It’s a familiar song to many industries: In an increasingly challenging retail environment, companies are looking in the mirror to find businesses bloated with layers of management as well as too many associates.
And they’ve been swift to act.
In the past two months alone, nearly 13,000 jobs have been eliminated at clothing and accessories stores, according to the U.S. Labor Department. Year-to-date, 38,000 retail job cuts were announced, according to the job placement firm Challenger, Gray & Christmas.
In May, L Brands Inc. said it was eliminating 200 home office associates as well as 90 labor positions to simplify its organizational structure. In June, Ralph Lauren Corp. said it was cutting its management layers to six from nine.
“There is no reason why we would need more than six layers between me and the actual doer doing the work to get the Way Forward Plan done,” said Lauren’s chief executive officer, Stefan Larsson, describing the company’s initiative that calls for cuts, store closings and a return to the brand’s “core.”
The ceo said rightsizing the organization would “empower the doers” to get closer to the consumer so they can react quickly to meet shoppers’ needs. Larsson is also cutting these unnecessary layers to bring the company back to an entrepreneurial culture.
Eliminating whole layers of management in a multibillion company isn’t easily accomplished. “It’s an extraordinarily difficult task,” said Jan Kniffen of Kniffen Worldwide Enterprises.
“When I was at the May Co., we were on a 54-week calendar. When we went to 40 weeks, it was an enormous change in culture.” So, cutting jobs may end up meaning an entire shift in the workplace culture, which is much harder to achieve.
Kniffen said reorganization requires a “process.” And either the titles change or the job description associated with the title changes. “It’s always painful to flatten management structures because all those jobs were there for a reason.” He said the biggest issue is how to make the changes, but not hurt the product or brand.
“Everyone is on a mission to cut costs as traffic slows,” said Farla Efros of HRC Advisory. “But I don’t believe traffic will ever get back to what it used to be.” That means retailers have to build a new organization to meet this “new normal.”
She said retailers make headcount reductions by two different methods. A broad cut, where every department takes a hit indiscriminately, or a bottom-up approach where the cuts are more precise.
“The top of the house gets so disconnected from the bottom or the customer, that by streamlining those layers, they get closer to the action and can react in a more nimble way,” Efros said. She said retailers who are being forced to redesign various roles within the organization is due to the growth of e-commerce.
“They are looking at all the tasks and what is valued added,” Efros said. “They want to be more efficient and get closer to the consumer. The old layers just created more red tape.”
Oscar Sachs, ceo of Salesfloor, said when retailers eliminate layers they need to empower the sales associates. “If you’re going to start cutting layers of management, you need to empower the workforce,” he said.
Sachs believes a new type of sales associate — who’s more educated — means retailers don’t need a dmm for each store: “You can have fewer district managers.”
As a result, these changes will likely require executives to wear multiple hats, and they’ll have to make decisions more quickly and do much more with much less.