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

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

? Hire the best people.
? Provide challenging opportunities.
? Pay well ( and pay for performance (with bonuses based on merit, not 
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 
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 and 
to allocate bonus money.


In addition to understanding this broad philosophy, we all need to understand 
the following details:

? Relative ranking.  Enron uses the descriptors &superior8, &excellent8, 
&strong8, "satisfactory", &needs improvement8, and &issues8 to group all 
employees.  This year, &relative to his/her peers8 precedes each of these 
descriptors. This qualifier confirms what we have done and will continue to 
do in practice; that is, evaluate individual performers against their peers.  
It is possible, therefore, for someone to perform at the same or higher level 
compared to prior periods, yet receive a lower rating for the current period 
if other employees, performance raised the bar.
? Teamwork.  A relative ranking may invite the view that for one employee to 
gain, others must suffer.  However, feedback is explicitly solicited on 
teamwork when evaluating each individual,s performance.  Anyone who attempts 
to gain by withholding information or refusing to collaborate with others in 
the organization will suffer in a relative ranking on this key performance 
criterion.
? Preferred distribution. In large part, the quality of our workforce has 
been driven by our willingness to make tough decisions. We have consistently 
captured business opportunities and overcome obstacles because we have made 
the choices that had to be made in order to constantly improve our employee 
talent base. The preferred distribution (5% superior, 30% excellent, 30% 
strong, 20% satisfactory, and 15% needs improvement or issues) forces PRC 
committee members to identify those who must improve in order to remain at 
Enron as well as to single out top talent for special recognition. There is 
some flexibility in the system, but every organization must ultimately face 
this difficult question: have we achieved the highest level of performance or 
are there still improvements that must be made? Few, if any, organizations 
adhere exactly to the preferred distribution. Rather, they exercise informed 
discretion in the individual categories and meet a distribution that reflects 
their groups, overall effectiveness and need for improvement.
? Communicating Ratings. Everyone rated &satisfactory8 or below should know 
his/her rating. Each organization has determined for itself whether to 
communicate ratings of &strong8 and above.  In all cases, employees will 
receive feedback about their performance against expectations, areas of 
success, and areas that need improvement.

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