Performance Reviews

Amazon's Performance Management Mistake: What the NYTimes found out.

It is hard to imagine that one of the largest online retailers in the world – larger than Walmart - started as a small business operating from a home garage in 1994. Founded and still chaired by Jeff Bezos, the retailer giant’s first line of business was selling books online. Over the years, Bezos’s ambition and vision grew the company into an innovation hub, developing its own products including Fire Phone, Kindle e-book readers and leading futuristic projects such as using drones for delivery.

Apart from being one of the largest retailers, Amazon also amazes many with its pace of growth. Its total revenue for 2014 is a whopping 89 billion dollars. Amazon currently has offices in 32 countries, boasting a total of 150,000 employees. Add to that the ongoing plans expand its Seattle headquarters in order to accommodate 50,000 employees, a stunt requiring an analyst specialized in “high volume hiring”.

Managing a company of Amazon’s size and ambition requires careful management of its people and strict adherence to company values to keep growing without getting lost. A recent NY Times article lays bare how people management works at Amazon. The article provides great insight into the otherwise secretive retailer and compiles interviews with people having worked at Amazon.

PEOPLE MANAGEMENT AT AMAZON

THE FEEDBACK CULTURE

Every employee at Amazon is requested to abide by 14 leadership principles. One of these, “Customer Obsession”, illustrates the company’s commitment to serving its customers, which is reportedly prioritized over employee engagement or satisfaction.

Although the company keeps its internal processes a secret with confidentiality agreements signed with each employee, there have been endless rumors about employee breakdowns and controversies. In fact, a 2013 survey by PayScale revealed that Amazon has one of the lowest employee retention rates among other Fortune 500 companies. The interviews made by The NY Times journalists Jordan Kantor and David Streitfeld reveal that one reason is the company’s feedback culture. The article claims that each employee is encouraged to harshly criticize coworkers’ ideas and they are instructed on how to send secret feedback to one another’s managers. It is also claimed that the feedback culture is too open to abuse and it is often used for undermining the work of others.

THE STRUCTURE

Designed by Amazon, the feedback system at Amazon is made to push the limits of each employee, which is described by some Amazonians as “an intricate machine propelling them to achieve Mr. Bezos’ ever-expanding ambitions”. Amazon’s difference is its ability to quantify every aspect of its business. Also applied to its performance management, Amazon holds weekly or monthly business reviews, where each employee is held accountable for an array of metrics.

Kantor and Streitfeld claim that employees receive these data in print form of 50 to 60 pages. During these reviews, employees are often tested on their knowledge of these metrics. These sessions are told to be long and exhaustive, with preparation and discussion of the metrics consuming a substantial amount of work hours.

PROVIDING FEEDBACK

Amazon currently uses its internal tool for making feedback available between employees. Called Anytime Feedback Tool, employees can directly send praise or criticism about their coworkers with the system. The feedback is sent directly to the manager of the person receiving the feedback and the identity of the feedback provider is only revealed to the manager.

Amazon spokesman Craig Berman informs The NY Times that the tool only provides a way to share feedback with one’s manager in a way similar to having a 1-on-1 conversation. The system is akin to Workday’s Collaborative Anytime Feedback. Considering that Bezos was one of the earliest investors of the human resources management company, this comes as no surprise.

THE OUTCOME

Another claim made in The NY Times piece is how Amazon uses the feedback provided by co-workers to managers as the basis for creating a list of bottom performers to let go annually. Each year Amazon organizes Organization Level Reviews, where top and bottom performers are presented to the board of managers. Named “purposeful Darwinism” by one former Amazon HR director, the system is apparently the traditional ‘rank and yank’ process in disguise.

Managers reported to The NY Times that preparing for these reviews is similar to getting ready for a court case. Often, managers have to come armed with proof to defend their employees against unfair accusations. And in some cases, supervisors resort to choosing a scapegoat in order to keep the most essential team members.

THE CRITICISM

While companies such as Deloitte aim for a comprehensive way of measuring performance that accounts for personal lives of its employees, there are cases at Amazon where personal problems are viewed as liability and employees are put under performance improvement plans. To give an example, one former employee reports that Amazon decided to monitor her performance "to make sure her focus is on the job” after she had a stillborn child.

Using individual experiences of former employees for chastising people management policies of a company might not be just. In fact, Jeff Bezos recently sent an internal memo company-wide, stating that the article does not describe the Amazon he founded and requested from his employees to report any unfair treatment to the HR. He further claimed that working in a company like the one described in The NY Times would be “crazy”. Another Amazon employee, Nick Ciubotariu, wrote a piece on his LinkedIn account, offering his own stand and rebutting the claims made by the original article. In his article, he states that The NY Times based its claims on past practices that were already improved upon and that the article is a “horribly misinformed piece of journalism”. For this reason, giving claims of The NY Timesarticle the benefit of the doubt is only fair. However, Bezos’ and Ciubotariu’s stands are also undeniably biased and one-sided.

The most fair, and relevant, criticism for Amazon’s performance management would be its structure. The system endorsed by Bezos supports meritocracy, where ideas are forced into competition and the best ones win. This kind of competition lays the groundwork for unhealthy workplace environment where everybody has to outperform others. The harsh nature of the feedback culture adopted at Amazon is different than the ones applied at other innovative companies such as Facebook, Google or Adobe. The company’s performance management philosophy places too much pressure on the link between employees’ individual performance and the company’s overall success from the very start. The misinterpretation of the ownership culture results in employees overwhelmed with the responsibility given to them. Coupled with the reportedly hostile language used during these feedback sessions, employee morale is probably not doing so well at Amazon.

LEARNINGS

Taking the side of The NY Times article or of the counterclaims made is a pointless attempt at best. More important are the learnings that we could obtain from the whole debacle. At a time when big companies such as DeloitteAccenture and Adobe are changing their performance management systems, it is important to tread very carefully in handling people management.

One major downside of the feedback system at Amazon is that it does not enable employees to see feedback themselves, they can only hear about it from their managers. However, this goes against the whole purpose of performance management, which is to help your employees grow. For this reason, we at Impraise believe in empowering employees with feedback. Employees can initiate their own feedback cycles and choose to share them with their teams or managers only when they want. This way, employees are enabled to take ownership of their own development without worrying about negative feedback. 360-degree feedback sessions are initiated by managers but even then the feedback is completely transparent.

Another issue with Amazon’s feedback system is the complete anonymity of the feedback. This makes it easy to abuse feedback for sabotaging others. On Impraise, the feedback is also anonymous by default, but users can choose to reveal their identities when providing feedback. In the case of unfair feedback, managers can view feedback with complete transparency to settle any conflicts.

Continuous feedback should not be viewed as a
replacement to the whole performance management cycle. We believe that 1-on-1 conversations are still more important than anything as far as employees’ development plans go. We built Impraise to serve as a tool for saving time on feedback cycles, so that managers can have more time conducting 1-on-1 conversations with their employees.

Last but not least, culture management is even more important than introducing new tools for managing performance. Without proper training on how to provide feedback and how to ask for it, new tools and methods will not be able to change performance management for the better.

 

For more information, download our free white paper on the benefits of implementing real-time feedback. 

Image via Steve Jurvetson