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Amazon Web Services Compensation Report August 22, 2015 Author: Suzanne Matson Villanova University Professor Matthew White, MBA
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Page 1: Amazon Web Services - Suzanne matson-LPC · Web viewAmazon Web Services 2015 Amazon Web Services 2015 Amazon Web Services 2015 Compensation Report Page 1 Compensation Report Page

Amazon Web Services

Compensation Report

A u g u s t 2 2 , 2 0 1 5Author:

S u z a n n e M a t s o n

Villanova University

Professor Matthew White, MBA

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Compensation Report

A u g u s t 2 2 , 2 0 1 5

Amazon Web Services – Compensation Report`

Table of Contents –

Company Description – o Amazon and Jeff Bezos, CEOo Amazon Web Serviceso Business Intelligence Unit

Compensation & Total Rewards Philosophy – 4-Market Compensation Analysis –

o Capital Marketso Customer Marketso Internal Marketso External Markets

Organizational Chart – Job Descriptions –

o Java Developero SW Development Test Engineero SW Development Engineero Big Data Developero SW Development Manager

Job Evaluation Methodology – o Hay Method & Simple Ranking o Pay for Strategic Value

Salary Administration Program & Strategy – Recognition Programs & Strategies – Variable Pay Strategy & Programs – Compensation Related Legal Issues –

o Non-Disclosure & Non-Compete Agreementso Intellectual Property

Executive Pay – Compensation Program Best Practices - References

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Amazon Web Services – Compensation Report`

Table of Contents – Continued

Appendiceso Appendix 1 – Business Intelligence Unit Profileso Appendix 2 – Methodology: Grade Levels & Salary Structureo Appendix 3 – Amazon Competitor Payo Appendix 4 – Additional Compensation Related Legal Issueso Appendix 5 – Executive Officers and Executive Pay

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Company Description –

Amazon, the world’s largest online-retailer, is the pioneering idea of Jeff Bezos, a former vice-

president at a global investment firm specializing in technology development. “Bezos pursued his interest in

computers at Princeton University, where he graduated summa cum laude in 1986 with a degree in

computer science and electrical engineering” (Jeff Bezos , 2015). Borne out of a simple website format and

Bezos’ understanding of the potential of e-commerce, Amazon has changed the way people purchase goods

and services, how people read, and how some of the largest and smallest companies around the world

structure their business operations through online technology and cloud services offered through Amazon

Web Services. Amazon’s growth has put it at the forefront of technology companies seeking talent in many

areas of software and hardware engineering. “The company is guided by four principles: customer

obsession rather than competitor focus, passion for invention, commitment to operational excellence, and

long-term thinking” (Amazon Annual Report, 2014, p.12).

Amazon Web Services

Amazon Web Services (AWS) debuted in 2006 to innovate how companies use technology to grow

their business. AWS provides a “technology infrastructure platform in the cloud comprised of a broad set of

compute, storage, database, and analytics applications, and deployment services from data center locations

in the U.S. and around the world. More than a million customers, including fast-growing startups, large

enterprises, and government agencies across 190 countries, rely on AWS services to innovate quickly, lower

IT costs and scale applications globally” (Amazon Web Services PR, 2015). As a “Best-in-Class” provider,

Amazon is ranked 16 of the top 25 technology companies competing for high technology talent that is not

only innovative but truly exceptional (Shontell, 2013).

Business Unit – Business Intelligence

The focus of this compensation report is the Business Intelligence Unit of AWS. With AWS leading

the industry in Business Intelligence and Big Data – generating nearly one-third to one-half of Amazon’s net

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operating income – Amazon must re-evaluate the compensation philosophy, talent strategy, and total

rewards package as well as the AWS culture. AWS must further develop these three areas of its Human

Capital Management to ensure that it maintains a competitive – if not strategic advantage – in attracting,

growing, rewarding and retaining its key software engineering talent.

Compensation & Total Rewards Philosophy –

From inception, Amazon’s mission and focus has been to be Earth's most customer-centric

company. Guided by four core values (customer obsession, passion for invention, commitment to

operational excellence, and long-term thinking), our compensation and total rewards strategy at Amazon is

the same as it was on Day 1. As a leading world-wide innovator in technology solutions, our compensation

and total rewards philosophy is to align employee financial interests with long-term shareholder value.

Amazon Web Services will continue to offer increasingly competitive compensation packages to all

employees, at above industry average compensation, to attract talented innovators in the face of ongoing

global competition. Our growth and continued industry leadership is largely determined through our ability

to select and retain exceptional, motivated talent who believe in our values and mission. In pursuit of this

goal, our rewards programs emphasize broad-based employee ownership of common-stock over cash

incentives for exceptional employees who drive business performance, innovation and excellence in all

areas of operation (Compensation & Total Rewards Philosophy is developed and compiled from exerpts

from the 2014 Annual Report for Amazon, Inc. and 2014-2015 Proxy, p.26).

4-Market Compensation Analysis –

Capital Markets. “AWS is a leader in the internet as a service (IaaS) industry. AWS is built on the

longstanding customer-centric values of exceeding AWS clients’ expectations. Achieving this goal embraces

the best interests of Amazon shareholders” (Amazon.com, Inc., p.5). AWS usage grew by approximately

90% in the fourth quarter of 2014 versus the prior year. AWS quarterly results for 2015 have continued to

astound investors: AWS cloud computing delivered an 81% increase in revenues for Q2 achieving 1.8

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billion. Along with these strengths is another achievement important to investors: “AWS earned $391

million in operating profit. That’s well over half the $684 million operating profit from Amazon’s worldwide

product sales of $21.4 billion” (Hof, 2015). AWS growth may present a challenge in maintaining operational

efficiency as well as continuing to exceed client expectations with other large competitors in the IaaS and

software as a service (SaaS) industry. Importantly, “volatility in our stock price could adversely affect our

business and financing opportunities and force us to increase our cash compensation to employees or grant

larger stock awards than we have historically, which could hurt our operating results or reduce the

percentage ownership of our existing stockholders, or both” (Amazon.com, Inc., p.21).

Customer Markets. AWS strength is its current clients. Now well over 1 million, they range from the

largest companies (Netflix, GM) in the world to the smallest start-ups (Jinesh & Sajee, 2014). AWS ability to

maintain their growth with the projected shortage of software engineers in, and entering the industry (140-

190K) over the next 5 years, is a formidable weakness (Bagley, 2014). Additionally, maintaining a balanced

corporate culture that can withstand growth, change, and high demand is a weakness of Amazon. Online

reviews of technology employees provide strong feedback that the Amazon culture requires attention.

Amazon holds its top market position because of an early understanding of the potential the IaaS industry

brings to innovating the way business is organized. AWS stellar growth in revenue highlights opportunity for

continued growth in clients and usage from existing clients.

Competition is always a threat, from Google, Microsoft Azure, IBM, Oracle, and Xfinity to others.

Competitors with internet and cloud products could develop better security protocols and service reliability.

