AMAZON AS AN EMPLOYER

Amazon was the biggest Internet-based retailer in the United States and had frequently been
featured in Fortune magazine’s Elite List of the World’s Most Admired Companies, ranking
second in 2014 and fourth in 2015. However, in 2015, controversy erupted on social media
when an article in The New York Times portrayed Amazon as a company that was “conducting
an experiment in how far it [could] push white-collar workers to get them to achieve its ever-
expanding ambitions.” Many leading technology wizards, such as former Twitter chief
executive officer (CEO) Dick Costolo, as well as venture capitalists Marc Andreessen and Keith
Rabois, dismissed the criticism, arguing that such practices were part of what made
“disruptive companies disruptive.”

The New York Times article focused on the unconventional office culture promoted at
Amazon. Particular attention was paid to the practice of encouraging employees to be
ruthlessly critical of each other’s ideas in meetings and to surreptitiously send feedback to each
other’s bosses. The article also mentioned the physical stress of Amazon’s workplace.
Employees were expected to put in long hours and were reprimanded when they failed to
respond to emails that arrived at midnight. This was the inevitable by- product of a policy that
demanded that all employees work overtime, effectively forcing employees to work harder and
faster until they quit, collapsed, or were terminated.

As a result of its workplace policies, turnover at Amazon was high: most employees did not
stay for more than a few months. Nonetheless, Amazon had climbed the ladder of
achievements and accomplishments in an unrelenting, expeditious manner. It had surpassed
Walmart as the most highly ranked retailer in terms of market valuation. The company was as
continuously innovative as a new start-up.

Amazon was on the verge of opening several new multi-floor offices in diverse locations, which
would expand its operating capacity to approximately 50,000 employees. The question that
arose at this critical juncture of its growth was whether Amazon would be able to attract and
retain the engaged talent it required to fill these vacancies despite The New York Times exposé.
Would Amazon’s demanding corporate culture continue to lead to innovation?

WORKPLACE CONUNDRUMS AT AMAZON

Amazon had always maintained a strict emphasis on customer satisfaction. The business was
built around this principle. Customers around the world were familiar with Amazon, but life
inside the organization had been impenetrable until it was probed by The New York Times
article. In a letter to shareholders, Amazon CEO Jeff Bezos wrote, “You can work long, hard,
or smart, but at Amazon.com, you can’t choose two out of three.”

In late 1999, when the Internet boom took a precipitous fall after years of exhilarating success,
Amazon was burdened with debt and spiralling losses. Bezos needed to convince Wall Street
that he was determined to cut costs. But what costs were left to cut? Unlike other competing
firms in Silicon Valley, the company had never provided perks and benefits to its employees.
The only “perk” Amazon had offered was free Aspirin, and this was taken away.

Many considered the frequent temper tantrums of Bezos to be key to the survival and success
of Amazon. Employees described Bezos’ outbursts as “nutters.” His favourite quips were, “Why
are you ruining my life?” and, “If I hear that again, I am going to have to kill myself.” In spite
of his infamous temper, Bezos was ranked as the top innovator in 2013.

When The New York Times published its article, Bezos immediately sent out a company-wide
memo in which he expressed his disagreement with the article’s portrayal of the company work
environment. Bezos noted that anyone working in such an environment would be crazy to stay,

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and he ended his memo by saying, “hopefully you don’t recognize the company described [in
The New York Times article]. Hopefully you’re having fun working with a bunch of brilliant
teammates, helping invent the future, and laughing along the way.”

Indeed, “work hard, have fun, and create history” seemed to be the motto of employees at
Amazon. Over-achievers bubbling with innovative ideas and eager to collaborate with and
learn from brilliant co-workers thrived in the challenging, fast-paced environment and seemed
to embrace the extreme demands placed upon them — not as a problem to run from, but as an
opportunity to grow. Many such employees were excited to be working on cutting-edge
projects that would impact millions of people and felt that working at Amazon advanced their
careers. The star performers or winners would visualize the innovations, implement them for a
quarter billion customers, and accumulate wealth from rising stock prices.

Amazon’s unconventional style extended beyond its office culture and into its business
development processes. Software developers were required to write an imaginary press release
and complete a list of frequently asked questions for an envisioned product before they began
programming it. This strategy of working backwards from a vision of the finished product
forced the developers to detect and confront any difficult post-production issues before
moving ahead with the product. This ensured that the developers understood the product’s
unique proposition and appeal to potential clients from the very beginning of the development
process. If the developers could not write a convincing press release, then the product was
discarded as not worth the effort. Many employees found this rigorous approach to software
development exciting and argued that such rigour made Amazon the best place to work for
those who were passionate about their profession. However, such employees were a small minority. In
2013, Amazon had the second-highest turnover among the Fortune 500 companies, with a median
tenure of one year.

