

Enron's system: rank and fire (2001) - TriinT
http://www.time.com/time/business/article/0,8599,129988,00.html

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tristan_juricek
I just don't really understand this "hire and fire" mentality. I took over
running a group, and one of the first things I did was fire someone - he was
really, really not productive, nobody respected him, etc. But it was a
terrible experience. I __never __want to do that again.

What happened to finding better ways at hiring good people? Sure, times
change, and yeah, you'll have to let a few go over time. All of these
companies just seem to go with a test drive approach. And I rarely find any
new, novel approaches on hiring practices.

These sorts of practices seem to breed a very impersonal culture, that just
makes me biased against big companies. A culture I hope I'm never a part of
again.

This article is pretty novel in that it's about Enron. But I'm sure you could
substitute many more legitimate businesses, and the techniques would be pretty
similar.

~~~
lionhearted
> I took over running a group, and one of the first things I did was fire
> someone - he was really, really not productive, nobody respected him, etc.
> But it was a terrible experience. I never want to do that again.

Yeah, I've done it too. Very hard letting someone go. Terrible experience.

But you do get people that are a bad fit in their roles, that shouldn't be in
them. It's not just bad for a company - it's bad for their coworkers, bad for
customers, and maybe it's the worst to the person who is doing a bad job. It
must be self esteem crushing to not ever accomplish anything interesting or
valuable in the place you spend the most waking hours.

So I wonder if the hire-and-fire-regularly cultures do so to desensitize the
people there to the process? Everyone I know that runs a moderate to large
company or division either lets people go regularly or has a lot of people who
are a bad fit on their staff.

Which goes into point 2:

> What happened to finding better ways at hiring good people?

You try, but it's impossible to always get right. Jack Welch was generally
regarded as one of the best hiring people of all time, and I listened to an
interview of him on hiring. He said that he always thought of it like a
"batting average" - how many hires are a good fit and mesh well? He says his
best rates, even towards the very end of his career, was getting about 2 out
of 3 right.

That means 1 out of 3 wrong. You ought to spend some effort trying to get
someone on track, but having a person who is a bad fit onboard is no good for
anyone. The best way to fix that, though, is a really hard question to answer.

------
makecheck
The _original_ version of this strategy _is_ sane, but it has to actually be
followed. And in every "implementation" I have seen, it was not.

The critical part of this strategy is continuous improvement: to _not only_
rank existing employees and lay off some, but to _hire new ones_. The NET
should be no real change in numbers, but an increase in overall quality.

But guess what. Companies invariably failed to do the 2nd, and simply used
this as a nifty new way to decide layoffs, during a hiring freeze. The result
is predictable: a productivity and morale drain. What did they _think_ was
going to happen, that making teams smaller would magically make the remaining
people more productive? Let's see: of the people left, the ones who then seem
"relatively" productive are just those that didn't lose as many team members;
there is no further indicator of who is actually most valuable. But that
didn't mean that layoffs stopped: no, the next rounds simply started cutting
to the bone.

~~~
gaius
_The critical part of this strategy is continuous improvement_

I'm not sure that's true. The occasional sweep to clear away the deadwood is
one thing. But if I think about the team I'm in right now, it took a long time
(years) to build, we are very very picky about who we let in, and it takes a
considerable amount of time to get someone up to speed (regardless of the
experience they had when coming in).

If the edict came down from on-high that we had to fire the least-performing
member and hire someone new every year, well, we simply can't find people at
the required level and train them to our own standard that quickly. It would
simply destroy a high-performing team for the sake of some fad.

Also, deciding the bottom 10% is not always as straightforward as it seems.
Say HR simply sacks the guy who shipped the least features that quarter and
the team loses the guru who helped everyone else with their tricky problems?

~~~
andymism
_Also, deciding the bottom 10% is not always as straightforward as it seems._

That's exactly right and the biggest problem with a rank and fire policy is
that there are so many pitfalls in quantitatively judging relative
performance. In the case of a high performing or highly specialized group, the
question comes down to who does the measuring and how much power would she
have to say letting someone go isn't necessary. I'm just speculating, but my
guess is that the powers up high at Enron wouldn't have let that slide.

We should also remember that this article was published just 6 months before
Enron filed bankruptcy. While ranking and fire sounds sane in principle, we
have to wonder how much this sort of hire-fast-fire-fast policy contributed to
the systemic and ethical break downs that have made the company infamous.

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StrawberryFrog
Firing the bottom 15% every year automatically is just going to lead to a
corporate culture of politicking and backstabbing, glory-hounding and not
helping each other. I hesitate to call this an "unintended consequence" since
it looks perfectly obvious to me.

I really don't think it's going to lead to the best actual performance of the
company. With any metric, you really do have to ask "how is this going to be
gamed" before implementing it. Unrelated example:
[http://www.thewelfarestatewerein.com/archives/2005/04/more_m...](http://www.thewelfarestatewerein.com/archives/2005/04/more_manipulati.php).

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petewarden
I've just submitted "The Talent Myth", a great analysis of how rank and fire
contributed to Enron's demise:
<http://www.scribd.com/doc/15668431/601TalentMyth>