Finally, regulation of the industry can pose a large threat to all cloud companies: “It’s not possible to

discuss, or even list, all the legal and regulatory barriers to the cloud” (McAfee, 2011).

External Labor Markets. The global shortage of talent and the competition among technology

companies for talent are the largest threats facing AWS in the external labor market. AWS strength is that it

has the money to “buy talent” as a strategy from the external labor market. However, many tech

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companies have learned that allocating more money and resources does not necessarily fix the problem of a

labor shortage; particularly when turnover rates in the tech sector are high and Amazon turning over new

hires on average after one year. Perhaps one of the greatest weaknesses facing AWS is understanding the

employee value proposition (EVP) and fully seizing the opportunity to create a different culture and

addressing not only management deficits, but the overall company reputation of being “frugal”

(Amazon.com, Inc., 2015).

Internal Labor Markets. A significant opportunity for AWS is to not only address any deficits that

may exist in its culture but also to strengthen its internal ability to strategically grow talent from within. Of

course, this would require AWS to address the issue of turnover. One phenomenon the tech industry

experiences, is when a workgroup develops cohesion and one member leaves, others in the workgroup tend

to follow. Developing a strategic understanding of these types of dynamics and designing programs to

address these challenges is difficult because the environment is always changing in response to clients and

other demands. The lead time needed to develop programs to address internal issues may be too large

because change is occurring too fast. For AWS, the internal labor market may pose the greatest challenge

due to the fact that it may require letting go of the early years, as described by their motto “Day 1,” to slow

down just enough to create sustainable changes that acknowledge they are no longer in a developmental

stage but in a more mature stage of business and organizational development.

Organizational Structure –

Flexibility. Amazon Web Services organizational structure is project team based and flexible to the

ongoing challenge of prioritization of client needs. The AWS organizational structure encompasses 5 levels

with the salary structure broken up into 12 levels. This causes some ambiguity within the company’s ability

to accurately rank and evaluate jobs efficiently. According to Stone, “another reason it’s difficult to scale

the ranks at Amazon is that the corporate structure is remarkably flat”, (Stone, 2013). Appendix 1 provides

additional information on the structure and job functions within the Business Intelligence Unit.

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Organizational Chart – [For Best View, Please Zoom to 200%]

Amazon Web Services – Job Descriptions

AWS believes that cloud-backed mobile and device applications generate unlimited possibilities

and developers demand for this type of platform is not only growing and changing, it is insatiable. “Software

Development Engineers (SDE) on the Business Intelligence Unit, are responsible for building web service

APIs that back mobile apps. SDEs integrate a wide range of existing AWS infrastructure to deliver large-

scale, high-throughput distributed services consumed by mobile developers. SDEs interact with customers

to ensure their needs are met; clear, professional communication with developer customers is an important

part of the job. All team members actively participate in technology definition, technical architecture

review, iterative development, code review, and operations.” (Jinesh & Sajee, 2014). The five Job

Descriptions on the following pages define the requirements of talent recruited to successfully perform at

Amazon Web Services within the Business Intelligence Unit as a Software Development Engineer.

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Amazon Web Services – Business Intelligence UnitJob Description

Job Title: Java Developer Job Level: IntermediateDepartment: Business Intelligence Reports To: FLSA Status: ExemptPrepared By: Eric Lee and Suzanne Matson Prepared Date: 7/22/2015Approved By: Approved Date: Pay Range: $120,640- $166,400 (based on Cupertino market) Summary: Job Summary needs help.

Essential Duties and Responsibilities: Include the following (Other related duties may be assigned)

Develops and maintains dynamic object oriented e-commerce application code with a strong emphasis on J2EE architectures and patterns.

Designs and develops applications with for reliability, security, manageability, scalability, extensibility, performance and re-use;

Provides technical expertise in the areas of architecture, design, and implementation. Works with technical and business team members to create excellent software. Determines the best implementation that will meet the design of the Application Architect. Ensures that thorough unit and component testing is carried out. Sets and adheres to software coding and style guides to ensure consistency. Performs code reviews to ensure consistency to style standards and code quality.

Qualifications & Competencies: To perform this job successfully, an individual must be able to perform each essential duty satisfactorily. The requirements listed below are representative of the knowledge, skill, and/or ability required.

Ability to triage issues, react well to changes, work with teams and ability to multi-task on multiple products and projects.

Excellent communication, collaboration, reporting, analytical and problem solving skills.

Education and/or Experience: BS in computer science or equivalent. Software engineering development experience which includes Java/J2ee specific experience is required. Strong understanding of Java, an in depth understanding of other Java technologies including Servlets, JSP, JDBC, and other J2EE technologies. Familiarity with XML, XSD, and XSL is required. Other object oriented design experience, experience applying design patterns, and UML familiarity is essential. Full lifecycle development experience on large projects, creating distributed and scalable e-commerce systems. Hands-on SQL/RDBMS experience, Oracle strongly preferred. Experience in developing and driving SOA strategies within large enterprises and deploying SOA implementations to production a big plus. Hands on experience with Agile methodologies highly desirable.

Certificates, Licenses, Registrations: None. Other Skills and Abilities: None. Other Qualifications: None.

Reasonable accommodations may be made to enable individuals with disabilities to perform the essential functions. (IQNavigator, 2015)

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Amazon Web Services – Business Intelligence UnitJob Description

Job Title: Software Development Test Engineer Job Level: IntermediateDepartment: Business Intelligence Reports To: FLSA Status: ExemptPrepared By: Eric Lee and Suzanne Matson Prepared Date: 7/22/2015Approved By: Approved Date: Pay Range: $123,000- $163,000 (based on Cupertino market) Summary: Software Development Engineers in Test (SDET) to champion testing and enforce quality, performance, and scalability to help propel the mobile development community to the next level!

Essential Duties and Responsibilities: Include the following (Other related duties may be assigned)

Designs, Develops, Executes and Maintains software to test Web, Desktop and Mobile applications. Tests RESTFUL APIs, using both automated and manual approaches. Collaborates with the development team and help debug and root-cause code level issues. Defines test plans and test cases, as well as designs and develops tools for unit, functional,

performance and load testing. Invent new ways to improve the experience for our customers.

Qualifications & Competencies: To perform this job successfully, an individual must be able to perform each essential duty satisfactorily. The requirements listed below are representative of the knowledge, skill, and/or ability required.

Must be hands-on with coding/testing C#/Java/C++ programming languages. Must have in-depth knowledge on Software Quality Engineering fundamentals as well as knowledge

on Object Oriented design principles. Experience in designing and developing test frameworks is a huge plus. Ability to triage issues, react well to changes, work with teams and ability to multi-task on multiple

products and projects. Excellent communication, collaboration, reporting, analytical and problem solving skills.

Education and/or Experience: Bachelor's degree in Computer Science, Computer Engineering or similar technical field.

Certificates, Licenses, Registrations: None.Other Skills and Abilities: None.Other Qualifications: None.

