Amazon is one of the giants in the digital industry. Amazon.com is the biggest online store in the world. Amazon is known for selling products at a price often lower than others and shipping the purchased items quickly without any hassle to the buyers. In 2008, Amazon had a market capitalization of about $29.4 billion with about 20,000 employees (Amazon, 2013). The company has a global presence with its websites operating in countries like UK, Canada, France, Japan, Germany and China. Though Amazon launched itself as an online bookstore, but over the years it has diversified into selling a wide variety of products from apparels to jewelry to cosmetic products to digital music. With the development of the services in the cloud, the company has notched itself a place as a leading player in cloud computing. Amazon aspires to become one of the leading customer-centric companies in the world and it brings in every developmental and innovative strategy looking at the changing needs of the customers and makes utmost effort to improve and aggrandize customer experience. Amazon in 2007-2009 went through a critical phase of business. It was doing well in its long running online book business and it was doing well in other segments in which it expanded like electronics, movies, computers and cameras (Amazon, 2013). It was satisfied with its progress but competitors were fast catching up. It wanted to revolutionize its business model in a way to continuously exceed customer expectations. Human resource is one of the biggest assets of Amazon. The success of its products and services depend on the coordinated efforts of many individuals. A motivated, efficient and well trained workforce will help Amazon a lot in achieving a sustainable and efficient supply chain. This essay will look at different human resource theories and discuss how Amazon performs against each of those human resource areas.
Performance Appraisal is a process of evaluating the performance of employees and their productivity in connection with certain predetermined goals and organizational objectives. Performance appraisal also measures other aspects of each of the employees including their organizational behavior, achievements, potential for improvement, strengths and weaknesses. Though performance appraisals are usually conducted on an annual basis, many companies are adopting the process of making evaluation on a quarterly basis. The objectives of performance assessment include 1) deciding and defining the performance goals, 2) evaluating the performance of the employees, 3) setting target bonus for various levels of performances and 4) giving rewards and bonus according to performance ratings (WEAC, 2013). A well-constructed performance management plan should have the following characteristics
- Performance appraisal process should be valid and reliable.
- The measurement tools used for evaluating performance should be consistent all the time.
- Performance appraisal tools should be acceptable and feasible. People who would be using the performance measurement tools should feel that the tools are satisfactory and viable (WEAC, 2013).
- The appraisal document which is used for making assessment of an employee's performance determines his goals. Therefore, it is important for the managers to break down the goals of the employees into smaller milestones so that the goals are easily achievable and the employees understand the expectation kept of them (WEAC, 2013).
- Performance evaluation process should be sufficiently specific to capture information related to an employee's performance so that everyone can easily understand the level of performance achieved by the employee.
- Since promotions, transfers and increase of compensation and benefits depend on performance reviews, the managers carrying out the performance appraisals should be objective in assigning performance ratings.
Amazon has a performance management system in line with the best practices in the industry. It follows a standard pay structure with variable and bonus structure based on the performance rating. The variable package provided by the company is based on the performance rating of each individual employee and is lucrative enough to motivate employees to give an extra effort. The organizational hierarchy is very flat and the employees are judged based on very specific and objective criterion. The expectation kept of the employees is very clear and specific. Though the performance management system at Amazon meets all the criterion of a good performance management structure, it still does come nowhere close to the best in the industry because of certain reasons. The main problem with Amazon performance management structure is that there is no feedback mechanism or discussion with the employees while setting goals (Jamieson, 2013). Goals are generally set from the top management and communicated down to the employees. This often results in excess work pressure for a lot of employees (Jamieson, 2013). So even after providing a good pay package Amazon employees remain unsatisfied.
