September 16, 2024
Photo by BoliviaInteligente on Unsplash
Is Amazon’s CEO on the Right Track To Improve the Company?
Amazon CEO Andy Jassy has announced plans to enhance the company’s culture and operational efficiency amid its recent growth. While showing approval for progress in sectors like AWS and Prime Video, Jassy stressed the need for ongoing cultural refinement due to recent expansions and increased managerial layers.
To address these issues, Jassy outlined two main initiatives in an announcement to Amazon employees:
- Reduce managerial positions: Amazon will cut managerial roles by at least 15% by the end of Q1 2025 to streamline decision-making and reduce bureaucracy, aiming to foster faster decision-making and greater employee ownership.
- Return to pre-pandemic office attendance: Starting Jan. 2, 2025, Amazon will reinstate pre-pandemic office attendance policies to boost collaboration and reinforce company culture, though flexible arrangements will still be available in certain cases. This means that Monday through Friday, employees will “be in the office outside of extenuating circumstances.”
“Having the right culture at Amazon is something I don’t take for granted,” Jassy stated in the announcement. “I continue to believe that we are all here because we want to make a difference in customers’ lives, invent on their behalf, and move quickly to solve their problems. I’m optimistic that these changes will better help us accomplish these goals while strengthening our culture and the effectiveness of our teams.
Jassy believes these changes will improve innovation and customer service. However, Amazon faces numerous criticisms and challenges that might not be getting addressed properly.
For example, previous employees and their relatives have shared distressing stories on social media about their negative experiences with Amazon management and Amazon’s Performance Program.
Moreover, some social media users are expressing frustration with Amazon’s alleged decline in quality. They note that, over time, more products from China have appeared on the platform, often being of poor quality. Users also complain about fake reviews becoming too common, making it hard to trust product ratings. The once-reliable two-day Prime delivery now often takes three or four days, with frequent delays and a rise in counterfeit items misrepresented as name brands. Many are questioning what alternatives exist beyond buying directly from each store.
These customer complaints align with a study from 2018 that showed how at least 61% of electronics on Amazon have fake reviews. If consumers are too trusting of these reviews, it can potentially lead to bad purchases and wasted resources on returns.
Furthermore, despite bans, lead continues to be found in children’s toys on Amazon. In July 2023, about 346,000 lead-containing stainless steel cups from Cupkin sold on Amazon were recalled. This issue is ongoing; unsafe products, including those with lead and cadmium, were sold on Amazon as far back as 2017-2018.
Investigations have shown that even after Amazon removes harmful items, they often reappear. The Washington Attorney General now requires sellers to provide safety certificates, but enforcement is weak. Limited oversight of third-party sellers allows counterfeit and unsafe products to persist.
Recently, a Senate probe found that Prime Day significantly increases worker injuries due to understaffing in warehouses. Senator Bernie Sanders reported that Amazon warehouse workers are over twice as likely to be injured during Prime Day compared to industry peers. Despite Amazon’s claims of progress and a $750 million investment in safety, the company faces ongoing scrutiny and investigations for potentially underreporting injuries.
As for its financial situation, on Aug. 1, Amazon’s stock dropped 6% in after-hours trading following its report of weaker-than-expected second-quarter revenue and a disappointing third-quarter forecast.
The company posted earnings of $1.26 per share, surpassing the expected $1.03, but revenue of $147.98 billion fell short of the $148.56 billion forecast. AWS generated $26.3 billion, exceeding estimates, while advertising revenue reached $12.8 billion, below expectations. At the time, Amazon projected that third-quarter revenue will fall between $154 billion and $158.5 billion, compared to the $158.24 billion average analyst estimate. Online store sales grew 5% year-over-year, and revenue from third-party seller services increased 12%.
Brian Olsavsky, Amazon’s finance chief, attributed the revenue shortfall to consumers buying cheaper products, lowering the average selling price. The company planned to introduce a discount store for unbranded items under $20 to compete with discount platforms.
The question now is whether Jassy’s plan will be effective and what strategies he will come up with next to help Amazon maintain its leadership position.
