Stupid Management Tricks at Circuit City

March 28, 2007 6:57 PM

Stupid Management Tricks at Circuit City. Is your retail electronics company losing money? Want to cut costs? Then how about firing some of your people? I know! How about singling out those store workers who are making too much -- 3,400 of them, and get them to reapply for the same job at a lower wage?
posted by storybored (66 comments total)

$7.75 an hour? I don't think crazy-high wages are the problem here, folks. That's insulting.
posted by Devils Rancher at 7:02 PM on March 28, 2007

Wow. That would be illegal in my country.
posted by i_am_joe's_spleen at 7:06 PM on March 28, 2007

i-a-j's-splee--
Those eight words make me feel very, very embarrased.
posted by Dizzy at 7:10 PM on March 28, 2007

Devils Rancher - the $7.75 wage was earned by someone who did not get laid off. i.e. this wage was low enough to not get the person laid off.


Nevertheless: this is a cold-hearted move, Circuit City. Say goodbye.
posted by rachelpapers at 7:11 PM on March 28, 2007

Back of the envelope calculation: Labor cost of 3400 workers paid $2.00/hour "too much" working 75 hours every two weeks for a year = $12 million dollars.

Cost of severance guessed at $2 million.

Total savings of this management trick: $10 million.
Total lost in employee morale, goodwill & experience: priceless..
posted by storybored at 7:12 PM on March 28, 2007 [1 favorite]

There are stores I avoid simply because the staff seem angry, miserable, desperate, or some combination of the three. Circuit City is one of those places. And I don't get the impression that shopping there would make the staff's lives any better -- more like just validate the business model that's making them unhappy.
posted by George_Spiggott at 7:14 PM on March 28, 2007 [2 favorites]

There is a 10 week delay, so they aren't really looking to rehire the laid off workers.

At the end of the day, this seems like a losing battle. Most of what Circuit City sells, I can buy more easily online. The only way out is to provide a better shopping experience than what can be found online. Somehow I doubt the lowest-paid sales people are the best ones, though they may be less pushy about the extended warranties.
posted by b1tr0t at 7:16 PM on March 28, 2007

From the Executive Paywatch Database:


W. Alan McCollough
Chief Executive Officer
Circuit City Stores Inc.

In 2005, W. Alan McCollough raked in $5,470,049 in total compensation including stock option grants* from Circuit City Stores Inc..

From previous years' stock option grants, the Circuit City Stores Inc. executive cashed out $3,052,902 in stock option exercises.

And W. Alan McCollough has another $20,773,329 in unexercised stock options from previous years.
posted by vacapinta at 7:16 PM on March 28, 2007

(and though customers don't like those warranties, they are nearly pure profit for the company. If the cheap workers can't push the profit makers like that, the company will be in even deeper trouble)
posted by b1tr0t at 7:16 PM on March 28, 2007

vacapinta writes "And W. Alan McCollough has another $20,773,329 in unexercised stock options from previous years."

He'd better hurry up and exercise them. Today's jump in the stock price isn't going to be a frequently recurring event, I don't think.
posted by mr_roboto at 7:21 PM on March 28, 2007

Elsewhere, proof that a business whose overriding objective is the happiness of it's staff can be successful.
posted by Olli at 7:21 PM on March 28, 2007

it's
Also proof I shouldn't post at 3am. Argh.
posted by Olli at 7:25 PM on March 28, 2007

Let me see if I've got this straight.

They're taking people who have spent possibly (probably) years to work their way up the corporate ladder to the lofty ranks of, say, Assistant Manager, kissing their corporate masters' asses the entire time, constantly fighting administrative fears that they have a personality of their own, all the while dealing with the pittance of a salary, no benefits, no real overtime, a shitty work environment, who have essentially sold their body, mind and soul and become the thankless bitch to a multinational DOM...

...and they get fired for it?

Well congrats, Circuit City, you've done the impossible. You've made me hate your company more than Wal-Mart.
posted by Civil_Disobedient at 7:25 PM on March 28, 2007

I've never cared for Circuit City, they are understocked, customer service sucks... and, now it looks a lot like WalMart...

