Tech Giants Plant Flags in Established and Emerging Talent Hubs

Tech Giants Plant Flags in Established and Emerging Talent Hubs

After a yearlong search that saw cities compete for its favor, Amazon announced in November that it had picked two locations rather than one for its second headquarters (“HQ2”) project: the Long Island City neighborhood of Queens, New York, and the Crystal City area in Arlington, Virginia, a major suburb of Washington, DC. The choices proved controversial, as the tech giant had made a spectacle of courting many bidders that may never have had a chance, while both New York and Virginia are giving Amazon generous subsidies to set up shop in their states, despite the fact that these locales are strategically desirable locations for tech companies anyway.

While some observers had speculated that Amazon would pick an up-and-coming city in the US heartland, where the introduction of such a huge employer would transform the local economy, in the end, the choice came down to talent, and the New York and DC areas simply offered better access to talent than any other city Amazon was considering. (It’s also setting up a smaller operations center in Nashville, Tennessee — more on that later.) It’s no coincidence, Recode’s Jason Del Rey observed at the time, that the winning bidders were among the country’s leading tech talent hubs:

[W]hat do you see when you look at rankings of the top technology talent pools in the U.S.? Only two metro areas rank above the Washington, D.C., metro area: The San Francisco Bay Area, which Amazon never considered, and Seattle, the home of Amazon’s original headquarters. At No. 3, Washington, D.C., makes a lot of sense. Fourth is Toronto — but despite its booming tech scene, Amazon never gave any hints that it would seriously consider a big move across the border. Which brings us to No. 5 on the tech talent list: New York City.

Ultimately, Amazon decided it needed two cities — whether it always knew this or not is up for debate — to meet its hiring demands and to reduce some of the potential downsides that Seattle has experienced as a result of Amazon’s 45,000-employee footprint there.

Establishing these new headquarters will take years, the Wall Street Journal added this month, perhaps as much as a decade, because Amazon plans to do most of its hiring for them locally rather than relocate workers from its home base in Seattle. By the end of next year, the company plans to add 400 employees in Crystal City and 700 in Queens — out of an expected total of 25,000 in each city by 2028, assuming the e-commerce giant continues its trajectory of rapid growth.

Amazon’s decision underscores the importance of talent communities for major companies making strategic planning decisions with regard to location. While many workers in tech and other digitally-enabled professions can work remotely today, most organizations still prefer to recruit and base the bulk of their workforce in centrally located offices, so it pays to set up shop in a place where the talent you need already lives or would be willing to move.

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Will Amazon’s Minimum Wage Hike Shake up the Labor Market?

Will Amazon’s Minimum Wage Hike Shake up the Labor Market?

On Tuesday, October 2, Amazon announced that it would raise its internal minimum hourly wage for US employees, including part-time workers and those hired through temporary agencies, to $15 an hour. This includes workers at the company’s warehouses or “fulfillment centers,” as it calls them, in addition to store employees at Whole Foods, which Amazon acquired last year. The e-commerce giant also said it planned to lobby the US government to raise the federal minimum wage from its current hourly rate of $7.25, last updated in 2009, the New York Times reported:

The new wages will apply to more than 250,000 Amazon employees, including those at the grocery chain Whole Foods, as well as the more than 100,000 seasonal employees it plans to hire for the holiday season. The change will not apply to contract workers. It goes into effect on Nov. 1. “We listened to our critics, thought hard about what we wanted to do, and decided we want to lead,” Amazon’s chief executive, Jeff Bezos, said in a statement. “We’re excited about this change and encourage our competitors and other large employers to join us.”

The move came amid growing pressure on Amazon from the media and politicians regarding its pay practices and the work conditions of its lowest-paid employees, particularly those at its warehouses or “fulfillment centers.” Vermont Senator and former presidential candidate Bernie Sanders has been an outspoken critic of Amazon’s CEO Jeff Bezos, who is currently estimated to be the wealthiest individual in the world, citing news reports that large numbers of Amazon’s low-wage employees were dependent on public assistance. Sanders and California congressman Ro Khanna have been pushing legislation that would require companies to compensate the federal government for the cost of public assistance benefits received by their employees, including food stamps, Medicaid, and public housing.

