Restructuring overload: The hidden drain on company productivity

Sunday, 14 December 2025

In February this year, Woolworths NZ staff were called into meetings to say the company was proposing a widespread restructuring of the business.

That restructuring has now been rolled out, and a handful of staffers who spoke to the Sunday Star-Times has called the emotional toll on workers “horrendous”.

Under a plan called “Better Together”, department managers, assistant department managers, and duty supervisor roles and specialisations were abolished, workers lost set hours in favour of changeable rosters, and “cross-skilling” was promoted.

Woolworths NZ rejects the programme is a cost-cutting move. But many employees beg to differ, reporting a dwindling number of colleagues have been left with low morale, confusion, and in some cases, lower pay packets from the changes. This publication agreed not to name the employees, who still work within Woolworths.

One South Island employee said the programme, which took effect in November, had seen many of her colleagues lose management titles and pay, and others were grappling to fit family commitments around a new form of rostering their working hours. But more than that, on the job, several were struggling - more were absent, leaving numbers down; the use of fill-ins was consuming the time of people who had turned up.

“A lot of our team members are calling in sick, mentally they’re struggling to cope, and we’ve had people crying at work due to the stress, it’s been a tough year,” the employee said.

“This programme comes from head office so I feel sorry for the store managers, who are forced to implement it, even while their own hours of work have changed to being on a rotating roster. They’re coping with pressure from staff and customers and trying to keep morale up.”

Another employee in the North Island operation had also seen a growth in sick days and burn out as people battled through the change of conditions they were ill-prepared for.

“It seems obvious to me they are trying to get rid of the more experienced and well paid people and replace them with junior workers who get lower pay, or just a few to work in online or pickup, which is huge,” he says.

“But they’re running through huge numbers of inexperienced workers brought in to try and cover the job of one experienced person. Wastage is also up massively, and it wouldn’t surprise me if sales were down.”

Woolworth’s view

Woolworths takes a different view of what has happened.

It says the programme was devised in New Zealand earlier in the year - and was nothing to do with full year results for Woolworths Group, announced in late August - at which company management identified a need to improve returns in New Zealand’s 184 store network, despite a $120m increase in sales overall, to $8.28 billion in sales in the year, and growth in pre-tax earnings.

Woolworths New Zealand director of retail Jason Stockill says the restructured model means “more team on the store floor helping customers, ensuring the products they need are on the shelves, and a better overall service and experience”.

He says cross-skilling - the end to working under specific departments - means more “working together for customers”.

“Under our new model, when a customer asks a store team member for help, for example, to locate an item, the team member will have more general knowledge about the store, products, and their location, which offers a much better experience for the customer.”

Regarding a change to leadership roles, Woolworths says “a number of new leadership roles have been created, allowing for more than 300 managers to move into senior leader roles across our stores”, who in turn support the coaching and capability of others.

Woolworths denied the idea was to reduce staff numbers, but would not give specific numbers. It said “some of our team have unfortunately made the decision to leave us for a variety of reasons, for example, retirement, new careers or to be overseas with family. Our redundancy rate has been lower than expected and we worked hard to retain as many of our team as possible and support them into the new model with comprehensive training.”

The company concurred team sentiment had been “slightly impacted” by the operating model changes, but said the majority of people supported it, especially the leadership opportunities, “and the chance to learn about other areas of the business”.

“We’ve invested about $6.6 million in training and we’re listening closely, with regular team meetings and coaching opportunities,” says Stockill.

A plethora of restructuring

Woolworths is of course far from the only entity undertaking restructuring in a cost of living crisis, in which margins are squeezed and bottom lines impacted.

A picture of restructuring across the country is a busy one, gleaned from news stories and data points: a record number of businesses seeking advice about redundancies from the Employers and Manufacturers Association (403 in the quarter, almost double on the same period two years ago); a Post investigation into restructuring in the public service (of about 70 government departments asked, 50 had undertaken restructuring in 2024-25 - prompting at least one commentator to charge that our public service was “obsessed with restructuring”), councils being chopped back or even disbanded entirely, big banks, agencies, tech platforms and other global concerns either pruning or using a sinking lid and as recently as this week, a loss of 400 jobs lost from the country’s Fire and Emergency service.

