Human Resource Management Practices at Amazon are Below Par

Overview

Effective human capital management is essential for every organization’s success. Arguably, organizations that can effectively undertake all human resource processes, such as hiring suitable candidates and training employees to equip them with the required knowledge, skills, and abilities to undertake their duties, are more likely to thrive in their respective industries. Human resource management also plays a critical role in identifying and fostering compliance with labor laws that govern human capital and equipping employees with the required skills to undertake their tasks. However, sometimes entities fail to consider some of these human-resource-related aspects, adversely affecting their reputation and relationship with stakeholders. Amazon, for instance, has been in the spotlight for failing to treat some of its employees humanely and in ways that comply with labor laws, leading to negative publicity and numerous lawsuits filed by some of its former employees. For example, suits have been brought against the company for forcing its employees to work under harsh and unsafe conditions. Arguably, although Amazon has a strong market position, an ideal business strategy, and a favorable market position, its human resource management practices are somewhat ineffective and may require improvements through establishing retraining programs, promoting positive employee relations, and an appropriate offboarding process

History

Although Amazon is currently the largest and most successful e-commerce retailer, its history can be traced to a humble beginning about two decades ago. The company began its operations out of Jeff Bezos’ garage in 1994, selling only books through its site (“15 fascinating facts you probably didn’t know about Amazon (AMZ),” 2018). Despite its small operations, the company sold many books to different states and countries. Three years later, Amazon went public and was valued at $300 million (DePillis & Sherman, 2018). This strategic decision put Amazon better financially and economically because it could sell its shares for financial investments.

However, in 1999, the dot-com bubble burst, which occurred due to excessive speculation by Internet-related firms, adversely affected Amazon, leading to a decline in its stock and loss of its market capitalization. Nevertheless, unlike other Internet-based entities that shut down or failed, Amazon survived and continued its operations. One factor that aided the company’s survival was its decision to go public because it could secure public finances amidst the crisis. After recovery, Amazon continued expanding its product portfolio and experienced significant financial growth. DePillis and Sherman (2018) note that the entity was the second firm to reach a $1 trillion market capitalization in 2018. Analysis of Amazon’s history shows that effective leadership and strategic management, such as raising money to cushion it during the dot-com bust, facilitated its success and survival over the years.

Strategy

Fundamentally, Amazon utilizes cost leadership and product and service differentiation in the different industries in which it operates. Amazon is extreme in terms of cost leadership, offering its products at lower prices than other market competitors. Nevertheless, its low-pricing strategy makes it more appealing to consumers and forms part of its competitive advantage. Besides, although the company generates low margins from its low prices, it remains successful because of its product diversification and significant economies of scale. Arguably, the entity enjoys enormous discounts and low operational costs by purchasing some of its products in bulk and storing them in its warehouses, which are located in different parts of the country. Service differentiation is also part of the company’s operational strategy. Nesmyanovich (2015) notes that Amazon strategically advertises its products and services, portraying them as unique, high quality, and affordable. Besides, the company differentiates its services by making them more valuable to consumers. Essentially, based on Porter’s description of the concept of strategy, Amazon utilizes cost leadership, product differentiation, and value to enhance its attractiveness to its potential consumers.

Position

Fundamentally, Amazon’s position in the market is characterized by a massive market share in the various industries in which it operates. For example, Williams (2017) notes that the entity dominates the cloud computing industry, going up against tech giants such as Microsoft and Alphabet Inc. The corporation also has considerable market shares in package delivery services, the healthcare industry, music streaming, movie, and TV content. Amazon’s product and service diversification and favorable market positions in different sectors enhance the company’s success and competitiveness.

Specific Area of Alignment

Despite being a successful company, securing a favorable position in different industries, and using its cost leadership and product differentiation to appeal to its customers, a few areas within the company would require realignment with its strategy. As highlighted, one of the firm’s strategies is value, which has largely been concentrated among consumers and very little on its employees. Therefore, one of the areas that require realignment is performance management, which has been highly criticized in recent years. Newspaper articles and blogs share stories of how Amazon workers are mistreated mainly because of the company’s tight schedules (Hunt, 2014). The firm’s performance appraisal system also fails to reflect the purpose of performance management, which involves continuous communication between the staff and managers to foster the company’s strategic objectives (Hunt, 2014). For example, Amazon uses an appraisal system based on the philosophy of “the best one wins,” where employees with lower ranking are retrenched and replaced with higher-performing staff. This system creates an unhealthy work environment and lowers employee morale, especially those who receive harsh feedback from the management. Essentially, Amazon should realign this performance management system to reflect its strategy of creating value for its customers and employees as well.

