The layoffs had a significant impact on Netflix's company culture and efficiency. Despite the pain of losing nearly 40% of the company's workforce, the layoffs resulted in a leaner, more focused, and more creative company. By retaining only top-notch employees, a culture of competitive excellence was created. This is a pattern usually seen in startups where the focus and creativity of the initial team gets it off the ground, and growth brings more hiring. Then there is a contraction of team size, and the mission is carried forward on the shoulders of new specialists who replaced skilled generalists of the past.
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Netflix was on track to acquiring 500,000 users by the end of 2001. But it desperately needed a pathway to become profitable. There was a relentless focus on streamlining the service using the Canada Principle and improving efficiency. Despite these efforts, it became clear that they had to make deep budget cuts without hampering growth. Nearly 40% of the company lost their jobs. Though the layoffs were painful, the company was leaner, more focused, and more creative. Retaining only top-notch employees created a culture of competitive excellence. This is a pattern usually seen in startups. The focus and creativity of the initial team gets it off the ground, and growth brings more hiring. Then there is a contraction of team size, and the mission is carried forward on the shoulders of new specialists who replaced skilled generalists of the past. In May 2002, Netflix hit 1 million subscribers.
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