work, limiting job satisfaction from work from home Netflix staff. The pandemic has widened the corporate productivity gap by disrupting the three drivers of workforce productivity: time, talent, and energy. Each employee's time dedicated to productive work has significantly been reduced, with more time allocated to doing home chores and other home duties. With most workers working from home, this has limited the level of talent development due to limited interaction for training from senior staff. Finally, the energy that each employee is willing to invest in their work is disrupted by household chores, thus limiting staff productivity and increasing the chance of staff experiencing fatigue. Challenges Netflix Faces in The Current Pandemic Environment for Its Internal Workforce Netflix faces the challenge of how to revise employee paid time off policies. With a staff already spending the larger part of the year working from home, Netflix needs to figure out how to formulate payment policies to adopt the current situation to avoid paying salaries for work not done. And with no clear timeframe as to when things will go back to normal, Netflix may incur high costs regarding salaries for work not done. They are finding ways to restart aspects of content production, which were traditionally not done from home, by figuring out how to get that operating out of people’s houses. With a high number of staff working from home and no clear guideline as to when staff can fully resume 11 working from their offices, Netflix faces the challenge of resume production with staff working from home. Ensuring the safety of employees is of utmost importance since they face different health risks depending on their health status. Netflix faces the challenge of supporting the different populations of workers and how to ensure fairness across the whole workforce. For employees who still need to report to work physically, frequent tests are needed to ensure they are healthy and do not spread the virus to their colleagues. (Pereira-Sanchez et al., 2020). Netflix also faces the challenge of how to coordinate return to work for its staff. It has to ensure there is minimal contact among employees by creating flexible work arrangements. With the high risk of contracting the coronavirus, this poses a challenge to Netflix on how to mitigate the risk of having an essential worker fall ill and become unable to carry out their duties. The large staff that Netflix has requires effective monitoring to ensure that they perform their duties. The limitation in interaction at the workplace poses a challenge to how management can carry out their duties. With the virtual meeting being the new way of conducting meetings, some staff may experience network issues that will limit the flow of information, making management a difficult challenge that Netflix is facing. There are also high costs associated with an investment in virtual communication equipment.