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Inside Amazon's complex employee review system, where workers feel left in the dark and managers expect to give 5% of reports bad reviews (AMZN)

WASHINGTON, DC - MAY 9: Jeff Bezos, founder of Amazon, Blue Origin and owner of The Washington Post via Getty Images, gives an update on Blue Origin and the progress and vision of going to space to benefit Earth at the Walter E. Washington Convention Center. (Photo by Jonathan Newton / The Washington Post via Getty Images)Getty Images / Jonathan Newton / The Washington Post

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As Amazon starts notifying employees about their annual compensation this month, Insider interviewed over a dozen employees, including managers, and reviewed leaked documents to reveal new changes and insights into the company's opaque performance review process.

Among the insights based on documents and sources: Amazon managers are expected to rank 5% of employees at the lowest tier, and even the most senior executives, including incoming CEO Andy Jassy, have a fixed target rate of employees they are expected to replace every year. And while Amazon has introduced a new grade to make the process slightly more transparent, the company still conceals much of its performance-measuring process from employees.

One new policy introduces a performance rating metric, with managers telling their direct reports where they rank on a scale from "needs improvement" to "achieves" to "exceeds." The new directive adds a dose of clarity to Amazon's secretive performance review system that left employees guessing about their performance review ratings, as Insider previously reported

However, those new ratings don't have a direct relationship with the metrics that managers use behind the scenes to determine compensation and raises. Even with the increased level of transparency, Amazon employees say they feel left in the dark, as the company begins this month to tell its corporate workforce how much they will make in salary, stock, and bonuses for the 12 months ahead.

More broadly, Amazon employees tell Insider that despite the moves towards transparency, the company's performance review system continues to be vague and confusing, with some saying that it includes elements of "stack ranking" — a managerial practice that Microsoft stopped using in 2013 following widespread criticism that it led to a cutthroat corporate culture that fanned the flames of office politics and stifled innovation.

"It's a step in the right direction," one current manager, who requested anonymity because he wasn't authorized to speak in public, said of the changes. "But they shouldn't be putting people through stack ranking."

Stack ranking broadly refers to any system in which teams are reviewed on a curve, with employees ranking at the bottom often getting put on performance improvement plans. Critics have charged that this practice leads to even high performers getting penalized if they rank just slightly lower than their peers. 

Amazon managers use a secret rating tied to compensation to grade on a curve, according to employees and internal documents, placing those at the bottom on a performance improvement plan, called PIP at Amazon. One document viewed by Insider shows company leaders "expect 20% of Amazonians" to receive the highest rating and 5% to receive the lowest for the current review cycle.

While the wording of the document leaves room for ambiguity in interpretation, over half of the employees who spoke to Insider compared Amazon's performance review system to stack ranking. Amazon has 1.3 million employees, many of whom work outside of the company's corporate workforce, and it's unclear how much performance reviews vary across teams.

In an email to Insider, Amazon's spokesperson confirmed the changes, but strongly disputed the notion of stack-ranking its employees. Instead, the spokesperson told Insider each employee is evaluated on their own merit.

"We regularly review our performance review process to make it more effective for managers and employees. This year we simplified the process to help give employees more information and insights to continue to grow in their careers at Amazon," the spokesperson said. "We do not, nor have we ever, stack ranked our employees. This is not a practice that Amazon uses."

Amazon did not respond to a request about whether it has quotas for performance review ratings, or how it views its performance review system as differing from stack ranking. 

The changes to Amazon's employee evaluation system come amid the biggest management upheaval in Amazon's history, including a CEO transition that will bring cloud boss Andy Jassy to the helm later this year. It also comes against the backdrop of a closely watched labor battle at one of Amazon's warehouses that could potentially lead to the first union at the company.

Amazon conceals performance review ratings to employees

The new performance ratings introduced this year rolled out through Amazon's employee feedback program, called Forte. The individual ratings are evaluated based on a number of factors, including job-specific skills and peer reviews.

