Amazon’s (NASDAQ:AMZN) mission has always been to be Earth’s most customer-centric company. That relentless focus on the customer is a big reason why Amazon is one of the most valuable companies in the world. Making things easier for the customer is the foundation of the company’s culture of invention, and its reputation for low prices, fast delivery, and great customer service has earned it a degree of customer loyalty that itself is a competitive advantage.
That’s made it easy for Amazon to layer on new businesses on top of its core e-commerce operation as its customers trust the brand and are happy to try new things from Amazon. This includes things like an Alexa-enabled device or delivery from Whole Foods through Amazon Prime, which now has 200 million members around the world, making it the most successful loyalty program in history.
Amazon regularly ranks near the top of customer-satisfaction surveys, but its relationship with its employees over its history has been more controversial. A 2015 New York Times profile painted Amazon as a grueling workplace where it’s not unusual for white-collar workers to cry at their desks after being upbraided by a supervisor or criticized by a colleague.
Meanwhile, the treatment of Amazon’s warehouse workers has long been a lightning rod for criticism from progressive politicians and labor activists, who have complained that the company underpays its workers, disregards some safety protocols, and has unreasonable performance standards. This leads workers to do things like forego bathroom breaks, a focus of a recent Twitter spat between Amazon and its detractors.
Those issues reached a head recently in the biggest union election in the company’s history at a fulfillment center in Bessemer, Alabama. Amazon emerged victorious in the vote, winning by a more than 2-to-1 margin, but CEO Jeff Bezos said he wasn’t satisfied with the outcome.
In his annual shareholder letter, his last as Amazon CEO, Bezos said he took no comfort in the results, saying the lesson he learned from it was, “It’s clear to me that we need a better vision for how we create value for employees — a vision for their success.”
Becoming Earth’s best employer
In response to the recent barrage of criticism on Amazon’s labor practices, Bezos proudly defended the company, insisting it does care about its employees, and he shared data to back up that claim. He said 94% of Amazon fulfillment employees would recommend working there to a friend, and noted the company invests significant resources in safety and coaching. Eighty-two percent of that coaching is positive.
However, Bezos is clearly unsatisfied with Amazon’s reputation as an employer, and said the company’s next big goal is to become the world’s best employer and safest place to work, adding that it would be among his top priorities among his new role as Executive Chair. He noted that Amazon has already taken significant steps on safety issues, reducing issues like musculoskeletal disorders like sprains and strains, and the company plans to spend $300 million on safety issues this year.
Will it work?
Changing the culture at a 26-year-old company with more than 1 million employees won’t be easy, and neither will improving its reputation as an employer. While many college graduates aspire to work at its offices, and its warehouses offer health insurance from the first day, as well as a $15/hour minimum wage, Amazon is also known to be ruthless about internal performance metrics.
It’s highly demanding of its employees, both in its fulfillment centers and corporate offices. Though Bezos claims nearly all of its warehouse workers think it’s a good place to work, its ratings on employment website Glassdoor portray it as only an average workplace. The company gets just a 3.8 rating out of five stars, and 74% of respondents say they’d recommend it to a friend.
Part of the problem for Amazon is that there’s a fundamental tension between pleasing both your employees and customers. Paying employees higher wages means that costs go up, which generally leads to higher prices. Offering 24/7 customer service means an employee has to always be available, and same-day delivery could mean a never-ending day for your delivery drivers.
Throughout its history, Amazon has clearly favored the customer in this conflict, and shareholders have been major beneficiaries, as well, given the stock’s monster returns. Of the three major stakeholder groups — customers, shareholders, and employees — customers and shareholders have done very well by Amazon. The fate of its employees, on the other hand, is an open question.
Bezos understands this. As he steps down from the CEO chair with an eye on his legacy, it’s a worthy challenge to confront.
Investors should be encouraged by his sudden attention to this problem. After all, Amazon has massive competitive advantages and few vulnerabilities on the business front, but its reputation seems to be increasingly at risk, as does its status as a tech titan yet to be disturbed by antitrust regulations. Amazon’s treatment of its employees touches on both of these issues, and the company would gain much credibility in Washington, with its critics, and with its own employees if it truly becomes the world’s best employer.
It’s a bold goal, but that’s never stopped Bezos before. Investors should be cheering as he tackles what could be his most complicated challenge yet.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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