It was always a second or third choice, now it just isn't a choice at all...
posted by HuronBob at 7:25 PM on March 28, 2007

In the late 90s I had a bunch of money saved up, ready to buy a nice 19" monitor. I was only 20 at the time, and I went to several of the large stores in the area. None of them wanted to serve me. A geeky looking kid must not have any money. I walked into to circuit city, was greeted, shown their monitor selection, they answered my questions, left me alone when I asked them, and then accepted my money. It was a little more than I wanted to spend, but out of everybody in town, I felt they deserved the sale.

To this day, I'll still go into some of the big box stores and get ignored. It's fun to bring my girlfriend and watch them swoop on us like a bird of prey. Apparently couples spend more on electronics than nerdy white single guys.

I'm still using the same Sony 420GS. That circuit city was always the first place I looked when I needed to buy electronics, they had me for life. That circuit city just closed due to their latest cutbacks.

Too bad.
posted by klaruz at 7:26 PM on March 28, 2007

$7.75 an hour? I don't think crazy-high wages are the problem here, folks.

In my neck of the woods, that's still considered a pretty impressive hourly rate for someone working on the bottom rung of retail.
posted by Clay201 at 7:29 PM on March 28, 2007

And note that their sales dropped pretty dramatically after stopping commissioned sales in 2003.

I don't think these guys have any freaking clue what they're doing.

I'm not a big spender at Circuit City, but I was willing to shop there, unlike with Best Buy. I guess I'll just stick with Fry's, now.
posted by Malor at 7:32 PM on March 28, 2007

I took a job at Circuit City right out of college (1996. Was on commission.) I had just graduated with an English degree and I was desperate.

On my second day of "training" they threw me on the sales floor. Didn't even tell me how the computers worked. Not the computers that I was supposed to be selling (data point: I was pretty much computer illiterate coming out of college back in the day, and the training material they gave me about computers still managed to be insulting,) but the actual computers that rang up the sales.

When we broke for lunch, I drove away, had a sandwich, and didn't come back.

I never even tried to claim a check for those two days. I just chalked it up to experience. Then about two years later I got a check in the mail from them for $0.00.

I keep meaning to get that thing framed.
posted by Cyrano at 7:43 PM on March 28, 2007 [9 favorites]

Hate to say it, but my daughter, age 13, gets 7 bucks an hour babysitting.

Those folks did not really get fired. They were dismissed so they could be rehired at a lower salary. In some industries, they would be given contract and asked to take big cut. If America had not moved to the right and given up on unions, and if America was not anti-union at the governmental level (labor relations board), this would not be a slam dunk. What needs to be noted is that this is not an instance of work being outsourced toforeign country at expense of workers here. All their goods are made elsewhere and so the only thing left to cut--salaries. Of couse they have been losing out for some time now to BestBuy and online shopping.

I don't cros picket lines. I will not buy at Circuit City ever again.
If they have options to screw workers, I have options to support decent places.
posted by Postroad at 7:53 PM on March 28, 2007 [3 favorites]

That's it. Between the fake web site at Best Buy and this shit at Circuit City I am now going to take a page from the ethics guiding both these companies and now only steal home electronics.

Fuck greed.
posted by DragonBoy at 8:01 PM on March 28, 2007

Hey, that girl works at the Circuit City I go to used to go to!

I think the analyst's comment about losing "customers-slash-employees" is very very accurate. I think a lot of people in retail spend a high percentage of their check in the store/chiain they work.
posted by graventy at 8:14 PM on March 28, 2007

And note that their sales dropped pretty dramatically after stopping commissioned sales in 2003.

Which is the greatest part--CC already went through a snit where they fired all of their experienced and effective commission sales staff so they could be more like Best Buy, press some English speakers in monochromatic polos and pitch, pitch, pitch! those extended warranties--and they've decided to retool once more.

How meaningful it is I sought employment at CC and was denied (before the end of commissions), but sought employment at BB and was hired, I leave to the reader. But it's instructive to note I left Best Buy by throwing my name tag at the store manager and wishing him to "go fuck [him]self."

