Amazon’s hard scrabble work environment isn’t hurting the company’s stock price — but it has sparked debate over just what it takes to succeed in the digital age.
Shares of the company rose 0.7 percent today despite a blistering expose in Sunday’s New York Times that cast working conditions at the e-tailer as harsh to a Dickensian degree, but also high-paced and laser-focused on delivering for the consumer.
Amazon has long been known as hard charging, relentlessly pushing e-commerce forward and breaking with orthodoxy to drive sales to $89 billion and build a credible competitor to the industry sales leader, Wal-Mart Stores Inc.
But while founder Jeff Bezos has pushed aside the notion that a company such as Amazon should turn a profit for shareholders, he made his case to the company’s 150,000-plus employees that he has not pushed aside human decency. The Times article claims, among other things, that employees are given severe performance reviews when coping with family tragedies or serious personal health issues and are routinely urged to harshly critique their fellow workers to upper management.
Bezos takes issue with those charges.
“The NYT article prominently features anecdotes describing shockingly callous management practices, including people being treated without empathy while enduring family tragedies and serious health problems,” Bezos said in the e-mail, which was obtained by WWD. “The article doesn’t describe the Amazon I know or the caring Amazonians I work with every day.”
He asked employees to contact human resources or him directly if anyone at Amazon is treated with a lack of empathy, ascribing to policy of zero tolerance.
Bezos said the article “claims that our intentional approach is to create a soulless, dystopian workplace where no fun is had and no laughter heard” and noted that, “I don’t think any company adopting the approach portrayed could survive, much less thrive, in today’s highly competitive tech hiring market.”
The New York Times executive editor Dean Baquet told WWD, “I think this was a powerful story driven by on-the-record interviews. It told the story of people who feel burdened by the Amazon workplace and those who feel exhilarated by it. In other words, an exemplary piece of journalism. And the comments on our site from present and former workers attest to that.”
Amazon is not the first merchant to come under the microscope for its business practices, particularly how it treats its workers.
Its rival in scale, Wal-Mart, has found itself beseeched by negative headlines over the years for how it treated its store associates and fought efforts to unionize the business to how it squeezed vendors in Asia and how it lived up to the Foreign Corrupt Practices Act.
The company has, within the context of its goal to drive down prices and drive up profits, made efforts to be more responsive, adding health benefits for workers and pushing for more U.S.-made goods. It is unclear whether Amazon will budge, assuming there are enough unhappy workers expressing their frustration.
“The thing about the [Amazon] corporate culture is that it’s one that’s consistent,” said a former Amazon executive who spoke on the condition of anonymity. “They do a really good job of being consistent. They weed out the people that the system doesn’t work for and burn through those people, and they also find people that this system works for.”
This modus operandi has worked well for Amazon, although the executive said new hires sometimes get to Amazon and are shocked by the lack of “social cohesions” at the company.
“Any culture can work if it’s consistent,” the former Amazon executive said. “They have strong principles and a way they operate. A lot of companies don’t know who they are and what they stand for. They aren’t Google and Facebook. [Amazon] starts with not believing in human connection and emotion. It’s very different.”
The other tech giants are known for taking a very different tack, plying workers with lunch buffets and longer-than-required maternity leaves and so on.
The former Amazon executive said this bout of bad press might push the e-tailer to make some changes in its corporate culture — but the company doesn’t seem to be getting pressure from the financial community, which have backed up Bezos’ vision.
Amazon’s stock gained $3.70 to $535.22 and the firm ranks as the largest merchant by market capitalization, valued at $250 billion, nearly $19 billion more than Wal-Mart.
Analysts reached by WWD generally saw in Amazon an aggressive company charging into new territory and said employees should be aware of what they’re getting into.
“Some of the allegations, such as health-related matters, are concerning and need to be addressed if true,” said James Cakmak, stock analyst at Monness, Crespi, Hardt & Co. Inc.
But Cakmak added: “The overarching takeaway though should be that step advances in innovation do not come easy and have been evidenced by success stories time and again — gradual change is one thing, step function changes are another. If you want to drive large scale advances in technology it comes at a cost. Employees have to weigh that cost benefit.”
