An Essay on the Leadership and Management of Jeff Bezos at Amazon

In this report we will be examining the Amazon Corporation and its CEO Jeff Bezos on a number of aspects related to leadership and management.

Leadership: Amazon’s culture is influenced by Bezos' abrasive personality and leadership style. Bezos 'authority and transactional leadership style has cascaded down the organization and influenced the culture negatively at the point where employees do not experience a supportive work environment and feel sabotaged and threatened at work.

Organization Design: The current organization design supports Benzo’s leadership style. The matrix structure with a mix of functional small teams as well as divisional structure. It facilitates managerial control of the company. Amazon has a track record of constant expansion across the globe in the e-commerce market and its structure supports the rapid growth.

Critical Thinking: Bezos’s vision and decisions as a leader have shaped Amazon to be both the success it is today and but has also caused many of the challenges.

Situational Analysis: While internal opportunities and external threats must be examined, for Bezos, the customer is the ultimate test of success.

Resources and Capabilities: Amazon’s capabilities are built around scaling and efficiency and structures are in place to get the most out of people for better or worse.

Business Rhythm: Amazon has many formal decision-making processes in place in order to ensure accurate and speedy action.

Alignment and Performance:  Amazon is aligned with their mission and strategy.  The link between their operational goals and company strategy is based on consumer satisfaction.

Metrics and Effectiveness:  Amazon measures its success based on the value it creates for its shareholders.  Amazon has delivered on their metrics for measuring success and has been validated by financial analysts placing them among other tech giants.

Change Management: Bezos and Amazon has shown they can change after the scathing New York Times article.

Amazon is one of the world's most successful companies. Bezos has unquestioningly been an influential leader. Amazon’s leadership principles, business structures, and culture of excellence, have made it a “CEO Factory” (Mattioli, 2019). At the same time, there have been many high-profile issues with the culture at Amazon and the experiences of the employees. There are many lessons that can be learned from understanding the successes of Amazon as well as the failures. We will discuss how we find Bezos’s leadership and management to be effective, but also where there are challenges and areas of improvement.

Leadership

Amazon’s culture is influenced by Bezos' abrasive personality and management style, including an "eagerness to tell others how to behave; an instinct for bluntness bordering on confrontation; and an overarching confidence in the power of metrics" (Kantor, J; Streitfield, D, 2015). Bezos' authoritarian and transactional leadership style has cascaded down the organization. At Amazon, employees don’t have a supportive work environment and feel threatened.

Bezos' portrays his leadership style and workplace ideas into the Amazon’s fourteen leadership principles. These guidelines encourage employees to constantly prove their worth, outpace their colleagues and even sabotage their careers. In contrast to Google’s Oxygen 8 Behaviors for Great Managers which is focused on coaching, career developing, communication and autonomy. Amazon, via its leadership principles and tools, encourages employees to be brutally critical of each other’s ideas in meetings and to furtively send feedback to each other’s managers which employees perceive as sabotage. (Amazon as an employer p.1) Leaders at amazon have a clearly transactional leadership style where they keep employees motivated through reward and punishment. In contrast to transformational leaders who are those who can shape individuals. (Frost & Purdy, 2008 pg. 15)

The backstabbing and pointing fingers culture at Amazon, incites SCARF threats. One of the most notable threats is Relating to Relatedness. There are no heathy relationships, trust or empathy. Another threat factor is autonomy which can be mitigated by increasing autonomy and reducing micromanaging. In addition, the sense of unfairness is threat factor that increase turnover. (Rock P.9) According to the New York Times Article turnover was him in 2013 Amazon had the second highest turnover among Fortune 500 companies and only 15 percent of employees had been at the company more than five years.

Amazon can benefit from a transformational leadership that encourages leaders to “broaden and elevate the interests of their employees […] and to look beyond their own self-interest for the good of the group.” (Frost & Purdy, 2008 pg.14). This can be achieved by incorporating Google’s manager principles.

