Employees Are Our Most Valuable Asset . . .

Curcuit City plans to fire 3,400 “over-paid” employees  and hire replacements.  That a company could even think this is a good idea is astounding.  (Much less publicly admitting the motive!)

Sure, you might lower your wage costs somewhat – but exactly who do you want staffing your stores?  If this isn’t a signal to short CC stock, I don’t know what is.  Smells of desperation to me.

When a company does something like this – they almost always try to keep the good employees – but how do the best employees react to such initiatives?  They question their own future with the company and go find a new job.  Who’s left behind?  Those incapable of finding a new job – OUCH!

Pile on the predictable Sr. Management hypocrisy about “employees being our most valuable asset”

From the CC 2006 Annual Report

“We believe our 46,000 Associates represent our best source for finding solutions for our customer’s needs.” 

Need I say more?

Circuit City’s plan to fire 3,400 will have ripple effects – USATODAY.com

The consumer electronics retailer announced Wednesday that it was immediately firing store associates “who were paid well above the market-based salary range for their role.” New workers will be paid less, although Circuit City did not reveal the pay of the workers.


9 Responses to Employees Are Our Most Valuable Asset . . .

  1. Rose Rivera says:

    Hi TO’B,

    Interesting article! But I don’t think lowering the wages is necessarily a bad idea for the company.

    Previously employees at Circuit City were paid above market, or efficiency, wages. Voluntarily paying higher than average wages does have its benefits. First, higher wages attract a better pool of employee candidates. Second, it reduces employee turnover because less people leave for other equitable-position jobs at competing companies. Less turnover leads to a well-trained and experienced sales staff, and eventually more sales. Finally, higher wages gives employees the impression that the company cares about them, which fosters company loyalty and a greater willingness to perform to the best of their abilities while on the job.

    These benefits were taken into account during Circuit City’s decision making process. The retailer realized that the general composition of its sales force would change due to the pay cuts. One major drawback is that the competency of its sales staff will decrease as its best employees leave for higher paying jobs, like you said. Also, the time and effort needed to train new employees will undoubtedly have a negative impact on sales in the near future. Because of these changes, “Circuit City is expecting to have consolidated net sales growth of 8% during fiscal 2007, down from the 9% to 10% originally forecast.” (Business Week, 2007) This means that the estimated effect of efficiency wages is between 1-2% of Circuit City’s net sales.

    If the money saved via these lower wages is greater than taking this 1-2% hit then there is no reason these pay cuts should negatively effect the company’s profits, even with a less skilled sales staff.

    Source URL: http://www.businessweek.com/investor/content/mar2007/pi20070328_712708.htm?chan=top+news_top+news+index_investing

  2. Tom O'Brien says:

    Thanks for the comment – while your argument makes logical sense and may be the right thing to do – why the h*ll would you position it like this???

    Tom O’B

  3. […] It’s being talked about a great deal around WordPress.com today. Gotta love this one post where we’re reminded how Circuit City says that their employees are the best part of it. Had […]

  4. […] Which I interpreted as a sign to sell CC Short Employees are our most valuable asset . . . […]

  5. […] City Part II This story goes back to one of my favorite alltime posts about Circuit City firing 3,400 “overpaid” sales employees.   […]

  6. […] City Part II This story goes back to one of my favorite alltime posts about Circuit City firing 3,400 “overpaid” sales employees.   […]

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