Amazon and the endangered future of the middle manager

Amazon CEO Andy Jassy’s note The article sent to employees this fall about company culture made headlines because of his five-day office mandate. But Jassy’s message about increasing the ratio of individual contributors to managers raises a much larger question about organizational structure: What is the right balance of individual contributors and managers in the overall workforce? It’s a question that companies have long been able to define only with anecdotal evidence.

According to organizational experts, companies are now firmly in a post-Covid world Amazon could lead the way in a new look at efficiency gains associated with corporate bloat and particularly middle management bloat.

“We have grown our teams quickly and significantly,” an Amazon spokesperson said, echoing the message in Jassy’s note: “When I think about my time at Amazon, I never imagined I would be with the company for 27 years… One “I noticed the unprecedented growth (we had annual sales of $15 million the year before I joined – this year we’re expected to well exceed $600 billion).”

This growth, the spokesman said, inevitably led to the hiring of many managers. Comparing Amazon’s plan with Meta’s last year of efficiencyThe spokesperson said the company ultimately added more layers than before due to its growth and now is the right time to bring the structure “closer to our customers” and strengthen Amazon’s “ownership culture.”

There have been layoffs and hiring in the tech sector in recent years. In 2022-2023, the sector was in what could be described as the phase Years of layoff. Meanwhile Staff reductions continues, the Amazon mindset involves a broader rethinking of how to right-size the largest companies.

Analysts at Morgan Stanley suggested Amazon could make cuts up to 14,000 management positionswith business efficiencies accounting for $2 billion to $4 billion in savings. Morgan Stanley’s forecast was based on an assumption Jassy made in the note that Amazon aims to increase its ratio of individual contributors to managers “by at least 15% by the end of 1Q25 across all business lines.”

Jassy pointed to “artifacts” of staff growth, such as the “pre-meetings for the pre-meetings for the decision-making meetings,” and has created a “bureaucracy mailbox” for employees to share processes that slow down decision-making, and that he said: “Creep in and we can exterminate.”

This is not a unique process at Amazon, said Joseph Roh, a professor at Texas Christian University’s Neeley School of Business. Rapid growth can result in “management levels being added quickly without reevaluating whether those roles are necessary,” he said. In general, the flatter structure has prevailed and there is now a greater focus on individual contributors across organizations. There is no exact formula, no “golden ratio” for the relationship between employee and manager. “It is my understanding that the ideal ratio of individual employees to managers depends largely on the nature of the work,” Roh said, but added that it is generally around 7 to 10 individual employees per manager.

Investor and economic pressures play a role, and at a time when tech giants are spending billions on AI without being able to provide immediate proof of return on investment to Wall Street, a conscious effort to contain other costs will pay off. And despite the fact that companies like Amazon want everyone back in the office and spitting out ideas around the proverbial whiteboard or water cooler, there’s a feeling that AI could already be playing a more direct role for some Middle management positions will become redundant.

“Digital transformation plays an important role,” Roh said, “as automation and advanced technologies reduce the need for middle managers to oversee tasks that can now be overseen by software.”

“What you saw on Amazon is just the beginning”

“What you’ve seen at Amazon is just the beginning,” said Naeem Zafar, a professor at the UC Berkeley Haas School of Business and Northeastern University, as downsizing is likely to be a larger trend sweeping across American companies becomes. Technology companies that have dominated the economy and grown rapidly are leading the way and preaching a return to an agile and innovative approach, but Zafar said there are also cultural factors at work. “The new generation of employees is different and works differently,” he said, pointing to the increasing use of communications and a general work culture ethos that privileges freedom and resists micromanagement.

According to Roh, companies are adapting to the preferences of a younger workforce that “values ​​less hierarchy and more autonomy in their roles.”

Zafar said the rise of AI along with a new generation of workers reinforces this evolving view of managers. “Amazon’s elimination of managerial positions is not just about cutting costs; it is a look into the future of work. Technology is eating away at the traditional career ladder and middle management is feeling the bite,” said Zafar.

For decades, managers were considered “the glue that holds companies together” and the key to turning strategy into action. But today, says Zafar, “AI-powered tools can analyze data, assign tasks and track performance with unprecedented efficiency.” This inevitably begs the question: “Why pay for a middleman when a machine can do it better?” he added added.

Roh said that while Amazon’s growth is an extreme example, it may also be a leading indicator. “Amazon’s realignment reflects a broader corporate trend toward leaner, more efficient organizational structures, driven by the need for cost control, innovation and competitiveness in rapidly evolving markets,” he said.

From healthcare to finance, companies are realizing that flatter hierarchies mean faster decisions and potentially higher profits. As with all efforts to improve efficiency and bottom line, there are risks in times of business slowdown. Sacrificing employee well-being and the crucial human elements of leadership and innovation are challenges that will be at the heart of this restructuring in corporate America, Zafar said. But he added: “The future belongs to companies that build lean, agile structures and enable employees to thrive in a world where machines do the heavy lifting.”