Reasonable accommodations may be made to enable individuals with disabilities to perform the essential functions. (IQNavigator, 2015)

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Amazon Web Services – Business Intelligence UnitJob Description

Job Title: Software Development Engineer Job Level: IntermediateDepartment: Business Intelligence Reports To: FLSA Status: ExemptPrepared By: Eric Lee and Suzanne Matson Prepared Date: 7/22/2015Approved By: Approved Date: Pay Range: $120,000- $165,000 (based on Cupertino market) Summary: Designs and develops web service APIs that back mobile apps and integrates a wide range of existing AWS infrastructure to deliver large-scale, high-throughput distributed services consumed by mobile developers.

Essential Duties and Responsibilities: Include the following (Other related duties may be assigned)

Actively participate in technology definition, technical architecture review, iterative development, code review, and operations.

Designs, develops and deploys systems components, including enterprise infrastructure, information systems, ERP applications, and Internet technologies. (Projects are typically focused on both software and hardware components.)

Evaluates existing systems to understand capabilities and recommend solutions. Participates in the layout design and installation of new systems or modification of existing systems. Develops and manages systems integration projects. Identifies and resolves existing system deficiencies. Works with non-technical business owners to understand needs and develop technical solutions.

Qualifications & Competencies: To perform this job successfully, an individual must be able to perform each essential duty satisfactorily. The requirements listed below are representative of the knowledge, skill, and/or ability required.

Must have strong, professional communication skills to interact with business counterparts.

Education and/or Experience: 3-5 years of prior systems engineering experience in large enterprise environments is required.

Certificates, Licenses, Registrations: None.Other Skills and Abilities: None.Other Qualifications: None.

Reasonable accommodations may be made to enable individuals with disabilities to perform the essential functions. (IQNavigator, 2015)

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Amazon Web Services – Business Intelligence UnitJob Description– Page 1

Job Title: Big Data Developer Job Level: IntermediateDepartment: Business Intelligence Reports To: FLSA Status: ExemptPrepared By: Eric Lee and Suzanne Matson Prepared Date: 7/22/2015Approved By: Approved Date: Pay Range: $145,640- $216,320 (based on Cupertino market) Summary: Job Summary needs help.

Essential Duties and Responsibilities: Include the following (Other related duties may be assigned)

Shape the next generation of big data solutions by working on the bleeding-edge technologies and solutions.

Manages very large-scale, highly-available Hadoop infrastructure supporting multi-Petabytes of data and growing very rapidly.

Writes jobs and applications to solve complex analytical problems. Builds a complex and high performance analytics system around Hadoop for scalability. Designs, develops architecture and builds data platforms over Big Data technologies. Solves challenging big data engineering problems across a broad range of Apple manufacturing

services. Provides leading innovation by exploring, investigating, recommending, benchmarking and

implementing data centric technologies for the platform. Provide hardware architectural guidance, planning, estimating cluster capacity, and creating

roadmaps for Hadoop cluster deployment. Supports Hadoop developers and assisting in troubleshooting and optimization of map reduce jobs

and Pig Latin scripts

Qualifications & Competencies: To perform this job successfully, an individual must be able to perform each essential duty satisfactorily. The requirements listed below are representative of the knowledge, skill, and/or ability required.

Passion for Big Data technologies and a flexible, creative approach to problem solving Have a solid track record of building large scale systems utilizing Big Data Technologies Experience building large-scale server-side systems with distributed processing algorithms Proficiency in MapReduce development and experience with Hadoop or other data processing

technologies required Deep understanding of Hadoop design principals, cluster connectivity, security and the factors that

affect distributed system performance Excellent experience in design and development of large scale applications Experience with Kafka and Storm is a plus Excellent problem solving and programming skills Proven technical leadership and communication skills Aptitude to independently learn new technologies Plus: Have made active contributions to open source projects like Apache Hadoop or Cassandra

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Amazon Web Services – Business Intelligence UnitJob Description – Page 2

Job Title: Big Data Developer Job Level: IntermediateDepartment: Business Intelligence Reports To: FLSA Status: ExemptPrepared By: Eric Lee and Suzanne Matson Prepared Date: 7/22/2015Approved By: Approved Date: Pay Range: $145,640- $216,320 (based on Cupertino market)

Education and/or Experience: BS or MS in Computer Science preferred, equivalent work experience will be considered. 3+ years of hands-on experience with the Hadoop stack (MapReduce Programming Paradigm, HBase, Pig, Hive, Sqoop, Shark and Spark) and key-value store technologies such as Cassandra. 3 - 5+ years’ experience in Java programming.

Certificates, Licenses, Registrations: None. Other Skills and Abilities: None. Other Qualifications: None.

Reasonable accommodations may be made to enable individuals with disabilities to perform the essential functions. (IQNavigator, 2015)

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Amazon Web Services – Business Intelligence UnitJob Description

Job Title: Software Development Manager Job Level: IntermediateDepartment: Business Intelligence Reports To: FLSA Status: ExemptPrepared By: Eric Lee and Suzanne Matson Prepared Date: 7/22/2015Approved By: Approved Date: Pay Range: $159,000- $224,000 (based on Cupertino market) Summary: Software Development Managers are responsible for leading development and program management resources for mobile technologies as we address specific developer challenges brought by mobile use cases. Challenges include building client code for multiple OS platforms and dealing with concurrent, distributed access to data from multiple devices, enabling real-time communication across devices that are geographically distributed.

Essential Duties and Responsibilities: Include the following (Other related duties may be assigned)

Participates in defining the team and corporate roadmap and release plans/portfolio. This is a “hands-on” position that requires strong technical leadership and participation is all aspects of the development portion of the SDLC.

Manage local and remote developers in the delivery of all committed projects on-time, on-scope, and adherence to corporate standards and quality.

Collaborate with other software development, architecture, solutions, and SQA teams to ensure that software systems are designed for testability, stability, scalability, and performance.

Qualifications & Competencies: To perform this job successfully, an individual must be able to perform each essential duty satisfactorily. The requirements listed below are representative of the knowledge, skill, and/or ability required.

Must have in-depth knowledge on Software Quality Engineering fundamentals. Experience in designing and developing test frameworks is a huge plus. Ability to triage issues, react well to changes, work with teams and ability to multi-task on multiple

products and projects. Excellent communication, collaboration, reporting, analytical and problem solving skills.

Education and/or Experience: Requires BS/MS degree or equivalent in computer science or a related area. 8+ years of hands-on development experience in a Java/J2EE technology platform. 4+ years of proven record in project leadership and management of technical professionals. Extensive experience in SQL and relational database like SQL Server, MySQL, or Oracle. Cloud database experience is a plus. Build/Configuration Management/Initial Setup experience is a plus.

Certificates, Licenses, Registrations: None.Other Skills and Abilities: None.Other Qualifications: None.

