photo by Tony Webster
Whether to make something or buy it is a classic business management decision. Making your own may be cheaper, but if it ties up resources that could be more profitably invested elsewhere, it can be a mistake not to outsource.
With a dramatic announcement that it will retrain one-third of its U.S. work force, Amazon recently decided that it is cheaper to make the talent it needs for its future growth than to “buy” that talent in a tight job market that is also constrained by an aging and slow-growing population.
Amazon arrived at this conclusion even knowing that many of the workers it trains are apt to take their training to other employers. Beth Galetti, senior vice president of human resources, said in a statement: “While many of our employees want to build their careers here, for others it might be a stepping stone to different aspirations. We think it’s important to invest in our employees, and to help them gain new skills and create more professional options for themselves.” Amazon also knows that some of the training it already finances does not apply to its current business needs. No system is perfectly efficient, and perfection is not the goal. In business as in life, the perfect is the enemy of the good.
The company announced its pledge to retrain 100,000 of its workers earlier this month, and said it will dedicate more than $700 million to the effort over the next six years. Eligible employees will come from across the company, from Amazon’s corporate offices to its fulfillment centers. In general, this “upskilling” is meant to move relatively unskilled workers into technical positions such as data analysis and software engineering. Besides direct training, Amazon plans to expand its existing program to assist fulfillment center workers with tuition if they pursue degrees in high-demand fields. The retraining plan will incorporate six programs altogether, some expanded from existing efforts and some brand-new. These programs are all voluntary for employees.
Amazon analyzed a situation in which robotics and automation are poised to reduce or wipe out many of its existing workers’ positions. At the same time, record low unemployment makes it difficult to fill open jobs, especially those that rely on highly valuable skills. The Wall Street Journal recently reported that Amazon has more than 20,000 open positions in the U.S. to fill, not including the projected jobs for its new facility in Virginia. Amazon management came to the reasonable conclusion that it makes sense to add the necessary skills to the people it already employs.
Other companies are beginning to draw similar conclusions. AT&T, Walmart and a handful of others have begun to train existing workers for new roles too. And worker-training and education programs are nothing new. But as is typical of Amazon, the company is an early adopter of a tactic that is likely to become common – and evidently plans to implement it with characteristic zeal.
I have already made known my view that Amazon is an exceptionally well-managed company. It isn’t afraid to take risks, but they are usually prudent risks in the sense that the upside greatly exceeds the downside. When it comes to acquiring the talent Amazon needs to drive its business forward, the training decision looks to be no exception. Although robots are unlikely to take over the warehouses for at least a decade, Amazon needs time for the training to yield the results it is looking for.
Amazon also probably calculates that there are extrinsic benefits to retraining. It can rub New York’s nose in the fact that it drove out Amazon’s plans for a major expansion in Long Island City, Queens, for example. I am exaggerating here – I don’t actually think Amazon cares one way or the other how New York feels about missing out on its full potential share of the retraining. But Amazon certainly is sending a message to all the communities where it currently operates and may operate in the future – including New York – that the company gives back to the places that support it in ways beyond providing a payroll.
Retraining all these workers will be a big investment, one that arrives well ahead of the curve of U.S. business. But then, it’s Amazon’s way to pioneer new methods of doing business and to pursue those methods in a big way. More often than not, the company’s bets pay off. I would guess that this one will turn out to be a winner.