Contemporary Management: Issues and Challenges

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BUSM4554/4555/4557 Contemporary Management: Issues and Challenges

Assignment 3 – Case Study (Individual Assignment – 40%

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 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 7am to 4:30pm 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

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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 a gain for somebody else. Moreover, other’s ideas are not just scrutinised; 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.

AMAZON = BEZOS

Much of the praise and many of the complaints are directed at Jeff Bezos. Not only is he the founder

and CEO, but he also is the chief architect of all things Amazon. His personality is embodied in the

company values and the way it operates. Like Bezos himself, employees are expected to use data,

confront, persevere, and win. This approach appeals to and is sustainable for only a very specific type

of employee. One former employee described Amazon’s hiring process as “panning for gold”. The

company is looking for the rare stars who can thrive in its demanding environment, and it must sift

through many people to find them.

This strategy is a real challenge for Amazon. Its size, growth rate, and turnover require the company to

hire thousands and thousands of employees every year, and this doesn’t include the thousands of

temporary workers it hires to meet the holiday rush. As of 2019, Amazon’s global workforce reached

more than 613,000 employees worldwide, not including the 100,000 temporary employees the

company hires for holiday seasons. Interviews with male employees in their 40s revealed that many are

convinced Amazon will replace them with employees in their 30s, who worry in turn that the company

prefers employees in their 20s. The implication? Younger employees have fewer commitments and

more energy.

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What Is Amazing Doing To Retain Its Employees?

To combat the churn, Amazon has structured its stock options to vest (transfer to the employee as

owner) on an unusual schedule. Instead of vesting evenly over a period of years, Amazon employee

options vest at 5 percent in year one, 15 percent in year two, 40 percent in year three, and 40 percent

in year four. Employees who leave within one year of hire must repay part of their signing bonus, and if

within two years they must repay their relocation package if any.

However, many experts question the effectiveness of such policies. Lindsey Thorne, manager at a

Seattle recruiting firm that places many former Amazon employees, says, “The potential payout of

waiting for stock to vest won’t tie down unhappy employees who are ready to jump ship.” Still, others

question whether Amazon can continue to innovate and lead in the marketplace if its most valuable

asset is ground-up and discarded in such a way and at such a high rate.

To be fair, surely some percentage of the company’s more than 150,000 employees are quite satisfied

and successful. The system works for some, and for many it works for a period of time. And the

incredibly high bar, marquee name, and extreme work ethic required to get hired at Amazon make

former Amazonians very valuable to the company’s competitors and many other companies both inside

and outside the technology industry.

But, Is That Enough?

Prepare a report for Amazon, addressing the range of contemporary management issues and

challenges raised in the case study above. Your report should be 2,000 words (+/- 10%) excluding

references and appendices. In your report, you are required to address a number of points including:

1. Identify and discuss the issues and challenges Amazon is facing.

a. Why are they important?

b. What are the implications for Amazon?

2. How can Amazon address the issues and challenges identified in (1)?

a. Identify some feasible strategies for Amazon.

3. What are the risks for Amazon if the issues and challenges identified in (1) are not addressed?

To obtain a good grade for the report, your responses to the questions must be thoroughly researched

and be well-grounded in current literature and evidence-based. You must also proofread your report

multiple times so that it reads coherently and logically. Ideas and materials that are taken from other

sources must be cited in your report. For more information, please refer to the Canvas “Assignments”

page.