Leadership: The Amazon Way - Term Paper Example

 Leadership: The Amazon Way BEZOS’ LEADERSHIP STYLE Jeffrey Bezos maintains a leadership style that is a cross between transactional leader and transformational, with a concentration towards transforming. Bezos believes in decentralization, the process of moving decision-making from the top layers of the organization and then distributing this knowledge downward. By involving employees in the routine decision-making of the organization, Bezos provides better skilled employees that are able to provide the vision of superior customer service. This was noticeable in the case study when Bezos put each new employee recruit through customer service exercises at the fulfillment centers. What Bezos is doing is cross-training employees against his own vision of being customer-centric, therefore allowing employees to expand their specialized job role knowledge into multiple areas with a focus on the customer. What is transactional and transformational leadership? Transactional leaders are those who understand what employees want to receive from their work and then sets up a contingent reward system for meeting job goals (Den Hartog, House, Hanges & Ruiz-Quintanilla, 220). This type of leader is not heavily controlling and will allow employees to follow their own self-interest so long as their jobs are performed effectively (Den Hartog et al). This was evident with Bezos as he promoted a fun working atmosphere so long as the ultimate goal of superior customer-service in the customer-centric organization has been fulfilled. A transformational leader, a great deal of Bezos’ personal characteristics, opens opportunities for fresh thinking, consistently re-imagines vision and purpose, ignites growth in employees, and they align the organization to champion a long-term motivational business model built on development and employee skills growth (Adams & Adams, 17). This is Bezos’ dominant leadership style that is always focused around his need to improve service rather than focusing on competitive actions in the external market. By putting new recruits through the customer service process, even though not necessarily their job role, Bezos transforms individual skill-sets and gives them the tools necessary to meet with Amazon.com’s corporate and customer-focused vision. Bezos’ organization topped one of the highest performing company lists periodically in the 2000s, therefore he required employee motivation and commitment to achieving high customer service goals as job roles became more complex and the sales environment more pressured by external shareholders. The question Bezos always asked when determining leadership strategy and employee interaction was What’s better for the consumer?. His role in transactional and transformational leadership was to inspire commitment to vision principles and then transforming the internal operational and support environment to support employee needs so that better service would be the final outcome. IMPORTANT LEADERSHIP QUALITIES IN THE DIGITAL ECONOMY Leaders today must be focused, like an entrepreneur, on internal and external innovation, especially when the sales market is often saturated by competition with unique differentiation strategies and promotions. Innovation is defined as “the ability to see connections, spot opportunities, and take advantage of them” (Bessant & Tidd, 6). Bezos has been operating in a digital sales environment where consumers are known to defect to different product brands based on issues of pricing or perceived quality. Amazon.com realized that in order to gain market share and improve profitability, policies and processes must be equal to or greater than competition. What Bezos realized is that the consumer behavior related to making product sales on Amazon.com is relatively predictable so long as new innovations are present that differentiate from competing offerings. For example, Bezos defied the ordinary in leadership when deciding to use third party sellers on his website. He was chastised for the efforts by external shareholders, however Bezos believed this was necessary to improve product offerings availability and also to give the company more positive marketing presence. Bezos realized that in today’s digital economy, gaining ground with customers was growing more and more difficult as new advertising channels opened and the distribution network (by competitors) to support growth in the digital sales environment were improving. Bezos was one of the first companies to consider partnering with other sellers in this fashion not only to boost profit, but to give customers what they wanted. He was always providing new innovations based on his knowledge of customer demand. Amazon.com also had high costs in their operational model, which is noticeable by the difference between revenues and net income in 2005 and 2006. The company earned 1.07 billion USD in 2006, but achieved only a net income of 190 million, as provided by the case study. A similar disproportionate net income was present in 2005. To improve operational costs and achieve higher profit for investors, Bezos realized the importance of leadership when it comes to change processes and transforming the organization to fit needs and streamline excess labor. His leadership style was somewhat radical at the time, especially in terms of partnering with different third party vendors, showing his focus on innovation in order to outperform competition. The importance of leadership in the digital economy is using innovative practices and performance guidelines at the internal level so that human capital is the most productive method of beating competition with high promotion and advertising. The digital environment provides new competitive opportunities for advertising, though they certainly do not come without cost to the operating budget. Bezos understood that promotion could come through innovation and better service provision, therefore he did not need to rely on concentrated and costly promotional activities. There are also limitations in the digital sales environment in terms of achieving a positive communications message with customers. In traditional bricks-and-mortar businesses, even the salespersons and in-store marketing materials are able to interact with customers. In the online environment, it is necessary to make connections with buyers quickly before they are lured to browse off the website in favor of another. Bezos’ transformational leadership activities kept him focused on how better to fill buyer needs, therefore he was always dedicated to new technology implementation and restructuring internally to meet these customer-centric needs. Leadership is necessary in the digital economy because high resource competition can easily outperform with periodic upgrades and more concentrated advertising. Bezos was always ready to implement change leadership practices to meet his organizational and profit goals. GAPS BETWEEN BEZOS’ STYLE AND DIGITAL LEADERSHIP Bezos always managed to make Amazon.com successful, though there were temporary gaps in profitability that caused alarm and criticism from shareholders. His transformational style is most commonly found in larger corporations with a considerable volume of human resources principles, therefore it was considered