Inside Amazon's Plan To Cut Managers: More Direct Reports, Fewer Senior Hires, And Pay Cuts

iStock; Rebecca Zisser/BI

• Amazon wants fewer managers.
• Internal guidelines for a big sales team at AWS give a glimpse into its plans.
• Amazon's reorg reflects a broader trend in corporate America to trim middle managers.

Amazon's effort to whittle down middle-management is taking shape.

The company recently told some managers to increase their direct reports, make fewer senior hires, and down-level or cut pay for some employees, according to people familiar with the matter and internal guidelines shared with a large sales team at Amazon Web Services.

In September, Amazon CEO Andy Jassy announced a plan to increase the ratio of individual contributors to managers by 15% by the end of March. By reducing management layers, the company hopes to "decrease bureaucracy" and "move fast," Jassy said at the time.

The internal guidelines give an early glimpse into how Amazon intends to complete a management shake-up that could impact thousands of corporate employees. Amazon hasn't shared anything publicly since unveiling plans to have fewer managers last year.

In an email to BI, Amazon's spokesperson said the internal guidance document might be true for a specific team but not for the whole company. Individual units communicate directly with employees as they make changes to their structures under the broad mandate of creating "customer-centric, agile organizations that empower fast decision-making," the spokesperson added.

Minimum 8 direct reports

Amazon

One key point in the AWS team guidelines document obtained by BI is to put at least 8 direct reports under each manager. The new "span of control" directive is an increase from a minimum of 6 direct reports each manager had in the past, according to the guidelines said.

It's not the first time Amazon has made changes like this. In 2017, Amazon founder and former CEO Jeff Bezos asked every manager to have at least 6 direct reports as part of a plan to "de-layer" the company.

The latest mandate has made some employees concerned enough to ask questions about it. At an internal all-hands meeting in November, Jassy addressed the issue, saying Amazon went on a massive hiring spree during the pandemic, which "stretched" the company and led to slower decision-making, BI previously reported.

"I hate bureaucracy," Jassy said during the meeting.

Amazon's spokesperson told BI that the ideal team size will vary, and no companywide mandate requires all managers to have a certain number of direct reports. The spokesperson added that a full-time employee with one or more direct reports is considered a manager "in title," regardless of the number of direct reports they have.

Pause hiring new managers

Amazon

The guidelines for the AWS sales team also require pausing new manager hires. This is temporary until the team understands the full ramifications of the organizational change, the guidelines said.

This particular AWS team has discussed hiring fewer middle managers since at least April of last year, according to another internal document obtained by BI. The team found that the hiring pace of middle managers had outpaced entry-level employees in recent years, resulting in increased costs. The document recommended hiring more early-career professionals to shift the team's structure from a "diamond"-shaped organization to a "pyramid" shape where more than half the team is concentrated in lower-level positions.

This trend is happening in other parts of corporate America. Besides Amazon, companies including Meta, Citi, and UPS have made changes to trim supervisory roles. Data from last year showed that companies are cutting middle managers and not backfilling those positions.

Another Amazon internal guideline from September, previously obtained by BI, said the manager reduction plan could result in role eliminations as "organizations may identify roles that are no longer required." In a note published last week, Bank of America analysts estimated that Amazon could save roughly $1.5 billion in annual costs from the manager cuts.

Amazon's spokesperson said the company adjusts hiring based on business needs, and it continues to have open manager roles available. The spokesperson added that there are many ways to reduce the number of managers without terminating them, such as by reconfiguring teams or reassigning employees.

Down leveling

Another aspect of the plan is to down-level some of the managers to individual contributor roles, according to the recent guidelines for the AWS sales team. Two current AWS employees told BI that several managers have been pushed down a level due to the new approach. That meant being moved to a smaller pay band, one of the people said.

One former employee who left recently said the promotion criteria are changing. This person said some AWS teams now require managers to have more people under them to qualify for a promotion.

Amazon's spokesperson told BI that moving from an individual contributor to a manager role, or vice versa, can happen without changing levels. There's no companywide requirement for team size to get promoted as the promotion criteria involve many factors, the spokesperson added.

For several Amazon employees who spoke to BI, the reorganization is creating a bigger problem: a culture of fear. They said managers seem to shy away from taking risks or making hard decisions because they don't want to be held accountable for failures, which could make them a target of the cuts.

"No one wants to be the one that failed," one of the people said.

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