"During Forte discussions you will communicate one of three performance ratings to employees based on the performance input you selected and calibrated with your organization during talent reviews," says Amazon's internal talent evaluation guidelines, viewed by Insider.

But the new Forte ratings are just one part of the equation. Employees say the more important performance measure is what Amazon calls "Overall Value (OV)" ratings because they have a bigger impact on compensation. An internal document seen by Insider says OV ratings are used as an "input into the annual compensation planning process." 

Under OV ratings, Amazon managers group their employees in three broad buckets of performance grades — Top Tier (TT), Highly Valued (HV), and Least Effective (LE). Starting this year, Amazon expanded the "HV" rating with "HV1," "HV2," and "HV3," to add depth to each evaluation, Amazon's spokesperson confirmed in an email to Insider.

An internal document provided to managers states: "We expect 20% of Amazonians are TT," 15% are HV3 (the highest of the HV ratings), 25% are HV2, 35% are HV1, and 5% are LE. Another document shows how these OV ratings correspond to pay. Amazon employees are each put in a pay band with a range for their total compensation, made up of base pay and stock options. The OV ratings are one of the key factors used to determine what percentage of the pay band an employee will get. One internal doc says those placed in the top performing group can reach 100% of their pay target, while those on the HV1 grade get zero upside.

The documents also show that while managers can disclose where an employee ranks from "needs improvement" to "exceeds," they also cannot share the actual "input scale" number from 1 to 7 on which those ratings are based. And so, while an employee might know that they rank as "achieves," they won't be told specifically if they landed at the high or low end of the score range necessary to obtain that ranking. 

"If you're unsure between one input or another, consider the behaviors the employee most consistently demonstrates and the importance of those behaviors over others for their role and level," one document viewed by Insider states.

The performance ratings, such as "needs improvement," don't directly correlate with the OV ratings, according to a map viewed by Insider. Those who land in "needs improvement" could have a LE or HV1 rating, while those in "achieves" could have an HV1, HV2, or HV3 ratings, and those in "exceeds" could have an HV1, HV2, HV3, or TT rating.

Amazon managers are told not to explicitly share the specific OV ratings with their employees, as Insider previously reported. Instead, Amazon's spokesperson said managers communicate the more "actionable" terms found in Forte ratings.

Until this year, Forte was largely considered "fluff" by many employees, as it simply asked for trivial feedback, like "super powers" and "growth ideas," for themselves and other colleagues, according to people familiar with the process. But the new ratings made Forte slightly more useful, employees say, as they are now able to use it to generally map out their OV ratings and have a more specific sense of their relative performance.

Amazon's spokesperson told Insider that Forte is not taken lightly at the company, as it helps employees understand "their unique strengths" and "how they can continue to grow." Like any company, Amazon's compensation is "tied to performance, but performance is only one input into what determines compensation," the spokesperson added, saying "current stock value and competitive analysis" are taken into account as well.

Amazon Web Services CEO Andy JassyAmazon

Employees say the current review process amounts to stack ranking

Amazon created Forte in 2017 as part of its drive to create a more positive and open performance review process, following scrutiny of its workplace practices and corporate culture in the wake of a 2015 New York Times article. The company at the time said the new system would be "radically simplified and focuses on our employees' strengths, not the absence of weaknesses."

But Amazon employees who spoke to Insider point to the Forte and OV ratings as signs of the company maintaining much of the management philosophy that gave its culture a reputation for ruthlessness, including a stack-ranking-like framework. 

One employee told Insider that some elements of stack-ranking have been in place for at least the past couple of years. This person said Amazon appeared to try to get rid of it after seeing the negative publicity generated by the 2015 New York Times article, but "brought it back into practice while making efforts to obfuscate how it all actually works."

Amazon's spokesperson told Insider that the company regularly makes improvements to its performance review system "based on feedback and lessons learned, not based on media coverage."