impractical in the digital sales environment. Shareholders wanted cost reductions and improved sales through technological focus, thereby giving Bezos a run for his proverbial money when it comes to explaining internal policy creation and direction. Digital leadership is generally about streamlining distribution or improving promotional activities by using internal human resources and focusing on technology improvement for service and product delivery. Bezos recognized the importance of human factors and behavioralist theories in order to provide a more motivating and rewarding internal job environment for all of his employees. What shareholders with a different leadership focus wanted were instant sales results, while Bezos recognized his capital developments and innovations were long-term strategies with longer-term results based on satisfied customers and a positive digital market reputation. There is a gap between standardized leadership style in the digital economy and that chosen by Bezos. However, his transformational style that focuses on moral authority and customer focus defied criticism by bridging the gap between consumer demands and sales success. Even though this gap exists between Bezos’ style and the rather standardized digital business model, Bezos needs to change nothing since he is able to satisfy both shareholders and customers without necessarily sacrificing quality or gross profit. “Moral authority as the basis of leadership gives credence to experience and intuition” (Sergiovanni, 2). This is what Bezos accomplished and should not adjust as his perceptions related to customer needs managed to help Amazon.com outperform all competition in the digital market. It is difficult in the digital economy to use benchmarking activities as part of leadership, since each retailer has a different strategy and vision for their companies. Some organizations rely heavily on technology and training in order to provide support, with less on customer service availability. Leadership style might be more tightly controlling in some digital sales leaders while much more progressive with employees so long as they are meeting performance guidelines. There is no single set of leadership found in the digital economy that should drive benchmarking activities. What happens to some businesses that have moved out of their growth stage in their business life cycle is they lose focus on internal dynamics in favor of meeting external demand. Bezos maintains a key focus on improvement and innovation in his business model, therefore he sets many of the customer-centric and employee-centric trends not commonly found in digital leadership models. An entrepreneurial leader is usually considered relevant for bricks-and-mortar organizations. The role of this type of leader is to communicate more than just facts, they provide the rationale and motive so that the listener evaluates the message effectively (Darling & Beebe, 77). Amazon.com is highly dependent on not only technology but the human factor related to customer interaction and service support. In order to facilitate positive communications, Bezos required an entrepreneurial style that focuses on creating shared meanings with all members of the organizational team. In many ways, Amazon.com is run like a non-digital sales company that would be commonly found in hard retail centers. The trends in leadership are usually focused around technological improvement, such as providing one-click shopping or more encryption for credit card sales as a means to gain favor with buying audiences. Amazon.com, also, realizes the importance of this, but there is a more concentrated focus on internal dynamics to find success. This is where Amazon.com breaks away from changing digital trends by adopting many of the same principles found in human resources-centric organizations across the world. LEADERSHIP ROLES FOR SUCCESS The key attributes of a successful leader who is able to motivate employees to meet company goals are harmony and good works, “engaging in shared goals and undertakings” (Bass & Steidlmeier, 188). Bezos attempts to create a harmonious organizational culture by removing certain controls from employees and allowing them to view the job as a rewarding experience instead of just a service or support role. He makes decisions with the advice and assistance of internal employees and does not sacrifice the motivational outcomes that are present by giving employees more visibility throughout the company. His every focus is on shared goals and he extends this decentralized leadership philosophy with employees at all levels. A typical business manager remains focused on costs, product development and operational production efficiency as part of their job role. A leader, however, maintains close and rewarding relationships with subordinates using theories of psychology and motivation to create more commitment and loyalty towards the company and their own job role. In the digital environment, the majority of service is provided via the Internet in rather self-managed service and support roles. Bezos understood that in order to ensure proper service dimensions in these roles, he would have to be more inclusive in areas of transformational leadership and establishing an organizational culture focused on the customer. Failure to remain with the customer-centric focus would send inconsistent messages to employees about the vision and goals of the company, thereby impacting support and motivation to meeting goals. CONCLUSION By defying certain elements of standard digital operations, Bezos maintained a positive image for customer groups in multiple segments. Growth for this business is not necessarily found in technological upgrades or improved convenience, it is produced by leaving a positive and lasting effect on buyers of multiple demographics. The transformational leadership style at Amazon.com, coupled with entrepreneurial elements that carried throughout its growth stage, outperforms all digital models. By ignoring criticism about customer-centric activities and not bowing to shareholder misconceptions about forward direction, Bezos established a quality leadership model that could be used by many different online retailers. Amazon.com is a success story because of its focus on innovation, leadership and entrepreneurialism. Works Cited Adams, William & Adams, Cynthia. “Transform or Reform?”, Leadership Excellence. Vol. 26, Iss. 11 (2009). Bass, Bernard & Steidlmeier, P. “Ethics, Character, and Authentic Transformational Leadership Behavior”, Leadership Quarterly. Vol. 10, Iss. 2 (1999). Bessant, John & Tidd, Joe. Innovation and Entrepreneurship. Chichester: John Wiley & Sons (2007). Darling, John & Beebe, Steven. “Effective entrepreneurial communication in organization development: achieving excellence based on leadership strategies and value”, Organization Development Journal. Vol. 25, Iss. 1 (2007). Den Hartog, D., House, R., Hanges, P. & Ruiz-Quintanilla, S. “Culture specific and cross culturally generalizable implicit leadership theories: are attributes of charismatic/transformational leadership universally endorsed?”, Leadership Quarterly. Vol. 10, Iss. 2 (1999). Sergiovanni, Thomas J. “Moral Leadership”. Viewed November 26, 2010 from http://www.tnellen.com/ted/tc/moral.html Read More