The Amazon organizational structure is predominantly hierarchical with elements of function-based structure and geographic divisions. While Amazon started as a lean, flat organization in its early years, it transitioned into a hierarchical organization with its jobs and functions clearly defined as it scaled.
Contents
Understanding the Amazon organizational structure
Geographic divisions
How has Amazon used organizational structure to its advantage?
Amazon is the largest eCommerce company in the world, employing over a million people spread across many different countries.
The Amazon organizational structure favors a vertical hierarchical approach with global, function-based groups and geographic divisions. This gives the company extensive top-down control over global operations, allowing it to increase market share and maintain market leadership status.
At the top of this chain is a senior management team reporting directly to CEO Jeff Bezos. Dubbed the S Team, this small team of Amazon senior executives works with Bezos to disseminate his ideas, solve problems, set high-level goals, and shape company culture.
The S Team has senior executives in charge of several function-based groups, including:
Despite the vast geographical reach of Amazon, the company only has two geographic divisions: North America and International.
The company also utilizes groups according to physical location and related business goals. For instance, Amazon.com Inc. is the eCommerce arm of the company. It uses groups to manage eCommerce operations according to geographic regions and their associated regulatory frameworks and logistical challenges. Ultimately, this allows Amazon to address country or region-specific issues proactively and efficiently.
How has Amazon used organizational structure to its advantage?
Many would assume that a large, hierarchical organization would be rigid and resistant to change.
However, this is not the case at Amazon. The company is a flexible and adaptive market leader in eCommerce. Indeed, Amazon has caused disruptive innovation in online marketplaces and also in global logistics.
How is this status maintained in the face of centralized decision-making and top-down control?
One key contributing factor is the Two Pizza Rule. Instituted by Bezos, the Two Pizza Rule states that no meeting should be so large that two pizzas cannot feed the entire group.
The goal here is efficiency and scalability. Smaller teams spend less time managing timetables or keeping others in the loop and more time doing what needs to be done. In turn, each team has access to company resources to meet short and long-term goals. A product team, for example, can add new product lines without having to meet with the project, process, or logistics teams.
In purely theoretical terms, these teams are given more autonomy than say a worker in an Amazon warehouse. But they are very much marching to the beat of Bezos’ drum.
Although there are frequent new additions to the S Team, many members have been in the same position for years or in some cases, decades. The long-term success of the hierarchical model has resulted in a highly experienced senior management team.
Ultimately, this has allowed Amazon to grow and expand into new markets without sacrificing competitiveness.
Key takeaways:
Amazon is a predominantly hierarchical organization incorporating function-based groups and geographic divisions.
Reportable to CEO Jeff Bezos is a group of senior executives called the S Team. Each member of the S Team is responsible for leading a functional or business unit. Many of these units are in fact large organizations in themselves.
Amazon has maintained its position as a flexible and adaptable market leader despite a rigid hierarchical structure. To some extent, this has been facilitated by small product teams having autonomous access to company resources and stable, experienced leadership.
Amazon organizational structure can be classified as hierarchical. Senior management team include three CEOs and three senior vice presidents responsible for various vital aspects of the business reporting directly to CEO Andy Jassy.
Amazon is a predominantly hierarchical organization incorporating function-based groups and geographic divisions. Reportable to CEO Jeff Bezos is a group of senior executives called the S Team. Each member of the S Team is responsible for leading a functional or business unit.
The four types of organizational structures are functional, multi-divisional, flat, and matrix structures. Others include circular, team-based, and network structures.
I explain that Amazon is decentralized to an extreme, so almost anything I describe might be different depending on where you work. This decentralization is a core aspect of how Amazon functions, what the employee experience is like, and how product development works.
Amazon is guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking. Amazon strives to be Earth's most customer-centric company, Earth's best employer, and Earth's safest place to work.
As for its structure, Amazon has a tree organizational structure, which means that is hierarchical. It also has a functional organizational structure, which refers to its organization in departments that are, for the most part, independent from each other.
