This week, the New York Times came out with a scathing report on the culture and employee environment inside Amazon. It shouldn’t have been a surprise to CEO Jeff Bezos, because Amazon uses forced ranking as a management method and similar reports have come out about other firms that have used this method. This method creates an increasingly hostile environment where employee is pitted against employee and collaboration becomes virtually impossible. This is why most tech firms have been eliminating the practice, including GE and Microsoft.
But instead of taking the New York Times article to heart, Bezos instead released a memo denying the problem, which is also not uncommon with companies that have adopted this method. Most interesting was that the core message was “this isn’t the Amazon that I know,” which showcases the deeper issue: Bezos doesn’t see the Amazon that is but an ideal that exists in his mind. He is in denial. This is incredibly dangerous, because if the top exec can’t see the real company, then he or she won’t see or address problems in a timely manner and his firm won’t be able to execute the CEO’s strategy, because that strategy is founded on the belief that the firm is something that it truly isn’t. We saw a similar problem at Microsoft under Steve Ballmer.
As a firm grows, the CEO can become increasingly isolated from the culture and business as he or she is shielded from this by his office, direct reports and aides. Confirmation bias takes over, and instead of addressing the problem, he actively avoids seeing it because he just doesn’t want to believe it is true.
This is a huge danger sign and it suggests that folks working for Amazon should take Bezos’ advice (from his memo) and “get out” before things get even worse.
Let me explain.
What Amazon is facing is not an unusual problem in the tech market—particularly where forced or stacked ranking is in play. This system, which basically forces a grading curve in reviews, was designed to address a problem at GE, where managers weren’t doing their jobs, by weeding out under-performing employees. Like any draconian procedure, it had a purpose, but it truly addresses only a symptom of a bigger problem—in this case, managers who aren’t doing their jobs—and if the method is left in place, the damage it does can exceed the damage done by the problem it is attempting to correct.
Over the short term, it does get rid of the under-performing employees, but in the long term, it rewards managers who hire under-performing employees (so they have people they can get rid of) and employees who backstab others to get ahead, and it creates financial disincentives for any collaborative effort.
The New York Times article showcased these symptoms and even included a process where employees could, with impunity, backstab peers by bad mouthing them secretly to their managers. This kind of situation creates a massive amount of employee distrust and stress and it should come as no surprise that employees of both sexes are often seen crying at their desks. I’ve personally seen good employees be broken as a result of forced ranking and I refuse to work at any company that employs stacked ranking.
The method is brain-dead stupid and has been connected to the reason that otherwise successful firms like Microsoft dropped into periods when they couldn’t execute.
One of the most painful times for me and many IBMers was when the firm almost failed in the early 1990s. I wrote one of the internal reports on the cause of this while there and what was interesting was that the office of the CEO had become isolated. John Akers, the only IBM CEO to have ever been fired, was a brilliant man who had been rigorously trained to be a CEO. But over the years since Thomas Watson Jr. had run the company, the office had become increasingly isolated by aides and direct reports who learned that they could advance by altering the reports to look more favorable than they should have looked. This went well down into the organization and groups whose mission was reporting the competitiveness of products and the viability of internal processes also learned that they could advance if they reported positive results regardless of the true findings. As a result, the glowing reports that were being generated throughout the firm had no bearing on what was actually happening. To the CEO, the firm looked incredibly successful, but there was massive accelerating rot inside the company and his firing came as almost a complete surprise to him.
Situations like this can’t happen if the CEO is aggressively looking for reality; they can exist, though, if the CEO is experiencing confirmation bias and only sees what he wants to see. What Bezos is showcasing is the latter. Rather than releasing a memo of denial, he should have instead launched an investigation to see if what the New York Times reported was accurate. If, as I expect would be the case given Amazon’s management practices, he discovered it was true, and if he did what Microsoft, Dell and other large tech firms have done and eliminated forced ranking and made other changes, he could correct the rot inside his own firm.
But that isn’t what happened. I expect we’ll see more failures like the Fire Phone as this rot continues to eat at the firm.
Wrapping Up: Teachable Moment
First, I strongly recommend that you avoid any firm that uses stacked or forced ranking in any form. It is a company killer. It creates a nasty environment in which to work, where employee backstabbing is the norm and not the exception. Second, if the top executive is aggressively avoiding bad information, get out, because they, and you, likely won’t see a major problem before it is too late to address. The real teachable moment here, though, is that when you get a report from a credible source that disagrees with your world view, don’t deny it—research it, because it may indicate that your view is wrong and that the decisions you are making based on that view can kill your company or your career. This is true of anything—be it a medical report or a report on your child. You need to know the truth and you should work to overcome the natural tendency to believe only what you’d like to be true.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm. With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+