Today's Edition

• Netflix’s Controversial “Keeper Test”: The Brutal Question Behind Their High-Performance Culture

• Health Savings Accounts and Why Your Startup Needs To Offer One

• Join me at Transform 2025

📺️ Netflix’s Controversial “Keeper Test”: The Brutal Question Behind Their High-Performance Culture

Netflix’s culture is all about creating a high-performance environment where excellence, freedom, and responsibility are the name of the game. They want to make sure that talented folks can thrive and help Netflix keep entertaining the world. Sounds all well and good, but there are strings attached:

Why it matters: Netflix’s unique culture is a bit of an enigma in Silicon Valley.

• With their eye-popping salaries, Netflix can attract top talent with the best of them.

• Famous for their “professional sports team” vs. “family” analogy, their culture is built on performance, accountability, and continuous improvement. They argue that “families” are built on unconditional support & long-term relationships… and this may not always align with business goals.

• Executives implore managers to apply the “keeper test” which is:

Take a closer look: Seems pretty straight forward, so where’s the controversy? Well, this question isn’t just asked during an annual review or even a quarterly review. It’s asked every single day. Feel the pressure yet? From the outside looking in, this could feel extreme. So how does it work?

• If the answer to the either of the above questions is “no,” then Netflix believes you should - to continue with the fishing analogy - cut ‘em loose.

• With this approach, only those who are contributing to the company’s success and high-performance culture remain.

• Here’s what current employees say about the “Keeper Test:”

The impact: The secret to hiring, retaining, and engaging an all-star team at Netflix comes down to one thing: “Talent Density”.

Reed Hastings argues that brutal honesty and real-time feedback actually enhances the culture and reduces stress. This results in:

• Employee Satisfaction: Netflix often scores high in employee satisfaction surveys, showing that their culture is working.

• The End Justifies the Means: The company’s rapid growth and consistent dominance as the top brand in the streaming world are proof that their high-performance culture is paying off.

• Proof is in the Stock: NFLX is up 133.24% (at the time of this post) over the last 5 years.

Yes, but: Results or not, not everyone is a fan. Some critics say that Netflix’s culture can be too demanding and stressful, with high expectations leading to burnout. The “keeper test” approach, where employees are evaluated on whether they’d be rehired, can make people feel insecure about their jobs. Here’s what some recent Glassdoor reviews have to say:

The Takeaway: Do more with less (other than “wear many different hats”) is probably the most common startup colloquialism you’ll hear. Netflix takes that belief to a different level. It’s hard to argue with them, considering the massive success & results they’ve posted year after year. This high-expectation culture isn’t for everyone, but hey - neither is professional sports.

I can’t help but think about how Reed Hastings will approach the AI boom: consolidation & automation implications could mean we’ll see the next evolution of “talent density” sooner rather than later.

What do you think about the “keeper test?”

💰️Health Savings Accounts and Why Your Startup Needs To Offer One

As a self-proclaimed Health Savings Account (HSA) evangelist, I tell my clients all the time that I've been on a High Deductible Health Plan (HDHP) for 8 years. To their surprise, HDHPs are the second most utilized kind of medical plan behind Preferred Provider Organizations (PPOs). I'm a huge proponent of including an eligible plan in a startup's benefits strategy for a few reasons, which we’ll talk about in a second. First…

What is an HDHP? A High Deductible Health Plan is an insurance plan with a deductible of at least $1,600 for an individual or $3,200 for a family plan. The deductible (being higher than a normal PPO plan, hence the name) is what the insured is responsible for paying before the carrier will contribute anything to the cost of claims. If you choose a HDHP, you become eligible for a Health Savings account.

What is an HSA? A Health Savings Account is a personal savings account for money spent towards qualified medical expenses that can be contributed to by the individual and the employer on a pre-tax basis. More on that shortly.

Why an HDHP? HDHPs are a phenomenal tool for startups looking to offer quality benefits at a lower premium, reduce year-over-year healthcare renewal increases, encourage employees to elect the right healthcare plan, and provide wealth building opportunities for their talent.

• As I talked about in my last post, healthcare costs are rising steadily. HDHPs have higher deductibles, therefore put more upfront cost on the responsibility of the insured. This leads to much lower premiums charged by the carriers.

