(Bloomberg) -- Andy Jassy’s campaign to flatten Amazon.com Inc.’s middle management ranks has started rippling through the company, raising fears about the prospect of lean years and fewer promotions for experienced corporate staffers.
Employees in multiple departments describe an uncertain workplace, where old career paths are drying up and managers fear replacement by lower-paid people with less experience. Workers wanting to know how they can ascend the corporate ladder have been told to consider “horizontal development.” Translation: You can learn new skills but they don’t necessarily come with better titles or more money.
Amazon veterans are used to their bosses shifting from rapid expansion to belt-tightening. But this latest effort is notable because Jassy, the company’s cost-conscious chief executive officer, published a 1,400-word manifesto for change on Amazon’s corporate blog — where investors could read it — and appears to have targeted an entire layer of middle managers. His goal is to ease bureaucracy and bloat that began afflicting Amazon after a pandemic-era hiring binge and to free up funds for an expensive bet on data centers and artificial intelligence.
Tension is already building in the middle layer of managers Jassy aims to flatten. They’re being told to keep hiring from a pool of recent college graduates to fill positions while finding reasons to remove more senior workers. All the while, finding a job with a different company is harder due to a challenging job market. The unemployment rate remains low, but many companies have tapped the brakes on hiring, so workers whose jobs feel tenuous will find it harder jumping to another company.
The timing is no accident, says D.A. Davidson & Co. analyst Gil Luria. “Amazon is capitalizing on a moment when return-to-office policies have become more common and the technology job market is cooling off, to accomplish two goals: higher productivity and lower payroll expense,” Luria says. Jassy’s cost-cutting has helped increase profits in each of the past six quarters, and the shares have surged 42% in the last 12 months — double the appreciation of the S&P 500. Profits are expected to be up again when Amazon reports fourth-quarter results on Thursday.
When Jassy published his memo in September, the easy take-away was that he expected employees to start reporting to the office five days a week in January. His second theme was harder to decipher — it read like a complex math word problem on a standardized test — but signaled structural changes were also coming.
“We’re asking each s-team organization to increase the ratio of individual contributors to managers by at least 15% by the end of Q1 2025,” Jassy said, referring to a council of senior executives who set company policies. “Having fewer managers will remove layers and flatten organizations more than they are today.”
Targeting middle managers rather than front-line workers has become more common recently in corporate America because these people tend to have higher salaries and usually don’t contribute directly to a project by coding or negotiating deals. So to a certain extent, Jassy is on trend. The danger is that thousands of experienced Amazonians will leave, taking decades of institutional knowledge with them at a time when executives are already fretting that many employees, especially recent hires, don’t understand the corporate culture.
In an emailed statement, Amazon spokesperson Margaret Callahan said the increased ratio of personnel to managers “impacts a relatively small subset of employees and aims to increase our team members’ ability to move fast, clarify and strengthen their sense of ownership, and drive decision-making closer to the front lines where it most impacts customers and the business. Each organization is determining the best way to reach this goal, and our internal surveys show that employee sentiment remains strong.”
For more: Amazon RTO Push Reflects Fear Recruits Don’t Get Company Culture
To assess the mood inside the company, Bloomberg interviewed 10 employees from several departments. Most said Amazon had become a less desirable place to work. For one thing, Jassy has axed or pared back multiple moonshots that gave people an opportunity to work on exciting new projects from cashierless shopping to telehealth. The mandate to be in the office five days a week hasn’t won the CEO many admirers either.
But employees are most exercised by the narrowing path for advancement. One, who recently left for another job, said they were offered a new role internally, but with lower seniority and less pay than the person they’d be replacing. The employee called the promotion process “demoralizing” because it required so many layers of approval and could be easily vetoed. Another worker described seeing open roles filled by new hires at lower pay grades. Business Insider, citing documents from an Amazon Web Services sales team, previously reported similar changes.
Meanwhile, the old tricks Amazon employees once used to game the system have stopped working. For years, personnel denied promotions would quit for another job, only to return a year or two later after negotiating a more senior role and higher salary — a maneuver known as “boomeranging.” It worked especially well during Amazon’s pandemic hiring frenzy, but recruiting teams and hiring managers have been discouraging the practice.
One employee said they left hoping to return to a more senior-level position. Instead, they’re back at the same pay grade as when they left. Amazon’s Callahan says the company hasn’t issued guidance to change the approach to hiring boomerangs.
Before the recent holidays, according to two employees, the manager of a department with hundreds of personnel bluntly told everyone he had to eliminate half of the workers in a senior category known internally as L6 and double the number of personnel at the lower-paid level of L4, typically an entry-level position at Amazon.
The message was interpreted by many senior workers, already frustrated with the five-day office mandate, as one more reason to start job hunting, the people said.
--With assistance from Jo Constantz and Matthew Boyle.
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