BrainTrust
Brad Halverson
Principal, Clearbrand CX
Mark Ryski
Founder, CEO & Author, HeadCount Corporation
Neil Saunders
Managing Director, GlobalData
Recent Discussions
Discussion Questions
How can Amazon balance rapid growth with maintaining a strong corporate culture, especially given recent concerns about management practices and worker safety?
With increasing complaints of low-quality and counterfeit products, as well as unreliable delivery and fake reviews, what steps can Amazon take to regain consumer trust and ensure marketplace integrity?
What measures should regulators and e-commerce platforms take together to enforce product safety and transparency, protecting consumers from harmful goods and misleading information?
Poll
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Under Andy Jassy, Amazon has moved from experimenting with everything and anything to disciplining itself to innovating in areas where it can generate the best return. Amazon has also been laser focused on improving productivity and efficiency. This has meant some areas of the business have been cut back, but the end result has been good top line growth accompanied by extremely solid profitability. Like any business, Amazon has its challenges, but it remains a powerhouse of innovation and good thinking which is customer centric. It’s notable that the main threat isn’t from the market, it’s from government interference via the highly misguided and badly misjudged FTC case.
Andy Jassy believes the main drivers of recent slowdowns, issues, and missteps is largely because decision making has evolved and is now taking too long, while project initiators are more hesitant to press forward. Thus the shift in layers by managerial reductions. And the plan for everyone to come back to the office 5 days a week in early 2025 should increase team communication, and will also help.
This is needed. Because Amazon operates best and most efficiently when it acts like a start-up company, with small teams to test and try things. Moving a little faster should help them address the opportunities.
Amazon is a massively complex and wildly successful operation, notwithstanding the recent financial results. A number of the challenges it faces are hardly new. Employee safety and working conditions, counter-fit product and fake reviews have been part of the Amazon story for a long time. Jeff Bezos stepped down as CEO in 2021, and it’s now time for Andy Jassy to put his mark on the company. I believe that Jassy is on the right track by focusing on the company culture, since the only way that they will be able to resolve these challenges is through the collective effort of their over 1.6M employees.
Mark, this is a sincere question. When was the last time Amazon’s retail operations were profitable?
Paula, your point is well taken. It’s widely understood that Amazon has operated its online retail business at thin to no profit since it’s founding in 1994. As you know, Amazon doesn’t break-out profitability by business unit so there is no way to know for certain. However, they have amassed over 200M Prime members which generates an estimated $35B alone. For context, Amazon generated more in Prime membership revenue than Macy’s did in total revenue ($23.87B based on their last fiscal year). When you consider the impact of Prime memberships on profitability, it changes the profitability picture. It’s worth noting that Costco generates some 73% of it’s profit from membership sales and without membership sales it’s profit picture would look far less interesting. Furthermore, Amazon stopped being a retail-only business when it launched AWS in 2006.
Thanks, I knew about Costco, though I thought membership was all of Costco’s profits, not “just” 3/4.
With regard to Amazon’s retail operations, it gets more complicated because the marketplace is basically pure profit, so that ALSO bulks up retail sales. And the uses of funds go towards Prime Video (surprise! Running commercials now) and other freebies. All the profits come from AWS, as far as I know. Everything else just covers the losses or expense of video production, planes, trains and automobiles.
I’m definitely down on the company at the moment, because of the way it treats its employees, and have been for some time. Today didn’t help.
I think Amazon’s salad days of dominance are behind it. It’s funny…I am a small investor,but I sold my stock early because of the way it treated its workers during the pandemic. I still use it if I’m in a big hurry,but if I’m not in a hurry I’ll buy elsewhere. Chewy for pet food, Home Depot. For home goods, and anywhere but Whole Foods for food. We have more options now.
Andy Jassy has it right. It comes down to one word: culture. The changes Amazon is making to ensure a better customer experience by changing the internal hierarchy and empowering people to give answers to customers with a minimum amount of friction, is one way to improve the customer experience. Complaint management is important. Customers need to have confidence that not only the company delivers quality merchandise and services, but also back them up with excellent support.
Cutting management roles will flatten Amazon’s organizational structure, improving agility and efficiency.
Amazon is a standards setter. Across sectors, expect more companies to mandate a full return to the office.
