Is Amazon’s high turnover a huge red flag or the secret to its dominance?
Is Amazon’s high turnover a huge red flag or the secret to its dominance?
Amazon is currently the second-largest private employer in the U.S., and it could become the largest in a few years. But a new investigation by the New York Times raises significant questions about the company’s management of warehouse workers and discovers an unusually high rate of turnover among its hourly associates — around 150% a year, even before the pandemic, which means the company was losing around 3% of its warehouse workers each week (nearly double the rate of similar businesses).
“There’s an open question now — because the turnover is so high, and Amazon’s needs for growth and employment is so large — about whether or not it’s sustainable,” said New York Times technology reporter Karen Weise, who reported the story along with Jodi Kantor, a Pulitzer Prize-winning investigative reporter at the Times.
“In conversations with current and former executives and leaders in Seattle, there is a palpable fear that Amazon will not have enough workers to be able to serve the customer demands that it foresees,” Weise said.
Part of what was so interesting, Kantor told “Marketplace Morning Report” host David Brancaccio, was that Amazon has long seen high turnover as a good thing — and has deliberately encouraged it through various internal policies.
“Bezos really wanted turnover. He was afraid of a stagnant workforce — what he would call a ‘march to mediocrity,’ ” Kantor said.
Weise and Kantor unearthed a web of confusing and confused, often technology-laden human resources systems that monitored worker productivity constantly but repeatedly made major errors, at times mistakenly terminating employees without cause and, at least once, mistakenly failing to terminate someone (who remains at the company today).
“Amazon is so good with packages. When’s the last time you got a mistaken item in an Amazon package? These people are logistical geniuses,” Kantor said. “So if they are so good with packages, how can they treat people so differently?”
Kantor and Weise spoke with Brancaccio about whether Amazon’s uber-high attrition rate is sustainable — and the story of one family caught in the middle of the company’s human resources errors. The following is an edited transcript of their conversation.
David Brancaccio: Among warehouse workers at Amazon, attrition for workers is how high?
Karen Weise: Roughly 150% a year. It’s actually so high that Amazon tracks it weekly. It’s about 3% a week. And this is much higher than the warehousing and retail industry is broadly.
Brancaccio: More people leave Amazon warehouses in a year than if you add up all the employees that are employed at Amazon warehouses?
Weise: Exactly, it’s the equivalent of having to replace the entire workforce every eight months. And so it creates these incredible pressures and demands to constantly be scooping up new people and putting them through the system. And the hiring is completely automated, essentially. You don’t do an interview, you take an online assessment and you show up for work, basically — besides a drug test and some basic forms.
“Amazon’s needs are so voracious right now and the attrition is so high that, as it is now, they need about 5% of the entire American workforce to apply each year.”
Karen Weise, technology reporter for The New York Times
Is Amazon’s high turnover sustainable?
Brancaccio: Why could this possibly be the case when every single other business I ever talk to is trying to lower overhead by retaining employees?
Jodi Kantor: Part of what was so interesting about kind of going on this journey of reporting and trying to answer that question is that it turns out that some of it relates back to Jeff Bezos’ ideas, and that some of this turnover is actually by design. Karen interviewed people who helped build and oversee this system over the years. And one of them, a man named David Niekerk, who was an early, very influential Amazon HR person, explained that Bezos really wanted turnover. He was afraid of a stagnant workforce — what he would call a “march to mediocrity.” He envisioned Amazon as like the Marine Corps: You would come for two years, it would be really hard, and then you would move on. So turnover is almost built into the system. If you look at the way they pay, they just don’t expect to keep people for very long. And also, promotion is very limited. Hourly workers get really excited to join Amazon because they feel like they’re going to be part of something very successful. However, it is very hard to fully participate in the success of the company, beyond the good wages and good benefits, because it’s very hard to move up.
Weise: There are structural and technological approaches that Amazon uses and it has built, based on Jeff Bezos’ ideas of how to grow unconstrained, and that enables both this churn and then this lack of promotion opportunities. For example, they use a lot of technology to monitor worker performance and productivity, which means that one manager might oversee 100 hourly associates. So there’s just structurally not that much room for promotion or growth because technology is doing so much of the management. It’s the same thing with the hiring: [they] have this automated hiring process that’s called, internally, “lights-out hiring” because it’s not a human doing the interviews. And that creates this system where you can hire at a mass scale. Someone just said to me, after reading the story, “Nothing makes things more disposable than acquiring them cheaply.” There is this lack of human connection that develops between the associates and management.
“The hourly workforce we are talking about that really powers the system largely consists of Black and Latino workers. And, more and more, we’re hearing frustration from them — not only at the strict monitoring that Amazon is known for, but the idea that they feel like they can’t fully participate in the success of this company.”
