Wharton professor says Netflix's new unlimited parental leave policy 'raises the bar' for the business world

Netflix announced Monday that it would offer "unlimited" paid parental leave within someone's first year of being a parent. The benefit applies to both mothers and fathers and includes adoptions.

The video-streaming company told Business Insider that the decision falls in line with CEO Reed Hasting's 2009 culture manifesto, which states, "Our model is to increase employee freedom as we grow, rather than limit it, to continue to attract and nourish innovative people, so we have a better chance of success."

Stewart Friedman, a professor at the University of Pennsylvania's Wharton School, has been researching work-life balance policies since 1991 as the founding director of the school's Work/Life Integration Project. He says the recent industry-spanning trend for the increase in more flexible corporate cultures is "absolutely thrilling."

As for Netflix's decision, Friedman says, "It raises the bar."

"This creates pressure for their competitors to go further," he says. "Most are probably going to say, 'Wow, how the hell are they gonna do that?' But they're going to see this internal pressure as the best and the brightest are going to be able to say, 'Hey, why can't we do this?'"

On Tuesday, a day after Netflix's announcement, Microsoft announced that it was also extending its paid parental leave. Microsoft won't offer as much as Netflix, but it will provide birth mothers up to 20 weeks of paid leave.

Friedman says companies from Silicon Valley to Wall Street are competing for the best benefits. "Every single company that recruits at Wharton puts out the message that you can have both a challenging opportunity to launch your career and we're going to respect you as a person," he says.

Companies are reacting to the talent market's demands, he says, especially young workers in their 20s and early 30s. Nothing is new about this. The Ford Motor Company hired Friedman for two and a half years in the late '90s to tap into what top talent wanted from their employers so that Ford could gain an edge over its competitors.

Compared to their parents' generation, millennials are unique in their desire for much more flexibility between their personal and professional lives.

"Millennials saw their parents forsake aspects of life like family life in their pursuit of career success and didn't always like what they saw," Friedman says, citing his research. The generation is also more motivated to contribute to social good, which he suspects is connected to growing up post-9/11 during a time of war.

Another significant factor behind this movement is the rise of connectivity through digital platforms. Although our devices allow us to be more productive than ever, many workers feel it comes with the burden of constant connection. "It's so much harder now to create boundaries between work and the rest of life," Friedman says.

Hastings, as CEO of Netflix, established his company at the forefront of a cultural shift when he decided early in Netflix's life that it would be dedicated to empowering employees. The unlimited parental leave policy's predecessor, unlimited vacation, has been in effect since 2004 and has inspired companies like the Virgin Group (and Business Insider) to follow suit.

"Unlimited" in this case means employers and employees don't need to track days off. Instead, employees and their managers have conversations about what is appropriate for that individual and ensure the privilege is not abused or under-used.

Perhaps surprisingly, Friedman says when he's studied unlimited vacation policies, the main issue was not abuse but rather employees' fear of using vacation days and looking less committed than their colleagues. He believes Netflix and any companies that mimic its generous parental leave policy will have to deal with this same problem. When people don't have limits that signal what's normal, they may not know how much time off is fair or expected.

"That requires a lot of consistent messaging and individualized attention to the needs and issues of virtually every person who's thinking about shifting their schedule," Friedman says. He believes that managers will need to encourage parents on staff to be open about what they need in their personal lives in order to give their all to Netflix.

Beyond social responsibility, Friedman explains, Netflix stands to gain practical benefits from this new policy. A gracious parental leave can allow Netflix to stand out in a highly competitive field for tech talent, retain valuable employees, and maintain productivity by preventing burnout.

An additional benefit, which Friedman says is "not trivial," is the positive publicity boost. Customers may be inspired to support a company that aligns with their values.

While he expects Netflix will deal with challenges around employees that take either too much or too little of the benefit to the detriment of the company, he's optimistic about the direction the company is taking and what it means for all American companies.

"It's just another signal that we are in the midst of revolutionary change in how we think about the structure of work," Friedman says.

"This is what we've been pounding on for the past 25-plus years," he says. "I can't tell you how thrilling it is to see that this is happening now, because when this movement first began we were trying to get people to think about these questions, let alone do something about them."