It wasn’t announced in a press release, but a 15 October filing with the US Securities and Exchange commission revealed that Office Depot had approved a plan to cut 1,100 jobs from its workforce in Europe, about 15% of its European employee base. This latest round of redundancies comes in addition to 300 positions that have already been eliminated in the past 12 months or so as Depot – much like its arch-rival Staples – struggles to achieve profitability in Europe.
Consultation process
The company isn’t revealing any specifics just yet about which jobs are to go in which markets because it is currently in a consultation process with works councils in several countries. Speaking to OPI from Office Depot’s European headquarters in Venlo, Netherlands, where he has been spending a lot of time recently, Steve Schmidt – who in addition to being President, International, also assumed the role of President of Depot’s European business following the departure of Dirk Collin in early 2012 – told OPI in a telephone interview that he hoped the consultation process would be largely completed before the end of the year, although it would most likely continue into the new year in some places.
It has been public knowledge for some time that Depot has been taking steps to restructure its European operations along channel lines as opposed to the current geographic organisation, and the 1,100 job losses are the result of this strategy. Schmidt pointed to a number of key reasons and trends why it was felt “critical” to take this action, including: steady low-single sales declines over a number of years; the explosion of e-commerce; the commodity nature of the office products business that has led to low barriers to entry; the need to be a low-cost operator.
“We felt very strongly that we needed to do something bold and decisive,” he stated. “But I want to make it clear – everything we are doing is about moving forwards and growth, not about cutting back or pulling out of markets.”
Depot currently operates in 12 core markets in Europe and European sales are about $3.5 billion, which is just over 20% of the reseller’s total. Schmidt said that the company at board and senior management level was “100% behind” this restructuring move and Depot’s future in Europe.
“The willingness to spend $120 million on this restructuring demonstrates the commitment […] to the European business,” he declared.
But why didn’t Schmidt take action sooner? The market trends and challenges we are seeing are really just a continuation of what has been going on for several years and the European economy in general has been soft for some time.
“What we are doing is something that is extremely complex and we wanted to make sure we did it the right way,” he explained. “When I took over two and a half years ago, what I found was a European leadership team that wasn’t working well together, an organisation that was very bifurcated by country – with an ‘I’ versus ‘we’ attitude – and which lacked a defining culture or strategy.
“Over the first year to 18 months, we spent a lot of time bringing the entire leadership team together as one, working on the culture, building what we see as the ‘foundations of the house’ that would enable us to go forward. I believe very strongly that you have to create a strategy first, then create the structure that supports that strategy and then build processes that enable the organisational structure to operate efficiently.”
Inefficiencies
Schmidt revealed that there were “hundreds” of examples of inefficiencies and process redundancies across Europe that were adding in extra costs and making Office Depot’s cost structure in Europe unsustainable. He stressed that this was a purely European restructuring programme without direct implications for Office Depot’s other international businesses, although he added: “I’m constantly evaluating our portfolio and will continue to look at what’s right for the businesses; where there are opportunities to eliminate redundancies, we will do so.”
