Amazon's plan to have fewer managers could result in huge job cuts and cost savings.
CEO Andy Jassy said last month that he wanted to increase the ratio of individual contributors to managers by at least 15% by the end of the first quarter of 2025. Jassy argued that having fewer managers would remove unnecessary organizational layers and help Amazon move faster without bureaucratic hurdles.
In a note published on Thursday, Morgan Stanley estimated that this effort could lead to the elimination of roughly 13,834 manager roles by early next year, resulting in cost savings of $2.1 billion to $3.6 billion.
The estimate assumes that 7% of Amazon's workforce is in management positions. At the end of the second quarter, Amazon had about 105,770 managers globally; that would drop to 91,936 in the first quarter of next year based on Morgan Stanley's estimate. Amazon doesn't publicly disclose a breakdown of its workforce.
Amazon told Business Insider that it had "added a lot of managers" in recent years and that "now is the right time" to make this change. Every team within Amazon will review its structure, and it's possible that organizations may eliminate roles that are no longer required, the company said, adding that the change was about "strengthening our culture and organizations." It declined to comment on Morgan Stanley's specific projections.
Morgan Stanley assumed that the cost per manager was $200,000 to $350,000 a year. Based on those numbers, Amazon would stand to save $2.1 billion to $3.6 billion next year if it cut those 13,834 manager roles. Morgan Stanley estimated that the savings would account for roughly 3% to 5% of Amazon's projected operating profit for 2025.
Amazon has more than 1.5 million total employees, a lot of whom work in the company's warehouses and logistics operations and aren't part of its corporate workforce.
The company could change the ratio of individual contributors to managers through other methods beyond cutting jobs. It could have managers take on new roles, for instance.
Still, Morgan Stanley sees a huge opportunity for Amazon to make itself more efficient with these big moves.
"Removing layers, operating with fewer managers and flattening the organization are all in focus to move faster," it said in the note.
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