• HDHPs have historically led to “cost-conscious behavior” as when the onus is on the insured to spend up to a “higher deductible” they are more likely to focus on preventive care & healthy habits as to avoid costly utilization.

• Startups with a population that is utilizing healthcare less than the average group means potentially lower year-over-year healthcare renewal increases, as the carriers will have less claims to recoup in the form of higher premiums.

Let’s simplify it:

Taking the overly simplified example above, you can see that the significantly lower premiums actually lead to a big win for the insured. Not only are they spending less premiums overall if they don’t use their insurance, but they come out significantly ahead if they do use their insurance. Plus, if the company contributes even $50/mo to the individual’s HSA, they can use those funds to offset their total out of pocket. Math!

Why an HSA? Here’s the fun part:

• Triple Tax Advantage! Individual contributions to the HSA reduce taxable income, earnings within the account grow tax-free, and withdrawals used for qualified medical expenses are also tax-free. Boom!

• Everybody Wins! Employer contributions are also tax-deductible, plus any contributions made through payroll deductions are not subject to FICA taxes.

• Rollin', Rollin’! Unlike an Flexible Spending Account (FSA) whose funds are “use it or lose it,” HSA funds roll over year after year, allowing for compounding savings over time.

• Keep it! An HSA is a portable account with typical savings interest rates (usually <1%). Individuals keep the account & the funds even if they leave the company.

• Investors? Possibly You! While it can deviate between HSA providers, most require a minimum balance of just $1,000 before you can start investing the funds into stocks, bonds, mutual funds or ETFs, similar to an IRA.

• A Rare IRS W! The IRS has increased the maximum annual contributions every single year since the HSAs inception:

What to consider: Now that we know the benefits of the HDHP/HSA strategy, let’s talk about how to deploy it based on Sequoia’s 2024 Benefits Benchmarking Data:

• 97% of companies offering an HSA contribute to the account on a monthly basis. The thinking behind this is to avoid up-front lump sum amounts that would not properly align incentives for the employee to stay with the company for the full year.

• 45% of employers do not contribute to their HSA.

• The average total annual employer contribution is $1,555 to an individual, and $3,024 to a family.

Yes, but: HDHPs & HSAs are not for everyone. They certainly require more maintenance than a traditional PPO or HMO plan.

• The administration of an HSA can be challenging if you’re not partnered with a broker or PEO that takes it off your plate. Consider the compliance, management of contributions, withdrawals, investment options, and integration with other benefits when deciding.

• Employee education is critical in implementing an effective strategy. Consider what your communication plan and available support for employee questions looks like.

• Your contribution strategy will dictate how your employees approach their benefits elections. If yours is leading to higher participation in plans that don’t make sense for the individual, it could be costly. I wrote about that here.

The Takeaway:

• Cost Savings: Lower premiums & lower utilization means lower costs. This is especially important as healthcare costs continue to rise.

• Employee Engagement: HDHP/HSAs encourage cost-conscious behavior, healthier habits, and investing opportunities.

• Finance & Tax Advantages: Triple tax advantage, savings account interest, and portability means even more benefits for the employee.

What did I miss?

Send me your questions here:

⭐️ Join me at Transform 2025 in Las Vegas?

Transform 2025 is the premier gathering of business leaders, investors, and entrepreneurs focused on transforming the now and next of work for the better.

Come join me to learn, get inspired, and connect with your peers.

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Thank you for reading and joining on this journey with me!

Please reach out with any feedback about future topics you’d like to read about.

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👋 Quick about me:

I’m Cris Cafiero, and for nearly a decade, I’ve collaborated with founders, CFOs, and people leaders of early-stage, venture-backed startups. As an ex-Zenefits, ex-ADP, and now Business Consultant for Sequoia, I help startups build scalable people management infrastructure and maximize their people investment through compensation & benefits strategies.

Based in LA, I share my life with my wife and our two dogs. I’m into NBA drama, Marvel, reading, video games, computer-building, real estate investing, and lifelong learning.

I care about helping startups build a thoughtful, people-first culture and hope you find the topic as interesting as I do.

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