Generally, these restructuring programmes are pitched as boosting performance, efficiency, and competitiveness - aka. productivity. But in the corporate world, analysts and institutions recognise a cost cutting exercise when they see it, usually rewarding it by sending stock prices soaring. Politicians also find mileage from what is perceived by some voters as a move to “cut waste” from public organisations - even if, as is often the case, the contractor bill soon balloons to make up for the loss of manpower and expertise.

Job insecurity

One of the issues is that globally, including New Zealand, organisational restructuring has become, in the words of one of the US’s top human resources authors and speakers, Jonathan Westover, “a reflexive managerial response to performance challenges.

“Yet evidence suggests that frequent reorganisations rarely deliver intended outcomes and more often inflict substantial hidden costs”.

Citing McKinsey studies, Westover says only 23% of organisation restructurings fully achieve their stated objectives, and over half of them result in productivity declines of as much as 30% during implementation and for quite some time afterwards.

The HR expert says the costs of a restructure can be great - a loss of knowledge, not just of particular expertise but of people who understand the way the company works; a loss of teams that had developed problem-solving routines and rhythms, financial costs including severance, relocation, new hiring, consulting - what he calls an “organisational tax” - and, he says, innovation suffers.

“Psychological safety - the foundation of creative risk-taking - requires stable team relationships where individuals trust they can experiment, propose unconventional ideas and and even fail without career consequences - constant restructuring undermines this foundation.”

Psychological safety is also imperilled by being insecure about losing your job in an upcoming or regular restructuring round. A New Zealand researcher, Associate Professor Lixin Jiang of the University of Auckland, has done studies and meta studies (aggregating the findings of other studies) looking at whether, as people like the former chairman of General Electric, Jack Welch, contended, job insecurity motivates people (he also advised keeping people in a constant state of anxiety about their jobs for the same reason).

Jiang and others found in their studies that when job insecurity was extremely high, employees do increase their performance, taking on tasks that are beneficial to organisational productivity and visible to managers, such as attending non-required meetings and volunteering for overtime.

But the motivating impact of this activity doesn’t last, and in addition, creativity declines – and then flattens out. And, unless the insecurity is very high - i.e. a direct threat to someone’s job on a regular basis - the more common impact is that behaviours that benefit colleagues, such as lending a hand when needed, decreases.

The data also revealed a link between job insecurity and a decline in employee safety performance.

Jiang told the Sunday Star-Times overall, job insecurity is negatively related to productivity: “Only at the very high level of job insecurity is there a weak, although statistically significant, impact on productivity. But the wellbeing costs associated with job insecurity at those levels outweigh the productivity gain.”

Resources

Felicity Salter, an associate in business advisory services at Baker Tilly Staples Rodway in Tauranga, helps companies adjust to periods of change like restructuring. She has a masters in business psychology and is also very interested in the impact of job insecurity on workers.

She understands that restructuring is inevitable in the current economic climate, even if anecdotally she says she’s seeing plenty of ways in which hard cutting can be counterproductive to the kind of increased efficiency aimed at, because again, it leads to job insecurity amongst those remaining.

This can lead to knowledge hiding or hoarding, reduced innovation, poorer performance, absenteeism and ultimately, higher turnover, she says, owing to “a perceived loss of control, and some scholars argue this is due to a breach of the psychological contract between parties.”

But there are ways to conduct restructuring that are better than others and help retain productivity rather than diminish it.

“For example, employers shouldn’t assume people who come through restructuring are grateful for their jobs, and that’s the end of it,” says Salter.

The business consultant advises companies undergoing restructuring to make sure employers actively communicate with remaining workers to ease anxiety, and engage in ‘personal resource’ building activities: helping employees understand their own unique strengths and how they can be applied in the new paradigm.

“This helps performance but also supports employees themselves feel engaged in their work, which can be a buffer when demands are inherently higher. Employees in my experience often exhibit a gratitude to their employers for this initiative, so arguably when done well there is a higher commitment.”

Until the next round of restructuring rolls around, at least.

What do you think? Email sundayletters@stuff.co.nz. Please include your full name and address.