Amazon CEO Note by Andy Jassy sent this fall to employees about the corporate culture attracted headlines for his five-day term in the office. But Jassy's messages about a greater ratio of individual contributors to managers raises a much larger question about organizational structure: What is the right balance between individual workers and managers in the overall number of -workers? It's a question that corporations have long struggled to define with anything other than anecdotal findings.

With companies now firmly in a post-Covid world, organizational experts say Amazon can lead the way in a new look at the efficiency gains related to corporate inflation, and especially middle management inflation.

"We've grown our teams quickly and substantially," said an Amazon spokesperson, echoing the message in Jassy's note: "When I think about my time at Amazon, I never imagined that I will be with the company for 27 years... Part of why I stayed was the unprecedented growth (we had $15M of annual revenue the year before I joined—this year should be well north of $ 600B)."

That growth, the spokesman said, inevitably led to the addition of many managers. Amazon plan comparison with The recent year of efficiency of Metathe spokesperson said that the company ended up adding more layers than it had before due to its growth and now is the right time to bring the structure "closer to our customers" and strengthen the "culture of ownership" of Amazon.

Over the past few years, layoffs have been as prominent as hiring in the technology sector. In 2022-2023, the sector was in what can be called the years of redundancy. While trimming the number of workers continues, Amazon's thinking involves a broader rethinking of how the rights of the largest corporations.

Morgan Stanley analysts have suggested that Amazon may reduce as many as 14,000 managerial positionswith corporate efficiencies amounting to $2 billion-$4 billion in savings. Morgan Stanley's forecast was based on an assumption that Jassy made in the note that Amazon is targeting an increase in the ratio of individual contributors to managers "by at least 15% by the end of 1Q25, in the divisions all."

Jassy pointed to "artifacts" of growing headcount, such as "pre-meetings to pre-meetings to decision-making meetings," and created a "Red Tape Box" for employees to share processes that reduce decision-making and that he said "it came in and we can root out."

This is not a process that is unique to Amazon, said Joseph Roh, a professor at the Neeley School of Business at Texas Christian University. Rapid growth can lead to the rapid increase of "management layers without re-evaluating whether these roles are necessary," he said. In general, the more fixed structure is in, and there is now a greater emphasis on individual contributors across corporations. There is no exact formula, no "golden ratio" for contributor to manager. "My understanding is that the ideal ratio of individual contributors to managers depends a lot on the nature of the work," Roh said, but added that it's generally in the neighborhood of 7 to 10 individual contributors per manager .

Investor and economic pressure play a role, and at a time when tech giants are spending billions on AI without being able to deliver Wall Street immediate proof of return on investment, effort will be rewarded aware to curb other costs. And despite the fact that companies like Amazon want everyone back in the office, spit-balling ideas around the proverbial whiteboard or watercooler, there is a sense that AI can already play a more direct role, with some some. unemployed middle management positions.

"Digital transformation plays a significant role," said Roh, "as automation and advanced technologies reduce the need for middle managers to oversee tasks that can now be monitored by software."

"What I saw from Amazon is just the beginning"

"What I've seen from Amazon is just the beginning," said Naeem Zafar, a professor at the UC Berkeley Haas School of Business and Northeastern University, with downsizing the management layer a larger trend to reach. across corporate America. Technology companies that have dominated the economy and grown at a rapid rate are leading the way, preaching a return to an approach that is agile and innovative, but Zafar said there are also cultural factors at work. "The new generation of employees are different and work differently," he said, citing a growing use of communication tools and a general ethos of a work culture that privileges freedom and denies the micromanagement.

According to Roh, organizations are adapting to the preferences of a younger workforce that "values ​​less hierarchy and more autonomy in their roles."

Zafar said the rise of AI along with a new generation of workers reinforces this evolving view of managers. "Amazon's downsizing of manager roles isn't just about cutting costs; it's a look at the future of work. Technology is eating away at the traditional corporate ladder, and middle management is feel the bite," said Zafar.

For decades, managers have been seen as "the glue that holds companies together" and key to translating strategy into action. But today, Zafar said, "AI-powered tools can analyze data, assign tasks, and track performance with unprecedented efficiency." This makes it inevitable that the question arises, "Why pay for a middleman when a machine can do it better?" he added.

Roh said Amazon's growth may make it an extreme example, but perhaps it's also a leading indicator. "Amazon's rebalancing reflects a broader corporate trend toward more efficient and more efficient organizational structures, driven by the need for cost control, innovation and competitiveness in rapidly evolving markets," he said.

From healthcare to finance, companies are realizing that flatter hierarchies mean faster decisions and potentially greater profits. As with any effort to improve efficiency and the bottom line, there are risks in an era of corporate flattening. The sacrifice of employee well-being and the crucial human elements of leadership and innovation are challenges that will be at the center of this reshuffling in corporate America, Zafar said. But he added, "The future belongs to companies that can build lean and agile structures, empowering employees to thrive in a world where machines do the heavy lifting."