Reasonable accommodations may be made to enable individuals with disabilities to perform the essential functions. (IQNavigator, 2015)

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Job Evaluation Methodology –

The AWS Business Intelligence department utilizes a combination of the simple ranking and Hay

Method systems to evaluate jobs and to categorize exempt positions. A flat 5-level hierarchal structure

allows the simple ranking method to define roles within the AWS Business Intelligence Unit. The executive

level is intentionally restricted to 2-levels. “Amazon Chief Executive Officer Jeff Bezos believes his managers

must raise the performance bar with every hire and promotion and that only exceptional talent should

progress within the organization” (Stone, 2013).

One vice president oversees the Amazon EMR and Pipeline divisions which is a branch of Amazon’s

Web Services. The BI director manages the Business Intelligence department and every job within the

department. The Hay Method’s series of differentiating factors have determined each grade range. Factors

such as working conditions, current salaries, number of reports, subject matter expertise, and years of

experience working specific projects differentiate groups’ and individuals’ contribution to the department.

The Human Resources compensation team evaluates jobs within the Business Intelligence Unit to

keep evaluations consistent with Amazon’s Web Service general compensation policies. Independent from

influence and bias as they evaluate the jobs, this reduces political dynamics associated with the committee

approach to job evaluation.

The overall evaluation process is kept simple and transparent to assist in communicating to the

entire organization and understanding of the compensation system. Managers are partnered with to

provide feedback into the system, but final decisions ultimately fall with the compensation team.

The compensation team works with an impartial consulting firm, Aon-Radford, who specializes in

compensation data for the technology industry as well as Robert Half Associates. AWS is located in 5

locations throughout the U.S. Gathering national data is essential to structuring the AWS compensation

structure to account for such factors as cost of living and supply and demand for talent.

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Business Intelligence Unit – Salary Grade Structure

AWS-BIU Position Level 25th Percentile

Median 75th Percentile

N/A Level 1 N/A N/A N/APC Technician Level 2 $33,750.00 $41,750.00 $49,750.00Help Desk Tier 1 Level 3 $34,000.00 $40,625.00 $47,250.00Computer Operator Level 4 $34,750.00 $41,375.00 $48,000.00Operations Manager Level 4 $65,500.00 $79,500.00 $93,500.00Web Designer Level 4 $64,000.00 $84,750.00 $105,500.00Java Developer Level 4 $86,171.43 $107,714.28 $129,257.13SW Development Test Engineer Level 4 $87,857.14 $109,821.42 $131,785.70SW Development Engineer Level 4 $91,330.00 $118,330.50 $145,331.00QA Engineer Level 5 $74,250.00 $89,000.00 $103,750.00Senior Web Developer Level 5 $104,500.00 $124,375.00 $144,250.00SW Engineer Level 5 $96,000.00 $121,625.00 $147,250.00Big Data Developer Level 5 $104,028.57 $130,035.71 $156,042.85Network Manager Level 6 $98,000.00 $117,625.00 $137,250.00Product Manager Level 7 $101,750.00 $123,375.00 $145,000.00Information Technology Manager Level 7 $101,750.00 $126,250.00 $150,750.00SW Development Manager Level 7 $113,571.42 $141,964.27 $170,357.12Technology Director Level 8 $118,750.00 $146,375.00 $174,000.00N/A Level 9 N/A N/AVice President Level 10 $138,000.00 $174,125.00 $210,250.00Senior Vice President - Jassy Level 11 $160,000.00 N/A $163,200.00CEO – Bezos Level 12 $81,840.00 N/A $1,680,000.00(Robert Half Inc., Salary Guide: IT Salary Evolution , 2015)

Market Pricing. Salary survey data from Aon-Radford and Robert Half was analyzed for accuracy to

the job descriptions and the strategic requirements of the Business Intelligence Unit. Robert Half data

appeared more closely matched to the business demands Offers are made above the market median. The

data has been organization weighted to ensure the data is not skewed. A more detailed methodology of

AWS Grade Levels is provided in Appendix 2 and a Table of competitor/peer salary data is provided in

Appendix 3.

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Human Capital Management & Total Rewards Strategy –

Salary Administration Program and Strategy

Overview. From the top down, Amazon is “customer obsessed.” A well-defined culture built with

the customer at the center, Amazon’s processes, technology, and the general worldview of its employees is

always singularly focused (Abilla, 2007). The philosophy of Amazon’s compensation program is as stated in

the Company’s 1997 letter to shareholders: “the fundamental measure of the company’s success will be

the shareholder value created over the long term” (Amazon.com, Inc., 2014). In its early years of

development, the company’s compensation lagged the market in relationship to base pay; and as the

company has grown and reached a stage of mature development – both in its retail sales and AWS – salaries

have also grown to position AWS as a leader paying above market rates (Amazon.com, Inc., 2014) to attract

and retain critical software engineering talent.

The strategic question and issue is whether Amazon has fully set-in-place a compensation strategy

and employee value proposition (EVP) that rises to the level of offering a competitive Total Rewards

program in relationship to industry peers like Google, Microsoft, and Apple? There appears to be

operational incongruence between the company’s start-up philosophy as an online retailer and the

carryover of this philosophy to a much different line of business and talent market with Amazon Web

Services. This incongruence is reflected in the turnover rate of software engineers. However, Bezos as CEO

is steadfast in every cultural value, leadership principle, and employees tolerating incongruence.

Performance Management. Amazon utilizes a combination of approaches to manage performance.

Amazon’s initiative of the customer at the center drives a commitment to track performance through a

“culture of metrics”. This has allowed Amazon to tracks its performance against roughly 500 measurable

goals, and nearly 80% of those have to do with customer objectives (Anders, 2012). The Stacked Ranking

Method is AWS performance appraisal technique. “Employees are ranked on a forced curve and grouped

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into three tiers: the top 20%, groomed for promotions, the next 70% who are kept happy, and the bottom

10%, who are either let go, or told to get it together. Unsurprisingly, turnover at Amazon is high. The

median employee tenure is one year, compared to four years at Microsoft and 6.4 at IBM” (Blattberg, 2013).

Amazon’s approach to talent does not necessarily fit the wide-range of personality and attributes of the

analytical and engineering workforce it is trying to attract. Amazon promotes a fully open, competitive

culture that emphasizes “unreasonably high standards” (Our Leadership Principles, 2015). While the

company can continue to place a high premium and preference for candidates with “ a strong bias to action

and ability to work through ambiguity” (Anders, 2012) the company may benefit from cultural change that

embraces more diversity within the strengths of its workforce and the strategic, if not central, role they play

in carrying out the 4 core values and 14 different leadership values of the company. At present,

performance management could be described as seeking only the “survival of the fittest.”

Pay to Quit. In another unique and controversial approach, Jeff Bezos explained in a letter to

shareholders: “Pay to Quit is pretty simple. Once a year, we offer to pay associates to quit. Amazon.com will

pay unhappy employees a bonus—up to $5,000—to leave. Unlike traditional severance, the departure

bonuses are not linked with firings or reductions-in-force intended to shrink payroll. The program is

intended to measure employee loyalty” (Miller, 2014).

Recommendation 1: Pay for Strategic Value. “A company should signal the strategic importance of

its positions through differentiated spending on salary… As a major human capital investment, the annual

salary budget must yield the maximum economic return possible on the company’s portfolio of positions.

