source: recently left Amazon as SDM
What it is good for in my view is making managers look and feel tough and establishing a culture of fear that is so necessary for hierarchical power structures. Power/status hierarchies are a common trait for most primates. So my shorthand for this sort of it-doesn't-make-sense situation is, "Primates gonna prime."
Not defending, just explaining.
This is where your cards analogy falls through, in a deck of cards, you know that there are better cards you don't have in your hand, you know exactly what your Jack is worth in absolute terms.
At Amazon, you can have a Royal Flush, and because of stack ranking decide to discard your 10, and if you know your poker, that makes you go from the best hand to one of the worse.
The issue is you wouldn't know your 10 at Amazon was a great engineer and a key asset to your team, and that all replacement candidates are going to be worse, except now you've lost precious time, ramp up, and moral, as well as a great employee.
For a smaller company, it might make sense as you're building a core team and might need to go through a few people before you find a set of good ones, but where Amazon is now, at its size, over time, it has lost engineers that in industry wide averages were above it, and it has created a reputation that hurts it from attracting them back or other engineer's above the industry's average.
Due to this, Amazon is becoming a second pick. Good engineers will pick Netflix, Google, Microsoft, and even sometimes Facebook (due to their higher comp) over Amazon. And since all these companies hiring process are the same, it's common that someone who can pass the Amazon interview can pass one of those other ones as well. In fact, almost 70% of everyone I've seen be released from a PIP went to work at one of the other big tech companies.
The other big problem is that the stack ranking works like American reality TV competitions. It doesn't matter if you've excelled year over year, if you have one bad year, where for whatever reason you get identified as a low performer, you'll get PIPed. In my experience that's often contextual, a new manager or you look like a bad performer because the business and leadership couldn't figure out good projects for you to work on and own that year, or they themselves couldn't get their act together and you're a scape goat. Other people on your team might have performed better simply out of luck of having been assigned better projects.
Amazon used to get away with simply finding the best talent, but in my experience there, that's now backfiring, and instead of growing the best talent, their quest to find it is turning into a system that recruits more and more mediocre talent as time goes on.
Amazon doesn't pay top dollar for engineers, and the delta between Amazon and other companies is growing every year. (The compensation ends up being competitive when you take into account stock growth, but the new hire offers are not attractive.) And it's a very results-driven, stressful work environment. The effect of that is that people who get better offers go elsewhere, both new hires and existing employees. Those who are left either don't feel like interviewing or interviewed but didn't like their other options.
Yes comp could help to attract better talent, that's what Facebook is doing. But of the about 150 interviews I've conducted for Amazon, 90% of almost all candidates always ask me: "So is it really as bad as they say working here? With how they treat you?"
I think that's a pretty good indicator that the reputation is just tarnished, and I wouldn't be surprised that that's having a sizable effect on the decrease of talent.
The other thing is, yes maybe some real bad apples leave from a PIP, but the whole culture around it, the stress, the feeling everyone has that they constantly have to fight for trust and respect, that is also a cause for a lot of the really good engineers and high performer to leave as well, of their own, no PIP involved, but it's the same root cause for why they leave.
I see so many good ones, ranking high every year, and after 3 to 5 years say: Well I had enough of this BS, too much hassle always playing the game. If anything, that's the biggest issue.
Every time an AMZ recruiter tries to poach me from my current job, I consider replying back with links to the NYT article, the URA article, and various anecdotes from friends that worked there. Ending with a question of 'Why in god's name would I work for your company?!'
There are elements of the culture I miss. The focus on writing was great. Shipping things quickly that impact a lot of people is nice. It made up for a lot of the deficiencies, and it isn't universal (cough Google). Amazon tends to make the right tradeoffs with tech choices to enable this, not always, but most of the time.
I enjoyed working with principal and senior engineers at Amazon. I didn't meet a single PE that I didn't thoroughly respect and enjoy talking with. I miss the internal PE talks, and I wish they'd make them public.
Compensation is deeply personal, but once I broke 400k, I really didn't care too much one way or another, and Amazon's total compensation was never significantly less than competitors. It was about the work, impact, and people.
But this makes sense _in a game with a fixed hand size_. But a company's staff should grow over time. So shouldn't one have an ROI-based criteria where you want each team member to help grow generate meaningfully more revenue than they cost to employ. If my "lowest" performing team members still make meaningfully more money than they cost to employ, they still increase my ability to hire more.
This acknowledges that the "optimizing a hand of cards" analogy leaves out factors -- which is true.
My point is, even if there were no emotions or institutional knowledge, even if I had a "staff" of AI agents or robots whose "knowledge" could be fluidly copy-pasted, the "optimizing a hand of cards" analogy is poor, because a robot that makes money is worth keeping even if there are better robots out there. An army of low-but-positive ROI robots can help me buy a high ROI robot.
Maybe you hired a 7 of clubs, but given time they can gain institutional knowledge and improve their skillset to become a Jack of Spades.
I'm happy there are companies that set attrition metrics as a KPI, it makes it easier for me to hire and build out a technical team for my company.
Of course teams of employees with emotions and institutional knowledge are a bit more complex than a hand of cards, but that has never stopped bad management strategies.