BUSM4554/4555/4557: Amazon.com Inc (Amazon) is not just a surviving company of the 1990s tech Boom : Contemporary Management: Issues and Challenges Case Study, RMIT, Singapore

Amazon to Competition: We Will Crush You! Amazon to Employees: We Will Churn You!

Amazon.com Inc (Amazon) is not just a surviving company of the 1990s tech boom; it is now one of the largest and most successful companies in the world and across many industries. In January 2019, Amazon became the most valuable company in the world, above Microsoft, Apple, and Alphabet (Google). It has leveraged its game-changing approach to selling books and now sells almost everything to anyone, anywhere. Today, Amazon is a leader in all things customer service, and it has achieved this leading position through ground-breaking technological innovation.

Technological innovation has also made Amazon one of the largest web services companies in the world and a formidable retailer. All these legendary accomplishments are the result of the commitment and contributions of thousands of extremely talented Amazonians. As you would certainly expect, the standards for hiring are exceptionally high. But what it takes to thrive and survive at the company is even more challenging.

It’s Not All Sunshine And Roses

While Amazon’s accomplishments are widely reported, until recently relatively little was known about its approach to managing employees. But recent reports describe a “punishing corporate environment: long hours, disparaging bosses, high stress, no time or space to recover, all resulting in uncommonly high employee turnover.” Just how bad is it? PayScale ranked Amazon 464th among the Fortune 500 companies for employee turnover, with median employee tenure of approximately one year! (A competing estimate puts average tenure at 18 months).

What pressures drive such high turnover? In a letter to shareholders in 1997, founder and CEO Jeff Bezos wrote: “You can work long, hard, or smart, but at Amazon, you can’t choose two out of three.” This suggests that employees must always be on, be in the game, and play it well. Amazonians experience many of the common pressures of today’s workplace—80-plus-hour workweeks, 24/7 connectivity, no real vacations or holidays (no surprise was given that Amazon is the largest retailer on the planet).

Amazon’s “always-on” culture is manifest in a number of chilling stories, such as that of an employee who negotiated a 7 am to 4:30 pm schedule with her boss after having her first child. The problem was that her co-workers didn’t see her arrive early and crushed her in anonymous peer feedback (which employees are encouraged to use). Her boss said he couldn’t defend her in her performance review if her own co-workers were critical of her. Can it get worse? Yes. Amazon also uses a “rank and yank” performance management system.

Employees are ranked by their managers, and those near the bottom are terminated every year. This leaves little room for taking a breather or backing off, even if you have to take care of an ailing parent, or need to receive
treatment for cancer. For example, Amazon warehouse employees are not free to go on toilet breaks as they risk “Tot” (time off task points) that could be used to justify job termination. There are stories of employees in all these predicaments who were essentially told that their lives were incompatible with working at Amazon. It is no wonder one former employee said, “Nearly every person I worked with, I saw them cry at their desk.” Amazon has, of course, disputed some of these claims.

We Can Measure “That”… And “That” Matters
Another key contributor to the pressure cooker environment is that everything is measured. For instance, warehouse employees are monitored using sophisticated systems to track how many boxes they pack per hour. White-collar employees participate in routine “business review” meetings, for which they need to prepare, read, and absorb 50 to 60 pages of reports amounting to thousands of data points. During these review meetings, employees are often quizzed on particular numbers by their managers, and it is not uncommon to hear managers say that responses are “stupid” or tell workers to “just stop it.”

To be sure, the company succeeds in large part because of the immense customer data it collects and uses to select and sell its products. The plan is to use data the same way to make performance management an efficient and effective everyday process, rather than a once-a-year event. However, many employees describe the result as “purposeful-Darwinism” in which every employee constantly competes with other employees. Such relentless and pervasive competition, while well-intended, has many undesirable consequences.

For instance, it is common for employees to hoard ideas because sharing becomes a personal loss for the sharer and again for somebody else. Moreover, other’s ideas are not just scrutinized; they are undermined. Groups of employees often conspire against others on the peer feedback system to get ahead (or to put somebody else behind). As for managers, they must both defend the direct reports they deem most valuable to their own performance, and at the same time determine whom they can sacrifice—not everybody can pass the performance test.