The first cut isn’t always the deepest. Sometimes it’s the following ones that prove fatal

It’s hard to keep track of redundancies at the big four nowadays. In July, Tesco announced 1,200 cuts at its head office, leaving about a quarter of staff at its Welwyn Garden City headquarters facing redundancy. Not to be outdone, Asda began a review of 3,000 roles a month later, in a move that could leave 10% at risk of redundancy or reduced hours.

So news of 2,000 job cuts at Sainsbury’s was hardly a shock (the only surprise being that 2,000 jobs are on the line, as opposed to the 1,000 forecast when McKinsey were parachuted in back in August). The gradual erosion of headcounts at the large mults has been going on for years now. The question is: will they deliver the desired cost savings or are supermarkets at risk of death by a thousand cuts?

While redundancies are always unwelcome and painful for those involved, sometimes they can work without any negative long-term impact on the business. Indeed sometimes they can deliver positive change. Dave Lewis’s early restructure of Tesco’s commercial team is a case in point. As well as cutting costs, Lewis effectively removed duplication by disbanding its international buying operation. Together with making buyers responsible for stock control Tesco actually improved its availability. At the same time, the restructure was accompanied by the first of several rounds of its so-called ‘Reset’ of Tesco’s product range and pricing architecture that saw prices lowered and the proposition simplified for customers, and it even tackled Tesco’s woeful supplier relations.

On the other hand, sometimes cuts can do real harm to a business. That’s why the first move by Lewis when he joined Tesco was to reverse cuts that had been made to store staffing levels. This had an immediate impact on availability and customer service levels. On the other hand it’s hard to say if Asda has ever recovered from the store culls it introduced in 2014. Not only did the mass redundancy programme and pay/role downgrades incensed store workers; the cuts had a steadily worsening impact on availability and service levels.

Sainsbury’s will clearly be hoping the latest tranche of redundancies will fall into the former category. The supermarket believes its “updates to our HR structures and systems” will enable it to cut back on its payroll and HR workforce (who make up the majority of the redundancies) without any adverse effects. According to Bloomberg, the introduction of a new IT system is central to this rationale.

Competition

With the UK grocery market “changing at a rapid pace”, there is some validity to this argument. These changes are partly down to competition. As Sainsbury’s said in its statement, there is a need to “transform the way we operate” to compete in today’s ultra-competitive environment. It’s also down to changes in the way consumers shop, whether that’s using less cash (which requires less resource on the treasury side) or shopping online or using click and collect. We’re also seeing stores without checkouts and warehouses without pickers – so the idea of technology replacing jobs is one we have to accept, however bitter the pill may be to swallow.

But even in today’s ultra-automated environment, people still value the human touch. One finding that comes across consistently in our G33 mystery shopper surveys is just how much difference staff can make to overall impressions. The store that has top-notch shop floor service and friendly checkout staff will usually take the store of the week crown.

As the Sainsbury’s changes are concerning the back office, shoppers may remain blissfully unaware of any changes. But the climate of job insecurity at the big four can’t be doing much to boost morale. So as the supermarkets try to outdo each other in trimming the fat, they must make sure they don’t lose what is the backbone of their success: an engaged and efficient workforce.

And with some departments undergoing several further rounds of redundancies you also have to question whether a point of no return has been reached, where these businesses simply can’t cut their cloth fast enough for the market conditions.