The next day, however, Bloomberg reported that Amazon was cutting monthly bonuses and stock awards for hourly employees to help offset the costs of the minimum wage hike. Still, the company insists that these workers’ total compensation is rising:

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Amazon Abandoned AI Recruiting Tool After It Learned to Discriminate Against Women

Amazon Abandoned AI Recruiting Tool After It Learned to Discriminate Against Women

Amazon canceled a multi-year project to develop an experimental automated recruiting engine after the e-commerce giant’s machine learning team discovered that the system was exhibiting explicit bias against women, Reuters reports. The engine, which the team began building in 2014, used artificial intelligence to filter résumés and score candidates on a scale from one to five stars. Within a year of starting the project, however, it became clear that the algorithm was discriminating against female candidates when reviewing them for technical roles.

Because the AI was taught to evaluate candidates based on patterns it found in ten years of résumés submitted to Amazon, most of which came from men, the system “taught itself that male candidates were preferable,” according to Reuters:

It penalized resumes that included the word “women’s,” as in “women’s chess club captain.” And it downgraded graduates of two all-women’s colleges, according to people familiar with the matter. They did not specify the names of the schools. Amazon edited the programs to make them neutral to these particular terms. But that was no guarantee that the machines would not devise other ways of sorting candidates that could prove discriminatory, the people said.

The company scuttled the project by the start of 2017 after executives lost faith in it. By that time, however, it may have already helped perpetuate gender bias in Amazon’s own hiring practices. The company told Reuters its recruiters never used the engine to evaluate candidates, but did not dispute claims from people familiar with the project that they had had looked at the recommendations it generated.

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Amazon Mulling Health Clinics for Seattle Employees

Amazon Mulling Health Clinics for Seattle Employees

Amazon is considering opening its own primary health care clinics for employees at its Seattle headquarters, CNBC reported on Thursday, becoming the latest in a series of major US companies pursuing innovative approaches to health care outside the traditional group insurance model. Two people familiar with the confidential discussions told CNBC that the company was planning to start with a pilot clinic for a select group of employees later this year, then expand the program in 2019:

Amazon was previously looking to outsource its clinics and brought vendors in to pitch their services. After numerous rounds of discussions, Amazon ultimately decided to develop clinics internally, one of the people said. Providers including Crossover Health and One Medical offer on-site or nearby services for other companies, including those in the technology sector. …

Amazon started its effort by hiring primary care experts, beginning last year with Christine Henningsgaard, who was previously vice president of operations at One Medical. In January, the company brought in Martin Levine from Iora Health, a primary care group with clinics in Seattle.

If Amazon moves ahead with this plan, it will be pursuing a similar path to Apple, which announced earlier this year that it was establishing a network of health clinics for its employees in and around its headquarters in Cupertino, California. To staff this initiative, Apple has since hired a number of employees away from the provider that operates some of its on-site clinics in other locations, along with a variety of wellness professionals and “care navigators” to help guide patients in choosing the appropriate care for their health needs.

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Atul Gawande to Lead Amazon/Berkshire/JPMorgan Health Partnership

Atul Gawande to Lead Amazon/Berkshire/JPMorgan Health Partnership

The joint venture launched earlier this year by Amazon, Berkshire Hathaway and JPMorgan Chase to explore new ways of lowering health care costs for their employees now has a dedicated leader. Dr. Atul Gawande, a renowned surgeon, medical researcher, and author of several highly regarded books on medicine who has also been a staff writer at the New Yorker for 20 years, will serve as CEO of the as-yet-unnamed organization, Fortune reported on Wednesday:

Gawande may come as an unexpected choice to lead this new health care company, whose aim is to decrease health care costs and improve outcomes for the approximately one million employees in the triumvirate’s workforce. He practices general and endocrine surgery at the renowned Brigham and Women’s Hospital in Boston and is a researcher and professor at Harvard’s T.H. Chan School of Public Health. …

Following the Amazon-JPM-Berkshire announcement, Gawande stated that he would continue his positions at Brigham and Women’s and Harvard and will keep writing for the New Yorker even as he takes the reins of the health venture on July 9. He will, however, step away from his role as executive director of Ariadne Labs—a company he founded that focuses on health care delivery with a global health-focused bent—to become its chairman.

Few other details are publicly known about the partnership, which was announced in January, sending ripples through the stock market as pharmacy benefit managers, health insurance companies, and biotechnology firms wondered what it would mean for them. The organization Gawande has been hired to lead is an independent nonprofit based in Boston, which is expected to focus on technological solutions, data sharing, and its participants’ bargaining power as large buyers in the health care marketplace. The organization may eventually partner with other companies along with Amazon, Berkshire, and JPMorgan.