In the current global scenario when the driving forces of globalization like communication, transportation, advent of technologies, transnational companies and internet have diminished boundaries, the work place environment has become extremely diverse and multiculturalism has become a norm in global organizations (Kerby, 2012). Though multiculturalism brings in some challenges but if those challenges can be overcome with proper implementation of strategies then diversity adds more value to an organization in terms of competitive advantage. Basic factors which a multicultural organization should implement are as below,
Pluralism: Pluralism refers to the mixed memberships of the organization and how the organization is implementing all-inclusive measures to involve all the people belonging to both majority and minority groups in different aspects of the organizational objectives. There are several techniques that could be employed to create an atmosphere of pluralism in the organization. First of all, employees should be given training on awareness and skill building. Awareness training makes the employees aware of the meaning of diversity and how diversity should be managed in the workplace. The skill building training offers more specific input on how cultural norms of different groups may affect work behavior (Cox, 1991).
Full Structural Integration: Full Structural Integration refers to the situation when the minority group members "are well represented at all levels, in all functions, and in all work groups". The fulfillment of this goal requires even distribution of education levels and skills throughout the organization. (Cox, 1991).
Full Integration in Informal Networks: In order to promote full integration in informal networks, a multicultural organization organizes different mentoring programs, support groups and social events for the minority members so that the minority groups can utilize the opportunity to give an expression to their cultural identity and share their cultural norms with members of the dominant groups (Kerby, 2012).
Absence of prejudice: Absence of prejudice is instrumental in creating a multicultural organization as prejudice begets discriminating behavior. The bias free environment devoid of discrimination can be created by making use of equal opportunity seminars, training on civil rights legislation, bias reduction training, sexual harassment workshops, focus groups, research and task forces.
Equal identification with Organizational goals: Members of different culture groups partake in the discussion of determining the organizational goals and deciding on factors to fulfill those goals. When all the employees regardless of their culture are allowed to take part in the decision making, they form a sense of attachment with the organization. When the companies manifest a genuine concern for the upliftment of the minority groups and indulge in fair treatment of all the groups irrespective of racial and religious differences, the employees develop an emotional attachment with the companies and identify themselves with the company's interest.
Amazon is a multinational and multicultural organization. Amazon offers skill training on how cultural norms of groups may affect work behavior to reduce pluralism. However, full structural integration is not possible by a company like Amazon as people of varied skills work at the same place at the same time. Amazon has less diversity in the top management than its workforce. It is yet to take any initiative to fulfill that gap. Pepsi in the past has started a managerial program called ‘Black Managers Program’ to address the diversity issue (Cook, 2011). Amazon is yet to take such initiatives. Amazon is one of the few organizations to have implemented in-house focus groups with the intent of scrutinizing the differences of attitude, feelings and beliefs existing among different cultural groups and their influence on work behavior. These focus groups discuss about the group differences openly and as more people take part in the discussion, lot of problems get sorted out on their own through communication. Further bias-reduction training is offered in Amazon to change attitudes. In Amazon, people are allowed to take part in the process of decision making irrespective of culture, race or color.
Organizational culture is the working environment of an organization. Organizational culture consists of a mixture of components like values, policies, procedures, norms, and expectations that motivate employees to work, stay committed to their goals and improve their performance. There are various organizational factors contributing to the growth of an organizational culture (Srivastava, 2005).
Leadership is one of the most important factors to induce a healthy organizational climate. How a leader guides a group of employees or an individual to meet the business targets of the company makes a lot of difference on the behavior and expectation of the employees.
Organizational Structure refers to a set of activities like coordination and supervision, work allocation aimed at accomplishing the organizational targets.
Historical Forces related to the circumstances, values and creative attributes surrounding the foundation of an organization influence the values and the model of an organization. The measures taken to deal with past crises would determine the route to be followed for dealing with future crises.
A standard of accountability should be maintained in an organization to promote a good organizational climate ensuring that the employees are aware of the responsibility of their performance and behaviors.
Some basic standards of behaviors should be followed in an organization to maintain a healthy work climate. Leaders should emphasize on the importance of these behaviors by putting a performance measurement process in place. That violation of behavioral standards would result in unpleasant consequences should be maintained. Communication, for example, is a very important aspect of desired behavior in any organization.