A message for the kiddies in all this--it seems great: electronics, a paycheck, talk computers and hi-def TVs all day, snazzy polos. Don't do it! It is soul-sucking work and just whoring the whole shift, electronics being a simple pretext for the whoring. And while nearly all jobs "at the low rung" like these are soul-sucking work, not all of them leave you feeling like a supreme asshole for convincing an ignorant wallet to spend $200 on a gold-plated digital video cable.

Unless you like being an asshole, in which case, "No, I think I'll just stay with the manufacturer's warranty, thank you. Plus I think my credit card has additional protection."
posted by adoarns at 8:16 PM on March 28, 2007

I once bought a DVD player from Circuity City but after we paid for it and we went over to the conveyor belt to pick it up, they had brought out a slightly different model. The one that I'd looked at on the floor and paid for supported mp3 CDs and the one that came out of the stock room didn't. We then had a long argument with the associate about whether it was the same unit or not. After a while, we finally convinced them that it was indeed not the unit that we had just paid for and they they were trying to give us a lesser model. But they didn't actually have any of the model we wanted in stock other than the floor model. So we had to go through the hassle of the whole returns process for a DVD player that we'd just bought. We then drove across the street and bought the unit we wanted at BestBuy and have never been back to Circuit City since.
posted by octothorpe at 8:21 PM on March 28, 2007

Clay,

Even in Greensboro, NC 7.75 is a pretty bad wage.

Methinks.
posted by zach4000 at 8:26 PM on March 28, 2007

Even in Greensboro, NC 7.75 is a pretty bad wage.

Oh, it's positively shitty in any state in the union. It's just that in Montgomery, Alabama, it's statistically high for that type of work.
posted by Clay201 at 8:37 PM on March 28, 2007

Fuck Circuit City; I'll never buy from them again. Firing 3400 people with no warning? Anyone want to bet the severance is gonna be enough for an ex-worker to pay even half of this month's bills?

And fuck HR people who advise bosses that firing with no notice is better for the company than giving workers a chance to adjust for a week or two while the money's still coming in. Just fuck 'em.
posted by mediareport at 8:47 PM on March 28, 2007 [1 favorite]

This just happened to a friend of mine. 2 cents worth. Sucks.
posted by geekhorde at 8:51 PM on March 28, 2007

I just sent them an email, sprinkled liberally with the word "cunts."

Hope their asses fill with bees.
posted by Senor Cardgage at 8:58 PM on March 28, 2007 [3 favorites]

i_am_joe's_spleen: Wow. That would be illegal in my country.

Not in the US. I have a friend that was fired and then rehired at the same or lower wage from his job at MCI Worldcom three times in the span of 18 months during the dot-com bust. Each time he was fired it was, as if by magical coincidence, a week before his medical, vacation, and (worthless) stock benefits were supposed to kick in. After being sacked he'd clean up his desk and drive home to have a message on his answering machine from the HR department saying that they had his resume on file and he would be a perfect candidate for.... his old job! Not that that's exactly what's going on here, but was a surreal episode to watch my friend go through.

Clay201: In my neck of the woods, [$7.75/hr is] still considered a pretty impressive hourly rate for someone working on the bottom rung of retail.

Wages aside, the thing that's distasteful to me is that Circuit City is insuring that all their sales staff remain at the bottom rung. They're sending the message that they don't have room in the payroll for employees that stick with the company long enough to earn some raises/promotions. Since it's safe to assume that longer-term employees perform better for the company, either through familiarity with the product or a improved salesmanship, it's strange that CC would place their bet on the beliefs that: consumer electronics can sell themselves, a warm body is only needed to work the register, and that the customer's questions are a impediment to doing business. I think the same management strategy is what caused Hechinger's to be wiped out by Home Depot.

