Posts Tagged ‘Kellogg’

Image Courtesy Fast Company

I recently read a blog post by fellow Kellogg professor Jan A. Van Miegham about some harsh accusations made against Amazon by American Rights at Work, an organization that describes itself as “inform[ing] the American public about the struggle to win workplace democracy.” The post struck me because of the harshness of the alleged conditions and the reputational risk posed to Amazon.  How these accusations, originally published in The Morning Call, a Pennsylvanian newspaper, pan out is yet to be seen, but Miegham breaks down the story and provides an interesting look at how the Internet can promote social responsibility as much as it can fuel a potential corporate crisis.

Three days ago, my friend Sheri forwarded me an email she had received from American Rights At Work (excerpts below) about sweatshop conditions in an Amazon warehouse.  I told my executive MBA class yesterday that I should write a blog entry about this for two reasons:

  1. Illustration of the social power of the Internet to force change for the better. This story will quickly make it to the major newspapers which will force Amazon to quickly address this before it becomes a PR crisis.  (My colleague Daniel Diermeier will surely write about the reputation management principles that Amazon should follow.)
  2. The use of performance measurement and temporary workers in a warehouse/service operation where every employee move is recorded.

On to the first item: The social power of the Internet to force change for the better.  The email started as follows:

Dear Sheri:

When you order a book from Amazon, do you know why it’s so cheap and arrives so fast? Because employees at an Amazon.com warehouse are literally working in a sweatshop.

New details have emerged that working conditions are so horrendous – with temperatures inside a Breinigsville, PA, warehouse often soaring above 100 degrees – that Amazon keeps an ambulance parked outside.1

Amazon would rather pay to take sick, overheated workers out on stretchers than turn up the air-conditioning.

The email cited a local newspaper that interviewed multiple people who work(ed) at Amazon’s Lehigh Valley warehouse.  I see no reason not to believe this article and, at the same time, I recognize that it may be “difficult” to control temperature in a large warehouse and that this may have been an outlier during some hot summer days. However, let us not forget that “difficult” in business means “costly.”  Surely, temperature control in large areas can be done—Costco’s large warehouse stores have pleasant temperatures all year round—it just can be expensive [I don’t often run the AC at home for that reason].  But Amazon clearly can afford it when rakes in $33 billion in revenues.

So my first point is: When managing an organization, don’t simplistically follow short-term profit maximization.  Rather ask yourself at the end of each the day before you go to sleep: did I do the right thing? Can I sleep well at night?  The answer here seems obvious to me…

Now on to the second item: performance metrics and temp workers. The email continues and states:

Amazon’s outrageous behavior includes:

  • Demanding work at such backbreaking speeds that employees suffer injuries and face constant threats of termination for being too slow.
  • Forcing employees to stay in an unsafe working environment where the heat index can hit 114 degrees.
  • Relying on temporary workers to drive down wages and make it hard for workers to collectively stand up for their rights.

While Amazon is an Internet company, these allegations are reminiscent of similar issues at the dawn of the Industrial Revolution when scientific management would use time and motion studies to set minimal standards.  In Amazon’s setting, every move of an worker is recorded because each item is scanned when retrieved or packet into a tote or box. So there is a wealth of detailed information and no space to hide.  Should a good operations manager not use this data?

The question is to what extent and how that data is linked to incentives.  It is not uncommon for sales people to be measured in terms of the numbers of calls made per day and to be summoned by their manager when they fail to reach their quotas.  So, there is nothing new here, except perhaps the moral/ethical implication: is Amazon pushing it to far?

Here again I would suggest any manager to not simplistically follow short-term economic profit
maximization but to also consult their heart.  While cold economic thinking can say: “well, there’s a deep pool of labor available so we can afford the turnover,” a sensible and wise manager will always ask: “Did I do the right thing?”  When ever in doubt, it is useful to ask: How will I feel if this appears in the newspaper?”  Again, the answer here seems obvious to me…

Last: in contrast to the two earlier points, the critique about using temporary workers is without merit.  We have recorded in this blog the huge demand swings that Amazon must accommodate: up to a fourfold increase for the holiday period.   Staffing up to the peak with permanent employees that for 80% or more of the year are idle is not advisable to either the employees or the firm…

Jan A. Van Mieghem is a professor of managerial economics and operations management at the Kellogg School of Management at Northwestern University. From 2009-2010, he served as one of the two Senior Associate Deans at the Kellogg School. He is the author of Operations Strategy and writes the blog The Operations Room, a forum for discussing current topics in operations management (OM).


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