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Amazon Hit With Labor Lawsuit Over UK Delivery Subcontractors’ Conditions

Amazon Hit With Labor Lawsuit Over UK Delivery Subcontractors’ Conditions

Amazon has become the latest company to draw fire from labor advocates in the UK over alleged mistreatment of independent contractors: The GMB, a general trade union representing a wide swath of the British workforce, announced on Monday that it was suing three delivery companies that contract with Amazon to fulfill orders in the UK: Prospect Commercials Limited, Box Group Limited and Lloyd Link Logistics Limited. The union alleges that delivery drivers working for these companies were incorrectly classified as self-employed, denied statutory rights as employees, compelled to work unsafely long hours, docked pay for failing to meet impossible quotas, and in some cases retaliated against after raising concerns about their conditions.

The claimants all worked for the companies as couriers, delivering parcels for Amazon. GMB say the drivers were employees, and the companies used the bogus self- employment model to wrongly deny them employment rights such as the national minimum wage and holiday pay. The drivers were required to attend scheduled shifts that were controlled by Amazon, meaning they did not have the flexibility that is integral to being self-employed. In this situation, the couriers were treated like employees in terms of their working hours, GMB Union contends they should be treated as employees in terms of their rights too.

Two of the members are also claiming that they were dismissed because of whistleblowing, saying that their roles were terminated because they raised concerns about working practices[.] … These whistleblowing claims are also being brought directly against Amazon on the basis that it was Amazon who determined the way that the drivers should work.

Tim Roache, general secretary of the GMB, tells TechCrunch’s Natasha Lomas that the union considers it “absolutely galling” that Amazon subjects these workers to “unrealistic targets, slogging their guts out only to have deductions made from their pay when those targets aren’t met and being told they’re self-employed without the freedom that affords.” Amazon, for its part, said in a statement to TechCrunch that the practices alleged in this lawsuit are not representative of the dozens of contractors the e-commerce giant uses to provide delivery services in the country:

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Integrating Disparate Cultures Can Be a Major Obstacle in Mergers and Acquisitions

Integrating Disparate Cultures Can Be a Major Obstacle in Mergers and Acquisitions

Whole Foods Under Amazon is a fascinating recent case study (conducted by Harvard Business School professors Dennis Campbell and Tatiana Sandino and co-written with James Barnett and Christine Snively) which considers the cultural challenges inherent in the acquisition the e-commerce giant agreed with the high-end supermarket chain last year. Historically, the two companies had very different approaches to business, the authors tell Michael Blanding at HBS Working Knowledge, with Amazon focused on driving costs down through data-driven supply chain efficiency and Whole Foods’ decentralized model, in contrast, allowing for a distinctive personal touch from store to store, which in turn justified a higher price point. In the case study, based on secondhand reports in the media of how the acquisition is working out, Campbell and Sandino speculate on how culture clash could be making the integration of these companies more challenging:

The question that Campbell and Sandino ask in their case is: Given the pressures Amazon was facing to turn around Whole Foods’ slide, should they have approached the acquisition differently? While there are no easy answers, Campbell says that part of the issue is realizing the limits of standardization, even for a company that has perfected data-driven management.

“It’s not totally clear that data will be a perfect substitute for human judgment,” he says. “That might work in a digital platform, where you have tons of data on customer history you can use to drive a recommendation engine, but in a store environment, there is a lot of learning that takes place from employees interacting with customers that can be very localized and specific.”

Whole Foods is still in its early days as an Amazon property, so it’s too soon to say with any certainty how prepared Amazon was for this culture conflict and how well they are handling it, especially without having an inside view of the acquisition. However, we do know from our research at CEB, now Gartner, that culture fit is a huge concern for CEOs when thinking about mergers and acquisitions and discussing the topic with investors. Our research shows that 20 percent of the time, when CEOs bring up culture on earnings calls, they are doing so in the context of M&A. CEOs leading through M&A are increasingly under pressure to provide details on how they are integrating two distinct cultures to satisfy investors’ concerns. (CEB Corporate Leadership Council Members can learn more in our Inside View on Discussing Corporate Culture with the Street.)

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