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| The flaw in Amazon’s management fad | The flaw in Amazon’s management fad |
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| Imagine working for a company where your annual performance review seems to happen every week. To assess performance, the company collects data on employees constantly, with hundreds of data points. Workers are encouraged to comment on each other’s performance constantly, using an anonymous online forum. Constant self-monitoring and self-measurement are also vital. If you spot any weakness in your own performance, you should be “vocally self-critical”, explaining your failings to others. | Imagine working for a company where your annual performance review seems to happen every week. To assess performance, the company collects data on employees constantly, with hundreds of data points. Workers are encouraged to comment on each other’s performance constantly, using an anonymous online forum. Constant self-monitoring and self-measurement are also vital. If you spot any weakness in your own performance, you should be “vocally self-critical”, explaining your failings to others. |
| Related: Why I’m finally going to boycott Amazon | Related: Why I’m finally going to boycott Amazon |
| When employees’ performance metrics dip, they are warned they could find themselves without a job. Each month or so, staff are called into a meeting where they have to explain their performance on a bewildering range of measures. Every year there are sessions where employees throughout the firm are rated on their performance, and a percentage of people are fired. In this firm, office employees work about 80 hours a week, and the average employee tenure is one year. | When employees’ performance metrics dip, they are warned they could find themselves without a job. Each month or so, staff are called into a meeting where they have to explain their performance on a bewildering range of measures. Every year there are sessions where employees throughout the firm are rated on their performance, and a percentage of people are fired. In this firm, office employees work about 80 hours a week, and the average employee tenure is one year. |
| This is how working life at Amazon has been described in a New York Times investigation – though Jeff Bezos, the Amazon founder and chief executive, has repudiated its claims. “The article doesn’t describe the Amazon I know or the caring Amazonians I work with every day,” he said in an email to staff. “But if you know of any stories like those reported, I want you to escalate to HR … our tolerance for any such lack of empathy needs to be zero.” | This is how working life at Amazon has been described in a New York Times investigation – though Jeff Bezos, the Amazon founder and chief executive, has repudiated its claims. “The article doesn’t describe the Amazon I know or the caring Amazonians I work with every day,” he said in an email to staff. “But if you know of any stories like those reported, I want you to escalate to HR … our tolerance for any such lack of empathy needs to be zero.” |
| It has been known for some time that Amazon is often a tough taskmaster. Sub-contracted delivery staff can struggle to make a living. People working in their warehouses can face harsh conditions. But the life of the relatively privileged employees working at Amazon’s corporate offices remained a mystery – until the New York Times suggested an equally extreme approach to managing its office employees. | It has been known for some time that Amazon is often a tough taskmaster. Sub-contracted delivery staff can struggle to make a living. People working in their warehouses can face harsh conditions. But the life of the relatively privileged employees working at Amazon’s corporate offices remained a mystery – until the New York Times suggested an equally extreme approach to managing its office employees. |
| The Amazon approach has created extreme results: the company dominates online retailing; it has a stranglehold over the book market; and it has a higher valuation than the world’s biggest retailer, Walmart. Some think that Amazon’s data-driven approach is the future of management. There are signs this might be the case. New-economy companies such as Uber use real-time data to manage the performance of their drivers. Many more established companies have adopted such an approach. The public sector is also following suit. | The Amazon approach has created extreme results: the company dominates online retailing; it has a stranglehold over the book market; and it has a higher valuation than the world’s biggest retailer, Walmart. Some think that Amazon’s data-driven approach is the future of management. There are signs this might be the case. New-economy companies such as Uber use real-time data to manage the performance of their drivers. Many more established companies have adopted such an approach. The public sector is also following suit. |
| Related: My week as an Amazon insider | Related: My week as an Amazon insider |
| There is only one problem. Amazon’s approach to managing people has been tried before, many times in fact, and mostly it has failed. A core feature of Amazon’s approach has been called “purposeful Darwinism”. This is the idea that if you create a struggle for survival among staff, they will increase their performance. It works by measuring employees on a wide range of metrics, ranking them on the basis of their performance, then splitting them into three groups: a small number of high performers who are lavishly rewarded; a large group of average performers who hold on to their jobs; and a third group of under-performers who are “managed out” of the organisation. This has created a system where, in the words of one ex-employee, “you learn how to diplomatically throw people under the bus”. | There is only one problem. Amazon’s approach to managing people has been tried before, many times in fact, and mostly it has failed. A core feature of Amazon’s approach has been called “purposeful Darwinism”. This is the idea that if you create a struggle for survival among staff, they will increase their performance. It works by measuring employees on a wide range of metrics, ranking them on the basis of their performance, then splitting them into three groups: a small number of high performers who are lavishly rewarded; a large group of average performers who hold on to their jobs; and a third group of under-performers who are “managed out” of the organisation. This has created a system where, in the words of one ex-employee, “you learn how to diplomatically throw people under the bus”. |