Structure will give employees more clarity, help manage expectations, enable better decision-making and provide consistency. Organizational charts also assign responsibility, organize workflow and make sure important tasks are completed on time.
A hierarchical structure, also known as a line organization, is the most common type of organizational structure. Its chain of command is the one that likely comes to mind when you think of any company: Power flows from the board of directors down to the CEO through the rest of the company from top to bottom.
The four basic forms of organizational structure are functional, divisional, matrix, and flat structures. Functional organizational structures divide your company teams based on job functions and responsibilities.
Amazon equates years of experience with each level as follows: Level 4: 1-3 Years of Experience. Level 5: 3-10 Years of Experience. Level 6: 8-10+ Years of Experience.
There are six main job titles in Amazon's compensation hierarchy, which are as follows: Software Development Engineer I (L4) Software Development Engineer II (L5) Software Development Engineer (SDE) III (L6)
The average salary for a Level 6 Engineer is $67,887 per year in United States, which is 45% lower than the average Amazon salary of $124,476 per year for this job.
Organizational control typically involves four steps: (1) establish standards, (2) measure performance, (3) compare performance to standards, and then (4) take corrective action as needed.
According to Leavitt and Scott-Morton, organizational components include: (1) organization structure and corporate culture, (2) management and business process, (3) individuals and roles to changes of global economic, and (4) political and social environment.
The four basic types of organizational resources are human, monetary, raw materials and Capital. Organizational resources are combined, used, and transformed into finished products during the production process. Human resources are the people who work for an organization.
Amazon is an example of an organization with a hierarchical structure, largely due to its size. As the largest internet retailer, the company currently employs approximately 560,000 people around the world. With the hierarchical structure, all of Amazon's employees report up to the founder and CEO, Jeff Bezos.
With so many variety products and services, Amazon has a divisional structure. In a divisional structure, dissimilar departments for variety products and services enable department heads to correctly focus their capital and results, as well as keep an eye on the organization's performance.
Amazon's business strategy is based on one primary goal: to meet every customer need and want with a superior experience, so Amazon becomes part of every single purchase made.
One of the oldest management theories, Taylorism or scientific management, is having a revival in the twentieth first century in the management practices of Amazon.
This is perhaps the most important Amazon leadership principle as it sets the foundation of the entire business structure. Leaders are never satisfied with their product, the word, 'perfect' is not in their dictionary. It's curiosity which helps them to achieve new feats.
Amazon follows a tall hierarchical corporate structure. There are three key components that Amazon's organizational structure follows: 1) A global hierarchy; 2) Global groups based on functions; 3) Geographical divisions have respective sub-divisions.
The company's quirky and famous founder, Jeff Bezos, believes a strong core company culture is essential to success. So, Bezos and an early leadership team created the Amazon 14 Leadership Principles.
The following are the major function-based groups in Amazon's organizational structure: Office of the CEO. Business Development. Worldwide Amazon Stores.
Each of these five types of organizational structures have advantages and disadvantages, so it's important to consider which one may be right for your business.
The project-based structure features the best of both the traditional line and functional organizational structures: it's simple, with the first tiers answering only to a direct supervisor. The final tier is the team responsible for completing whatever project is set before them.
Amazon is an example of an organization with a hierarchical structure, largely due to its size. As the largest internet retailer, the company currently employs approximately 560,000 people around the world. With the hierarchical structure, all of Amazon's employees report up to the founder and CEO, Jeff Bezos.
And while its share of the US e-commerce market is high at 56.7%, that's not the all-dominant fraction that you might expect of a business with monopolistic power. But on closer examination, it seems like Amazon enjoys a different kind of advantage – that is, monopsony power.
Introduction: My name is Nicola Considine CPA, I am a determined, witty, powerful, brainy, open, smiling, proud person who loves writing and wants to share my knowledge and understanding with you.
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