Job Pricing and Compensation Package in the Organization

Despite a questionable performance appraisal system, Amazon has an industry-leading starting wage and numerous employee compensation benefits. For example, a report by The Verge reveals that the company’s starting wage is at least $15 per hour for full-time, part-time, and seasonal employees and contractors (Faulkner, 2021). Nonetheless, the wages and compensation packages vary depending on the job description. For example, a Glassdoor report shows that the company’s senior vice president of business development earns an estimated wage of between $103,466-$1,012,683 annually (“Amazon Vice President Salaries,” 2021). Apart from the salary, individuals occupying this position receive additional compensation stock-based benefits of about $22.2 million, as was the case in 2016 (Levy, 2017). The company’s CEO of Worldwide Consumer earns $160,000 annually, $32.9 in equity-based benefits, and $6,783 in compensation-like awards (“Amazon.Com Inc.” n.d; Levy, 2017). The CEO of Amazon Web Services, one of the company’s divisions, earns $175,000 in cash and $35.6 in equity-based benefits (“Amazon.Com Inc.” n.d.). An analysis of Amazon’s job pricing reveals that the organization allocates different wages for various job positions and considers market conditions in determining employee wages. This information also suggests that the organization values long-term employee success, explaining why it also offers the latter stock-based compensation.

Current and Targeted HR Work Processes

Like other organizations, Amazon’s HR is vital for its operational and strategic activities. Among the company’s HR processes that facilitate the achievement of its short, medium, and long-term objectives through human capital include employee relations and performance management, talent management, succession planning which includes hiring new and promising talents, employee engagement, and legislative compliance (“Human resources fulfillment,” n.d.). These HR work processes,, such as hiring, training, and talent management,, are synchronized to ensure that the employees achieve the firm’s ultimate goals.

Nevertheless, further exploration into the firm’s HR work processes suggests some shortcomings that must be addressed. For example, when it comes to employee performance management, Amazon’s HR utilizes a somewhat ineffective system to achieve performance appraisal. For instance, rather than feedback forming the basis for employee learning and improvement, subordinates who receive negative feedback and low rankings or often fired while the best-performing candidates continue working in the entity. This process is ineffective because the company can easily lose competent employees over time, given the continued changes in the work environment and processes. Therefore, the entity should examine some of its HR work processes, such as performance management, to ensure they serve the initial purpose of enhancing employees’ performance rather than demoralizing and creating unhealthy working condition.

KSAs Required to Achieve Organizational Objectives

Knowledge

Amazon is recognized as a consumer-centric company implying that its employees must know various concepts related to consumer relationships to meet their needs and demands. Most notably, some of the knowledge employees require includes customer management, leadership, and relationship building. Arguably, as an e-commerce retailer, Amazon’s success significantly relies on its relationship with its consumers. Therefore, for the entity to succeed, its employees must know how to manage the consumers and build positive relationships that lead to consumer loyalty. In addition, Amazon managers must also understand operational management and how to manage employees’ behavior to run some of the brick-and-mortar stores successfully. In essence, attaining Amazon’s long-term objectives relies significantly on hiring employees and managers who are knowledgeable in relationship building and consumer and operations management.

Skills and Abilities

Amazon’s success depends on its employees’ capabilities to associate with internal and external stakeholders such as consumers and their colleagues. Therefore, some of the most critical skills and abilities that employees should possess are outstanding interpersonal skills, problem-solving abilities, good communication skills to respond to consumer needs, problem-solving skills, and accountability. Other employees’ abilities that the company requires to include technical capabilities to fulfill their jobs, collaborate, influence, and motivate each other to achieve organizational goals. In essence, the company should hire candidates with the skills and abilities to undertake their jobs, associate with others, and effectively manage their relationships with customers. Amazon should also reduce the employee turnover rate and retain employees who share the company’s values and objectives.

Relevant Technology Considerations to Achieve Work Output in the Context of the Organization’s Goals

In essence, Amazon’s goals are to serve its clients physically and online, with a significant focus on selection, price, and convenience. So far, the company has employed considerable technology to facilitate work output in these areas and foster its goals. For example, the entity utilizes over 200,000 mobile robots to move inventory in warehouses and across high shelves (Del Rey, 2019). This technology helps the organization accomplish its goals of convenience because the robots can move across the warehouses faster than human workers and carry more items, thus promoting a higher-order fulfillment rate.

