Bunnings strips out a layer of senior management in efficiency drive

The hardware giant is slimming down its senior management ranks in a bid to cut costs and keep prices down in the tougher economic climate.

Bunnings has stripped out a layer of senior management in a corporate restructure that will involve some redundancies, but which the hardware chain believes will reinforce its low-cost model just at a time when shoppers hit with cost of living pressures focus on shelf prices.

Wesfarmers-owned Bunnings is evolving its strategy to ramp up the competitiveness of its stores, with staff walking the stores to engage more with customers.

And after years of investment in technology and productivity programs, Bunnings now wants to leverage those assets by slimming down its corporate reporting lines and cutting costs – which ultimately should flow down to better prices and higher profit margins.

Bunnings believes internally that a flatter corporate structure is the right fit for its business, while it should also serve it well in tougher economic conditions.

The restructure and redundancy round was announced to Bunnings senior staff last week at its Melbourne headquarters, with some staff flown down from Sydney to hear from Bunnings bosses first-hand about the new operating model the company is adopting.

Under the new reporting structure, Bunnings managing director Mike Schneider will have beneath him a director of store operations, who in turn will now have a larger pool of general managers and area managers that then feed into store managers across Bunnings’ 352 outlets.

A layer of eight regional managers, that reported to general managers, has been eliminated.

Mr Schneider told The Australian the restructure was part of an ongoing strategy to create the most efficient operating model possible, while also evolving to meet changing customer needs as the Covid-19 pandemic recedes.

This was also being driven by the large investments in technology Bunnings has recently made helping to simplify and improve its business model.

“We regularly review team structures and resourcing to ensure we have the right skills and roles to support our team,” he said.

“We recently announced some small changes to our senior retail operations team to simplify our structure and leverage investments made in our operations, both in store and in our wider team.”

Bunnings employs around 53,000 people. Picture: NCA NewsWire / David Mariuz

Crucially, the removal of a layer of senior management should also reinforce Bunnings’ core ethos of a low-cost model that keeps it price competitive at a time when retailers are feeling the heat from weaker consumer confidence.

At Wesfarmers’ half-year results earlier this year Bunnings’ revenue for the period increased 6.3 per cent to $9.792bn, with earnings increasing 1.5 per cent to $1.278bn.

The hardware giant now contributes around 60 per cent of Wesfarmers’ total earnings and its success or failure now influences the conglomerate more than any other division within its investment and business portfolio.

For Wesfarmers chief executive Rob Scott it means the Bunnings boss is responsible for the majority of his own profits and despite the demerger of Coles five years ago, Wesfarmers remains heavily exposed to the retail sector.

Late last year Bunnings kickstarted a round of redundancies across its national support centre and head office in areas such as training, communications and other support services.

Bunnings employs around 53,000 people, of which around 1600 work at the head office in Melbourne, and there is now a renewed effort to flatten its corporate structure amid tougher economic times and inflationary pressures.

But the latest restructure would also be good for the local Bunnings store managers, Mr Schneider said on Monday, and give a greater voice to store teams as they pass on to senior managers what customers want.

“This supports our low-cost operator model, ensures a stronger voice for our team, simplifies communication and enhances execution across our network. Post pandemic, this design will help enable deeper engagement with our store teams and in turn a more consistent customer offer,” Mr Schneider said.

The number of redundancies should be less than 10, with executives offered redeployment opportunities.

“We can confirm this will not affect our team working in stores and will simplify their reporting lines. Overall, our team continues to grow as we actively recruit roles across our store network to ensure we are offering customers the best experience.

“We’re currently working with any affected team members, all of whom have been offered redeployment options.”

Wesfarmers will report its full-year results to the market on August 25.

Originally published as Bunnings strips out a layer of senior management in efficiency drive