This return is largely a product of connecting incremental salary increases with the strategic value of

positions” (Weinberg, 2007, p.42). The pay for strategic value philosophy, perhaps better termed “invest for

strategic value,” or “pay for potential” is recommended because it compliments AWS current culture while

at the same time placing a greater focus on the importance of the employee value proposition. The base

salary structure of AWS is primarily determined by market measures. Complementing salary increases,

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short-term and long-term incentive programs with premiums that inform the strategic value of people and

projects is a first step in ensuring Amazon’s salary administration program is not confused with the

Leadership Principle of “frugality” or “doing more with less” (Our Leadership Principles, 2015). Bezos might

argue that, in fact, the current salary programs and strategies do pay high potentials for their strategic

value, and individuals with no strategic value are paid to leave and in no way does this equate with frugality

and it creates opportunity for new high potentials.

Recommendation 2: Salary Increases. With its current salary administration practices reflecting a

growth stage of development, rather than a mature stage, it is recommended AWS would benefit from

shifting from perceived “frugality” and “one-size-fits-all” to “best practices.” A strategy consistent with

many of AWS competitors is employing the short-term practice of allocating 2-3 times the average annual

increase in base salary to assist in retention and recognize high potential employees have many

employment options (Shontell, 2013). Although research did not uncover the actual method for

determining salary increases for AWS, it is recommended that salary increases are determined by several

measurable factors: Paramount to AWS is achieving exceptional customer satisfaction, meeting project

goals on time, and company performance. A merit matrix combined with manager discretion may, at this

time, not be the appropriate tool for the current culture, strategy or compensation objectives.

Merit Programs and Short-Term Incentives (STIs). STIs will become more important as AWS

continues to generate over one billion in revenue each quarter. Consistent with its “Day 1” philosophy,

stock awards are much more prevalent than cash bonuses. While this was an appropriate strategy in the

beginning stages of development, Amazon and AWS in particular, is in a critical position to retain talent at

all organizational levels. Even the costs associated with filling an open position within AWS continue to rise

as a shortage in these knowledge workers continues to widen, increasing opportunity costs.

Recommendation 3: Multi-Faceted Talent Management Programs. Another key focus for AWS is

to structure programs to meet a wide variety of employee needs and interests while strengthening

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organizational commitment and throughput. AWS structural environment of “a survival of the fittest,” or as

one article put it “Gladiator” environment is an effective approach if there weren’t a shortage of talent. The

company can continue to focus on high potentials and at the same time develop a multi-faceted culture that

can grow, develop and mentor medium potentials’ talent, through career path choice, leadership

development, mentoring programs and becoming more internally “obsessed” with the diverse motivational

triggers of its medium potentials’ and millennials. Amazon and AWS would not be alone: “Surprisingly,

many companies have yet to develop an effective talent strategy; they are not doing anything different to

attract new data workers. Only one in five organizations has changed its approach to attracting and

retaining analytics talent” (Ransbotham, 2015, p.4).

Variable Pay Strategy –

As a Forbes article outlines, “To offer the lowest prices, Amazon is famously frugal. Unlike in much

of Silicon Valley, Amazon employees pay for their meals. Desks are slabs of wood that could be used for

doors…. ’We also have no incentive compensation of any kind. And the reason we don’t is because it is

detrimental to teamwork.’” (Amazon's Jeff Bezos The Ultimate Disrupter, 2012). This quote exemplifies the

Amazon culture and all research indicates the incentive compensation strategy discussed here in 2012 –

that does not exist – is regarding individual STI’s.

Long Term Incentives (LTIs). LTIs include Restricted Stock Units (RSUs). According to the 2014

Amazon Annual report, RSUs comprise a significant part of AWS annual bonus and merit increases. Amazon

is careful to not dilute shareholder stock, at the same time, the effectiveness of issuing RSUs to promote

longevity must be questioned when 1.8 and 2.3 million units of stock went unexercised in 2012 and 2013,

respectively. RSUs vest over 2-5 years. Amazon reports that in 2012 and 2013 about 25% of RSUs were

forfeited as a percentage of units vested (p.73.). Additionally, as noted earlier, “volatility in our stock price

could adversely affect our business and financing opportunities and force us to increase our cash

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compensation to employees or grant larger stock awards than we have historically…” (Amazon.com, Inc.,

Annual Report, 2014, p. 21).

Recommendation 1: Re-Allocation of Forfeited RSU’s Expense. Although the company may see a

benefit to the expiration of RSU’s in terms of cost savings, if originally willing to take such an expense –

particularly when using the “accelerated method, rather than the straight-line method for recognizing

[stock] compensation expenses” (Amazon.com, Inc., 2014, p.24) – the company may better benefit from

taking that expense fully to increase the impact of merit and short-term incentives. Through investing in

pilot programs to experiment with the variable pay mix, AWS may be able to address issues of burnout,

dissatisfaction with a 24/7/365 environment, work-life balance, time for training, and ultimately turnover

and talent attraction, and reducing the cost of hire. With $264 million dollars in RSUs being forfeited in

2013 alone, AWS must calculate the opportunity cost of not obtaining a return on investment of those

dollars (Amazon.com, Inc., 2014, p.73). STI pilot programs are offered in Recommendation 2, below.

Recommendation 2: Merit and Incentive Travel/Team-Building/Training. Although, a strong

departure from Amazon’s current culture, AWS would benefit from employing short-term, team-based

incentives, if only for strategic purposes and for temporary time periods. While cash incentives and bonuses

are typically the most popular STIs, training, teambuilding and travel may provide AWS knowledge workers

the understanding that AWS “gets” the importance of work-life balance through travel perquisites upon

completion of projects. AWS would benefit from recognizing the sacrifice AWS employee families make and

structure these types of merit programs with families in mind. A second variation of this is to include brief

teambuilding or continuing education with team and/or family travel.

Recognition Strategy –

Upon review of AWS recognition and rewards program which has not fundamentally changed since

1997 and in consideration of the organization’s high turnover rate in its industry, AWS is not meeting key

objectives. Moreover, to emerge as a major talent competitor AWS must take more strategic steps when

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“two-thirds of all workers believe they could find a better job in less than 60 days if they only took the time

to look.” With the supply of jobs outnumbering the availability of experienced software development

engineers, Amazon continues to operate from the “Day 1” mindset: recognition is achieved primarily

through stock awards, deferring much of the costs of this form of recognition, and cash bonuses are used as

a secondary alternative. AWS must reflect an understanding that money alone – and in truth, unvested

stock – is not enough to attract and retain talent (Bersin, 2015). A deep understanding of every generation

in today’s workforce – especially Millennials – is leading the current trends in talent management and

retention strategies. With this being said, ironically even Google, one of AWS significant talent competitors,

and has offered an extensive Total Rewards package on the cutting edge of trends for some time with a

nearly identical turnover rate (PayScale-Turnover, 2015). Best practices to identify and uncover the

underlying causes behind this industry issue will be important. It appears that current trends may no longer

as effective as they once were.