However, like any other technology, the robots used in Amazon have a downside besides the high rate of employee retrenchment that comes along with it. Most notably, research shows that robots are likely to increase worker injuries even though they undertake most of the hard labor (Del Rey, 2019). This claim is reinforced by statistics that revealed that since Amazon debuted robots in Tracy, California, the rate of serious injuries nearly quadrupled, going from 2.9 to 11.3 per 100 workers in 2015 and 2018, respectively (Del Rey, 2019). Many of these injuries emerge from the fact that, unlike human workers, robots can lift any weight in whichever sequence. Conversely, humans must keep heavy items between their knees and chest to avoid damaging the muscles and tissues. However, with the lack of sequence and high rate of movement by the robots, human workers are forced to take safety shortcuts, leading to potential injuries.

Therefore, Amazon should conduct research on robots and identify ways of enhancing safety in these motion technologies. Arguably, such research, especially in a lab setting, may help the entity identify ways of promoting convenience in its warehouses while enhancing workers’ safety. The entity should also consider establishing and equipping the staff with safety policies and regulations to closely monitor the former’s engagement with the robotic technology and improve their work output within the facilities.

The Labor Market and Appropriate Labor Law Context

The labor market describes the demand and supply of labor in the market. Essentially, Amazon’s demand for labor tends to be high, especially in peak seasons and during the pandemic when the demand for online purchases has risen significantly. Although the organization strives to maintain an optimal employee capacity to promote convenience, sometimes consumer orders are too high, exerting pressure on the workforce and promoting unhealthy working condition that violates labor laws. For example, a few years ago, Amazon was accused of forcing an employee during her late pregnancy to stand for ten hours a day (Onasanya, 2018). Other allegations of employees having timed bathroom breaks, working for long hours, and under difficult working conditions have also been reported in the past. Analysis of the labor market, and based on employee allegations, it is evident that Amazon lags in effective employee management, probably because it fails to retain an optimal workforce. Such accusations may also negatively affect Amazon; thus, it should strive to manage its labor market effectively and ensure compliance with ethics and values that govern employee management.

Apart from its shortcomings in effective employee management, Amazon has been in the spotlight severally for violating the labor laws governing employee safety in the workplace. For example, in 2011, Amazon forced its employees to work in heat that hit 114 degrees at one of its warehouses in Lehigh Valley. Ironically, the organization kept paramedics within the facility to attend to employees who were fainting and suffering from dehydration due to the high heat (Yarow, 2011). This action by Amazon was a blatant violation of labor laws, notably the Occupational Safety and Health Act (OSHA) of 1970, which requires entities to maintain safety measures to protect employees against safety hazards in the workplace. This event is merely one of the many harmful working conditions that the organization has been accused of providing for its workers. Arguably, such practices may garner a negative reputation for the organization, especially among consumers whose purchasing decisions are influenced by their perception of an organization. Therefore, Amazon should strive to enhance its safety protocols to ensure that all its workers work in a safe environment and that its decisions comply with labor laws.

Identification of Companies Preparing to Address Legal and Regulatory Changes

Overall, most organizations today are preparing to address regulatory changes because of the ongoing global pandemic. Since President Biden was elected into office, various OSHA-related regulatory changes have been established to safeguard employees during the COVID-19 pandemic. These regulatory changes include the Emergency Temporary Standard, created and enforced to ensure employees’ safety. A majority of the organizations have established the necessary measures in compliance with the regulations, but some, such as Amazon, are yet to address these changes fully. For example, in 2020, an Amazon whistleblower protested against the company’s coronavirus-related safety practices (Sonnemaker, 2020). Besides Amazon, other entities such as meatpacking plants, restaurants, and logistics firms are still adjusting to the pandemic’s regulatory changes. Since workers play a critical role in Amazon’s success, the organization should invest significantly in these safety measures to protect all its employees. Besides, failure to address these changes may lead to lowered productivity as infected employees may be forced to skip work and remain isolated. Therefore, addressing these regulatory changes may help the organization promote employee productivity, which would, in turn, help it achieve its goals.

Human Resource Management (HRM) Recommendations for Amazon

As is evident from the above analysis, there are several HRM processes that Amazon needs to improve, including performance appraisal, employee relations, and offboarding, to enhance its employees’ productivity and accomplish its objectives, as shown in figure 1. For example, this research paper shows that the entity’s performance appraisal system is ineffective because rather than capturing feedback that may facilitate actionable insights to improve employees’ performance, it is often used to retrench the lowest-ranking workers. Besides, the research shows that Amazon’s performance appraisal somewhat compromises employee relations because each individual strives to improve their performance relative to their colleagues to remain in the company.

Therefore, one of the HRM recommendations that Amazon should consider integrating into its practices is establishing a retraining program for employees who receive lower rankings during performance appraisal. Arguably, a performance appraisal should identify employees’ weaknesses and help them improve their skills to accomplish organizational goals. Besides, most of the “underperforming” employees may not necessarily lack the skill sets required to accomplish their goals; sometimes, their shortcomings result from dynamic workplace-related changes, which, if unaddressed, can lead the firm to lose some of its most competent employees. Hence, rather than firing underperforming employees, the HRM should establish a program for them to receive the required training to undertake their duties.

