Circuit City fires higher earners
By Stephanie Armour
USA Today
Circuit City Stores' decision to lay off 3,400 employees in order to hire lower-paid replacements is raising questions about the impact of severe cost-cutting on employee morale.
The consumer electronics retailer announced yesterday 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.
In Hawai'i, Circuit City said it laid off 10 workers at its Pearlridge store, the company's only outlet in the state.
Workers were offered severance packages and can apply for any open positions after 10 weeks, spokeswoman Jackie Foreman said.
Circuit City, which opened its Pearlridge store in 1996, employs about 200 workers there.
Laying off workers who earn higher pay raises the risk of deflating the morale of employees who are left behind, says Penelope Trunk, author of "Brazen Careerist: The New Rules for Success."
"People left behind are probably thinking they don't have a future there," Trunk says.
"We have and continue to pay competitive wages in the stores across the country, but we have to control costs," Circuit City spokesman Jim Babb says. "We've got to get our stores to adhere to wage ranges."
The layoffs could have broad impact:
Seven percent of companies plan to trim staff levels during the second quarter of 2007, according to a survey by Manpower.
"If lower-cost labor is available, it's the right thing to do. They're not a charity," says Francie Dalton of Columbia, Md., president of Dalton Alliances, a management consultancy. "If it was your business, and you have lower-cost labor available, you should do the same thing."
"You have to reassure (the remaining workers) that, 'You're OK,' and we're a stronger company now," says Paul Endress, president and CEO of Maximum Advantage, a Harrisburg, Pa.-based company that focuses on applying psychology to hiring and retaining workers.
Circuit City, which like other electronics retailers faces stiff competition, reported a loss for its most recent quarter ended Nov. 30.
Its stock price has fallen 39 percent from its 52-week high.
Its share price rose yesterday to $19.23, up 1.9 percent.
