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Circuit City: Reaping What You Sow

July 10, 2008

A little over a year ago, I received a call from a reporter at USA Today who was writing a story about Circuit City’s announcement that it planned to lay off the highest paid workers and replace them with lower cost labor. In response to how I thought the company would fare I essentially said, 

Circuit City’s plan to eliminate one earning category to replace it with another is an odd strategy.  But what's stranger is to say publicly that they are basically going to replace their existing, most expensive labor with a cheaper alternative. I think more than potential morale problems, they face PR and consumer troubles too. Frankly, from an image perspective, it’s not a very flattering move. There is a psychology attached to value and worth in the workplace and this makes Circuit City look as though they are treating people like tradable commodities. Not only do I think that customers and employees will be turned off, I also think that the negative aftermath will extend to hinder employees' desire to sell and customers' willingness to buy.  The company is trading savings now for the costs they are likely to pay later. I’m not saying that cuts don’t need to happen. But I am saying that this way doesn’t make a lot of sense. I would have preferred to see them do a compensation restructuring rather than gouging out a segment of the workforce to save a margin on salaries. In my opinion, it’s a short-sighted strategy.

Needless to say, when the article came out positioning Circuit City’s strategy as justifiable, and even viable, I had my doubts. I just couldn't see it.  So, I was wrong? Well, not exactly.  For the moment maybe.  But as it turned out, it was more appropriately a matter of wait-and-see.

So now, fast forward to earlier this week and we learn that it’s not looking very good for Circuit City. The news of their potential demise reinforces my belief that you can’t be a company that treats employees like dirt and pull stunts that make them feel unvalued and disregarded and expect them to want you to succeed, let alone profit.  It's HR 101.  

Let's face it.  The results speak for themselves.  Circuit City's 52 week high traded at 15.15 and today’s low was 2.13. Not good. Not good at all.


Posted by Donna Flagg on July 10, 2008 | Comments (17)


Industries: Human Resources
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July 10, 2008
In response to: Circuit City: Reaping What You Sow
HOOVER8871 commented:

This has 0 substance and adds nothing the the discussion about Circuir City. Dont forget that they still employ 40,000 associates and 650+ stores. The demise of Circuit would be devestating, dont forget that leaving Best Buy unchecked could be personally very expensive. Competition is vital to a healthy economy- Circuit has a great deal of work ahead, hopefully they have enough time




July 10, 2008
In response to: Circuit City: Reaping What You Sow
Hugo commented:

My catostrophic layoff from Circuit City left me devistated. Eleven years working for them and they stold the rug from under me and my coworkers. We have coped with reality in a very serere awakening. I still have all my stock which was purchased while working there and havent sold not one. I was hoping their stratagies would work to at least replace what a hard worker like me put into their company. From the looks of it, I was wrong. Their new management philosophies will be their demise.




July 11, 2008
In response to: Circuit City: Reaping What You Sow
Carolyn commented:

It totally has substance. That's just the point. If they continue along the road they are on and continue making the people decisions they make, there won't be 40,000 associates and 650+ stores! It's worth repeating, "You reap what you sow and the results speak for themselves." That's enough substance for me.




July 11, 2008
In response to: Circuit City: Reaping What You Sow
thelimeusa commented:

Could this be a new opportunity to make a killing on this stock? Best Buy was this depressed at one time and people made a fortune from the turnaround.




July 11, 2008
In response to: Circuit City: Reaping What You Sow
Donna commented:

Perhaps that is so. I guess we are still in the "wait and see" mode. Time will tell...




July 19, 2008
In response to: Circuit City: Reaping What You Sow
cardunerjc@aol.com commented:

The whole basis for a stre like Cc was that there were informed people that couls be asked questions. order takers won't cut it. You can readily see when you enter a Circuit store moral is down and there is not enough product to fill all the " holes " on the shelves. Best Buy may be just too powerful.The manufactures have ti give them more help or there will be just one left. So many people it would be a shame. management has let everybody down. Even at two bucks a share it may not be woth it But is tempting Lets give some support the emloyees!
M




July 27, 2008
In response to: Circuit City: Reaping What You Sow
JTW commented:

As A Circuit City stockholder I have waited and watched for leadership at the top. It is not there and now it is perhaps too late to save a sinking ship. How leaders who are so well paid at the top have been allowed to ruin this once vibriant company is indeed sad.




