Performance Review Process

With the extension of the PRC to all organizations, questions have arisen=
=20
about the results of this process. This memo provides some details about th=
e=20
PRC process.

First some context: The key to Enron=01,s success is the increasing qualit=
y and=20
dedication of our talent. As we continue to attract and retain the very be=
st=20
people, we all have continued to raise the performance bar throughout the=
=20
organization. At the core of our system are the following principles:

? Hire the best people.
? Provide challenging opportunities.
? Pay well =01( and pay for performance (with bonuses based on merit, not=
=20
entitlement).
? Evaluate performance through a rigorous review process.
? Provide clear feedback and direction to employees.

The PRC is a critical component of our performance management system. The=
=20
PRC is built on this foundation:

? 360 degree performance feedback.
? Review by a broad group, not just the supervisor.
? A relative ranking of performance across Enron to determine promotions an=
d=20
to allocate bonus money.

In addition to understanding this broad philosophy, we all need to understa=
nd=20
the following details:

? Relative ranking. Enron uses the descriptors =01&superior=018, =01&excel=
lent=018,=20
=01&strong=018, "satisfactory", =01&needs improvement=018, and =01&issues=
=018 to group all=20
employees. This year, =01&relative to his/her peers=018 precedes each of t=
hese=20
descriptors. This qualifier confirms what we have done and will continue to=
=20
do in practice; that is, evaluate individual performers against their peers=
. =20
It is possible, therefore, for someone to perform at the same or higher lev=
el=20
compared to prior periods, yet receive a lower rating for the current perio=
d=20
if other employees=01, performance raised the bar.
? Teamwork. A relative ranking may invite the view that for one employee t=
o=20
gain, others must suffer. However, feedback is explicitly solicited on=20
teamwork when evaluating each individual=01,s performance. Anyone who atte=
mpts=20
to gain by withholding information or refusing to collaborate with others i=
n=20
the organization will suffer in a relative ranking on this key performance=
=20
criterion.
? Preferred distribution. In large part, the quality of our workforce has=
=20
been driven by our willingness to make tough decisions. We have consistentl=
y=20
captured business opportunities and overcome obstacles because we have made=
=20
the choices that had to be made in order to constantly improve our employee=
=20
talent base. The preferred distribution (5% superior, 30% excellent, 30%=20
strong, 20% satisfactory, and 15% needs improvement or issues) forces PRC=
=20
committee members to identify those who must improve in order to remain at=
=20
Enron as well as to single out top talent for special recognition. There is=
=20
some flexibility in the system, but every organization must ultimately face=
=20
this difficult question: have we achieved the highest level of performance =
or=20
are there still improvements that must be made? Few, if any, organizations=
=20
adhere exactly to the preferred distribution. Rather, they exercise informe=
d=20
discretion in the individual categories and meet a distribution that reflec=
ts=20
their groups=01, overall effectiveness and need for improvement.
? Communicating Ratings. Everyone rated =01&satisfactory=018 or below shoul=
d know=20
his/her rating. Each organization has determined for itself whether to=20
communicate ratings of =01&strong=018 and above. In all cases, employees w=
ill=20
receive feedback about their performance against expectations, areas of=20
success, and areas that need improvement.

We hope this answers most of your questions about the PRC process. We woul=
d=20
like your feedback and ideas on how to improve the PRC process going=20
forward. Therefore, we will be conducting an eSpeak in the near future, an=
d=20
there will be other methods we will create to let us know what you think. =
In=20
the meantime, please feel free to consult with your HR Generalist if you ha=
ve=20
any immediate questions, comments, or concerns.