Organization Design

According to Jeff Bezos “two pizza rules” theory rule, “meetings should be held in teams small enough that could be all fed with only two pizzas” (Cain June 2017). This is illustrated in Amazon’s organizational structure. It has a matrix structure with a mix of functional small teams as well as divisional structure.  There are three main functions: Global Function-based groups, Global hierarchy and Geographic divisions. (Meyer,2019). The global function- based group enables the company to facilitate successful operation management and eliminate the duplication of equipment and efforts. Their main functions are: Office of the CEO, Business Development, Amazon Web Services, Finance, International Consumer Business, Accounting, Consumer Business, Legal and Secretariat. The second function is Global Hierarchy which is stated in terms of vertical levels of commands that manage the online retail sales. This function aims to facilitate managerial control of the company. The third function is geographical divisions. Its main purpose is to manage e-commerce and the two division are North America and International division. These two divisions allow the company to address issues relevant to each region.

The company has a track record of constant expansion across the globe in the e-commerce market and the matrix structure supports the rapid growth. The function-based groups and hierarchy allows Amazon.com Inc. to effectively implement managerial directives. Also, the geographic divisions address the online retail market concerns and related economic conditions in each region. However, one of the disadvantages of the matrix structure is that it limits the flexibility and responsiveness. (Frost & Purdy, 2008 pg.5). We recommend that Amazon decrease the control of these structural characteristics and to establish a higher flexibility and responsiveness by increasing the degree of autonomy of regional or local offices. This will allow the company to operate more effectively

Critical Thinking/Decision Making

The work ethic, determination, and decision making of Jeff Bezos for Amazon is both complex and simple.  In the Business Insider interview with Jeff he simply says, “if there’s problem there’s always a solution” (Business Insider, 2018). He’s a strong believer that teams are better than individual work because it’s not about being individually resourceful but how to incorporate your teams’ resources and knowing the strengths of everyone together (Business Insider, 2018). This is a form on his personal biases, of what he values as a leader shapes his organization, right or wrong. His goal is to see continued progress and advancement.  From the start of Amazon, he drove the company and employees to only stay focused on internal factors and not external factors such as competitors. When Jeff felt that employees were unsettled by media coverage, he held all-hands meetings. In the interview he says at the all-hands meeting “it’s ok to be afraid, but not afraid of our competitors, but afraid of our customers. Our competitors don’t pay us, but our customers do” (Business Insider, 2018). This is a strong example that Jeff’s decisions were mainly customer focused as they are revenue drivers.

It is evident that Bezos has made some of the best decisions thus far to grow the Amazon organization. The decision-making process are made by inquiry, encouraging critical thinking through dissension (Garvin & Roberto, 2001).  Bezos is an intelligent, business savvy man that has continuously been building the biggest internet-based retailer in the US and able to take Amazon to greater successes year after year (Bhatnagar & Jaiswal, 2016). From the start of any project there was a culture at Amazon, that employees were able to tear apart one another’s ideas in meetings then follow-up with one another’s manager on their thoughts. This was also a place where you are expected to put countless hours, proactively check emails after hours or you job was on the line (Bhatnagar & Jaiswal, 2016). As you can imagine this was a very unhealthy work environment, there were high turnover rates, but somehow Amazon continuously climbs the ladder of achievements and accomplishments (Bhatnagar & Jaiswal, 2016). This leads to how Bezos made the decision to focus on customer satisfaction, the growth of the business, and not so much on internal issues (Bhatnagar & Jaiswal, 2016). Customers were happy with Amazon, as Bezos’s number one focus is customer satisfaction (Bhatnagar & Jaiswal, 2016).  Was it the most effective decision? From the looks at the books, yes, because the company’s revenue and numbers are growing year after year.

Situational Analysis

To understand the demands and capacity asked by Bezos we must look at the SWOT analysis and PESTEL analysis. From these two analyses we can determine various internal factors and external threats. Through the many articles and research, Amazon is going above and beyond projections. When looking from the top down in 2014 to 2015 Bezos went from the top CEO to 87^th in just 12 months, this was a result from internal as well as external analysis (Bhatnagar & Jaiswal, 2016).

When conducting a SWOT analysis, we look at internal and external strengths, weaknesses, opportunities, and threats.  Strength is demonstrated at Amazon by being ranked as the number one online retailer in the US. Weaknesses come from the internal factor of observed negative cultural practices. Opportunities are established by continuous technological advances. Some threats that Amazon faces is how far it can push white collar workers and redrawing the lines of what is acceptable (Kantor & Streitfeld, 2015). One of the biggest threats Amazon face is its competitors. The competition may also draw Amazon employees for better work life balance opportunities.

