Amazon, the King of Hiring at Scale, is Running Out of Potential Employees

Sep 26, 2022

As the weather starts to change, many of us are already thinking ahead to the holiday season. Perhaps no organization has so many people who are doing so much thinking ahead to the holiday season as Amazon. Not coincidentally, no other organization has ever hired as many people so quickly to cope with customer demand as Amazon, the subject of today's podcast.

Yet can Amazon continue to hire the people that it needs? The uncomfortable truth is that it cannot -- and internally admits so -- without fundamentally changing its approach to how it recruits and retains its largely part-time, hourly workforce. Internal documents reveal that Amazon is already running out of potential employees in multiple key markets and will run out in most within several years. Instead of reacting to the problem when it is too late, leaders at Amazon have identified the threat and are working feverishly to solve the problem. What is apparent is that the problem cannot be solved easily nor will one change -- large or small -- solve the problem. Instead, Amazon is actively working along multiple paths to ensure that it can continue not just to survive, but also to thrive, in a world where its current high volume hiring practices will no longer be feasible.

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Transcript

Speaker 1 (00:14):

Today's episode of the high volume hiring podcast is gonna be a little different than most of the others. Today. I'm gonna talk about a company that has probably come closer to perfection than any others. When it comes to high volume hiring, I'm gonna talk of course, about our friends at Amazon.

Amazon has plenty of fans, especially amongst consumers, but it also has some detractors, but no one can deny that their devotion to efficiency from top to bottom has produced a remarkable talent acquisition system. The scale that they operate at is unimaginable for virtually every other employer everywhere in the world. Every day, they need to hire thousands of employees into warehouse positions. These are often part, but sometimes full time, the work is hard. It's fast paced and it isn't glamorous. Oh, and they need to do that in hundreds of warehouses around the world. With those warehouses often being located in suburban or even rural locations where the available labor force can be relatively small, given the needs of Amazon and their competition for the same talent. Amazon has invested vast employee money and other resources into its recruitment process repeatedly. It is found and embraced opportunities to improve its system rather than resisting those opportunities.

By arguing that their old ways have always worked well enough in the past, it embraces change. And it isn't afraid to admit that it has made a mistake and immediately set out to learn from and correct those mistakes, which brings me to the topic of this week's episode. According to a recent article in Vox, Amazon is running out of people to hire in its us warehouses. That's right, according to a document prepared in 2021 for internal use by Amazon, it will run out of people to hire in 2024, the report states quote, if we continue business as usual, Amazon will deplete the available labor supply in the us network by 2024 close quote, the first area is to experience this worker shortage will be the Phoenix, Arizona Metro area, and then the inland empire region of California, which is located about 60 miles east of the city of Los Angeles.

Why is Phoenix particularly bad? Amazon operates more than 20 facilities in the region. And attrition is even worse than in many of their other regions. In 2019, attrition in Phoenix was 128% meaning that the average worker quit or was fired after only about five months, as bad as that sounds by 2020, the attrition rate went to 205%. So under three months to help stop the bleeding, Amazon has reversed or simply stopped enforcing some of its workforce policies and its Phoenix warehouses. According to former manager, Michael Gargan, Amazon's more lenient. HR policies meant it became almost impossible to get fired. When I first heard about this problem, my thought went to automation, but of course so did Amazon's the projection that it will run out of people in 2024 takes into account its ability to raise wages and increase the use of warehouse automation. Instead of employing these evolutionary tactics Amazon's own staff concluded that it will need to implement revolutionary changes.

One of those changes is simply to reduce turnover. Amazon's internal report states that it can buy another three years simply by reducing the turnover to a hundred percent. So how will Amazon solve this problem? One way is to massively reduce that turnover. Since the launch of Amazon, it has embraced turnover as a productivity tool because it found that employees were unproductive until trained, productive early in their tenure. And then unproductive again in the internal report, Amazon recommends that it emulates some of the management practices of Walmart, FedEx and other competition for the same talent by better fitting skills and interests, making the work itself less physically and mentally demanding and better aligning shift lengths and schedules to those desired by their workforce. Another way to reduce turnover is to further increase wages. Amazon has long headed app reputation of paying its workers more per hour than they could get for most employers, but Amazon's own projections show that for every dollar it increases its wages.

It increases the size of its labor pool by 7%. In other words, some might not be willing to work for Amazon for $20 an hour, but 7% more will be at $21 per hour. And if it increases its hourly wages by a dollar 50 per hour, it'll buy another three years. Another strategy would be to increase the apply to higher rate. As of the 2021 date of the report, Amazon needed 6.7 applications to fill a single role. That's about 15%, which is about double what most employers see, but Amazon surely sees opportunity when it is rejecting about 85% of those applying getting existing employees to work more hours would also help the average warehouse employee worked 27 hours a week in 2020. The company can reduce new hires by a whopping 118,000 a year. If it increases that to just 30 hours a week. Finally, another strategy that Amazon is looking at is where to locate its warehouses to begin with instead of placing them far out in the suburbs, or even in rural areas, look for Amazon to start building new warehouses and maybe even moving existing ones to urban locations, better supported by public transportation.

And with far more people living within walking or biking distance, thank you for joining us today on the high volume hiring podcast, we appreciate your support. Please go to www.highvolumehiringpodcast.co... to subscribe for free on your favorite app. Review it. Five stars are always nice and recommend it to a couple of people. You know, who wanna learn more about how best to hire dozens or even hundreds of people. Today's podcast has been a co-production of evergreen podcasts and college recruiter, a special thanks to our producer and engineer, Ian Douglas and the rest of the team at evergreen. I'm your host, Steven Rothberg, the founder of college recruiter. Each year, we help more than 7 million students in recent graduates find great new part-time seasonal internship, apprenticeship, and other entry level jobs. Our customers are primarily fortune 1000 companies, government agencies, and other employers who are hiring at scale. They advertise their jobs that require zero to three years of experience on our niche global job search site. For more information, go to www.collegerecruiter.comslashadvertisingoremailmestevencollegerecruiter.com. Cheers.

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