A Kick in the Teeth
Amazon delivers Easter surprise with shock pay freeze
“If I had a time machine, I’d go back to the pandemic and prioritize my family over this company. This is a kick in the teeth.”
This was the sentiment from one of my former Amazon colleagues yesterday after the company shocked its mid-level and senior managers with a pay freeze.
Amazon recorded its most successful peak season and most profitable quarter ever in Q4 2023, banking $13.2B in profit enroute to an annual operating income of $30.4B.
The stage was set for a positive compensation cycle.
Everyone performing at or above the bar expected to see some level of reward and recognition for delivering such superb results.
It was a reasonable expectation.
And then the company yanked the rug out from beneath everyone.
Despite being profitable in 33 of its last 35 quarters and raking in $138B in profits over the last nine years, there somehow remained a cost control crisis so dire as to prevent fair and just compensation for those whose work generated all that abundance.
Or, Amazon’s executives don’t actually believe their managers are all that valuable.
Or they’ve become too greedy to pay a fair wage regardless of facts.
Whatever the true motivations, they’re clothed in cynicism by the timing and method of the announcement.
Instead of a candid conversation where assailable rationale was furnished to those impacted, Amazon chose to leak a media story just prior to Easter weekend before anyone could brief their teams.
This was obviously designed to minimize bad PR and give the fires of raging sentiment time to cool over the weekend.
It may achieve those things. But it will also absolutely hemorrhage mutual trust and confidence between managers and the company’s leaders.
Of course, many of those impacted will be working on Easter Sunday while the executives who made this whopper of a decision are home counting their money.
When the news broke in Fortune yesterday morning that no Level 6+ manager would receive a raise in this year’s compensation cycle, which typically unfolds in early April, my inbox filled with messages from incredulous former teammates.
“They must want us to quit,” one of them remarked, a sentiment echoed by many others.
Amazon’s middle and senior managers are its frontline leadership element, responsible for the safe execution of the fulfillment operation at the core of its business model.
They supervise teams numbering into the thousands, work grueling hours under relentless demands, and are consistently exposed to the high stress levels that come with a dynamic retail environment.
In recent years, they’ve worked in an increasingly understaffed environment, compounding pressure and further eroding the enjoyment of operational life at the company.
Compensation has traditionally been a strong argument to work at Amazon. But the dynamic shifted a few years ago and pay levels have eroded ever since.
The pandemic showcased what true commitment and dedication look like.
Legions of Amazon managers, including thousands impacted by the current pay freeze, gave everything they had to help the company expand its capacity and deliver for customers when they needed it most.
Profits soared to 220 percent of pre-pandemic levels.
Executives made a bet that many of the customers who found Amazon during the pandemic would remain when it was over.
They built the network to hold that demand, but later found their guess had been too high. Many customers returned to their previous retail habits, stopped using Amazon, and the network was over-built.
The expense of that excess capacity, combined with post-pandemic macroeconomic conditions and the energy price spikes resulting from war in Ukraine, made for a rocky ride for Amazon in 2022.
At an executive-hosted conference in Nashville that year, senior managers were given stern direction to execute strong, eliminate waste, and help recover the company’s cost to serve.
Most of us looked at each other and shrugged, given that the same people putting pressure on us were those who’d created the problem in the first place. Nothing they told really needed to be said.
The senior managers at that conference went back to their parts of the network and delivered beyond what had been requested. Share price is up 68% since that conference adjourned.
Amazon now turns that success against its senior managers, rolling out the horseshit claim that because they are partially compensated in shares and those shares are up in value, they’re making too much money to deserve a raise.
The reason this is rubbish is that to make the claim, Amazon makes assumptions about the future value of the shares it gives managers in their compensation packages.
Those claims are not always accurate.
When share price tumbled in 2022, many Amazonians lost tens of thousands of dollars in compensation. The company did nothing to make up that loss in 2023.
This sent the message that the share component of compensation “will be what it will be.” Amazon won’t try to balance out share fluctuations.
But the real message seems to be that it is happy to notice and react to such fluctuations when it serves executives, just not when it serves the rank and file.
If Amazon is using above-projection share prices to justify no raise, then below-projection share prices should have triggered a raise.
This level of bare-faced hypocrisy is fatal to its claim of aspiring to be Earth’s Best Employer. You don’t play these kinds of games with your own leaders if you aspire to anything more than mediocrity.
Oh by the way, Amazon hires intelligent people to run its operations. They’re not daft enough to believe in any of the bullshit coming from Amazon’s PR machine. By failing to talk straight, the company adds insult to injury.
“Wow. Working myself to the bone during the pandemic, and now the shares I got for doing that are being used to justify a pay freeze. Just wow.”
This is how the descent from great to good to mediocre company culture makes people feel.
For years, Amazon was a good place to be a manager, and was getting better.
But since Bezos left and notoriously minutiae-obsessed micromanager Andy Jassy took over, things have been going downhill fast. I don’t know anyone who thinks otherwise.
Amazon is losing its imaginative and curious spirit. It’s losing focus on customers and employees, pulled instead into what Bezos would call Day 2 behaviors … process, bureaucracy, and top-heaviness displacing customer obsession and common sense.
And now, it’s tempting an Enron-esque collapse by risking the trust and confidence of those who create its value.
Amazon has a leadership principle it calls “Earn Trust.” This principle recognizes the centrality of respect as prerequisite for trust-based operations.
Withholding a pay raise when it is deserved and you can afford to pay it isn’t just unpleasant. It’s disrespectful.
And doing it with a circumspect press release featuring nonsensical word salad that attempts to swerve the lived reality of employees isn’t just disrespectful. It’s cynical.
And doing these things in the style of an ambush instead of an adult conversation, surprising people with bad news who deserve so much more, isn’t just cynical and disrespectful.
It’s shameful. It’s a kick in the teeth.
So before I close this screed, which I am moved to write on behalf of friends and colleagues who woke up today in a company that doesn’t value them, let me share three pieces of unsolicited advice for the Amazon c-suite.
Examine your motives. You can’t inspire broad-based trust unless your motivation includes actually caring about what’s best for your people. Do you care about what’s best for your people? This pay freeze says otherwise loud and clear.
Examine your behaviors. If you want trust, you need to act and be seen acting in the best interests of everyone in the team. Opaque PR games when dealing with the livelihoods of employees is not a good look.
Examine your agenda. Are you seeking mutual benefit? If not, you will fail to establish a broad trust base in your organization. Your employees created benefit for you in the expectation you would do the same for them. So quit screwing around and do it.
For many years, I believed in Amazon because I saw its principles in everything it was doing. I was one of those who downplayed and defended when others seemed to glimpse a more cynical and corporatist ethos behind its actions.
They saw the leadership principles as a smokescreen to pacify the workforce and create enough false belief to keep people working productively.
It pains me to say it, but when I see Amazon blessed with enough abundance to serve everyone’s interests and instead choosing to leave its employees behind, I can’t argue against those critics anymore.
TC is an independent writer, speaker, coach, and consultant specializing in organizational leadership. He is a former General Manager in Amazon operations.