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Exclusive: Amazon’s attrition costs $8 billion annually according to leaked documents. And it gets worse. | Engadget

Amazon churns through workers at an astonishing rate, well above industry averages. According to a tranche of documents marked “Amazon Confidential” provided to Engadget and not previously reported on, that staggering attrition now has an associated cost. “[Worldwide] Consumer Field Operations is experiencing high levels of attrition (regretted and unregretted) across all levels, totaling an estimated $8 billion annually for Amazon and its shareholders,” one of the documents, authored earlier this year, states. For a sense of scale, the company’s net profit for its 2021 fiscal year was $33.36 billion.

The documents, which include several internal research papers, slide decks and spreadsheets, paint a bleak picture of Amazon’s ability to retain employees, and how the current strategy may be financially harmful to the organization as a whole. They also broadly condemn Amazon for not adequately using or tracking data in its efforts to train and promote employees, an ironic shortcoming for a company which has a reputation for obsessively harvesting consumer information. These documents were provided to Engadget by a source who believes these gaps in accounting represent a lack of internal controls.

“Regretted attrition” – that is, workers choosing to leave the company – “occurs twice as often as unregretted attrition” – people being laid off or fired – “across all levels and businesses,” according to this research. The paper, published in January of 2022, states that the prior 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.” By way of explanation, Tier 1 would include entry-level roles like the company’s thousands of warehouse associates, while a vice president would be positioned at Level 10. It also notes that “only one out of three new hires in 2021″ stay with the company for 90 or more days.

An investigation from the New York Times found that, among hourly employees, Amazon’s turnover was approximately 150 percent annually, while work from the Wall Street Journal and National Employment Law Project have both found turnover to be around 100 percent in warehouses — double the industry average. The rate at which Amazon has burned through the American working-age populus led to another piece of internal research, obtained this summer by Recode, which cautioned that the company might “deplete the available labor supply in the US” in certain metro regions within a few years.

The assertions contained in this new set of documents align with prior reporting, but illustrate that problems with Amazon’s workplace and culture extend well above the warehouse floor. Managers of every stripe, too, are butting up against feeling their roles are a dead end. “The primary reason exempt leaders are resigning is due to career development and promotions,” one of the papers states, while also indicating those same issues represent the second-highest reason for quitting among the non-exempt workforce.

For some leaders, this could be because Amazon actively stacks the deck against certain internal promotions. The same Times investigation reported the company “intentionally limited upward mobility for hourly workers,” according to David Niekerk, a former Amazon HR Vice President. Entry-level workers who are able to beat the odds and get ahead are still pitted against the company’s preference for fresh college grads. Of leaders hired in 2021, 39 percent “are university graduates with little to no work nor people leadership experience,” while only four percent of warehouse process assistants, a low-level leadership role, were promoted to area managers.

For others, though, the documents point to considerable issues within Amazon’s vast learning and development complex, some 97 programs and 2,000 learning modules of which are overseen by the Consumer Talent Strategy, Management and Development (CTSMD) team. CTSMD has existed within Amazon for at least three years, according to one report, and in that time has ballooned to a headcount of 615, including contractors, with a projected $90 million run-rate for 2022.

A slide deck among the documents provided to Engadget states that “most programs [under CTSMD’s purview] were not created (and are not currently managed) with financial metrics as key metric” and that the existing dashboard for reviewing these programs is “inaccurate and obfuscates the actual spend.” The current arrangement “prevents proper oversight and analysis of CTSMD’s current portfolio.”

A report from April 1 of 2022 similarly found that CTSMD, as of December of last year, “did not have a standardized process to measure impact (business metrics) of our training programs” and that the report’s authors were “unable to determine whether the learning path had detectable effects on behaviors or business impact” including regretted attrition, promotion rates or a variety of internal indexing scores. Grimly, it also notes that CTSMD’s definition of “completion” for a learning module — “in contrast” to its typical definition in the learning and development industry — is “simply clicking through to the end of the course.”

