Amazon could cut 14,000 managers soon and save $3 billion a year, according to Morgan Stanley
- Morgan Stanley estimates Amazon can cut 13,834 managers and save roughly $3 billion next year.
- CEO Andy Jassy wants to lower the ratio of managers to individual contributors.
Amazon's plan to have fewer managers could result in huge job cuts and cost savings.
CEO Andy Jassy said last month that he wants to increase the ratio of individual contributors to managers by at least 15% by the end of the first quarter of 2025. Having fewer managers will remove unnecessary organizational layers and help Amazon move faster without bureaucratic hurdles, Jassy added.
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, Morgan Stanley estimated in a note published on Thursday.
The estimate assumes 7% of Amazon's workforce is in management positions. As of the end of the second quarter of 2024, Amazon had approximately 105,770 total managers globally, and 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 has "added a lot of managers" in recent years and "now is the right time" to make this change. Every team within Amazon will review their structure, and it's "possible" that organizations may eliminate roles that are no longer required, the company said, adding that the change is about "strengthening our culture and organizations." It declined to comment on Morgan Stanley's specific projections.
Morgan Stanley assumed the cost per manager is between $200,000 to $350,000 a year. Based on those numbers, Amazon stands to save $2.1 billion to $3.6 billion next year if it cuts those 13,834 manager roles. The savings would account for roughly 3% to 5% of Amazon's projected operating profit for 2025, Morgan Stanley estimated.
Amazon has more than 1.5 million total employees. A lot of these people work in the company's warehouses and logistics operations, rather than as part of its corporate workforce.
The company could change the ratio of managers to individual contributors 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 potential moves.
"Removing layers, operating with fewer managers and flattening the organization are all in focus to move faster," Morgan Stanley's note said.
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