Through utilizing tools such as PESTEL analysis module Amazon decision makers will be able to identify strategic opportunities and threats based on external factors in remote or macro environment of the business. (Greenspan, 2019).  Amazon heavily relies on the performance of the economy, because economic trends and changes on the remote or macro environment are taken into consideration when using the PASTEL analysis (Greenspan, 2019). Amazon performance is dependent on the global economic situations of where they have any operational locations. Key decision factors are the success of the economic stability of the developed markets globally, an opportunity of increasing disposable incomes globally, and a possible threat of China hitting an economic recession (Greenspan, 2019).

While Bezos surely must be aware of external threats, he emphasizes on the customers beyond any competition. He also emphasizes the customer over any internal concerns either. His reaction to the New York Times expose was to deny there was an issue in his opinion, perhaps because the culture of rigor and intensity is reflective of what his expectations truly are (Wagner, 2015).

Resources and capabilities:

While Amazon has a mission and vision statement, the 14 leadership principles provide further context into how priorities shape the resources and processes. To highlight two of the most relevant: “Frugality” and “Invent and Simplify” (Amazon Career Site, 2019) When it comes to capabilities, Amazon’s ethos is efficiency. While resources and processes are enablers, priorities represent constraints on what the business can do with the resources and processes available. At Amazon resources are limited, take for example the philosophy of “Two-Pizza Team.” The idea is that teams are kept small enough that they could be fed by 2 pizzas. In theory, these small units allow for scalability and efficiency. (Hern, 2018) However, while the leadership principles decree that “constraints breed resourcefulness, self-sufficiency, and invention”, what limiting resources actually does is pit team against team and coworker against coworker (Denning, 2019). As the NY Times article shows, “workers are encouraged to tear apart one another’s ideas in meetings, toil long and late… and held to standards the company boasts are ‘unreasonably high” (Kantor, J; Streitfield, D, 2015). However, by expecting more than people can sustainably give, they burn through an important resource- people.  In 2014 an employee reports an average length of employment of only 14 months (Nolan, 2014). However, when the capability to innovate resides in the business model and processes, rather than the resources, the company becomes more resilient to the effects of personnel turnover (Christenson, 2008).

Processes and team structure again align around supporting efficient innovation. Each “two-pizza” team is organized by their skills and capabilities, rather than project. Once decisions are made for the direction of the team, they are provided significant independence and autonomy in how to provide the result. “One of the primary goals is to lower the communications overhead in organizations, including the number of meetings, coordination points, planning, testing, or releases. Teams that are more independent move faster” (Denning, 2018). However, there are drawbacks and frustrations to being siloed when the team is working on a component of the end product. At Amazon the emphasis is on speed, each team’s goal is focused on a completion target rather than on cohesion with the other teams. There are cases where this extreme autonomy is beneficial. Amazon has a dedicated team called “Lab 126” which is focused only on innovation. This team is not only structurally separated to have a direct line with leadership, it is also physically distant from the Seattle base (Denning, 2018).  As Christenson explores, Organizations cannot disrupt themselves” (Christenson, 2008).

Business rhythm:

The executive role has two fundamental challenges: Determining what needs to be done and aligning people to execute on that mandate. (Kotter, 1999). In order for a business to scale and run efficiently, decisions must be made constantly. A lengthy review process or bottleneck approval is not sustainable in a business where speed is important. Therefore, Bezos classifies two types of decisions depending on the impact. Type I decisions are almost impossible to reverse, once made, they cannot be un-done easily. While type II decisions are easy to reverse, though may take time and work. (Haden, 2018).

Meetings are an important aspect of both decision making and executing. Amazon’s meeting structure is memo based, there are no PowerPoint presentations. The memos are a narrative story explaining the purpose, data, recommendations, and outcomes for the meeting. The meetings start with everyone reading the memo. This is a significant time investment, that seems to contradict conventional meeting wisdom that meetings should not be focused on sharing information but on the acts of problem solving and decision making (Krattenmaker, 2000), However, this ensures no one is coming to the meeting unprepared or making decisions without all the relevant information. This is also where the “Two-Pizza” Teams come in to play. Afterall, “one sure way to stifle creativity is to pack the meeting room with too many people” (Krattenmaker, 2000) Small independent teams lower the overhead of communication to keep everyone updated and with decreased interfaces with other teams decreases the number of meetings overall.