Recommendation 1: AWS must build a stronger foundation around a culture for work life balance.

A workforce platform built on a high results and achievement is the results oriented work environment

(ROWE). Netflix is a talent competitor that is seeing success with this rewards and recognition strategy.

Reed Hastings, the CEO of Netflix mentions in a Bloomberg Article: “We want responsible people who are

self-motivating and self-disciplined, and we reward them with freedom.” He went on to highlight that the

best example of how Netflix achieves work life balance and provides freedom is their vacation policy. The

fact is that they don’t have one. Hasting’s said “we focus on what people get done, not on how many days

they worked” (Hastings, 2012).

Recommendation 2: As previously noted, Amazon is highly criticized for career growth

opportunities and underdeveloped management. Raytheon is a high-tech company who has successfully

addressed identical corporate criticism. Raytheon is now recognized in the Top 100 of the Fortune 500

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Companies who have loyal employees (median age 36); by contrast Google ranks 462 and Amazon 464

(PayScale, 2013).

As an engineering-focused company, Raytheon has created several programs to recognize and reward outstanding performance. Entry-level engineers can look forward to these opportunities as they advance their careers in our organization: (1) Achievement Awards: Offers cash awards to recognize extraordinary accomplishments; (2) Technical Honors Program: Provides a progression of awards based on career level, from senior engineer to the senior principal fellow. Award packages include a cash award, an annual technical stipend, public recognition, honoree celebration and commemorative plaque. (3) Fellows Program: Recognizes the "best of the best" based on highly selective criteria that will only apply to the top 4% of our engineering organization. (4) Engineering Mentor Program: Provides recognition for mentors and mentees, honoring those engineers who have demonstrated technical competence and a willingness to help other engineers OR the ability to benefit from the relationship with a mentor (Raytheon, 2015).

Compensation Related Legal Issues –

Amazon attracts criticism and controversy from a variety of sources where questions are drawn

from the ethics of their business practices, including human rights, as well as compensation related policies

and practices. Questions concerning the company’s legal compliance have been raised not only in the

United States but also in other countries where they operate. Not surprisingly, Amazon attracts attention

regarding how it responds to its workplace and legal issues across the globe. In direct relationship to the

business of AWS, non-disclosure and non-compete agreements as well as intellectual property rights and

patent infringements are the most common legal issues to arise. As of the date of this report no

compensation-related legal issues were uncovered for AWS, and one specific patient infringement case had

been filed against Amazon.com, Inc., and Amazon Web Services, LLC:

In the United States District Court for the District of Delaware, the complaint alleges, among other things, that the use of certain Kindle devices, Kindle apps and/or Amazon.com, Inc.’s website to purchase and receive electronic media infringes nine U.S. Patents…all entitled ‘Signal Processing Apparatus And [SIC} Methods.’ The complaint seeks an unspecified amount of damages, interest, and injunctive relief. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter. (Amazon.com, Inc., 2014, p.71)

Amazon’s e-commerce business has defended several lawsuits related to FLSA violations, harsh

working conditions, and successfully prevented unionization of portion s of its workforce. Amazon, as the

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result of its unparalleled success in e-commerce globally, is highly exposed from a legal risk management

perspective. Additional information regarding compensation related lawsuits and other pertinent legal

issues are provided in Appendix 4.

Executive Pay –

Executive Pay Philosophy. Executive Pay, among other management practices, clearly reflects the

background of CEO Jeff Bezos as a former investment industry professional and technology venture

capitalist. Amazon’s executive compensation philosophy has remained consistent and clearly linked

regarding the alignment of executive pay and overall company performance:

…is the same as for all of our employees and is governed by the following principles. First, our compensation program is designed to attract and retain the highest caliber employees by providing above industry-average compensation assuming stock price performance. Second, our compensation program provides strong long-term incentives to align our employees’ interests with our shareholders’ interests. Third, our compensation program emphasizes performance and potential to contribute to our long-term success as a basis for compensation increases, as opposed to rewarding solely for length of service. Finally, our compensation program reinforces and reflects our core values, including customer obsession, innovation, bias for action, acting like owners and thinking long term, a high hiring bar, and frugality (Amazon.com, Inc., 2015, p.36).

Executive Officers. Five executive officers are highlighted in the 2015 Annual Proxy Statement and

their compensation is fully disclosed (Appendix 5). Amazon is unique in that base pay compensation for

each of the executive officers is significantly lower than its industry competitors and most Fortune 500

companies. Approximately $80k separates the CEO base salary of $81,840 and the next highest paid

executive officer, the SVP and CFO at $160K. The company has broken down its business into Domestic

Consumer Business, International Consumer Business and Amazon Web Services. Only a variance of $15K in

base salary compensation distinguishes the SVP of Amazon Web Services ($160k), the SVP of Consumer

Business ($165k) and the SVP of International Consumer Business ($175k).

Pay Transparency. Amazon clearly identifies base salary compensation, in addition to stock

awards, all other forms of compensation and total compensation for its executives: Amazon compensates

its executives “primarily through stock-based compensation that vests over an extended period of time,

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and our chief executive officer receives minimal annual compensation, and no equity compensation, in

light of his substantial ownership in Amazon.com” (Amazon.com, Inc., Proxy Statement, 2015, p.16).

The 2014 Annual Report does not identify Amazon or AWS peer-groups. The 2015 Proxy

Statement identifies Intel, Microsoft, Google, eBay, and Target as peers, (p. 16, 19 & 21) with the first

three directly or indirectly competing with AWS. As AWS continues to increase its contribution of net

operating income to the company, currently at about 50%, it is expected that AWS, LLC. will become the

primary business of the e-commerce retailer, parent company, Amazon.com, Inc.

“Say-on-Pay”. Although not readily found within the 2015 Proxy, Amazon has provided a clear

and informative statement providing for a 3-year vote on executive compensation and the rationale

behind their decision. The proxy does not provide information regarding a 2014 vote.

At our 2011 Annual Meeting of Shareholders, our shareholders approved, on an advisory basis, a frequency of every three years for casting advisory votes approving our executive compensation. Due to the vote of shareholders on the matter, as well as the fact that our executive compensation programs are designed to reward long-term performance and operate over a period of years, as opposed to a single year, we adopted a triennial shareholder advisory vote on executive compensation. Accordingly, after the 2014 Annual Meeting, our next such shareholder advisory vote will occur at our 2017 Annual Meeting of Shareholders. (Amazon.com, Inc., Proxy Statement, 2014, p.13)

Based upon the 2015 Proxy Statement, Amazon.com, Inc. does not employ separate Chairman

and CEO/President positions. Jeffrey Bezos is President, CEO and Chairman of the Board. The ratio of CEO

pay to median pay in the organization is not disclosed in the 2015 Proxy Statement. This information was

available through other sources and is summarized in the table below for AWS competitors in the Fortune

100. High-technology companies are among the leaders in the CEO pay to median pay ratio. Google,

Microsoft, and Amazon are recognized as the top leaders, reflecting this new regulatory reporting

requirement and best practice.