Shifting back to the office will boost retail growth by fuelling demand for food, apparel and beauty. One study found that we spend an average of $15 per day when we work from home vs. $51 at the office.
Amazon succeeds or fails (and mostly succeeds) on the strength of its logistics. The capability of its distribution centers and delivery operations to offer ever-increasing speed is the company’s superpower. Whether a “back to the office” corporate policy will have an impact on Amazon’s supply chain performance remains to be seen — the results of these mandates appear to be mixed so far.
Andy Jassy has brought much more discipline as the markets have demanded, and the managerial cutting is consistent with what we’ve seen successfully work at Google and Meta. The 5 day work week will cause a certain amount of churn and make it a less desirable place to work for many. Well that churn is a strategic way to trim without paying severance or hits Amazon in undesirable areas that hamper it’s growth, is yet to be seen. One thing Amazon has going for it is a longer, backloaded vesting schedule where the incentives for veterans to stay are much higher than flat 4 year vests. With the stock near all time highs set this summer, that’s a compelling reason for people to accept a 5 day work week.
Regulators to the rescue! Bernie Sanders is on the case! I think we can all take a deep breath now, knowing that Amazon will be saved by our Federal Government!
God help us all. If Bernie knows so much about running a business, why doesn’t he set up his own?!
Increased profits and motivation does not come from harnessing people to an office and reducing managerial headcount. Instead, enhanced communications, tasking managers with listening and implementing employee concerns, and rewarding innovative performance, better production, and creating a superior corporate environment. To do this, Amazon needs to pay everyone more money, use a performance-based reward system that includes bonuses focused on goal achievement, overrides focused on a team environment, and salary growth focused on both continued achievement and repetitive performance within a longer period of time with the company.
Less managerial levels – yes!
In-person collaboration, for sure, it’s a must!
5 days in the office – it is culturally tone-deaf to the fact how we work has changed. 3-4 days is the win-win.
Andy Jassy’s focus on streamlining operations and reinforcing an in-office culture is exactly what Amazon needs to maintain its dominance and innovation edge. By cutting inefficiencies and re-energizing collaboration through face-to-face engagement, Jassy is paving the way for the next phase of Amazon’s growth. The emphasis on operational discipline will allow Amazon to scale faster while staying true to its customer-obsessed ethos, especially in a competitive retail environment where every misstep can cost billions.
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Under Andy Jassy, Amazon has moved from experimenting with everything and anything to disciplining itself to innovating in areas where it can generate the best return. Amazon has also been laser focused on improving productivity and efficiency. This has meant some areas of the business have been cut back, but the end result has been good top line growth accompanied by extremely solid profitability. Like any business, Amazon has its challenges, but it remains a powerhouse of innovation and good thinking which is customer centric. It’s notable that the main threat isn’t from the market, it’s from government interference via the highly misguided and badly misjudged FTC case.
Andy Jassy believes the main drivers of recent slowdowns, issues, and missteps is largely because decision making has evolved and is now taking too long, while project initiators are more hesitant to press forward. Thus the shift in layers by managerial reductions. And the plan for everyone to come back to the office 5 days a week in early 2025 should increase team communication, and will also help.
This is needed. Because Amazon operates best and most efficiently when it acts like a start-up company, with small teams to test and try things. Moving a little faster should help them address the opportunities.
Amazon is a massively complex and wildly successful operation, notwithstanding the recent financial results. A number of the challenges it faces are hardly new. Employee safety and working conditions, counter-fit product and fake reviews have been part of the Amazon story for a long time. Jeff Bezos stepped down as CEO in 2021, and it’s now time for Andy Jassy to put his mark on the company. I believe that Jassy is on the right track by focusing on the company culture, since the only way that they will be able to resolve these challenges is through the collective effort of their over 1.6M employees.
Mark, this is a sincere question. When was the last time Amazon’s retail operations were profitable?