Once a decision is made on the direction, each team independence and autonomy to execute. Any collaboration or intersection with other teams is formal and documented. Informal business rhythm is minimized. Each team owns their project and data, for example, “If an advertising team needed some data on shoe sales to decide how best to spend their resources, they could not email analytics and ask for it; they needed to go to the analytics dashboard themselves and get it” (Hern, 2018). In order to ensure these independent and autonomous teams execute to the expected standard, Amazon uses forcing functions. “A forcing function is a set of guidelines, restrictions, requirements, or commitments that “force,” or direct, a desirable outcome without having to manage all the details of making it happen” (Denning, 2018).

Alignment and Performance

Amazon is well aligned to deliver on its mission “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online and endeavors to offer its customers the lowest possible prices.”  They started out nationally in the US in 1994 and now their customer base is worldwide and have grown to include millions of Consumers, Sellers, Content Creators, and Developers & Enterprises. (“Amazon's global career site” 2019).

The link between their operational goals and company strategy is based on consumer satisfaction.  “Our goal remains to continue to solidify and extend our brand and customer base. This requires sustained investment in systems and infrastructure to support outstanding customer convenience, selection, and service while we grow.” (Amazon Annual Report 2017, p.10).  As a reflection of this, we can see from their Operational results that Sales have increased by at least 3% over the last few years. “Sales increased 27% and 31% in 2016 & 2017, compared to the comparable prior year periods.” (Amazon Annual Report 2017, p.35).  Sales in North America alone “increased 25% and 33% in 2016 and 2017 compared to comparable prior year periods.” (Amazon Annual Report 2017, p.35).  Operation revenues have also increased “Operating income was $2.2 billion, $4.2 billion, and $4.1 billion for 2015, 2016, and 2017. We believe that operating income (loss) is a more meaningful measure than gross profit and gross margin due to the diversity of our product categories and services.” (Amazon Annual Report 2017, P.36).

Perhaps Amazon’s secret in linking strategy and operational results is their ability to maintain a startup mentality all these years.  The competitors forecast their strategy 5-7 years while Amazon looks out to 2-3 years. This enables them to be agile with the changing landscape in technology.  In addition, their alignment and performance does match based on their customer-centric mentality.  They do not see their employees as assets (disposable resources), rather as a means to achieve customer satisfaction.

Metrics and Effectiveness

Amazon measures its success based on the value it creates for its shareholders.  It can be summed up from their 1997 Letter to Shareholders from the 1997 Annual report when Amazon states, “We believe that a fundamental measure of our success will be the shareholder value we create over the long term. This value will be a direct result of our ability to extend and solidify our current market leadership position. The stronger our market leadership, the more powerful our economic model. Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity, and correspondingly stronger returns on invested capital.” (Amazon Annual Report, 1997)

Amazon has placed great importance in market leadership to maintain shareholder value.  This is once again stated in their 1997 Annual report stating, “Our decisions have consistently reflected this focus. We first measure ourselves in terms of the metrics most indicative of our market leadership: customer and revenue growth, the degree to which our customers continue to purchase from us on a repeat basis, and the strength of our brand. We have invested and will continue to invest aggressively to expand and leverage our customer base, brand, and infrastructure as we move to establish an enduring franchise.” (Amazon Annual Report, 1997)

These forcing functions include the original planning documents, again in a narrative memo format, which form the framework for any new initiative. (Denning, S, 2018) They also include leadership priorities and mandates, most importantly, Customer Obsession. Planning documents cover what metrics will be used to measure success, always built in is customer experience. Through real time metrics, senior leadership can evaluate the value and customer impact, ensuring that their decisions are appropriately executed on.

Amazon’s high-performance in shareholder value based on stock market performance has placed them in company with Facebook, Netflix and Google.  These four companies have earned a nickname “FANG” as the four highest-performing technology stocks.  Amazon has clearly delivered on their metrics for measuring success and has been validated by financial analysts placing them among other tech giants.