While I do not necessarily endorse this point of view, which ignores a lot of personal hardship that can cause people to be stuck in a bad situation, working at a big box retailer is something that anyone in their right mind would use as a stepping stone to something better or as a part-time gig to get a discount on things you would buy anyway. My heart goes out to the people who are now wondering how they are going to make rent for next month.
posted by peeedro at 9:22 PM on March 28, 2007 [2 favorites]

Senor Cardgage: Hope their asses fill with bees.

Me too. But I also thought so before these layoffs.
posted by peeedro at 9:52 PM on March 28, 2007

This is one of the most sickening stories I've read in a while.
posted by phaedon at 9:58 PM on March 28, 2007

The only people you're really hurting in a "boycott" of a poorly managed company are the next 3400 people to lose their jobs. That's the fun of business structure.

Which is the greatest part--CC already went through a snit where they fired all of their experienced and effective commission sales staff

It may be interesting to expand on this and note that this exact procedure occured before (at least at some stores) some time before/around the commission restructuring. I have only heard the story reported through a friend who was working with the company at the time, and I've always had a bit of doubt that it actually happened... but I suppose this proves it.
posted by pokermonk at 9:59 PM on March 28, 2007

666 mark of the beast
posted by phaedon at 10:00 PM on March 28, 2007

It's a truism in retail, though it is not often admitted, that the business model really depends on turns (i.e., turnover in employment).

Most retailers are rather more subtle about effecting the turnovers than this, though, keeping some people on for a long while, even as they institute practices that ensure their personnel pool is at the bottom run of earnings and seniority.
posted by darkstar at 10:07 PM on March 28, 2007

The other large stores are no better. There were a series of articles at The Consumerist about how Best Buy keeps a second hidden copy of their website that can only be accessed through computers in the stores. This copy looks identical to the real public site but has higher prices, so that when a customer comes in and says "but it said it was only $xx.xx on your website" they can load the fake page and show them that they're wrong and it costs more.
posted by Rhomboid at 10:10 PM on March 28, 2007

Yeah'Meah gonna burn this post down.
posted by Ufez Jones at 10:10 PM on March 28, 2007

I'm surprised no one is actually pointing a finger at Wal-Mart. It's their human rights violations, monopsonies, and abysmal workplace practices that allow them to put this kind of competitive price pressure on Circuit City. (In case anyone wasn't paying attention to the business pages in the last few months, 2007 is the year that Wal-Mart decided to take on Circuit City and Best Buy.)

Everyone's really harshing on Circuit City here, but if the next development is that Wal-Mart proceeds to put Circuit City out of business, do we think that is necessarily going to be a great day in the annals of American fair labor practices?
posted by ikkyu2 at 10:19 PM on March 28, 2007 [1 favorite]

It's their human rights violations, monopsonies, and abysmal workplace practices that allow them to put this kind of competitive price pressure on Circuit City.

Wal-Mart is such a strong monopsony that it can put companies out of business, simply by selling their product.
posted by Blazecock Pileon at 10:31 PM on March 28, 2007

Management has mandated that a sign with the following slogan be put over the entrance to the employee break room in ever Circuit City store:

"The beatings will continue until morale improves."
posted by Cranky Media Guy at 12:39 AM on March 29, 2007

Haven't read the whole thread, but this really saddens me. Of all the big electronics retailers, they're the only one that I've had a good experience at.

As a specific example, shortly after being laid off in 2001 and landing another job that same week (which meant two months of severance while earning a paycheck, woot!) I decided to buy a much larger TV and surround sound. I got the surround sound at Circuit City and got the TV (a 32 inch CRT) at Best Buy. Both were around $500. For anyone who knows much about home entertainment systems, both of those are not top of the line items, but they're also not ultra-low end either.

At Circuit City, I got prompt service, and they insisted I bring my friend's truck around to the back where they loaded it up for me, no charge (though I did tip the guy who did it). I was in and out of there in probably 20 minutes, including the time I took to decide what I wanted to get.

At Best Buy, it took me 20 minutes just to find a salesperson who would help me. Upon deciding to buy the TV, I was informed it was up to me to find a way to transport the TV up to the front of the store to buy it. I was told "Well...go find a hand cart." There were 3 hardcarts in the store, all being used, so I had to go out front and vulture people loading things in their cars to get one. Once I got it, it was up to me and my (petite female) friend to load a 32 inch CRT (they are HEAVY) onto the cart and bring it to the front of the store, the salesperson was long gone. We ended up having to load it into the truck as well.

