Two weeks ago, Circuit City (second only to Best Buy in retail electronics) announced that it was laying off 3,400 employees. That's not news. What's news is that they're laying these employees off and replacing them with lower paid hires! Then, to add a little creativity to the scheme, they're allowing those laid off to reapply for their old jobs after they've been off for 10 weeks.
What's wrong with this picture? First, you take your experienced workers and replace them with those who know little or nothing about Circuit City. I stopped shopping at Circuit City about five years ago when they changed their product lines in their stores. What I found was that, other than being understaffed, the staff they had knew less about the products they now concentrated on than before. Not only couldn't you find somebody to assist you, when you finally found someone, they didn't know a woofer from an entrenching tool.
So, second in this ploy might well be that CC could lose customers who become dissatisfied with service. It's one thing to reduce staff to cut losses (or even show false profits), it's quite another to not reduce staff to save money while alienating your customer base. Why not just tell employees that they have to take a 33% cut in wages (and probably lose two thirds of them anyway)? At least give them a choice.
Why, because - and this would be a third consequence - morale would hit rock bottom, not that it won't anyway. Even a 20% cut would tick me off, though I might stay.
Worse, it doesn't exactly inspire the employees left behind. They could be the next to go, and if this scheme works, you can expect the same ploy to be tried at many other retailers.
From what I understand, many of these 3,400 are at a store management level. Not only will Circuit City be staffed with new, inexperienced employees, they will not have the staff to train them. And even if they had a staff left to do the training, what's the motivation to do a good job of it? And so we come back to losing customers, and then Circuit City has two choices: close stores to save face and money, or hire more experienced employees are higher wages, but will they find potential hires who would trust the company?
I'm not sure that anyone really cares about employment statistics anymore. It doesn't matter if you have 4.5 or 10.5% unemployment when those who are employed are either insecure, dissatisfied, or have such low morale that it affects productivity. Circuit City's shares may have gone up when they announced this scheme, but what would happen to those same shares if profits, numbers of customers, productivity and whatever other factors I may have forgotten drop?
I wonder who gets the job of resurrecting morale? HR? A new CEO with a $25 million package? Doesn't matter. What does matter is, can morale every really be reestablished? It's going to take an awfully long time. But then, there's always the possibility that Best Buy will come in and buy the better Circuit City stores...