Netflix just tweaked its famous 'keeper test' used to drive out underperformers

Netflix's "keeper test" isn't going anywhere, but the company added some clarifying language.

• Netflix added a new line about its "keeper test" in an updated version of its culture memo.
• The test is when a manager asks themselves if they would fight to keep an employee. If the answer is no, they're fired.
• Netflix's culture deck is famous in the corporate world for its directness in stating company values.

Netflix overhauled its famous culture memo — and that means a new line added about its "keeper test" used by managers to determine if they should fire an employee.

The keeper test was previously defined as when a manager asks "If a team member was leaving for a similar role at another company, would the manager try to keep them?"

If the answer was "No," the employee was given generous severance and cut so that a stronger replacement could be found.

Netflix has long been known to operate its business like a sports team, not a family, and the keeper test is part of that culture. This also means tenures can be brief as the company seeks out top talent and is quick to cut underperformers.

The keeper test has since evolved to, "If X wanted to leave, would I fight to keep them?" Or, "Knowing everything I know today, would I hire X again?" If the answer is no, the memo says it's fairer for everyone to part ways.

So, the same idea just worded a bit differently — but it also now includes a disclaimer.

"In the abstract, the keeper test can sound scary," Netflix says in the latest version of its culture memo. "In reality, we encourage everyone to speak to their managers about what's going well and what's not on a regular basis. This helps avoid surprises."

In the abstract, the keeper test can sound scary. In reality, we encourage everyone to speak to their managers about what's going well and what's not on a regular basis. This helps avoid surprises. Managers also evaluate team members on their whole record, rather than focusing on the mistakes or bets that didn't pay off. On the Dream Team, you need people who challenge the status quo and try new things. So we stick with employees through short-term bumps.

Netflix's keeper test was first introduced in an over 100-page memo published in 2009. Netflix used to encourage managers to do the test once per quarter, founder and former CEO Reed Hastings said. He reportedly used it to fire his product chief and longtime friend after 18 years.

The memo, which was originally regarded as fairly blunt for a public corporate document, has had several revisions since it was first released and is now only five pages.

Netflix co-CEO Greg Peters said in an interview with The Verge's "Decoder" podcast that the memo is shorter because the company got "better at articulating" its practices.

In the interview published Monday, Peters said that the original memo may have also incorrectly communicated that Netflix "was a harsh and maybe cutthroat place," which he said it isn't. In the three versions after, Peters said the company may have swung too far on the other side of the pendulum and went too soft.

The co-CEO said that in the versions that followed the original, employees also misinterpreted the company's statement on "freedom and responsibility" — which essentially said Netflix employees were trusted to act in the company's best interest and weren't micro-managed — and acted in ways that weren't in line with its collective corporate goals. It has since deleted that section and its new section, "People Over Process," includes a statement about hiring "unusually responsible people who thrive on this openness and freedom."

The new memo also says "Not all opinions are created equal" and that, as the company has grown, it's no longer possible for everyone to weigh in on every decision.

The latest memo took 12 months to make and received 1,500 comments from employees weighing in, according to a press release from Netflix. It was made publicly available on June 24.

You can read the newest version of Netflix's culture memo here.