4 ms·

Enron's system: rank and fire (2001)

13 points by TriinT 17y ago

makecheck 17y ago
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 17y ago
  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 17y ago
    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.
tristan_juricek 17y ago
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 17y ago
  > 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.
StrawberryFrog 17y ago
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_manipulati.php http://www.thewelfarestatewerein.com/archives/2005/04/more_m....
petewarden 17y ago
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 http://www.scribd.com/doc/15668431/601TalentMyth

13 points by TriinT 17y ago

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 17y ago
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 17y ago
  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.

tristan_juricek 17y ago

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 17y ago
> 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.

StrawberryFrog 17y ago

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_manipulati.php http://www.thewelfarestatewerein.com/archives/2005/04/more_m....

petewarden 17y ago

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 http://www.scribd.com/doc/15668431/601TalentMyth