Department store, Debenhams, has also announced plans to cut its store managers by a quarter.
All the retailers said they were facing a more challenging environment, not only because of intense competition from budget retailers, Aldi and Lidl, but also because consumers were becoming more price conscious as well as changing their buying behaviour.
Sainsbury’s hope to save £500 million over three years, but, in common with the other retailers mentioned, also said the changes will introduce “a more efficient and effective structure”.
Stripping out layers of management is nothing new. It has been used as a favourite cost-cutting tool by businesses in the past, most notably in the 1990s.
In some instances, no one notices when a layer of management is removed, but in others it can leave a void, especially in those where staff have not been empowered to make decisions.
Removing layers of management can improve productivity
One of the most significant organisational differences between SMEs and large corporations is their flexibility and ability to communicate throughout the organisation.
On the whole, SMEs have fewer layers of management and this enables them to adapt more quickly to change and to discuss and communicate plans to all their employees. This flexibility can attributed to everyone feeling part of a team, and where necessary doing each other’s job. There is often no need to defer to a manager for a decision.
Larger organisations, on the other hand, tend to have much more complex structures with more rigid procedures. Communication normally passes from the top down, from senior management through numerous layers to the workforce. Where decisions have to be made this is still down to managers or decision-making committees. Everyone simply follows procedures.
This makes it hard for initiative and feedback up through the layers of management. The focus is on lean structures and optimal efficiency. However, this runs the risk of suppressing initiative and reducing scope for employee consultation. As a result, larger businesses are often unable to react swiftly in a world where the pace of change is accelerating.
A flatter structure assumes even more rigid procedures albeit ones increasingly being overseen by workers instead of managers.
The challenge is to improve productivity while at the same time empowering staff by giving them scope for taking their own initiative. Or is the next step automation and self-service retailing?