Circuit City plan: Bold strategy or black eye?

While many human resource professionals were stunned by Circuit City’s bold announcement, on expert believes the company deserves praise for its candor.

"Circuit City has been very up front about the fact that this is a cost-cutting move in order align its costs more closely with industry averages," said David Urban, professor of marketing at Virginia Commonwealth University in Richmond, where Circuit City is based. "Electronics retailing is a tough business, with a lot of pressure on profit margins. Therefore, the major players in that business have to seek efficiencies wherever they can.”

Not everyone agrees.

Career and human resources expert Roberta Chinsky Matuson doesn’t expect other companies to follow Circuit City’s lead.

“Smart competitors will see this as an opportunity to hire those talented people that Circuit City just let go,” she says "“The guy at Circuit City who came up with this ‘strategy’ should be fired."

Aside from the impact on workers, consumers can expect some customer-service hiccups since many of their higher-wage earners, who probably have more experience, are leaving. “We expect to be able to hire and train good people,” says Babb, “but anytime there’s a major change in our stores there always a chance for some volatility for a while.”

“The move sends a chilling message to other employees and can be expected to have a significant negative effect on the work climate in Circuit City's stores," says Villanova's Clark, noting that Circuit City appears to be terminating sales floor personnel.

"From a strategy perspective, customer-facing sales personnel would appear to be a core resource and potential differentiator for a consumer products retailer," he says. "Especially in an era of rapidly changing and more complex consumer electronics, knowledgeable sales personnel who are perceived by customers as 'experts' can be a source of competitive advantage.”

But for many it all comes down to the best deal. Electronics retailing, like so many businesses, is becoming all about price, adds Urban, the Virginia Commonwealth professor. Consumers, he adds, aren’t fixated on customer service; they want to save $20 on a computer.

Still, there are successful companies that focus on making their workers happy and thus create a better experience for the consumer, says Linda Ford, a corporate culture consultant. “Look at great companies like Southwest Airlines, who understand that happy employees make for happy customers. Companies like these can create a market and then dominate it because the people are invested in the success of the company, not because they can hire cheaper labor than their competitors.”

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