Why Netflix's CEO Proves It's Better to Beg Forgiveness Than

by Cathy Vandewater | September 22, 2011

The message in my inbox reads, "Dear Cathy, I messed up. I owe you an explanation."

It's not from a cheating boyfriend—it's from Reed Hastings, CEO of Netflix. And I have to say I agree with him. Netflix's big split may well be a mistake. But then, I realize, that's not what he's apologizing for.

NetflixImagine yourself in a similar position, at your company: you have to ask your customer—or coworkers, or boss—to accept a new initiative that will 1) Cost more money, 2) Cause inconvenience, and 3) Generally shake things up. Whoever your audience is, they'll likely give you a resounding "no."

Hastings, in his email, only apologizes for one thing: not fully explaining the company's plans before rolling out the new pricing system.

But it's likely that exactly those actions will keep Netflix afloat in the coming months.

Surprised? Don't be. Hastings has human nature on his side. By forcing Netflix subscribers to either passively forgive him (by not unsubscribing) or actively rejecting the new plans (by going out of their way to cancel their memberships), Netflix (safely) assumes that we all take the path of least resistance. And we will. Social scientists have known this for 70 years--the famous "allow-forbid" study of 1941 showed that only 25% of those questioned answered yes to allowing "speeches against democracy"--but oddly, a 46% said no to forbidding them. The only difference?  Required action.

Most of us are hesitant to actively say "yes" to new things. Take that effect and double it for the business world, where bad decisions translate to loss of money. Triple for a corporate environment, where complex hierarchies mean people's jobs are in danger for other's choices. Simply put, asking people to approve your risky ideas doesn't work.

Asking them to actively deny you a chance to try? That does.

Take Hastings: he upped prices, giving customers a vague explanation and one month of notice for the change. Would we approve of this idea if Hastings had asked first? No! Will we cancel our subscriptions now that he's gone through with it? Well… that's a tough one. It puts the uncomfortable decision in the hands of subscribers. And being humans, they—we—let the new pricing deadline come and go without cancelling.

In truth, Netflix has lost subscribers—news headlines report "plummeting stocks" and mass exodus of customers. But the reality—as reported in the Wall Street Journal--is that only 4% of subscribers actually said "no" to Hastings. Compare that to an estimate of how many would have actively given him permission to do this in advance (oh, 99.99% perhaps?) and that number sounds downright miraculous.

The lesson: never ask for your "no" by begging permission. Instead, do the legwork: create the business model, design the logo, and then, like Hastings, apologize when you need to. The results may surprise you.  

--Cathryn Vandewater, Vault.com

Filed Under: Workplace Issues


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