How Amazon's Strategy on RTO is Wrong
My comments on Amazon's CEO letter to staff
Hey, fellow Leader 🚀,
I am Artur and welcome to my weekly newsletter. I am focusing on topics like Project Management, Innovation, Leadership, and a bit of Entrepreneurship. I am always open to suggestions for new topics. Feel free to reach me on Substack and share my newsletter if it helps you in any way.
The Return To Office will be a hot topic in the next few years, ever since the revolution of COVID-19 lockdowns especially in technological companies. A new chapter happened recently after Amazon’s CEO, Andy Jassy, issued an internal communication this past month. You can see the full letter by following this link.
Before going into more detail and in terms of transparency, a disclaimer is in order: I am biased towards this particular topic. My analysis and solutions tend always to fall under hybrid and remote modes of working. For that reason, and spoilers alert, this article will not paint a favorable image of Amazon’s strategy. The next article will provide my insight on how the announcement is a Soft Layoff and how it should be done differently.
Why This Is a Soft Layoff
The communication sent by Amazon’s CEO starts with the (good) news the company is doing well, launching different services and products in multiple areas:
Stores, AWS, and Advertising continue to grow on very large bases, Prime Video continues to expand, and new investment areas like GenAI, Kuiper, Healthcare, and several others are evolving nicely. (Source)
Nevertheless, the statement has highlighted that the company wants to improve in other areas, notably internal modes of working. Intending to foster cooperation and lean the processes and doing so by decreasing the level of bureaucracy that exists inside the company and how the middle management may be part of the problem. The letter provides good insight into the company’s willingness to continue to develop innovative projects and push implementations forward instead of wasting time with red tape.
As we have grown our teams as quickly and substantially as we have the last many years, we have understandably added a lot of managers. In that process, we have also added more layers than we had before. It’s created artifacts that we’d like to change (e.g., pre-meetings for the pre-meetings for the decision meetings, a longer line of managers feeling like they need to review a topic before it moves forward, owners of initiatives feeling less like they should make recommendations because the decision will be made elsewhere, etc.). Most decisions we make are two-way doors, and as such, we want more of our teammates feeling like they can move fast without unnecessary processes, meetings, mechanisms, and layers that create overhead and waste valuable time. (Source)
This quote says it all. Amazon has grown in a way that for a change to happen, it needs to pass multiple levels inside the company. This is indeed a problem since it all needs one manager to slow a good idea going forward. Also, this is a symptom of fast growth or lack of long-term organizational planning.
The conclusion is Amazon wants to optimize the middle management staff to be more efficient and have a flatter and more streamlined organization. However, how this will be achieved?
We’ve decided that we’re going to return to being in the office the way we were before the onset of COVID. When we look back over the last five years, we continue to believe that the advantages of being together in the office are significant. (Source)
This is where the letter becomes a bit confusing with a sharp turn. Typically big changes need a good strategy and how it will fix the problem. However, increasing efficiency and returning to the office are contradictory strategies. The advantages of remote or hybrid working models are astonishing when compared with all the time-wasting activities that happen in an office environment. Doing calls nowadays is done in digital rooms, without losing time to physically move into a physical room and lose time to plug a laptop into a monitor. Or waiting for the previous meeting to be over while a group of people wait patiently outside the room. What the last few years have shown us is an office setting is inefficient at its core. Nowadays there are very powerful digital tools for collaboration, which set a whiteboard with failing pen markers deprecated. The link between Office and Efficiency doesn’t make sense.
Making this big of a change, with so many impacts on Amazon’s workers, is expected to believe the Management is aware the decision will trigger resignations. However, nothing is written in the letter about how this risk will be mitigated. It’s doubtful the risk wasn’t discussed internally before the communication.
From an operational standpoint, this risky move makes less sense since the company is performing well as seen in the graph below.
I can only speculate, the risk of resignation should be an obvious topic and is somehow part of the strategy. Unfortunately, the letter doesn’t provide more visibility about the CEO’s perspective on the risks of resignations. However, the letter has been well drafted for these objectives:
Improve operational efficiency
Reduce middle management to remove obstacles and artifacts.
The need to improve collaboration and innovation with a flatter organization
This Return To Office mandate by triggering a series of resignations will contribute to a flatter organisation. However, I doubt with will be such of effect that can transform Amazon in such a way, that it will lose all the harmful artifacts stated.
