Circuit City chooses the low road

Circuit City announced yesterday that it is laying off approximately 3,400 store associates. According to the company, the layoffs are targeted at employees who “were paid well above the market-based salary range for their role.” Based on reports from workers, it appears that they simply established a cut-off wage for each department and are laying off anyone who earned above it. This means that they are getting rid of their most experienced workers and those who have received performance-based wage increases in the past.

We’re not experts in retail, but it seems obvious that this is a counter-productive strategy in a market where the only reason someone is going to walk into an electronics store (rather than buying online or from a warehouse store) is because they need customer service.

Circuit City was once an industry leader, even featured in Jim Collins’ bestselling book Good to Great. As explained in this article, employees were a key element of that success: "Circuit City… felt no one knew its business better than its employees.” Today’s management seems to have forgotten that lesson.

Circuit City seems to be trying to copy Walmart’s approach to employee relations, but they don’t have the huge number of stores or cutting-edge supply chain and inventory management practices that lets Walmart "succeed" with its low-cost strategy. Instead, they should be looking at the number one consumer electronics retailer – Best Buy – which has been succeeding with a combination of a strong customer service orientation and cutting edge human resources management.