Furthermore, Amazon’s HRM should invest significantly in improving its employees’ relations to enhance the final work output. Arguably, some of the firm’s processes may be boosted if employees were mentored to collaborate in their tasks and avoid unhealthy competition to maintain their positions. For example, some of the duties, especially in corporate offices where competition and work pressure are extreme, could benefit significantly from positive employee relations. In addition, promoting a culture of employee collaboration and healthy competition may enhance the former’s productivity because they would be guaranteed job security and thus willing to give their best when dealing with all internal and external stakeholders. Some of the organization’s strategies to promote positive employee relations include providing constructive feedback to group tasks and promoting an open-door policy where employees, supervisors, and managers can communicate openly and transparently about issues affecting them. 

Besides employees’ relations, Amazon should also be vigilant about some HRM practices such as offboarding. Offboarding is a process by which employees are separated from an entity through resignation, retirement, or firing. Although offboarding is a trivialized process, it may have significant effects on a brand’s image and firm’s reputation. For example, Amazon has been in the spotlight on several occasions for firing employees without notice for exposing some of the practices within the company, which sometimes creates a negative and lasting impression among consumers and other stakeholders. Therefore, to avoid the associated adversities, Amazon’s HRM should ensure that offboarding is done appropriately. Sometimes positive offboarding can be an effective way of turning a former employee into the company’s champion. Besides, conducting appropriate offboarding may help align the company’s HR practices with its strategy by ensuring that it has an adequate and highly engaged workforce to undertake order fulfillment and promote convenience.

Figure 1: HRM Recommendations

Conclusion

Amazon’s strong position in different industries and historical success despite the economic adversities proves that effective leadership and a favorable business strategy can promote organizational success. Nevertheless, the research paper also shows that effective employee management and failure to comply with laws that govern the labor market can be detrimental to a company’s success and taint its image among potential consumers. In essence, Amazon has positive HR practices that align with its business strategies, such as compensating its employees in a way that creates value. However, further analysis of the organization’s HR processes reveals that the firm should improve employee safety-related processes, relations, performance appraisal, and offboarding processes. Most notably, the firm should consider establishing a retraining program where underperforming workers are trained and create the dos and don’ts of employee offboarding to ensure the process creates a positive impression among stakeholders.

References

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“Amazon Vice President salaries” (2021). GlassDoor. https://www.glassdoor.com/Salary/Amazon-Vice-President-Salaries-E6036_D_KO7,21.htm

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Del Rey, J. (2019, December 11). Amazon’s warehouse robots and their complicated impact on workers. Vox. https://www.vox.com/recode/2019/12/11/20982652/robots-amazon-warehouse-jobs-automation

DePillis, L., & Sherman, I. (2018, August 10). Amazon’s extraordinary evolution. CNN Business. https://edition.cnn.com/interactive/2018/10/business/amazon-history-timeline/index.html

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Hunt, S. T. (2014). Common sense talent management: Using strategic human resources to improve company performance. Pfeiffer

Levy, N. (2017, April 12). This was Amazon’s highest-earning employee in 2016 — and it wasn’t Jeff Bezos. GeekWire. https://www.geekwire.com/2017/amazons-highest-earning-employee-2016-wasnt-jeff-bezos/

Nesmyanovich, I. (2015). Amazon competition – survival guide for retailers. Eradium Publishers.

Onasanya, F. (2018, July 20). Amazon must be forced to change, for the sake of its workers | Fiona Onasanya. The Guardian. https://www.theguardian.com/commentisfree/2018/jul/20/amazon-workers-employees-unions-regulations

Sonnemaker, T. (2020, April 28). Amazon may have violated labor laws by firing worker involved in protest, New York attorney general says. Business Insider. https://www.businessinsider.com/amazon-may-violated-labor-law-firing-worker-new-york-attorney-2020-4?r=US&IR=T

Williams, C. (2017, July 21). A dozen disruptions: Amazon’s pursuit of massive market share in 12 major industries. Forbes. https://www.forbes.com/sites/bisnow/2017/07/21/a-dozen-disruptions-amazons-pursuit-of-massive-market-share-in-12-major-industries/?sh=607bb6871ebe

Yarow, J. (2011, September 20). Amazon forced warehouse employees to work in suffocating 110 degree heat. Business Insider. https://www.businessinsider.com/amazon-warehouse-2011-9?r=US&IR=T

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