Remainder of Page Left Blank Intentionally

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Table 1. – Ratio of CEO Pay to Median Organizational Pay for Amazon.com

RankCEOPay toEmployee

FortuneCompanyRank

CEO Company CEOAnnualCash Compensation

Median Annual EmployeePay

% Company Pays Compared to Market

% High Job Satisfaction

CEO Pay to Median Employee Pay

Intel, Rank:#62 ; Oracle, Rank:#41 ; Apple, Rank:#2665 19 Virginia

RomettyIBM $8,300,000 $85,700 2% 68% 97:1

92 10 Margaret Whitman

Hewlett-Packard

$2,770,000 $81,700 -2% 65% 34:1

94 64 John Chambers

Cisco Systems

$3,370,000K $108,000 9% 72% 31:1

96 56 Jeffery Bezos

Amazon $1,680,000K $91,600 17% 71% 18:1

98 Steven Ballmer

Microsoft $1,370,000K $110,000 17% 69% 12:1

100 73 Larry Page

Google $1.00 $102,000 17% 83% 0:0

(Pay Scale, Inc., Fortune 100 CEO Income in Perspective, 2013)

Additional Proxy Research Findings. Investors, employees, prospective employees, customers,

and the public in general expect the nation’s largest corporations to show clear measures of internal and

external consistency (or congruence) between corporate values and the corporation’s response to

allegations. As stated earlier, Amazon faces intense scrutiny of its actions in all areas including

environmental, social and governance (ESG).

In 2014, Amazon Web Services (“AWS”) shared its long-term commitment to achieve 100% renewable energy usage for the global AWS infrastructure footprint. AWS also announced the Amazon Climate Research Grant Program, in which the Company committed to award a total of 50 million core hours of supercomputing using Amazon EC2 Spot Instances to apply to research on better understanding and mitigating climate change. (Amazon.com, Inc., Proxy Statement, 2014, p.20)

While the above constituents look to corporate social responsibility as a measure of confidence

and trust in the company, the incongruence between large renewable energy investments made by the

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company and Amazon’s long-term reputation for “churning and burning” it’s human capital is a significant

obstacle to overcome.

Compensation Best Practices –

Tackling and Wrestling Incongruity. Approximately 7 days prior to the publishing of this

compensation report, a ground-breaking article entitled Wrestling Big Ideas in a Bruising Workplace

appeared in the weekend edition of the New York Times. Over 100 current and former Amazon employees

were interviewed for the article that perhaps disclosed and confirmed more information than any other

previous. “Amazon declined a request to interview Mr. Bezos…but made several executives available”

(Streitfeld & Kantor, 2015). In a maneuver to respond to the “deplorable” accusations in the article Bezos’

response embodies and perpetuates the very ambiguity and incongruity that is expected and screened for

in candidates AWS recruits:

Its [The New York Times Article] portrait of “a soulless, dystopian workplace where no fun is had and no laughter heard” and said, “I don’t think any company adopting the approach portrayed could survive, much less thrive, in today’s highly competitive hiring market.” He told workers “I don’t recognize this Amazon and I very much hope you don’t, either.” In a letter to employees, Mr. Bezos said Amazon would not tolerate the “shockingly callous management practices” described in the article. He urged any employees who knew of “stories like those reported” to contact him directly. “Even if it’s rare or isolated, our tolerance for any such lack of empathy needs to be zero,” Mr. Bezos said (Streitfeld & Kantor, 2015). The New York Times article and its fallout raises several questions as to whether compensation best

practices – or any best practices – can be applied to a company whose success comes from the company’s

Leadership Principle: “Hiring and Developing The Best” and contradicting every other rule in the Book of

Human Capital Management “Best Practices.”

The most successful business and businessman of the 21st Century: Amazon and Jeff Bezos, “ A

Riddle Wrapped In a Mystery Inside an Enigma.” Berger & Berger, 2008.

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Appendix 1 – Business Intelligence Unit

Business Intelligence Group Profiles

Culture: All groups have strong team values, trust, and service, which are paramount in their core values. Groups are highly collaborative, but also require the ability to complete individual work at a very high level with little to no guidance. Multiple skill sets are essential to lead and be an individual contributor in a number of different scenarios. Relationships are critical: groups must attract passionate people to get things done regardless of the adversity faced. Work-life balance, is difficult because but everyone is expected to be called upon 24/7/365 to support the business (Amazon Web Services, 2015).

Strategic Data Solutions Production Support: SDS Production Support team is responsible for the operation of all SDS applications in production environment worldwide. They work with various SDS team such as system admin, database admin, network admin team and development to ensure that all systems are functioning properly. They are the first escalation point of contact for SDS customers and provide system monitoring, break fix, new deployment, and incident management services to SDS. (Amazon Web Services, 2015).

Strategic Data Solutions Database Administrators: SDS DBA team is responsible for all database related operation within the department. This includes database monitoring, new installation, break fix as well as performance tuning. Currently the technologies we are mostly involved are Oracle and MySQL.

Data Quality: Data Quality is responsible for gathering, consolidating and tracking all data for Amazon’s products worldwide. The team works with business partners inside and outside of the company to identify data quality issues and address them in order based upon urgency and priority. Additional responsibilities include driving improvements in the organization, processes, and implementing data quality initiatives (Data Quality Roadmap). (Amazon Web Services, 2015).

Research & Development: The R&D group is responsible for the architecture and development of data pipelines and storage, the research of related emerging technologies, platform planning and new capability development. This is a highly collaborative team that strives to develop world-class assets that enable Amazon to prototype and build the next innovative product. (Amazon Web Services, 2015).

Rapid Business Intelligence: RBI team is responsible for delivering Presentation and Access (P&A) solutions across Business Intelligence. The core expertise of the group is on user interface design, data visualizations and building data access mechanisms of large data sets. RBI manages P&A projects for the BI department. (Amazon Web Services, 2015).

Quality Assurance: QA is responsible for validating any change (software, hardware, database or configuration) necessary to the production systems. The team follows standard methodology of functional, regressions, integrations, and performance/stress/load testing to validate changes leveraging automation whenever possible to expedite cycles. The team works closely with the development team during their design and development cycles. They work with the Production Support team for Release Deployments and Production Troubleshooting and they service all areas of the department with experiments in the QA environment (Amazon Web Services, 2015).

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Business Unit- Business Intelligence (Big Data):

1. Amazon Elastic MapReduce (Amazon EMR)2. Amazon Data Pipeline

Amazon EMR: “Amazon Elastic MapReduce (Amazon EMR) makes it easy to quickly and cost-effectively process vast amounts of data using Hadoop”, (Amazon Web Services, 2015). Amazon Data Pipeline: “WS Data Pipeline helps customers build highly reliable and scalable data processing workflows” (Amazon Web Services, 2015).

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Appendix 2 – Methodology of Salary Grades & Structure of the Business Intelligence Unit

Market Pricing. After receiving salary survey data from Aon-Radford, the compensation team analyzes the data for accuracy to the job descriptions within the Business Intelligence department.