Vision and Strategies reflect the future ambition of an organization. If an organization adopts an aggressive vision statement and aligns it goals, strategies and priorities with its vision, over a time the organizational climate would mirror the same.
Amazon leadership promotes an open organizational culture. The organizational culture in Amazon is based on competitiveness. The management encourages employees to compete against each other and outperform the peer group. It provides special incentives to do so and this way the company expects to improve processes. However, at times this creates a sense of rivalry among the peer group which leads to stress and infighting among employees (Cook, 2011). The structure of Amazon is pretty flat. There are not many supervisory structures in Amazon. It has continuous pay grades decided on the basis of skill but there is very little managerial hierarchy. Amazon being relatively a new company should try to build a culture in the organization which will promote an environment of trust and belongingness. If that can be done successfully then it will promote a positive image of Amazon in the marketplace.
Reward and Motivation
Motivation is the force which directs people to achieve a goal. According to motivation theories, people are motivated by unfulfilled needs (Friend, 2011). Motivation is often cited as the single most important parameter for better performance. The question that remains is how to motivate an employee in a workplace. Adelf and Maslow suggest that there is no single parameter for motivating an employee (Maynard, 2002). There is a hierarchy of needs and it changes as an employee moves from one hierarchy to the next.
Financial rewards are one of the most applied methods to motivate an employee.
Incentive pay or performance pay is another reward mechanism which helps motivate an employee to work in better manner.
In some cases, employees get motivated by public recognition and increase in the area of responsibility.
Amazon provides all the above rewards to its employees to motivate them. It has a salary structure better than most in the industry. However, the average salary of Amazon is much less when it is compared to the real peer group, like Facebook, Google and Microsoft, in which it belongs. Amazon has strong performance based pay system (Cook, 2011). This system works wonders with the ground level staffs and delivery operators. This pay system motivates the employees and third party operators to deliver excellence day in and day out.
Equity theory proposes that job satisfaction is not a factor only dependent on motivational factors; rather it is dependent on multiple factors. An employee derives his job satisfaction after comparing his efforts and income with those of other in the same organization or at the same level in different organization. Equity theory proposes distribution of salary in a fair effort and skill basis (Morand and Merriman, 2013). Equity theory states if there is a big gap between the efforts an employee makes in in comparison to the income he earns, then that system will fail to sustain.
If an organization is paying much higher than the competitors then more and more people will try to join that organization at that higher salary level. This will increase the total cost for the company which will ultimately force the company to reduce its pay structure. The inverse will happen for a company which is paying less salary.
Amazon is one of the better pay masters in the current environment but it does not pay the best salary in the market. There are some organizations paying better than Amazon and there are some organizations paying worse than Amazon. This situation is ideal for Amazon as resource inflow and outflow compensates for each other and Amazon always gets skilled workforce. However, in recent times it is seen that Amazon is trying to cut down on its operational and overhead cost even further (Jamieson, 2013). This caused the average salary of Amazon employees to go down. This is causing an increase in attrition rate adding to the dissatisfaction of employees. Amazon should immediately try to take some curative measures to improve the situation or else it may end up losing skillful resources.
Management often thinks that the biggest asset for a company is its product or manufacturing processes or its services. However, the actual asset for any company is its resources. That is why human resource management is so important for an organization. There are many human resource theories and practices that have evolved over the years for better functioning of a company. Performance management, reward and recognition, equity, motivation and organizational culture are some of the structures which an organization tries to follow. Amazon is a world class organization which employs all the world class practices of human resource. Amazon implements world class human resource practices like incentive pay, pay for performance, open organizational culture, less hierarchy and diversity. However, in some of the parameters like employee equity and top management diversity Amazon is yet to take big steps. Amazon needs to take some steps in the coming future to create a human resource pool which will help Amazon go to the next level.
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