Amazon is one of the most successful organizations in the current technological era as it has eclipsed the likes of Walmart and become America’s largest retailer. The tech giant has established itself in almost every industry, from eBooks to video streaming, web hosting, smart devices, and more (Gunther & Chawla, 2018). It is known for selling almost everything a consumer could need starting from clothes, electronics, home décor, shoes, etc. Amazon has also established several stores worldwide, including France, Japan, Germany, and Canada. It currently has over 700,000 employees worldwide and boasts of net revenue of $386 (Long, 2021). However, unlike Microsoft, Apple, or Google, the company’s working culture is anything but glamorous. Yet Amazon is undisputedly a direct competitor to these organizations. The firm has been accused severally of creating an environment where employees are ruthlessly pitted against each other through a brutal stack rank performance management system (Impraise, n.d.). This essay aims to analyze the performance management strategy of Amazon through the use of theories and concepts. It argues that the firm has a toxic environment for employees where they are not sufficiently valued.
The Principles of Performance Management
The designation of a performance management strategy (PMS) needs to be based on strategic choices. The PMS is supposed to be based on organizational principles set by the senior leaders and widely shared across the organization (Cappelli & Tavis, 2015). In the case of Amazon, the company’s executive chairman, Jeff Bezos, has set a strategy that ensures the best possible customer experience at the best price (PerformYard, 2021). This is evident as he uses a Six Sigma style process in his leadership. The company’s performance management solutions are aligned to fit this purpose and accepted by employees and managers.
Therefore, the performance management strategy of Amazon is based on this principle. Amazon utilizes a stack ranking system where employees are rated against each other annually. In this case, every aspect of the employee’s performance from their recruitment process is measured and ranked (Setty & Bezos, 2020). This type of system treats the workers as data subjects in every sector. This performance management process is based on the principle of being the best company and providing the customers with the best experience possible. Therefore, employees are only retained at the end of the year if their performance metrics meet the expectations. Those who do not perform well are put in a 3-month performance improvement plan to help them get back on track (PerformYard, 2021). Failure to improve within this period leads them to be fired. The performance bar also keeps increasing as the previously acceptable level of performance is upgraded, thus if the employees do not meet the newly acceptable level of performance, they get fired. It is logical that the employee turnover rate of Amazon is high.
The Power of Performance Feedback
Most organizations believe that effective feedback solves several performance management problems. However, if not given well, feedback could result in a detrimental PMS where employees do not feel valued (Cappelli & Tavis, 2015). Amazon uses a continuous feedback system where employees are able to praise or critique their fellow workmates anonymously (PerformYard, 2021). Through this, continuous feedback and company goals are easily computerized and tracked. Such a strategy is both competitive and damaging to the employees. Although it forces employees to compete and work harder, it also pits them against each other rather than working as a team. In this case, employees are more likely to criticize each other to ensure someone else other than them is eliminated (Setty & Bezos, 2020). Since the company also provides performance feedback annually, it puts employees on track and enables them to work towards achieving their performance targets.
Performance Management Alignment
A good performance management process is one of the most important factors that ensure employee engagement and development. To ensure the organization’s PMS is successfully implemented, the strategy has to be specific to the firm’s challenges and culture (Cappelli & Tavis, 2015). In the case of Amazon, its performance management purpose is vibrant as it constantly stresses the best out of its employees. The strategy also aligns with its goal to be the best and offer the best customer experience possible. Arguably, this strategy does not show much regard for the employee. The management process is abusive as individual performers are not guided or assisted by anyone. Instead, they are responsible for their career progression and finding the teams that are compatible with them. Individuals are forced to be self-motivated as no one will hold their hand in the organization. Therefore, the system forces managers to rate the employees negatively due to politics and stack ranking.
It is evident that Amazon’s performance management strategy is built in such a way that only the strong survive while the weak have no chance at all. It is a type of strategy that will enable one to develop a harder edge if they survive. The strategy creates a toxic environment, with employees often feeling that they are not valued. Amazon’s PMS may only work well with a certain type of high-performer. Although Amazon’s employee turnover rate is high, the strategy aligns with the organization’s unique position as a fearless and fast innovator. Such a strategy of rating politics and emotional abuse is unsuitable for small brands that need to hang on to their employees.
Cappelli, P., & Tavis, A. (2015). Spotlight on building the workforce of the future: The performance management revolution. Harvard Business Review. Web.
Gunther, N. J., & Chawla, M. (2018). Linux-Tomcat application performance on amazon AWS arXiv preprint. Web.
Impraise. (n.d.). The amazon controversy: What is missing in its performance management. Impraise. Web.
Long, K. A. (2021). Amazon tells bosses to conceal when employees are on a performance management plan. The Seattle Times. Web.
PerformYard. (2021). How does amazon do performance management? Forte, OLR & PIP Explained. Web.
Setty, P., & Bezos, J. (2020). Performance appraisal methods great organizations use. Profit.co. Web.