Similarly, my fiancee bought a new car stereo for her Mustang, and then called around for installation prices. Best Buy wanted $230, saying that replacing the stock Mach stereo was "very complicated". Circuit City did it for $50.

I've only gone to Circuit City when I'm shopping for those kinds of items, and I can only imagine that I got better service because of the employees that they're letting go. The sad part is, I know that my experience can't be alone, but no matter how much I tell the company that I continue to buy there because of these very employees, nothing will trump the perceived increase in stock price. I work for a public company and have learned that short term stock price increases trump all things, even at the expense of long-term benefit.

Yet another story to illustrate that, I work for a company that sells a subscription service that resells a product from another company, the benefit being a tremendous increase in convenience. For referrals, we were giving away $1X amount of that resold product. When I suggested that we instead give one month free, which was 65% of the dollar value of the product, but that customers had said they would prefer, I was told that while that would save the company money, it would lower revenue and therefore negatively impact the stock price.

We'd make more money, make a lot of customers happier (just imagine if we'd just given them a choice of which they wanted), and that is apparently bad.

I will never understand the business world of today.
posted by Swervo at 1:03 AM on March 29, 2007 [1 favorite]

Hope their asses fill with bees.

Nice li'l honeybees deserve a better fate than to the trapped within the anuses of these clods.
posted by pax digita at 3:32 AM on March 29, 2007

Businesses do all kinds of interesting things (sometimes pleasantly creative and more often desperate and unpleasantly noxious) when their business models are in their death throes.

Squeezed by direct sales via Internet on one side and Wal-Mart on the other, big-box electronics retailers don't have a bright future selling to consumers. As for this specific story, when "cutting costs" means firing your (presumably) most experienced customer service staff, you're not trimming fat any longer, you're chopping bone. Start the Circuit City deathwatch.

Best Buy is trying to diversify into services (e.g. Geek Squad) and just made a pretty significant bet that selling to small businesses will be a big part of its future. They just bought Speakeasy, thus dipping their toes nto the small-business VoIP market.
posted by enrevanche at 3:51 AM on March 29, 2007

It's things like this that makes me glad I no longer work in big box retail.

For years I haven't liked shopping at Circuit City, and while I didn't like Best Buy either, I hated Circuit City with a passion I usually reserve for Cingular/AT&T. Their stores just seemed to influence the nervous system in all the wrong ways.
posted by drezdn at 7:48 AM on March 29, 2007

The Wheaton Circuit City lost my business long time ago when they expanded the Hispanic music and got rid of over half the rock/soul selection.
posted by doctorschlock at 7:56 AM on March 29, 2007

This thread is weird. I'm generally pro labour and I do think this is a crap way to treat employees. However, I am surprised those employees exist at all. I haven't bought anything of the sort of stuff that they sell in a store for years. So with my $$$ I support companies that don't even have sales staff.
posted by srboisvert at 8:00 AM on March 29, 2007

What a screw job. Something similar happened to my father years back. His entire department was told that their jobs were being eliminated and an outside contractor would be taking over BUT they encouraged the workers to apply for the same jobs with the contractor for 33% less pay and no benefits. The management apparently wanted to retain all of those experienced employees without having to actually pay them what they were worth. IIRC nobody applied.
posted by MikeMc at 8:00 AM on March 29, 2007

It's a truism in retail, though it is not often admitted, that the business model really depends on turns (i.e., turnover in employment).

Most retailers are rather more subtle about effecting the turnovers than this, though, keeping some people on for a long while, even as they institute practices that ensure their personnel pool is at the bottom run of earnings and seniority.

Darkstar nails it. The only difference between what Circuit City has done and standard retail practice is that they were stupid enough to announce it to the world. Big Box retailers have been doing this for as long as Big Box retailing has existed. Maintaining a steady turnover among "senior" sellers is a standard practice and percentage of employee churn is often one of the performance metrics for retail units.

