With the tech giant set to open its giant warehouse in Melbourne next month, it’s fair to say the retail sector is quaking. So HRM puts the spotlight on Amazon’s controversial people strategy and asks, is it overly harsh or is it a smart and effective way to reward hard work?
There’s been an apocalyptic tone to the coverage of Amazon arriving in Australia. Whether it’s a story about it “looming” and leaving Australian business behind. Or a report about Gerry Harvey of Harvey Norman preparing to “wage war” on the tech giant and calling it “Atilla the Hun”.
And if you run a retail company in Australia, it does make sense. Your share price has probably dropped, and your earnings forecast slashed. But, considering the company’s approach to employee relations, perhaps HR should also be taking a second look.
The dark history of Amazon’s workforce management
The complaints about Amazon’s treatment of employees can be broadly separated into two workforces, their white collar or office staff and their fulfillment centre staff.
For the former, an in-depth 2015 report in the New York Times caused a sensation when it revealed the company’s idiosyncratic approach to employee relations. Essentially, Amazon considers the working habits of other organisations bad, and they want people to take the approach that when they “hit the wall”, they should “climb the wall”.
To that effect, the story included details such as:
- A digital workplace and performance complaint system that allowed employees to send secret feedback to each other’s bosses.
- Even low-level employees sign a “lengthy confidentiality agreement”.
- A culture that became addictive and pushed people beyond what they thought were their limits – while grinding away at their work-life balance.
- A former employee of two years saying, “Nearly every person I worked with, I saw cry at their desk”
And for their warehouse employees, Amazon made news in 2011 when The Morning Call, a local Pennsylvanian paper, reported on the conditions during summer heat waves. The most grabbing tidbit was the story of ambulances being on standby outside to treat workers who would inevitably suffer from heat stress. If the treatment didn’t take quickly, they were sent home and replaced by standby employees.
In reaction to the article, Amazon now has air conditioning in their fulfilment centres. But the philosophy behind the ambulance story remains. Amazon installs sophisticated systems to monitor employee performance, and has a remorseless data-driven approach to achieving peak performance from its staff.
It’s this reputation that it has towards its own employees and any competition that has local retail organisations wary. Peter Strong, CEO of the Council of Small Business Australia, doesn’t think companies should try to compete with Amazon at it’s own game. It won’t work, and it’s not worth it.
“Amazon don’t have a reputation for being contributing members to the local community – they have been known to take jobs and destroy businesses,” he says. “With Amazon entering the Australian market, small businesses have to continue to excel at customer service and human relations.”
But should you be like Amazon?
On the one hand, a lot of Amazon’s practices sound extreme. On the other, plenty of workplaces have similar environments (even if they’re less data savvy about it) and it’s hard to argue with the company’s success. But is that success because of this approach to performance, or is it a parallel phenomenon?
It’s hard to say. The big tech companies succeed because of the network effect. Essentially once you reach enough users, the more useful you become to each user. (Amazon also benefits from more traditional economies of scale – they’re big enough that they can dictate terms to suppliers.)
But there’s a split in tech companies between those who famously trust their employees and lavish them with benefits, and those that manipulate them and work them to the bone. Facebook and Apple fall into the former camp, Uber and Amazon into the latter.
The reason for the difference might seem simple: it’s easier to treat your workforce well when it’s small and filled with high-skill positions. Uber’s main workforce are its drivers. And Amazon has more than double the amount of employees as Apple, a great deal of whom work low wage jobs in their large warehouses. According to Jackdaw research, Amazon generates about $500,000 per employee as compared to Apple’s $2 million.
But the truth is that the difference isn’t low-skilled workers demand a less people-focused HR. Lyft treats its drivers better than Uber, and is gaining market share against their larger rival. And Amazon doesn’t have all the perks of other tech companies, even for their office staff.
It’s just the case that Amazon founder Jeff Bezos believes, according the the NY Times, that “harmony is often overvalued in the workplace – that it can stifle honest critique and encourage polite praise for flawed ideas”. It’s a philosophy that values compensation above all else – if you create value, you will be rewarded with promotions and grants of stock.
Perhaps Amazon has got it right? Have employees become too mollycoddled? We’d be interested to hear your points of view.