Thursday, October 12, 2006

It's the culture.

I was thinking about the relationship between company culture, hiring and promoting practices and company success. Specifically I was thinking about two contrasting examples - Google and Enron. The differences between the two in hiring practices and culture are profoundly different. Let's see how those differences played into each companies successes and failures.

One of the standard practices at Enron was firing the bottom 10% of the people in their annual performance reviews. The "logic" behind this particular practice is that through darwinian evolution you would be producing a better work force. In fact it had the unintended consequence of institutionalizing corruption by making sure that everyone would do ANYTHING not to be in that bottom 10%. This undoubtedly helped foster an environment of institutional corruption as you would do anything to hit your numbers. Indeed the recorded conversations with Enron traders as they shut down power plants (to spike the wholesale price of electricity by dropping supply) or engaged one of the dozens of illegal schemes. Instead of institutionalizing a dedication to excellence, instead it institionalized a sociapathic concern for self above all others.

"But what Brian," you might say, "Greed is good right?" Well yes and no. Unrestrainted greed is gluttony and eating ones self to death is never a good corporate practice. Remarkablly in an effort to keep the stock afloat, that's what happened to Enron - except they hid their debt in a series of structured companies. Yet their is another approach to the hiring and retention and for that I am going to take the example of Google.

A lot has been made of the hiring process at tech companies. For a long time Microsoft was the undisputed leader in annoying questions designed "to reveal how you think." There was "How would you find out how many gas stations there are in America?" A question that once a stumper now can be answered by asking Google or the US government - How Many Gas Stations there are in the United States. Now Google has replaced the stumper question with a series of stumper interviews. The Google interview process is tough and you are interviewed multiple times. One of the important factors is that Google instead of hiring for the project or division is hiring for the company. This is an attempt to move the bell curve of the average google employee just a little bit to the right. So they combine the traditional hard interview questions with the mulitple interviews up and down the food chain in the company. This does several things. With enough people looking at a candidate, that candidate's weaknesses will become apparent. With enough eyes, all bugs are shallow. By eliminating the bugs before they get hired you can help insure a better workforce. Programmers on the far right side of the bell curve are often 10 times more productive than the people just one median to the left. This solves the problem that Enron retention practice was trying to solve but it does so without damaging corporate culture. They seek to eliminate the bugs before they get in the company. There are a whole host of reasons why this is a good idea but in a nut shell once your quality of employee goes down, it's going to spiral downward from there. Additionally the multi interview gauntlet adds to the esprit de corp of the company of the employees.

There you have two solutions to the problem of hiring and retention - Google's and Enron's. It's pretty clear which is the better method.

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