Change Management

After the negative press that Amazon endured after the New York Times article, Bezos and Amazon has made significant changes in how it assesses employees.  In about a year’s time since the article came out, Amazon stated that "We're launching a new annual review process next year that is radically simplified and focuses on our employees' strengths, not the absence of weaknesses. We will continue to iterate and build on the program based on what we learn from our employees."  (Bariso, 2016)  Bezos’ is quoted as not “recognizing this Amazon, and I very much hope you don’t either.”  (Bariso, 2016).  Bezos’ has heard the criticism and is making some changes in addressing the review process.

In the article Leading Change Why Transformational Efforts Fail, Kotter writes “change sticks when it becomes, ‘the way we do things around here,’ when it seeps into the bloodstream of the corporate body.”(Kotter, 1995)That mantra of “the way we do things around here” fits right into Amazon’s culture of favoring skills over social cohesion when responding to the New York Times article by launching a new annual review process that focuses on employees’ strengths.  Bezos’ and Amazon have crafted change management that fits right into their leadership principles.

One of their leadership principles is bias for action where speed matters in business.  Bezos’ strategic agility is skyrocketing Amazons global success. “Because Amazon has mastered strategic agility and can act and respond faster than its competitors, it is taking over the world. Like other Agile organizations, it is connecting everyone and everything, everywhere, all the time. It is delivering instant, intimate, frictionless value on a large scale. It is creating a world in which people, insights, and money interact quickly, easily, and cheaply.” (Denning, S, 2018)

Amazon “has just been quicker in responding to changes that the rest of the work world is now experiencing: data that allows individual performance to be measured continuously, come-and-go relationships between employers and employees, and global competition in which empires rise and fall overnight (Kantor, J; Streitfield, D, 2015).

Summary

Amazon in its attempt to increase productivity, revenues, be more agile and anticipate the needs of consumers, has forgotten about building a positive culture.

Bezos should focus on developing a transformational leadership style, creating a culture that also focus on employees, and aligning its organization structure with a new set of values and culture to foster productivity, decrease employee turnover, and increase employee engagement. This will result in higher profits and a positive company reputation.

Ultimately, the issue that must be addressed is culture. As we learned it is a very important aspect to an organization success and impacts the performance and effectiveness of a company  (Warrick, 2017). Bezos’ focus is the customer and not his employees. This cascades into a culture where employees are not valued and are held to extremely high standards. Amazon is financially successful and growing year to year, yet it ranks poorly on employee’s satisfaction and engagement. Productivity is linked to employee engagement and Amazon could achieve greater revenues by investing on its culture and employees.

Bezos is a very strong leader that has built Amazon in the company that it has become. Bezon’s has many innovative ideas that other leaders have learned from. It is shown that former Amazon employees do carry forward Bezos’ principles. Many CEOs that started as employees at Amazon have been able to translate and improve on Amazon’s success and culture. What these CEOs have been successful in doing is retaining the positive aspects and leaving the negative behind. In order to improve the culture and employee experience, Amazon should take the example of its former employees.

Team Summary

As we learned and analyzed Amazon’s leadership and culture, we became better informal leaders in our team and learned how to better organize our time to achieve our timelines and deliverables.  We worked together in the previous semester which facilitated the process of working on this project. We were on alignment to complete this project and were highly committed and involved.

As a team we worked through each question on the initial milestone of our project and split questions at random. After the milestone we decided to move a few analyses around to areas that individuals felt strongest to work on and complete individually. We read and provided feedback, comments and edit each other’s questions.

We also tried to meet weekly and set goals to have our project done ahead of time. We develop a team culture with an open communication, collaboration and support. We shared various resources that we felt would help one another in different analysis or writing in general throughout the term. What was most helpful to all of us was being openly communicative and brainstorming together through our rough drafts. Also, constructive feedback kept us on track and align to the milestone’s rubrics.

It has been a great learning experience to be able to identify each other’s strengths, writing techniques, and creativity. As a team we were able to hold each other accountable and keep the ball rolling throughout the semester. This will be an additional project added to our success as a team and we are happy to be able to execute these milestones together.

References

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