The office culture cultivated at Amazon led those outside of the company to think negatively
of Amazon’s ex-employees. Many recruiters were hesitant to hire ex-employees, believing they
had been trained to be aggressive. Amazon employees were also known to be belligerent and
work-fixated. A Seattle-based technology recruiter who had worked at Amazon for four years
said that he was still struggling with the workaholic nature from within and trying to control
the urge to verbally eviscerate any colleagues who did not perform up to his expectations.

PEOPLE MANAGEMENT PRACTICES AND DIVERSITY

The talent acquisition process at Amazon was rigorous and included screening by the
company’s star performers and part-time interviewers brought on to ensure the company
hired only the best. New employees had to sign a contract that required them to repay the
signing bonus in the event that they left the organization within a year of signing and to repay
part of their relocation expenses in the event that they left before the completion of two years.

Performance management at Amazon continued to be based on a bell curve approach when

other companies were moving away from it. Every year, a company-level review was conducted
in which managers discussed their subordinates’ rankings. Managers came to such meetings
armed with documents and evidence to defend their key members and to incriminate the
employees of competing groups. To protect critical talent, managers chose team members who
could be sacrificed in the review process. Employees were encouraged to criticize their
colleagues by sending feedback to management using a confidential online feedback tool.
Because employees were constantly under scrutiny, and bottom performers were
unceremoniously thrown out, everyone tried to outperform or sabotage everyone else. Indeed,
many employees reported in their performance reviews that they felt sabotaged by their
colleagues’ negative comments.

Amazon did not have female employees in the top leadership team. Many attributed this gap
to Amazon’s system of competition and elimination. Many female employees believed that

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some of Amazon’s “leadership principles worked to their disadvantage”; for example, being
encouraged to “earn trust,” “have backbone,” and “disagree” with colleagues was seen as
difficult for female employees to practice in the workplace. Many key employees at Amazon
were told that raising children could hinder their chances of advancing their careers because
child-rearing would prevent employees from putting in long working hours. Despite working
full-time, one female employee was criticized by her boss because the employee’s colleagues
often saw her leaving early, not realizing that she was also coming in early to complete the
required hours. Another female employee who, for years, had consistently exceeded
expectations was criticized by her boss when she began taking time off to care for her critically
ill father. This employee mentioned that those who were unable to give their “absolute all” and
put in 80-hour workweeks were perceived as weak.

Some male employees also had to quit Amazon — or consider quitting — because the workplace
pressure was forcing them to spend less time with their families. Older employees were
worried that they would be replaced by younger employees with fewer commitments and more
time to focus on work.

Dick Finnegan, a consultant specialized in talent retention, cautioned organizations about the
cost of mandatory cuts in the workforce:

If you can build an organization with zero deadwoods, why wouldn’t you do it? But I don’t
know how sustainable it is. You would have to have a never-ending two-mile line around the
block of very qualified people who want to work for you.

AMAZON WORKPLACE: FUTURE DIRECTION

In 2014, Harvard Business Review ranked Bezos as the top CEO. Yet, just 12 months later, his
ranking fell to the 87th position largely because, in 2015, CEOs were evaluated not just on the
basis of their financial success but also on the basis of their performance with respect to social
responsibility criteria. However, with topline growth and controlled spending, Amazon stock
prices had more than doubled.

In response to The New York Times article, Bezos sent the following message to Amazon
employees:

The article doesn’t describe the Amazon I know or the caring Amazonians I work with every
day. But if you know of any stories like those reported, I want you to escalate [them] to HR.
You can also email me directly at jeff@amazon.com. Even if it’s rare or isolated, our tolerance
for any such lack of empathy needs to be zero.

Given its work culture, would Amazon continue to be a competitive employer and offer an
attractive employee value proposition? Did the strategy of keeping employees on the edge
always result in innovation?

Questions

Please read the attached case and be prepared to discuss on the following:

1. Does the people management strategy of care and compassion make business sense?

2. How does the practice of keeping employees on the edge impact business in the short
and long run?

3. Is Amazon’s employer brand as reported by The New York Times sustainable? Why or
why not?