Putting this in sharp relief, the April report reviewed extant training programs using the Kirkpatrick Model — a scheme within the learning and development field which evaluates training programs and separates them into four ascending levels. Of the 26 programs examined in the report, 12 merely asked trainees to react to what they had learned; nine measured some level of information recall. Only three tracked the degree to which learners were applying any knowledge they gained from the course. (An additional program — AL3M — somehow tracked information application, but not recall.) None reached Kirkpatrick level four, which measures what impact such training might have on the business.

Organizational bloat notwithstanding, the apparent directionlessness of CTSMD has meaningful financial impacts on Amazon which these documents were willing to estimate. Beyond the team’s $90 million annual budget, Amazon’s managers occupying roles from L3 up to L8 allegedly spend an estimated average of 113 hours annually on training. At what they assess to be an average annual salary of $110,000 each spread over a 120,000-deep population of employees, one document purports this could represent up to $715 million of potential waste. Given again that training is often an integral part of ascending the org structure of Amazon, and that lack of meaningful advancement is a major reason for regretted attrition, some portion of that $8 billion can likely also be ascribed to CTSMD. Another document estimated that even a 15 percent reduction in attrition would save Amazon $726 million annually. As previously stated, the source who provided these documents to Engadget believes this represents a failure of internal controls.

“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 University of California, Irvine’s Paul Merage School of Business, told Engadget. “For these gigantic companies that are listed as large accelerated filers on exchanges here in the US, they’re required to have elements of good internal control. Management is required, themselves, to go through their own internal control processes and give an opinion on them: identify weaknesses, and, if they’re material, they definitely have to report them,” she said. Large companies are also required to have an auditor attest to the company’s internal controls, though according to Professor Wellmeyer so-called adverse opinions indicating a lapse in those controls are “quite rare” and occur in “probably less than one percent” of SEC filings.

That Amazon had internal reports commissioned on lapses in its training and retention suggests the company is at least aware of the issue. It has never disclosed such gaps in its annual 10-K reports; its auditor, Ernst & Young, has never produced an adverse opinion on Amazon. However, all such disclosures hinge on the concept of “materiality” — that is, whether it will meaningfully impact the business and its investors. Professor Wellermeyer stressed that “there is no bright line rule that I can say, ‘Okay, anything above this makes this material’.”

Those 10-K filings do tell a small story in themselves, though. A smaller, scrappier Amazon of days past included the line “we believe that our future success will depend in part on our continued ability to attract, hire, and retain qualified personnel” for nearly 20 years in its annual filings, but seemingly abandoned that belief in its report from 2009 onward. For the report summarizing 2020 Amazon renamed the “employees” subsection of its preamble to “human capital” — the same year it stopped including the phrase “we consider our employee relations to be good.”

While the current slate of learning and development programs appears disorganized and potentially wasteful, Amazon is apparently in the midst of streamlining them under a new scheme it’s calling Brilliant Basics. Another document, describing the revamp, states that Brilliant Basics was slated to be deployed across operations this past June. The pilot module (called “employees want to be treated with dignity and respect”) — which was projected to take 60 to 90 minutes total — was tested among a group of 2,059 leaders in September 2021. Only 65 percent completed the module, and nearly a quarter never started it. A graph (which lacks any sort of labeling on its Y axis) does not show Brilliant Basics overtaking “existing programs” in terms of “learning hours/investment” until Q1 of “2024+.” A comment on the document notes that, like its predecessors, there do not appear to be any financial metrics currently associated with Brilliant Basics performance.

Amazon repeatedly declined to answer specific questions related to these documents. Reached 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 we can improve. Attrition is something all employers face, but we want to do everything we can to make Amazon an employer of choice. This is accomplished through offering good pay, comprehensive benefits, a safe workplace, and robust training and educational opportunities that are effective, yet always improving.” Amazon also declined to confirm or deny any of the specific claims or figures made in the documents, instead generalizing that internal documents are sometimes “rejected due to lack of reliable data, or are modified with corrected information” without indicating if that was the case here.

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