The most common definition of stack ranking, also known as "rank-and-yank," is to put every employee on a curve, meaning some employees have to end up in the bottom ranks. Those at the bottom ranks are typically placed in a performance improvement plan. While it was once a popular management tool, major companies like Microsoft and GE have largely abandoned the practice in recent years because it created a needlessly competitive dynamic among employees that often led to unpleasant work cultures.

"You can end up with people who were doing okay but are now in a performance management process," one Amazon employee told Insider about the company's performance review process.

While Amazon has denied that it uses stack ranking, Tom Stone, a management professor at University of Oklahoma, says this system has some similarities. Many companies that once used stack ranking, including Microsoft and GE, have changed their process to be more "forward-looking," he said, giving more frequent feedback and guidance on their career development.

"I would be tempted to call [Amazon's] a soft form of a forced ranking," Stone said. "I can see the need for it, but it's not very development-based."

Amazon sets clear benchmarks for employees it would be comfortable losing

Amazon applies this management tactic broadly, though not uniformly.

It closely follows a metric called unregretted attrition rate (URA), which represents the portion of employees that managers weren't sad to see leave the company — whether voluntarily or otherwise.

According to an internal document obtained by Insider, even the most senior executives at Amazon — including Jassy and Amazon Web Services SVP Peter DeSantis — have a goal of seeing as many as 6% of employees in their respective organizations leave as annual URA.

Sources say that some leaders may have a URA goal that's even higher. And when that number falls below the target, some managers will have no choice but to force out the lowest-performing employees, these people said, even if they're generally performing well overall.

The document viewed by Insider shows the company tracking the number of employees on an "active" performance training program, the "conversion rate" to an unregretted departure, and the "current gap" to the 6% goal.

Amazon's spokesperson said the URA targets cited in this article are "not accurate and are misleading," but did not go into specifics. 

Low-rated employees typically start performance improvement plans

Amazon rates a certain number of employees as "least effective," according to people familiar with the process. Most people who receive the LE ratings are put on a development plan for under-performers through a system called Focus. And if that process doesn't yield the expected results, they put them into a separate program called Pivot.

Amazon's spokesperson said it's "inaccurate" to say there's any tie between a performance rating and the placement on a development plan. Providing additional coaching is "something that managers determine is necessary if an employee is not meeting performance expectations," the spokesperson said.

Pivot, introduced in 2016, is an employee training program for the most under performing employees. In recent years, however, Amazon has added a twist to Pivot, making it more difficult for employees to make the case against their placement in the program, according to people familiar with the matter. 

When Pivot first launched, employees were given three options: improve performance; voluntarily leave Amazon with severance; or appeal their manager's decision to place them on Pivot. New language describing the Pivot process internally, however, shows that it no longer includes the appeal process as an option. Instead, employees can only challenge the outcome of the performance plan they were placed under.

"The program provides employees with an option to either leave Amazon with a payment or meet the expected performance bar for their role by completing an Improve Plan," an internal document describing Pivot says.

If an employee leaves Amazon while in one of these training programs, or as a result of an unsuccessful Pivot, the person will not be eligible for rehire and will count towards URA, according to people familiar with the matter.

All this, employees say, is part of Amazon's results-driven ethos that lacks a culture of empathy. Like it or not, it's the type of corporate philosophy that will continue to be at the center of Amazon's success, they say.

"Firing people and making some people feel bad — that's unfortunate, but it's not the end of the world at Amazon," one person said of how he feels about the company's approach. "What's the end of the world? It's when you don't hit your goal, don't get something done, and have a bad impact on the customer."

Do you work at Amazon? Contact reporter Eugene Kim via encrypted messaging apps Signal/Telegram (+1-415-926 -2066) or email (ekim@businessinsider.com).

Are you an Amazon Web Services employee? Contact reporter Ashley Stewart via encrypted messaging app Signal (+1-425-344-8242) or email (astewart@businessinsider.com).

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