Jodi Kantor, investigative reporter for The New York Times
So you see this incredible, constant turnover. There’s an open question now — because the turnover is so high, and Amazon’s needs for growth and employment is so large — about whether or not it’s sustainable. In conversations with current and former executives and leaders in Seattle, there is a palpable fear that Amazon will not have enough workers to be able to serve the customer demands that it foresees. And it’s this open question about what do they do about it? The model of this high-churn, mass-management-by-machine approach has brought them so far. But their needs are so voracious right now and this attrition is just so high that, as it is now, they need about 5% of the entire American workforce to apply each year just to stick where they are now. Imagine all the future growth they have: They spent $44 billion in capital investments last year. A huge portion of that is new warehouses, which means [they’re going to need more people] to staff and move through the buildings.
Growing frustration among workers of color
Brancaccio: You can see why they might want to also hire some robots for some of this. But other companies that do a lot of logistics and have big warehouses don’t approach it in quite the same way. Think of Walmart — it has its problems, but they’re always boasting that a lot of their store managers come from the ranks of people who started at lower levels in stores.
Kantor: That’s right. And that’s part of why you see some real frustration rising across the country from Amazon workers, especially Black workers. The story we all followed in Bessemer, Alabama, with watching Black workers organize there — they were ultimately unsuccessful, but their work did lead to a kind of moment of recognition at the company, because the hourly workforce we are talking about that really powers the system largely consists of Black and Latino workers. And, more and more, we’re hearing frustration from them — not only at the strict monitoring that Amazon is known for, but the idea that they feel like they can’t fully participate in the success of this company. Derek Palmer, one of the workers we wrote about who’s now trying to unionize JFK8, which is Amazon’s only fulfillment center in New York City, said, essentially, you do really well [as a warehouse worker] and there’s no reward for that merit.
Amazon’s response
Brancaccio: What did Amazon tell you about this blockbuster number, 150% attrition rate — an attrition rate you might be able to see even from space? They suggest, what, that maybe you shouldn’t get too caught up in a number?
Weise: They repeated a phrase that “attrition is just one metric and without broader context doesn’t have enough meaning.” But they really didn’t elaborate on that. And they definitely didn’t say that that number was unacceptable. And that was, to me, very interesting and very telling. We spoke with a VP for human resources in the warehouses who said, yes, we want to build careers for people, but we’re also really happy to provide short-term employment for people in the time of need. And we definitely saw that in New York. I mean, we saw people from all different industries, classic New York City industries that collapsed in the pandemic, turn to Amazon. Its wages are solid for an entry-level job in New York City now; it’s about $18 an hour as their minimum wage. And they do have really solid health care. That’s something workers talk about quite a bit. But the challenge is being able to stay in and keep those jobs. ‘
“Amazon has begun recognizing that there needs to be more human in the human resources. But people are pushed into back offices; into apps and chat bots that become extremely frustrating for people to work with. And you’re talking about a million workers that are running through these systems.”
Karen Weise
And, yes, we have talked to workers who did just look to it for a couple months of time — they’re about to start school. Jodi interviewed one worker who secretly knew he was a dancer in a Beyoncé video that was about to drop, so he just needed a couple months of work. But we definitely talked to workers who had ambitions and hopes to build a career. And, frankly, some of them would have been really wonderful managers — you can tell, just from talking with them, they have that leadership that you might want — who just washed out of the system for so many different reasons. And so that is sort of this open question, again, of whether or not they can bring that [attrition] down or have the intent to bring that down — and whether Jeff Bezos’ vision of having a short-term workforce is now running head into the labor market being as tight as it is. They’ve raised wages. They’ve limited screening on pot — you can now take marijuana and, not show up to work high, but get hired. And so they definitely need workers to fill this machine.
Kantor: And David, I think you’re asking the right question — is that 150% attrition number a giant, red danger sign? Or is it the secret to Amazon’s domination?
The human cost of HR errors
Brancaccio: Tell me about an Amazon employee that you focus on in some of the reporting. His name is Alberto Castillo. He gets coronavirus early on. And he has terrible physical effects from this.
Kantor: He got really sick. It’s one of the worst coronavirus stories I’ve ever heard. He’s a 42-year-old dad of two kids. Really warm, tight family, immigrants from the Philippines. Loyal Amazon worker, works faithfully for the company for five years, is severely disabled by coronavirus. And he had been working, by the way, mandatory overtime in late March when the virus hit New York City very, very hard. So his wife, Ann, has an incredibly difficult experience with Amazon as her husband is going through this crisis. Now, it’s great that she’s got Amazon’s benefits, those are really solid. But trying to access them was a problem. And her communications with the company just exemplify something we heard again and again, which is, Amazon’s HR systems are very automated. They’re treated, in part, like an engineering process. It can be very difficult to get a human being on the phone.
And so Ann Castillo, while her husband is suffering, runs into these walls of confusion. His disability benefits just suddenly halt for no apparent reason in the middle of this crisis. We found out later it was connected to a much bigger meltdown in Amazon’s employment systems during the coronavirus. And then in September, after she has been trying for months to convey to the company what’s been going on — her contact with the warehouse has been very minimal; she’s reached out to people again and again — they send this notice in the mail saying to Alberto: “We notified your manager and HR about your return to work on Oct. 1, 2020.” Meanwhile, as this is happening, Alberto Castillo is entering hospice care. And so Ann Castillo is incredulous, and she asks this question that becomes kind of the moral center of our story: “Haven’t they kept track of what’s happened to my husband?” And she said that she wanted to ask the company, “Are your workers disposable? Can you just replace them?”
