Leaked data show Amazon’s attrition costs $8 billion yearly Worse Amazon hires and fires people at an amazing rate, much faster than the average for the industry. According to a group of documents marked “Amazon Confidential” that were given to Engadget and had not been reported on before, this huge loss of employees now has a cost.
One of the documents, written earlier this year, says, “[Worldwide] Consumer Field Operations is experiencing high levels of attrition (regretted and unregretted) across all levels, which is estimated to cost Amazon and its shareholders $8 billion per year.” For a sense of size, the company’s net profit for its fiscal year of 2021 was $33.36 billion.
The documents, which include internal research papers, slide decks, and spreadsheets, paint a bleak picture of Amazon’s ability to keep employees and how the current strategy may be bad for the company’s finances as a whole. They also say that Amazon doesn’t use or track data well enough when it comes to training and promoting employees, which is an ironic flaw for a company with a reputation for obsessively gathering customer information. A source gave these documents to Engadget. This source thinks that the gaps in the accounting show a lack of internal controls.
Leaked data show Amazon’s attrition costs $8 billion yearly Worse
This study found that “regretted attrition,” which means workers leaving on their own, happens twice as often as “unregretted attrition,” which means people getting laid off or fired, “across all levels and businesses.” The paper, published in January 2022, says that the previous year’s data “indicates regretted attrition [represents] a low of 69.5% to a high of 81.3% across all levels (Tier 1 through Level 10 employees), suggesting a distinct retention issue.” To explain, Tier 1 would be entry-level positions like the company’s thousands of warehouse associates, and Level 10 would be a vice president. It also says that “only one out of every three new hires in 2021 will stay for 90 days or more.”
A New York Times investigation found that Amazon lost about 150 percent of its hourly workers every year. The Wall Street Journal and the National Employment Law Project both found that Amazon lost about 100 percent of its warehouse workers every year, which is twice the industry average.
The claims in this new set of documents are in line with what has been said before, but they show that problems with Amazon’s workplace and culture go far beyond the warehouse floor. Managers of all kinds are also feeling like their jobs are dead ends.
For some leaders, this could be because Amazon works against internal promotions. A Times investigation found that the company “intentionally limited upward mobility for hourly workers,” according to David Niekerk, a former Amazon HR Vice President. Even if an entry-level worker is able to beat the odds and get ahead, they still have to compete with the company’s preference for recent college graduates.
For others, though, the documents show that there are a lot of problems with Amazon’s huge learning and development system. The Consumer Talent Strategy, Management, and Development (CTSMD) team is in charge of 97 programs and 2,000 learning modules. CTSMD has been part of Amazon for at least three years, and its number of employees and contractors has grown to 615, with a projected $90 million run rate for 2022.
In one of the documents given to Engadget, a slide deck says that “most programs [under CTSMD’s control] were not created (and are not currently managed) with financial metrics as key metrics” and that the existing dashboard for reviewing these programs is “inaccurate and hides the actual spend.” The current arrangement “prevents proper oversight and analysis of CTSMD’s current portfolio.”
A report from April 1, 2022, also found that CTSMD, as of December of last year, “did not have a standardized process to measure impact (business metrics) of our training programs.” The report’s authors were “unable to determine whether the learning path had detectable effects on behaviors or business impact,” such as regretted attrition, promotion rates, or a variety of internal indexing scores.
In April, a report looked at existing training programs using the Kirkpatrick Model. This is a method used in the learning and development field to evaluate training programs and divide them into four ascending levels. Of the 26 programs the report looked at, 12 just asked trainees to react to what they had learned, and 9 measured some level of information recall. Only three programs looked at how much knowledge was being applied.
The apparent lack of direction of CTSMD has real financial effects on Amazon, which these documents were willing to estimate. In addition to the team’s $90 million annual budget, Amazon’s managers in roles from L3 to L8 are said to spend an estimated average of 113 hours per year on training. At what they estimate to be an average annual salary of $110,000 per employee, spread over a population of 120,000 employees, one document purports that this adds up to a total cost to the company of $70 million
“Internal controls are set up so that you have policies and procedures to make sure that the company’s strategic mission and, ultimately, their financial statements are correct,” Patricia Wellmeyer, an assistant professor of accounting at the University of California, Irvine’s Paul Merage School of Business, told Engadget.
The fact that Amazon commissioned internal reports on gaps in its training and retention shows that the company is at least aware of the problem. It has never mentioned these gaps in its annual 10-K reports, and its auditor, Ernst & Young, has never given an unfavorable opinion on Amazon. However, all such disclosures depend on the concept of “materiality,” which means how much it will affect the business and its investors.
Those 10-K filings do tell a small story, though. When Amazon was smaller and more scrappy, it said in its annual reports for nearly 20 years, “we believe that our future success will depend in part on our continued ability to attract, hire, and retain qualified personnel.” However, it seems to have given up on that belief in its reports after 2009, when it renamed the “employees” section of its preamble to “human capital.”
Amazon seems to be in the process of organizing and streamlining its learning and development programs under a new plan called Brilliant Basics. The current set of programs seems disorganized and wasteful.
Amazon repeatedly refused to answer specific questions about these documents. When asked for comment, a spokesperson wrote: “As a company, we recognize that it’s our employees who contribute daily to our success, and that’s why we’re always evaluating how we’re doing and ways to improve. Attrition is something all employers face, but we want to do everything we can to make Amazon an employer of choice. This is done by offering good pay, comprehensive benefits, and a great work environment.”