Wednesday, March 28, 2007

Circuit City Fires 'Em and Rehires 'Em (At A Lower Wage)

Circuitcity According to this story from Yahoo! News and the AP, Circuit City has embarked on a cold-hearted corporate strategy to fire its highest paid store workers and then offer to rehire them at a lower wage after a period of time has passed:

A new plan for layoffs at Circuit City is openly targeting better-paid workers, risking a public backlash by implying that its wages are as subject to discounts as its flat-screen TVs.

The electronics retailer, facing larger competitors and falling sales, said Wednesday that it would lay off about 3,400 store workers — immediately — and replace them with lower-paid new hires as soon as possible.

The laid-off workers, about 8 percent of the company's total work force, would get a severance package and a chance to reapply for their former jobs, at lower pay, after a 10-week delay, the company said.

And here is how the company is trying to sell this employee betrayal to the public:

Circuit City . . . says the workers being laid off were earning "well above the market-based salary range for their role." They will be replaced with employees who will be paid at the current market range, the company said in a news release.

I'm not buying it.  Whatever happened to loyalty to your employees and rewarding them for past service provided and a job well done?  Shoot, corporate strategies like these could singlehandedly revive Ameican unions with their promise of just cause protection.  At-will employees like these have no protections against arbitrary dismissals.

I wonder whether enough people will be outraged by this labor strategy that they will not shop the store and any gains made from savings in labor costs will be lost in terms of good will from customers.  I also wonder whether the loss in remaining employee morale will significantly affect productivity.

In the end, this is such a short-sighted strategy that it must be the last desperate gasps of a company soon to be out of business.


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Hey, if this sort of bone-headed corporate stunt will help revive the labor movement, then maybe I'm all for it. Still, I have to wonder why they didn't just cut the employees' wages to the "market rate", instead of sacking them and making them reapply. That would have been bad enough; but at least it wouldn't likely have gotten such negative publicity.

Posted by: eric | Mar 29, 2007 11:37:31 PM

There will be no "backlash" over this. Wal*Mart proved that you can practice slavery in the U.S. and the American consumer will still come flocking in to save a few pennies on a pack of toilet paper. The sociopaths on Wall Street know it's true, which is why Circuit City's stock shot up right after the layoffs were announced.

Posted by: Old Dog | Mar 31, 2007 7:59:52 AM

«why they didn't just cut the employees' wages to the "market rate"»

That's breach of contract? Termination is much easier. Teaches a lesson too to everybody else.

«Whatever happened to loyalty to your employees and rewarding them for past service provided and a job well done?»

Well, with a very large worldwide labour glut, that is a joke. Interesting statement quoted by BusinessWeek:
«"There are certain professions where skills are in such demand that even average or below-average people can get hired,"»

Note the shock and horror at the notion that in some rare cases merely average western workers have to be hired...

Also, seniority based salary is very bad for longer serving employees who lose their jobs. They are then indeed mispriced out of the market, and locked out even of restarting their career. Companies that have seniority of service based pay (e.g. most tech companies) end up only hiring at the bottom of the pyramid.

Posted by: Blissex | Mar 31, 2007 10:38:28 AM

As a thirty year veteran in retail management Circuit City has taken the first step in reducing their level of customer service.Yes there will be plenty of new lower paid employees on the sales floor but without the knowledge to realy work and close a sale on high priced quality goods.When customers know what they want or think they do they shop at K-mart,Target or Walmart where service expectations are not that high. Customers who need the advice of a true retail professional with years of knowledge and experience would shop at places such as Circuit City and Best Buy.
The news that Circuit City fired several thousand experienced "overpaid" retail professionals is good news for Best Buy.

Service in the retail sector for the most part is average at best and this strategy to enhance the bottom line in a "penny wise dollar foolish" move will prove damaging in the long run where both the customer and Circuit City will suffer.

Posted by: mike b | Apr 1, 2007 2:12:29 PM

Im one of the 3,400. I started in 1996 in customer service then worked on the sales floor. Trained in the Richmond Corp office to be a salaried Cust. Svc. Manager. I left in 1999, then returned in 2001,as an hrly Cust. Svc. Lead (the salaried mgr position was eliminated.) I EARNED pay raises by working very hard. I never threaten to leave or asked for more money. My managers rewarded me for a job done well above their expectations. You won't find that for $7.25/hr.

Posted by: Natasha | Apr 1, 2007 3:56:20 PM

While I am well aware of the slave/master ideal that is so well practiced in our country, I am also well aware that it CAN stop - but only after enough slaves overtake the masters....

Simple logic, huh?

Even simpler is to not shop at places like Circuit City. That too is pretty logical. From here on out, I will use BestBuy or another source for all my electronics.

When I find companies that treat their employees or customers like dirt, then I simply make the decision to not utilize their products/services. Period! I no longer shop at WalMart either. I'm sure the Walton's are not exactly devastated by my lack of patronage, but if enough people like myself decide to stand up for what they believe in, the Waltons will bend over backward to do what we consider fair.

You DO have the power to change the way you and your community is treated....

WalMart, Circuit City.... who's next?

Posted by: Brandon | Apr 4, 2007 10:24:58 AM

I've worked for cc in so cal for about 4 years now...( i know, i know..)Last week 15 people lost their jobs in the store. 15 friends, 15 individuals who honestly made a decent living with the salary their dedication has earned them. 22 years was the longest running associate they fired. 5 children and the sole provider for his family. 9 other fromer employees were the sole providers for their families. Dedication, honesty, loyalty, whatever you want to call it, cc lost it. Yes, moral is down, internal theft is up, others who werent fired are just walking out. The parking lot has been empty since this happened. I hope it stays that way so the company goes under and I don't have to walk.

Posted by: ray | Apr 4, 2007 2:12:25 PM

When I distributed copies of the New York Times article to my international employment law class, one student commented that she now had an ADDITIONAL reason not to patronize CC. (Previously she had not shopped there because it was her understanding that employees were rewarded for steering customers to more expensive products than they needed.) In class we had already discussed how companies in other countries deal with a downturn in business, without simply dismissing their workers to cut costs.

Posted by: Hilary K. Josephs | Apr 7, 2007 12:12:35 PM

I was recently RE-Hired @ Kmart for seasonal work (again)...assuming I would be paid what I was paid the last time, I never thought twice about it...until PAYDAY came around. I am now being paid a full $2.00 LESS per hour, than the first holiday season I worked for Kmart...I need the job, there aren't many of those little buggers just laying around, ya know. I am furious, but I can do absolutely nothing about it. It really sucks, especially since I was always dedicated and easy to "call in" at a moment's notice. I'm not sure how dedicated I am anymore...I think I will just go in and take my time until something better comes along.

Posted by: mathrice | Nov 26, 2008 12:33:06 PM

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