| This is commonly known as the “rank and yank” system – rank people on performance metrics, then yank out the poor performers. The system was brilliantly dramatised in David Mamet’s Glengarry Glen Ross, when a senior executive from headquarters visits a sleepy sales office to “motivate” the staff. He offers them rewards for results. First prize is a Cadillac Eldorado. Second prize is a set of steak knives. Third prize is “you’re fired”. | |
| Rank and yank may be widely used, but most of the available evidence suggests it does not work. In their work on evidence-based management, Jeffrey Pfeffer and Robert Sutton point out that the systems can drive destructive internal competition. More recent research has found that when you introduce a forced ranking system into a team, people are more likely to start sabotaging each other in the hope of pushing themselves up by pushing others down. | Rank and yank may be widely used, but most of the available evidence suggests it does not work. In their work on evidence-based management, Jeffrey Pfeffer and Robert Sutton point out that the systems can drive destructive internal competition. More recent research has found that when you introduce a forced ranking system into a team, people are more likely to start sabotaging each other in the hope of pushing themselves up by pushing others down. |
| This kind of tooth-and-claw competition drains the life blood of most organisations. When your colleagues are likely to stab you in the back to improve their own performance ratings, it is hard to trust them. As a result, people focus on protecting themselves. Sharing knowledge with them or doing things that are beyond the call of duty become very risky. This can create a toxic work environment that undermines the basis for cooperation, sharing and even innovation. | This kind of tooth-and-claw competition drains the life blood of most organisations. When your colleagues are likely to stab you in the back to improve their own performance ratings, it is hard to trust them. As a result, people focus on protecting themselves. Sharing knowledge with them or doing things that are beyond the call of duty become very risky. This can create a toxic work environment that undermines the basis for cooperation, sharing and even innovation. |
| But the most worrying problem with rank and yank is it can become a self-fulfilling prophecy. The hope is that by giving people a poor performance evaluation, they will work hard to lift their game. The reality is quite different. When people are labelled poor performers they usually conform to expectations and end up performing poorly. This is exacerbated when “high potentials” are lavished with rewards, and members of the “B team” are overlooked. Huge inequalities are created between “top talent” and those who are deemed to be merely average. Such inequality breeds resentment. | But the most worrying problem with rank and yank is it can become a self-fulfilling prophecy. The hope is that by giving people a poor performance evaluation, they will work hard to lift their game. The reality is quite different. When people are labelled poor performers they usually conform to expectations and end up performing poorly. This is exacerbated when “high potentials” are lavished with rewards, and members of the “B team” are overlooked. Huge inequalities are created between “top talent” and those who are deemed to be merely average. Such inequality breeds resentment. |
| When people are labelled poor performers they usually conform to expectations and end up performing poorly | When people are labelled poor performers they usually conform to expectations and end up performing poorly |
| Given these problems, many companies have abandoned the system. Among these are Ford, Microsoft and Accenture. Amazon insiders seem to have an excessive faith that it is a crucial part of the company’s success. Rank and yank may continue to work for Amazon, as long as there are queues of people willing to subject themselves to a punishing work schedule and data-driven self-criticism sessions that would have made Chairman Mao envious. But it will also probably continue to fuel infighting, undermine employees’ self-esteem and destroy cooperation in the company. | Given these problems, many companies have abandoned the system. Among these are Ford, Microsoft and Accenture. Amazon insiders seem to have an excessive faith that it is a crucial part of the company’s success. Rank and yank may continue to work for Amazon, as long as there are queues of people willing to subject themselves to a punishing work schedule and data-driven self-criticism sessions that would have made Chairman Mao envious. But it will also probably continue to fuel infighting, undermine employees’ self-esteem and destroy cooperation in the company. |
| But there is a greater tragedy brewing if leaders around the world think Amazon really does represent the future of management. The techniques that Amazon uses to manage its own people can destroy the lives of individuals and undermine organisational performance. The decision to rank and yank is based more on a commitment to an outdated ideology than any real business benefits it might bring. | But there is a greater tragedy brewing if leaders around the world think Amazon really does represent the future of management. The techniques that Amazon uses to manage its own people can destroy the lives of individuals and undermine organisational performance. The decision to rank and yank is based more on a commitment to an outdated ideology than any real business benefits it might bring. |
| It is vital that managers are not seduced by the success of a company like Amazon without seeing the hundreds of companies that have tried and failed to adopt similar systems. This is not to mention the hundreds of thousands of people who have had their lives tarnished by this misguided management fad. | It is vital that managers are not seduced by the success of a company like Amazon without seeing the hundreds of companies that have tried and failed to adopt similar systems. This is not to mention the hundreds of thousands of people who have had their lives tarnished by this misguided management fad. |
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