Amazon and the Dangerous Future of Middle Management | Wilnesh News

Amazon CEO Notes from Andy Jassy A message about corporate culture sent to employees this fall made headlines for its five-day tenure. But Jassy’s message about the increasing ratio of individual contributors to managers raises a larger question about organizational structure: What is the right balance between individual employees and managers in terms of headcount? Businesses have long struggled to define the problem with anything other than anecdotal findings.

With businesses now firmly in the post-Covid world, Amazon may be leading a new way of looking at efficiency gains related to corporate bloat, especially middle-management bloat, organizational experts say.

“Our team has grown rapidly,” an Amazon spokesperson said, echoing the message in Jassy’s note: “When I think back on my time at Amazon, I never imagined I would be with the company for 27 years… In part because I stayed and the growth was unprecedented (the year before I joined we were doing $15M in annual revenue and should be well over $600B this year).

The spokesman said that growth inevitably led to the addition of many management staff. The spokesperson compared Amazon’s plans to Meta’s efficiency in the most recent year, saying that due to its growth the company ended up adding more tiers than before and is now bringing the structure “closer to our customers” and strengthening Amazon’s “culture” has never been better.

Over the past few years, layoffs in the tech industry have been as prominent as hiring. From 2022 to 2023, the industry is in the so-called layoff year. While layoffs continue, Amazon’s thinking involves a broader rethinking of how to right-size its largest company.

Morgan Stanley analysts say Amazon may cut Up to 14,000 management positionsbusiness efficiencies saved $2 billion to $4 billion. Morgan Stanley’s forecast is based on assumptions made by Jassy in the report that Amazon aims to “increase the ratio of individual contributors to managers by at least 15% across all divisions by the end of the first quarter of 2025.”

Jassy pointed to the “artifacts” of staff growth, such as “pre-meetings for decision-making meetings,” and created a “bureaucratic mailbox” for employees to share processes that slowed down decision-making, and, he argued, said, “Sneak in, We can uproot it.

Joseph Roh, a professor at Texas Christian University’s Neeley School of Business, said this is not a process unique to Amazon. Rapid growth can lead to “rapid additions of management without the need to reassess whether those roles are necessary,” he said. Overall, a flat structure has taken shape, with a greater emphasis now placed on individual contributors within the company. There is no exact formula, no “golden ratio” between contributors and managers. “My understanding is that the ideal ratio of individual contributors to managers depends a lot on the nature of the work,” Roh said, but he added that typically there are seven to 10 individual contributors per manager.

Investor and economic pressures play a role, and when tech giants spend billions on artificial intelligence without immediate proof of return on investment to Wall Street, conscious efforts to control other costs will pay off. While companies like Amazon want everyone back in the office spitting out ideas around the proverbial whiteboard or water cooler, there’s a sense that artificial intelligence may already be useful in a more direct way, with some middle management positions being redundant.

“Digital transformation plays an important role as automation and advanced technologies reduce the need for middle managers to oversee tasks that can now be monitored through software,” said Roh.

“What you see from Amazon is just the beginning”

“What’s happening at Amazon is just the beginning,” said Naeem Zafar, a professor at the Haas School of Business at the University of California, Berkeley, and Northeastern University. The reduction in the size of management will be a bigger change across corporate America. Big trends. Fast-growing technology companies that dominate the economy are leading the charge, touting a return to flexibility and innovation, but Zafar said there are also cultural factors at play. “The new generation of employees is different and works differently,” he said, citing the increased use of communication tools and a prevailing work culture that values ​​freedom and is unwilling to micromanage.

Lew said organizations are adapting to the preferences of a younger workforce who “value less hierarchy and more role autonomy.”

Zafar said the rise of artificial intelligence and a new generation of workers has reinforced managers’ changing perspectives. “Amazon’s cutting of finance positions isn’t just about cutting costs, it’s about getting a glimpse into the future of work,” Zafar said. “Technology is eating away at the traditional corporate ladder, and middle managers are feeling the impact, too.”

For decades, managers have been viewed as the “glue that holds companies together,” the key to turning strategy into action. But today, Zafar said, “AI-driven tools can analyze data, assign tasks and track performance with unprecedented efficiency.” This inevitably raises the question: “When machines can do better, Why pay for a middleman?” he added.

Lu said Amazon’s growth may make it an extreme example, but it may also be a leading indicator. “Amazon’s rebalancing reflects broader corporate trends toward leaner, more efficient organizational structures driven by the need for cost control, innovation and competitiveness in rapidly evolving markets,” he said.

Companies from healthcare to finance are realizing that flatter hierarchies mean faster decisions and potentially greater profits. Like any effort to improve efficiency and profitability, there are risks in the era of corporate flattening. Zafar said sacrificing employee well-being and the key human factors of leadership and innovation will be a core challenge in the reshuffle of corporate America. But he added, “The future belongs to companies that can build lean, agile structures that allow workers to thrive in a world where machines do the heavy lifting.”