The 25th percentile, Median, and the 75th percentile price percentiles are used from the survey. The compensation team would then recommend a salary range to the managers, around the 25 th percentile salaries up to the 75th percentile salaries. The market Median would be the target salary to pay through the Compa-ratio method. The pay data should be organization weighted, so there’s less data skewed by a large company versus smaller companies. The compensation survey should also report the total cash compensation, which includes the variable pay and short-term incentives. With all the data collected, the compensation team will decide which data would be included on the pricing exercise. Data selections will have the mostly include relatable situations to the Business Intelligence department.

Amazon’s pay salary structure is broken up into 10 levels. This causes some ambiguity within the company’s ability to accurate rank and evaluation jobs efficiently. The levels go from 1 to 12. Level 1 is not applicable for any positions, as this is common with other companies, as they don’t want their new hires to feel they’re hired into the lowest ranked level in the company. Level 2 and 3 are reserved for the manual laborers mostly from the fulfillment centers. Level 4 is where the new hires like the recent college graduates are listed under, but will also include positions for individual contributors.

The 4 job descriptions (Java Developer, SW Development Test Engineer, SW Development Engineer, and Big Data Developer) from our research paper are listed under level 4 because of their intermediate job level and their lack of management responsibilities.

Level 5 is where we would start to see management type of roles like the program managers. Level 6 is reserved for the senior managers. Level 7 is the level reserved for senior managers with graduate level education and responsibilities of managing the level 5’s and 6’s. The SW Development Manager is listed under level 7 as it matches the requirement for this grade level.

Level 8 we get to the executive level starting with the directors. There’s no level 9 at Amazon and no confirmation of the reason. According to Stone, “the absence of Level 9 is symbolic-that Bezos and his early execs eschewed rigid corporate hierarchies and rebelled against the notion of adding senior directors and another layer of bureaucracy”, (Stone, 2013).

Level 10 is designated for the vice presidents and Level 11 is for the senior vice presidents. The final level 12 is only for the CEO (Bezos).

One common complaint I heard is that positive feedback from superiors is rare and promotions even rarer. This, it turns out, is probably by design. Amazon Chief Executive Officer Jeff Bezos seems to believe his managers must raise the performance bar with every hire and promotion and that only exceptional talent should progress within the organization. As he has done in so many other ways, Bezos has codified his beliefs within his company in the form of a custom called the OLR, for organization and leadership review.

“OLRs give us the opportunity to identify our future leaders and prepare them for their next challenging role,” it reads. “Our Least Effective 10% of employees will be targeted for appropriate action to keep Amazon’s performance bar high.”

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Appendix 3 – Competitor Salary Information

Median Total Compensation

Median Base Salary

Glass Door

Netflix $180,000 $180,000Mozilla $147,556 $112,737Good Technology $147,500 $136,250Altera $147,200 $133,250VMware $145,000 $121,500Cadence Design Systems $145,000 $130,000Google $143,500 $116,000Synopsys $143,000 $123,000TrueCar $141,500 $100,000

TurnoverAmazon (32) Median Age $93,200 1.0Google (29) Median Age $107,000 1.1

http://www.slate.com/blogs/business_insider/2013/07/28/ turnover_rates_by_company_how_amazon_google_and_others_stack_up.html

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Appendix 4 – Other Compensation Related Legal Issues

Outside of the business of AWS, other compensation-related legal issues for Amazon were discovered and are summarized below. The concerns are drawn from the ethics of their business practices and policies, not only in the United States but also in other countries where they operate. In addition to legal cases related to non-compete agreements, cases of poor treatment of workers, unsafe working conditions, anti-unionization tactics and violation of federal wage and hour laws have increased. In some cases, employees have gone on strike to have their complaints heard.

In December 2012, Kivin Varghese, a tech and ad industry veteran and former CEO of online ad startup BrandPort filed a lawsuit against Amazon seeking to invalidate an 18-month non-compete clause in his employment agreement with Amazon. His suit also asks the court to cancel his assignment to Amazon of an invention called the “Television Advertising Companion,” which predated his work at the company. (Bishop, 2012) Varghese won the lawsuit that exempted him from an 18-month non-compete agreement and was given rights to a patent application that Amazon attempted to “liberate” from him. Apparently, Amazon initially fought the lawsuit, but days before the trial, surrendered the case. (Maupin, 2014)

Amazon has faced numerous patent lawsuits with competitors. In 2013, Apple and Amazon.com were the most frequent targets of U.S. patent-infringement lawsuits in an increasingly complex legal climate. White House reports estimated over 100,000 companies were threatened in 2012. (Ciccatelli, 2014)

In February 2013, Amazon hired a contractor to manage temporary staff in Germany and they later canceled the contract. The contractor allegedly defaulted on promised wages, kept migrant employees under surveillance and in cramped and unsuitable accommodation and supervised employees using guards whose uniforms had neo-Nazi connotations. (Matlick, 2013)

In May 2014, a lawsuit filed in South Carolina by warehouse workers for being required to continue working during their unpaid half-hour breaks. Employees had to wait in line to go through a security screening. Claims of managers reprimanding employees during their lunch breaks. The suit claims this violates federal wage and hour laws. (Jamison, 2014)

In June 2014, the U.S. Occupational Safety and Health Administration (OSHA) cited five staffing firms in two separate incidents in fatal injuries of contingent workers at two Amazon fulfillment centers. Even if a temporary staffing contract has indemnification clauses, OSHA compliance responsibility typically rests with the site holder. Client companies are responsible for ensuring a safe work environment under OHSA rules. These companies were cited for failure to perform a hazard assessment of the facility before assigning employees; however, OSHA did not cite Amazon. (Johnson, 2014)

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In January 2014, Amazon held off the union from organizing within its company. A small group of maintenance and repair technicians at an Amazon warehouse in Middletown, Delaware, voted 21-6 against joining the International Association of Machinists and Aerospace Workers. The results marked a major victory for Amazon, which risked organized labor gaining a toehold within its operations and using it to recruit tens of thousands more fulfillment center workers across the country. Steve Tadelis, a professor of economics at University of California at Berkeley said that unionization would make it more complicated for Amazon to fire workers, incur higher labor costs that could narrow the company’s already thin profit margin. (Kopytoff, 2014)

In December, 2014, more than 2,000 Amazon staff at German warehouses went on strike on to demand better pay and working conditions as Amazon ensure Christmas orders are delivered on time. Amazon has repeatedly rejected the union's demands, saying it regards warehouse staff as logistics workers and that they receive above-average pay by the standards of that industry. Amazon employs almost 10,000 staff at its warehouses in Germany, its second-biggest market behind the United States, as well as more than 10,000 seasonal workers. (Thomasson, 2014)

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Appendix 5 – Executive Officers and Executive Pay

(Amazon.com, Inc., Annual Proxy Statement, 2015, p.29)

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Amazon Web Services

Compensation Report

A u g u s t 2 2 , 2 0 1 5

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