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IKEA became the latest corporation to undergo layoffs with a goal of “simplifying its organization” to speed up decision making and help reduce costs for customers.
As a result of the initiative, 800 roles “may become redundant” within group functions, IKEA said in a statement.
“We have grown too complex in a retail environment that requires speed and agility,” said Juvencio Maeztu, CEO of Ingka Group, IKEA. “Simplicity is one of our core values, and with this step, we are putting it at the center of how we organize, work and lead the company. This change is driven by our purpose -- not to maximizing profit. It is about bringing our focus and decisions closer to our customers and the co-workers who serve them every day. This step will create the right pre-conditions to grow and lower prices while staying true to our vision of creating a better and more affordable and sustainable everyday life for the many people.”
IKEA Joins Kroger, Amazon, Walmart, and Other Retailers in Flattening via Layoffs
Among other retailers, Kroger last year announced layoffs of fewer than 1,000 corporate staffers as the grocer said in an internal memo it was looking "to simplify the organization, shift resources closer to our customers and focus on work that creates the most value."
Amazon in January revealed internal plans to eliminate around 16,000 corporate roles globally, following an October move to reduce 14,000 roles.
"Our ambition is to be the world's largest startup," Amazon executives wrote in memos viewed by Business Insider. "That means doubling down on a culture of ownership, speed, and experimentation — which requires us to continue evolving how we're structured."
In what's been dubbed the Great Flattening, tech giants including Microsoft, Google and Intel have been shedding middle managers for the past few years, but the streamlining has spread to retailers -- including Walmart, Wayfair, and Starbucks -- as well as corporations such as HSBC, Ernst & Young, and UPS.
Cutting back on middle managers can help businesses reduce costs, encourage more collaboration between frontline employees and senior executives, empower lower-level employees to take action, and reduce redundant approval steps to speed decision making, according to a 2020 report from McKinsey & Company.
Artificial Intelligence Could Further Flatten Operations
Artificial intelligence is also seen helping reduce management layers.
Gartner has predicted that by 2026, 20% of organizations will use AI to flatten their organizational structure, eliminating more than half of current middle management positions. Gartner said in October 2024, “AI deployment will also allow for enhanced productivity and increased span of control by automating and scheduling tasks, reporting and performance monitoring for the remaining workforce which allows remaining managers to focus on more strategic, scalable and value-added activities.”
However, several recent articles have called out the risks of flattening an organization too far. Having more direct reports means managers have less time to guide and motivate employees and raises risks related to miscommunication, mistakes, and morale. Brad Smith, chief science officer at meQuilibrium (meQ), told HR Morning, “Beyond the negative impact on team mental well-being... execution of corporate strategy is also likely to suffer. Middle managers have historically been the filterers and translators into action of senior executives’ business-speak.”