Paula, your point is well taken. It’s widely understood that Amazon has operated its online retail business at thin to no profit since it’s founding in 1994. As you know, Amazon doesn’t break-out profitability by business unit so there is no way to know for certain. However, they have amassed over 200M Prime members which generates an estimated $35B alone. For context, Amazon generated more in Prime membership revenue than Macy’s did in total revenue ($23.87B based on their last fiscal year). When you consider the impact of Prime memberships on profitability, it changes the profitability picture. It’s worth noting that Costco generates some 73% of it’s profit from membership sales and without membership sales it’s profit picture would look far less interesting. Furthermore, Amazon stopped being a retail-only business when it launched AWS in 2006.
Thanks, I knew about Costco, though I thought membership was all of Costco’s profits, not “just” 3/4.
With regard to Amazon’s retail operations, it gets more complicated because the marketplace is basically pure profit, so that ALSO bulks up retail sales. And the uses of funds go towards Prime Video (surprise! Running commercials now) and other freebies. All the profits come from AWS, as far as I know. Everything else just covers the losses or expense of video production, planes, trains and automobiles.
I’m definitely down on the company at the moment, because of the way it treats its employees, and have been for some time. Today didn’t help.
I think Amazon’s salad days of dominance are behind it. It’s funny…I am a small investor,but I sold my stock early because of the way it treated its workers during the pandemic. I still use it if I’m in a big hurry,but if I’m not in a hurry I’ll buy elsewhere. Chewy for pet food, Home Depot. For home goods, and anywhere but Whole Foods for food. We have more options now.
Andy Jassy has it right. It comes down to one word: culture. The changes Amazon is making to ensure a better customer experience by changing the internal hierarchy and empowering people to give answers to customers with a minimum amount of friction, is one way to improve the customer experience. Complaint management is important. Customers need to have confidence that not only the company delivers quality merchandise and services, but also back them up with excellent support.
Cutting management roles will flatten Amazon’s organizational structure, improving agility and efficiency.
Amazon is a standards setter. Across sectors, expect more companies to mandate a full return to the office.
Shifting back to the office will boost retail growth by fuelling demand for food, apparel and beauty. One study found that we spend an average of $15 per day when we work from home vs. $51 at the office.
Amazon succeeds or fails (and mostly succeeds) on the strength of its logistics. The capability of its distribution centers and delivery operations to offer ever-increasing speed is the company’s superpower. Whether a “back to the office” corporate policy will have an impact on Amazon’s supply chain performance remains to be seen — the results of these mandates appear to be mixed so far.
Andy Jassy has brought much more discipline as the markets have demanded, and the managerial cutting is consistent with what we’ve seen successfully work at Google and Meta. The 5 day work week will cause a certain amount of churn and make it a less desirable place to work for many. Well that churn is a strategic way to trim without paying severance or hits Amazon in undesirable areas that hamper it’s growth, is yet to be seen. One thing Amazon has going for it is a longer, backloaded vesting schedule where the incentives for veterans to stay are much higher than flat 4 year vests. With the stock near all time highs set this summer, that’s a compelling reason for people to accept a 5 day work week.
Regulators to the rescue! Bernie Sanders is on the case! I think we can all take a deep breath now, knowing that Amazon will be saved by our Federal Government!
God help us all. If Bernie knows so much about running a business, why doesn’t he set up his own?!
Increased profits and motivation does not come from harnessing people to an office and reducing managerial headcount. Instead, enhanced communications, tasking managers with listening and implementing employee concerns, and rewarding innovative performance, better production, and creating a superior corporate environment. To do this, Amazon needs to pay everyone more money, use a performance-based reward system that includes bonuses focused on goal achievement, overrides focused on a team environment, and salary growth focused on both continued achievement and repetitive performance within a longer period of time with the company.
Less managerial levels – yes!
In-person collaboration, for sure, it’s a must!
5 days in the office – it is culturally tone-deaf to the fact how we work has changed. 3-4 days is the win-win.
Andy Jassy’s focus on streamlining operations and reinforcing an in-office culture is exactly what Amazon needs to maintain its dominance and innovation edge. By cutting inefficiencies and re-energizing collaboration through face-to-face engagement, Jassy is paving the way for the next phase of Amazon’s growth. The emphasis on operational discipline will allow Amazon to scale faster while staying true to its customer-obsessed ethos, especially in a competitive retail environment where every misstep can cost billions.