Amazon’s attrition costs $8 billion yearly, leaked documents state. And this is just the beginning.
Amazon fires employees at a startlingly high rate—far higher than the industry average. That astounding attrition now has a price, according to a batch of previously not announced documents tagged “Amazon Confidential”. One of the documents claims that: „[Worldwide] Consumer Field Operations is suffering significant levels of attrition across all levels, totaling an estimated $8 billion yearly for Amazon and its shareholders.” To put things in perspective, the company’s net profit for 2021 was $33.36 billion.
These records, which include several internal research papers, PowerPoint decks, and spreadsheets, present an unfavourable picture of Amazon’s ability to retain workers and how the company’s current approach might be financially disastrous. They also broadly criticise Amazon for not using or tracking data effectively in its efforts to teach and promote staff, which is an interesting flaw for a business known for compulsively gathering consumer information.
A study found that, across all levels and businesses, “regretted attrition,” or employees deciding to leave the company, “occurs twice as often as unregretted attrition” or employees being fired or laid off. The data from the previous year “indicates regrettable attrition [represents] a low of 69.5% to a high of 81.3% across all levels (entry-level positions through top executives) demonstrating a separate retention challenge”. Additionally, “just one out of three new hires in 2021” remain with the business for 90 or more days.
The Wall Street Journal and National Employment Law Project have both determined that turnover in warehouses is about 100 percent, which is double the industry average. A New York Times investigation found that Amazon’s turnover among hourly employees is about 150 percent annually. The rate at which Amazon has depleted the American working-age population suggests that the corporation may “deplete the available labor supply in the US” in key metro areas within a few years. Amazon’s workplace and cultural issues go far beyond the warehouse floor. Every type of manager is struggling with the idea that their positions are meaningless. According to one of the papers, career advancement and promotions are the second-most common reasons non-exempt employees leave their jobs, while they are the main cause for exempt leaders to resign.
According to David Niekerk, a former vice president of Amazon HR, the corporation “actively hindered upward mobility for hourly workers”. The company’s predilection for recent college graduates is still set against entry-level employees who manage to overcome the barriers and advance. For others, however, the records highlight serious problems with Amazon’s extensive learning and development system, which is supervised by the Consumer Talent Strategy, Management and Development (CTSMD) team. According to one report, CTSMD has operated within Amazon for at least three years. During that period, the company’s staff has increased to 615 with an expected $90 million run-rate for 2022.
The majority of the programs [under CTSMD’s purview] “were not created (and are not currently managed) with financial metrics as key metric, and the current dashboard for reviewing these programs is “inaccurate and obfuscates the actual spend.” According to a report from April 1, 2022, CTSMD “did not have a standardised process to measure impact (business metrics) of our training programs” as of December of last year. It further adds that CTSMD’s definition of “completion” for a learning module is “just clicking through to the end of the course,” which is “in contrast” to its conventional definition in the learning and development business.
Despite organisational bloat, the apparent lack of direction of CTSMD has real cost ramifications for Amazon, which these docs were willing to quantify. Amazon’s managers are said to devote an additional $90 million in annual funding to training, putting in an estimated 113 hours per year on average. A part of that $8 billion loss can likely also be attributed to CTSMD, given that training is frequently an essential component of rising within Amazon’s organisational structure and that a lack of meaningful development is a significant contributor to lamented departure.
To ensure that the company’s strategic purpose and its financial statements are accurate, internal controls were put up. The fact that Amazon ordered internal assessments on shortcomings in its hiring and retention practices implies the business is at least aware of the problem. It has never reported such gaps in its yearly 10-K reports, and Ernst & Young, its auditor, has never given Amazon a negative opinion. Nevertheless, all of these disclosures depend on the idea of “materiality,” or whether they will impact the company and its investors.
However, those 10-K forms do convey a brief story. For nearly 20 years, a smaller, more scrappy Amazon said in its annual filings that: ”we think that our future success will depend in part on our sustained ability to attract, hire, and retain skilled personnel”. Still, from 2009 onward, it seems to have abandoned that notion. Amazon changed the “employees” element of its prologue to “human capital” for the report summarising 2020, the same year it discontinued using the statement “we consider our employee relations to be good.”
While Amazon is reportedly in the process of simplifying its current lineup of learning and development programs under a new initiative Brilliant Basics, it now appears unorganised and potentially inefficient.
The company continually turned down requests for clarification regarding these materials. A spokesman for Amazon responded when contacted for comment, writing: “As a company, we know that it’s our employees that contribute daily to our success and that’s why we’re always analysing how we’re doing and ways we can improve. All employers experience attrition, but we want to do everything we can to position Amazon as a desirable employer.” Additionally, Amazon declined to confirm or deny any of the specific statements or numbers contained in the documents, instead stating in general that internal files are occasionally “rejected due to lack of reliable data, or are modified with corrected information” without indicating whether this was the case in this situation.
Original source: https://www.engadget.com/amazon-attrition-leadership