Mistaken terminations and other errors
Brancaccio: You’re describing human resources systems that are more like when you want to call customer service for an also-ran cellphone company. But it’s different if you’re dealing with HR matters where there should be some kind of, people would think, a relationship.
Kantor: Well, and also, Amazon is so good with packages. When’s the last time you got a mistaken item in an Amazon package? These people are logistical geniuses. So if they are so good with packages, how can they treat people so differently?
Weise: Yeah, and here in Seattle in the corporate headquarters, this is a question that people are starting to really worry about. As they say, “This is Amazon. We can achieve anything. Why have we not prioritized this enough?” Both the attrition, but also just the overall approach and management of people. Amazon has begun recognizing that there needs to be more “human” in the human resources. But people are pushed into back offices, into apps and chat bots and things like that that become extremely frustrating for people to work with. And you’re talking about a million workers that are running through these systems.
And some of the stories we heard were Kafkaesque. We spoke with employees at a back office in Costa Rica that were processing leaves, and the employees in Costa Rica would get these panicked calls from warehouse workers in the U.S. who were saying, “I’m on an approved leave. Why is Amazon telling me I’m about to be fired for not showing up for my job?” And that’s because the tech system would not update their attendance systems. So the employees in Costa Rica had to then put in a ticket for a team in India to manually input these systems. And they’re saying, “This is crazy. We are Amazon, one of the top technology companies on the planet, and yet we have this incredibly manual process.” So Amazon is kind of catching up to the technological needs for really managing a workforce that is essential to Amazon’s success. This is what I’m starting to hear in Seattle more and more.
“These are systems that have propelled Amazon to dominance. They have been successful beyond compare. And how many stories in the business world do you really see where a company revisits something that is ultimately very successful for them?”
Jodi Kantor
Brancaccio: Didn’t you [speak to] a guy who was just coming back from leave, anxious to get back to work, and he got caught in the electronic system, and he’s essentially told his services are no longer needed?
Kantor: We found a pattern of mistaken terminations during the pandemic. Just as people were depending on these jobs as lifelines, and Amazon is boasting of its job creation numbers, there were systems that were mistakenly terminating people. And also a pattern of job abandonment notices that were sent to people just because they applied for leaves. They were applying for totally regular leaves, they had done nothing irregular and they were sent these messages kind of accusing them of not showing up for work. And that’s because the attendance system does not easily speak to the leave system. And it was kind of shocking the degree to which those job abandonment notices were accepted as a regular business practice. You’d talk to HR people and they’d say, “Oh, yeah, yeah, they got the job abandonment notices, but I was able to go into the system and fix it, and they didn’t get terminated in the end.” Or they would speak about people who actually were terminated, and some HR people would say, “But I was able to go back and reinstate them.” But what nobody can say is how many people slipped through the cracks of this giant system and really did lose their jobs for no reason.
Weise: There was also an example in our story of a woman who was supposed to be fired for, essentially, a behavioral problem; who was told, “You’re no longer allowed to be an Amazon employee, you can never reapply for work.” And then, all of a sudden, her phone alerted her for missing a shift, and she came back to work, and she kept working. And she still works at Amazon today. And it turns out that no one processed her termination properly. They told her she was fired, but in the system it wasn’t there. And so we have now, in the story, someone who was fired erroneously and someone who was supposed to be fired who wasn’t actually fired.
Does Amazon want to change?
Brancaccio: What do you think — is this a moment where Amazon is ready for some introspection on this issue of how it runs its internal processes as opposed to its amazing ability to get a new bicycle headlamp to me on time?
Kantor: The jury’s totally out. On the one hand, while we were reporting this story, Jeff Bezos suddenly declared an ambition to be Earth’s best employer — which felt like a startling concession because, for most of his tenure, he’s been pretty unapologetic about his focus on customers and not employees. But then again, as we know, Jeff Bezos has weeks left in his tenure at the head of this company, and he’s about to blast off into space. So this raises huge questions: Are his successors going to clean this up? And what exactly are they going to do? Because, again, these are systems that have propelled Amazon to dominance. They have been successful beyond compare. And how many stories in the business world do you really see where a company revisits something that is ultimately very successful for them?
Weise: The CFO addressed this with journalists a couple months ago, and I asked, “What does it mean to be Earth’s best employer? Is there any budget being earmarked to that beyond pay raises, which is their traditional approach?” And the CFO said, “You know, we’ve always wanted to be a great employer, we’ve always wanted to have a safe workplace. So Jeff is really just reiterating that, kind of internally more than anything.” And so, to me, that was such a fascinating response, because that did not, to me, suggests a true reckoning. But we’ll see. Again, the labor market is changing so fast. The CFO talked about that, too — they need to step up their game if they can hire. And, traditionally, that’s just been wages, but what we found is that wages were not enough to keep people there.
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