August 7, 2008
In response to: Circuit City: Reaping What You Sow
RantMeister commented:

Every time I see Circuit City in the news, I thank my magically delicious lucky stars that I don't own their stock or depend on them for a payday. I am not the least bit surprised at the slow motion train wreck that's taking place there. Reaping what they sow extends far beyond their human relations/corporate citizenship. That is merely a symptom of their overall corporate culture. In short, it is one of arrogance, and arrogance in the face of downfall is hubris. As of May/06, Circuit City was a US$30 stock. At the time of this writing, it is trading at US$1.96. They have treated more than one potential business partner with the same disdain afforded to the 3000+ experienced, competent, contributing employees that they deemed as liabilities rather than the strong assets that they were. Poor earnings reports were blamed on market conditions. Stockholders' faith was rewarded with a 95 percent (and counting) erosion of their investment. If you do the arithmetic, to get back to a share value of $30 from here at $2, management would have to pull off an increase of 1500 percent! Given management's track record, the likelihood of a coup like that is pretty darned remote. It's just a hunch, but we'll probably discover a cure for stupidity before that happens. In their Q1/09 financials, they reported their strategy for turning things around, which included the statement: "




August 7, 2008
In response to: Circuit City: Reaping What You Sow
RantMeister commented:

Every time I see Circuit City in the news, I thank my magically delicious lucky stars that I don't own their stock or depend on them for a payday. I am not the least bit surprised at the slow motion train wreck that's taking place there. Reaping what they sow extends far beyond their human relations/corporate citizenship. That is merely a symptom of their overall corporate culture. In short, it is one of arrogance, and arrogance in the face of downfall is hubris. As of May/06, Circuit City was a US$30 stock. At the time of this writing, it is trading at US$1.96. They have treated more than one potential business partner with the same disdain afforded to the 3000+ experienced, competent, contributing employees that they deemed as liabilities rather than the strong assets that they were. Poor earnings reports were blamed on market conditions. Stockholders' faith was rewarded with a 95 percent (and counting) erosion of their investment. If you do the arithmetic, to get back to a share value of $30 from here at $2, management would have to pull off an increase of 1500 percent! Given management's track record, the likelihood of a coup like that is pretty darned remote. It's just a hunch, but we'll probably discover a cure for stupidity before that happens. In their Q1/09 financials, they reported their strategy for turning things around, which included the statement: "




August 7, 2008
In response to: Circuit City: Reaping What You Sow
RantMeister commented:

(continued) ..."The board has not determined any course of action." Wow! What decisive leadership! BestBuy, Walmart and Radio Shack are thrilled to be feasting on their squandered market share. Shareholders who hold faint hope of a recovery should probably consider that 2 bucks is better than no bucks per share and they should probably grab it before the door slams shut on their fingers. Not that I wish any of them any misfortune, but current employees of Circuit City who do not have a "Plan B" in the works are equally misguided.
(Sorry for the duplication and extra post, but had to get that off my chest and i panicked! Best to all of ya!)




August 7, 2008
In response to: Circuit City: Reaping What You Sow
Suzanna commented:

Touche` Rantmeister.




September 15, 2008
In response to: Circuit City: Reaping What You Sow
Getting what they deserve commented:

I know several youngsters who work at CC. They know what happened, and the result is they really don't give a damn about the company. The stock is now down to $1.70, and a rating service puts its fair market value at $0.

If CC goes under, it will be a message to management that you can't bully your people, while you pad your pocketbook. The underground, aided by the internet, passes the stories around to fast.

And after the 2007 layoff, which involved several friends, I spoke at several area churches via their social justice groups. And it was, amongst other things, about circuit city and how they treated their employees.

And their business is collapsing. Many people will not buy there on principle. Jesus' Life on Earth was really about social justice and fighting poverty. CC, like many other companies whose top mgt worships their golden calf, will find out their mistreatment of their employees, when the fault is their inept if not outright criminal mismanagement of their business, does have consequences.

The only ones who profit will be the liquidators, but at least the mgt will be held accountable, one way or the other.




September 15, 2008
In response to: Circuit City: Reaping What You Sow
Carrie commented:

And so we watch the system collapse because of the people who see and serve only themselves and know only how to take and not give - in the end really they are the ones who have nothing worth anything.




December 18, 2008
In response to: Circuit City: Reaping What You Sow
Mary commented:

And there we have it... can you say "bankruptcy?"




January 22, 2009
In response to: Circuit City: Reaping What You Sow
Unemployed commented:

I made $12.00 an hour at the DC in Florida doing forklift work. The custodial guy who cleaned our restrooms...keep in mind 6 toilets and mopped.....made a whopping $15.30 an hour under Circuit city! Now who would not hop off the forklift and grab a mop........




March 6, 2009
In response to: Circuit City: Reaping What You Sow
also unemployed commented:

Even better employees not getting payed as promised"It will bee on next check; well maybe on the check after, see where this is going.




March 6, 2009
In response to: Circuit City: Reaping What You Sow
Stevie commented:

For what it's worth... bankruptcy filed.





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