And Greg Melich, Amazon analyst at Evercore ISI, said Amazon’s customers are voting with their wallet.
“I don’t think the article will change things,” Melich said. “It won’t change consumer shopping habits. If they need to keep a certain level of customer service, they’ll find the right people to do that. They’ll react to the customer, so if their customer tells them that their service has slipped, if their renewal rates for Amazon Prime drop, they might react.
“Those types of companies whose customers aren’t happy, those companies don’t gain market share,” he said. “So, if the package comes at the wrong day, if the customer says ‘I’m not buying from you — I didn’t get what I wanted.’ If unhappy employees begin to affect customer service then Amazon will address that. So far there’s no evidence of that.”
Retail consultant Brian Kelly said pioneers are known for their work ethic.
“When I was [chief marketing officer] at Lane Bryant, there was a hugely focused business model left over from the Les Wexner days,” he said. “It required six workdays a week. When Sam Walton was starting Wal-Mart, it also was known as a slavish work environment. And Wal-Mart changed the retail world. That is what Jeff Bezos is doing. Now it’s his turn, and I am sure he has studied both Walton and Wexner.”
Bezos has been pushing Amazon to further expand, not just into fashion but also into television program, drone delivery and beyond, always with an eye toward giving the customer more.
But deep-value companies focused on driving prices and cost down might be particularly vulnerable to workplace complaints.
“Firms and organizations that compete on price — Amazon, China, Wal-Mart, McDonald’s — will view employees as a cost and the majority of innovation will be around how to get more, for less, from them,” said Scott Galloway, New York University marketing professor and founder of L2 Inc. “This leads to companies that can be brutal places to work.”
The companies he cited are “typically great” if you’re a shareholder or customer reaping the benefits of the low costs, but it’s a different story for employees who have relatively little equity in the firm. He said Amazon, as a workplace, is a proxy for the global economy — where the top 1 percent of employees have “incredible jobs, vacation homes, and kids whose parents will buy their way into the best schools in America” — and the other 99 percent of Amazon staffers will work harder for less money.
It’s a drastically different company culture, than say, at Starbucks, where he said morale of employees is a tenet of the brand.
“[They] spend more on employee benefits than coffee beans,” Galloway said.
For his part, Les Berglass, founder and chairman of Berglass + Associates, questioned the intensity of the work environment portrayed in the Times’ Amazon story and noted, “The bulk of employees that work for Amazon are Millennials and it’s a generation that will not tolerate that type of supervision.”
While he acknowledged that there are bad actors — from the C-suite to professional sports — Berglass said they generally don’t succeed.
“Bad behavior is not a corporate function,” he said. “It’s a human function and it’s pervasive in our society. It usually doesn’t work. All that type of behavior has a short-term gain and a long-term loss. You cannot excel in today’s environment treating people that way.”
One of the Times reporters on the story, Jodi Kantor, told “CBS This Morning”: “So many of us know Amazon as customers, but what we realized is that we don’t know how the company works inside. Employees had very powerful things to say about it. They really spoke to the strengths of working at the company. They said that they love the innovation, the customer focus, the quality of the people who work at Amazon, but they were essentially questioning, ‘is our workplace — it’s designed to be tough — but is it too tough?’ A former human resources director at Amazon used the phrase ‘purposeful Darwinism’ to describe the company’s method of constantly getting employees to do more and to improve.
“We had begun to hear more and more things about what life was like inside Amazon, but I want to be clear: We were moved also by the strengths of the company. This has become one of the most powerful retailers in the U.S. They’ve changed our way of shopping, and it’s very clear that on some level what they’re doing is working very well.”
Asked about the commonality of a tough workplace in today’s landscape, Kantor said, “what we found so fascinating in reporting this article is Amazon is singular. They call themselves peculiar. They pride themselves on being different. That’s a consistent message inside the company. On the other hand, it does reflect the future of the workplace — more efficiency, more data, come-and-go relationships between employer and employees — the question is how far is too far? Are there limits on how hard employees can work?”