Amazon will significantly change how it assesses the performance of its employees each year — shaking up a controversial tradition that has emerged as an emblem of the technology giant’s exacting standards and hard-charging workplace.
“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,” the company confirmed in a statement to GeekWire. “We will continue to iterate and build on the program based on what we learn from our employees.”
The buzz among employees is that Amazon will drop or significantly alter its existing employee ratings program as part of the changes in the broader review process. Amazon currently uses employee ratings as the basis for a forced curve or “stack-rank” system — also known as “rank-and-yank” — a controversial management technique used by companies to get rid of the lowest-performing employees and identify those with the most growth potential.
But the extent to which Amazon will replace or modify its current system isn’t yet clear. The company declined to confirm any details beyond its statement. The new approach is expected to start in February of next year.
The current approach has drawn external criticism and internal complaints. A widely-read New York Times story about the company’s “bruising workplace” last year spotlighted the current employee review process. “Preparing is like getting ready for a court case, many supervisors say: To avoid losing good members of their teams — which could spell doom — they must come armed with paper trails to defend the wrongfully accused and incriminate members of competing groups. Or they adopt a strategy of choosing sacrificial lambs to protect more essential players,” the New York Times reported.
It’s known internally as the “Organization and Leadership Review,” or OLR. CNN last year quoted an HR expert who compared it to The Hunger Games.
Amazon disputed many elements of the NYT story, but it’s clear that the current review process is not a popular tradition inside the company. Managers and their direct reports can spend a staggering amount of time working on annual reviews, especially when someone is angling for a promotion, according to current and former employees.
The company’s traditional performance review process is a reflection of Amazon CEO Jeff Bezos’ exacting standards for the company, wrote journalist Brad Stone, author of The Everything Store: Jeff Bezos and the Age of Amazon, in a piece in Bloomberg Businessweek two years ago. Bezos “seems to believe his managers must raise the performance bar with every hire and promotion and that only exceptional talent should progress within the organization,” wrote Stone.
Amazon’s challenge will be maintaining those standards while also streamlining and improving the review process.
The shift to a simplified review process is the latest in a series of moves by Amazon to create a more accommodating workplace. Last fall, the company expanded its parental leave benefits, which had been another target of criticism at the company. This summer, Amazon began testing a new program that creates technical teams consisting entirely of part-time employees who are still eligible for the same benefits as Amazon’s full-time employees.
These changes come amid an unprecedented wave of growth at the company. Amazon’s worldwide employment recently topped 300,000 employees for the first time, up more than six-fold over five years, fueled by a massive expansion of its warehouse and distribution network.
But it’s not just warehouse workers. The company now reports 35,000 employees in Washington state, home to its Seattle headquarters. That’s up from about 25,000 employees in Washington state a year ago. Amazon last week opened another huge office tower on its new campus on the northern edge of downtown Seattle.
The stack-rank approach, aggressively managing people out of the company, can become daunting with such a large workforce and big growth ambitions. Amazon is also competing for talent against other tech giants that have already shifted away from performance review systems based on ratings and stack ranking.
Amazon’s fellow Seattle-area tech giant Microsoft, for example, used the stack-rank practice for many years, rating employees on a fixed curve, which had the effect of giving a lower standing and compensation to some employees even in cases where their managers might have felt they deserved more.
In 2013, Microsoft replaced the process with a new system that lets managers hand out raises and bonuses as they see fit, within the limits of their overall budget for compensation. The company said that the prior system was designed for an era when Microsoft was focused on employees as individual performers within a vertical corporate structure. Some blamed stack ranking for fostering dysfunction at Microsoft and reducing morale among employees.
