According to Amazon CEO Andy Jassy, this week’s 14,000 layoffs were not caused by a focus on AI or to cut costs. Instead, the massive layoffs are intended to kickstart a cultural change within the company.
Amazon reported quarterly revenue of $180.2 billion, a 13% increase year-on-year. Profits amounted to $21 billion. Nevertheless, the company is taking a $1.8 billion charge for severance payments this quarter.
The layoffs affect the 350,000 office workers within Amazon, while the total workforce numbers approximately 1.55 million people. Beth Galetti, Senior Vice President for People Experience and Technology, stated earlier in a memo to staff that the move is necessary to become “even stronger.” Resources must be shifted to what is most important to customers.
Operating like a startup
The announcement, made a few days earlier, was not primarily financially driven, Jassy emphasized during Amazon’s most recent quarterly analysis. “It’s not even really AI-driven, not right now, at least. Really, it’s culture.”
According to the CEO, the company is struggling with too many layers of management that slow down decision-making. “When that happens, you unknowingly weaken the ownership of the people who do the real work,” Jassy said. He was referring to employees who have to make daily decisions on the front line. They need to be able to act quickly without slow management layers getting in the way.
Remaining agile
Jassy emphasized that Amazon is committed to operating as the world’s largest startup. He believes that the technological transformation currently taking place requires an organization that can move quickly. Too many layers in the organization would hinder progress.
Earlier this year, Jassy warned that the rise of AI within large companies such as Amazon would likely lead to job losses. In a memo, he wrote: “We will need fewer people for some jobs that are done now, and more people for other types of work.” We note, however, that AI has often been used as an excuse for layoffs that are actually financially motivated. Either way, this time we are getting an explicit denial of this state of affairs at Amazon. The layoffs are therefore part of a broader reorganization that Amazon is implementing. The company wants to become more agile in a rapidly changing market, where efficiency and rapid decision-making are key.