Why This Strategy Is Wrong
The strategy’s fundamental problem is the lack of agency of who is leaving the company. With the release of the CEO’s letter, I am confident that a lot of Amazon’s employees are now in the job market trying to find alternatives. Especially the highly attractive skilled employees, who are also in middle management. With time, the only staff remaining will be the ones who had no other choice than to continue to work at Amazon. This means the company will continue to have the same artifacts because they are the tools that ensure low-valued management continues to have an active voice in the decision-making processes.
In terms of building an environment of collaboration, having middle management with the wrong mindset will even hurt the company for the objectives proposed. The artifacts will be tougher to remove, new ideas will be challenged with a lack of motivation and buy-ins. This will create the perfect culture that goes against innovation, collaboration, and mostly autonomy and authority among the staff. Which is the opposite of what is desired in the CEO’s letter.
In the future, will be even more challenging to find talented people to work at Amazon. Especially knowing that there are sexier companies there that offer hybrid and remote working conditions.
Based on information leaked in 2022, the turnover rating on Amazon has always been high. Looking at overall complaints regarding compensation, it’s a matter of time before a significant amount of employees can find a new job with better office policies. In terms of competitiveness in the job market, the policy of 5 days at the office will only harm further the retention rate.
From the financial and operational standpoint, the hybrid and remote setups offer savings opportunities in terms of office space. One of the important data I am waiting for this year’s end is the effects of office downsizing. This effect might take time to make a significant appearance since a lot of office spaces are rented in a span of multi-year contracts. However, it will provide companies with an opportunity for cost reduction in conjunction with using hot-seat approaches. The predictions are high for the downsize of office spaces, but we need to wait some years to see them materialize.
Specially for big corporations like Amazon, which by adopting hybrid or remote ways of working don’t need as many square meters of office space. The reduction of office space can translate to significant savings visible in its cost sheets. However, this paradigm challenges the way office spaces are designed today and pushes for a revamp to optimize for new ways of working. Having spaces built for conferences, internal events, and dedicated rooms for team workshops, instead of old-fashioned desks. The offices in the future need to have different objectives than the ones before COVID-19.
How Could It Be Done Better?
The following paragraphs are written on how to capitalize on the expertise of middle management and avoid a layoff. So let’s study some actions and start by reverting the RTO decision altogether. The problems at Amazon seem to be more profound than the office’s policies. However, I won’t address compensation improvement points, because I need access to more data about employee compensation schemes to build more well-thought-out measures.
The first take: Hiring freeze. At least, at a level the turnover rate allows. This measure won’t act alone. Many of the following suggestions are working with each other, to mitigate the need for recruiting from the market and much of the recruiting would be done in-house. A company like Amazon is continuously building new products that require continuous staffing. Using Amazon’s way of working could provide opportunities to move the middle management inside the organization by offering other tasks and challenges.
The CEO’s letter already takes into consideration turning part of the middle management into Individual Contributors. This is important for having highly specialized staff in missions focused on process and product optimization. The ICs are the best personnel to apply change in Amazon because they have unique insight and are both experts in the company and its products. I would strengthen this strategy a bit further by creating a program of volunteers for identifying potential ICs and having a separate program for Continuous Improvement ideas that could be implemented by the new ICs task force.
Another interesting take for middle and big corporations is the possibility of offering lateral career progression. This is done by offering roles inside the company that can promote the existing middle management to a new department or work on a new product. This goes very well with the hiring freeze stated initially. For new projects, the company would look internally for personnel who would be available to take on a new project. Some middle management would be transferred to these projects without being replaced at the point of origin and aggregating scopes between other middle managers. Some of the staff might be eager to learn new skills or work in a new area, and with time Amazon’s organisation would become flatter and flatter.
The final recommendation which is not referenced enough, is the amount of middle management who would be available to step down from management responsibilities altogether. Some staff are promoted to management without prior experience and without knowing their aptitude and interest in the position. Offering the possibility to step down and and work as experts or seniors on a project, is paramount to having good people where they feel their contribution is best served.
That’s it. If you find this post useful please share it with your friends or colleagues who might be interested in this topic. If you would like to see a different angle, suggest in the comments or send me a message on Substack.
Cheers,
Artur