I worked for Borders for almost nine years, and our GM was often chided for missing his target churn rate. His retention numbers were too high, which meant his payroll was too high.

This will remain standard practice until the people in the boardrooms realize that frontline retail workers are NOT fungible units. For some reason there is a belief in the retail boardrooms of America that there is no difference between a brand new hire and a worker with experience - except for the rate of pay. They don't seem to *get* that a bookseller with five years of experience is more productive and can generate twice as many sales as a bookseller with no experience.

I think this is because corporate managers* truly cannot understand the people who occupy those jobs and believe, in their blind arrogance and sense of self-superiority, that anybody working in retail is lacking in intelligence and ambition. To them, retail workers are an undifferentiated mass of would-be slackers who would do no work if they thought they could get away with it. It is inconceivable to them that retail workers could have a strong work ethic or desire to do a simple job well.

This kind of stuff will also continue to happen as long as retailers are driven by the day-to-day vageries of the stock market rather than long-term growth of value and profitability. Somewhere along the line corporate America began catering to a day trader mentality. Circuit City got what it wanted out of the announcement - a temporary rise in share price.

If you really protest this sort of thing, you won't shop in any big box retailer. I doubt there are any who don't follow this and similar practices on some level.
posted by ereshkigal45 at 9:54 AM on March 29, 2007 [4 favorites]

The only people you're really hurting in a "boycott" of a poorly managed company are the next 3400 people to lose their jobs. That's the fun of business structure.

Well that's a bit of a strech. Actually, that is bullshit. Even if you are correct, employee are hurt if their employer profits less and is more likely to fire them, them employer is suffering as well.

Employers can exploit their financial might and the fact they can at worst cut losses, close shop and find their capital investment devalued, their overstock bought for a dime or maybe harrased by creditors. Yet I guess the people that will lose from CC are these who don't don't know when to liquidate CC stock or the mutual fund investors...as their managers are unlikely to spot the problem and try to mitigate it..they sit their asses on diversification, you take the risk.

Squeezed by direct sales via Internet on one side and Wal-Mart on the other, big-box electronics retailers don't have a bright future selling to consumers.

Shipping 1000 pieces in a shot is still less expensive, in many circumstances (not all of course) , then shipping single piece to Joe. Can optimize, will optimize and obtain maybe excellent allocation of single shipments, but still if the cost of single shipment goes down, it will at some scale meet the fact you can't move a 69 wheeler in many city streets; customers are also time sensitive and customers still need a job to earn money and buy shit.

Incredibly enough, workers and customers can be the same persons ! INCREDIBLE !
posted by elpapacito at 9:58 AM on March 29, 2007

What is this a charity operation? Jeebus.
posted by markulus at 10:13 AM on March 29, 2007

Things such as the firing of senior low level employees are symptoms of one of the problems of the stockmarket.

The stockmarket creates a system where thoughts of humanity are completely taken out of the equation and instead everything becomes about shareholder value. Decisions no longer need to be considered from ethical standpoints as they are looked at with the simple "will this increase shareholder value?"

It's essentially a corporate version of the type of thinking that leads to war crimes.

Another symptom of this is mission creep. Publicly traded stores always need to be increasing profit or their stock will drop. So, for example, in a bookstore (I worked in a chain one for nearly 4 years), first they'll add candy bars at the register, then they'll add an impulse table that you have to pass by in order to get to the registers. Then they'll have a row of impulse tables to browse while you check out. Eventually you have to run a gauntlet to get to the registers.

Another bookstore example would be increasing size of the gift and calendar sections in the chains. These areas are high profit especially compared to the rest of the stock. I imagine one day Barnes and Noble will be 90% gifts and board games, with a little section of books.

To borrow a quote from Max Barry "The ideal company would be one with no employees."
posted by drezdn at 10:16 AM on March 29, 2007

At least the remaining workers have got plenty of computers and fax machines to send out their resumes on.

And this just made it roughly 3400% easier to shoplift at Circuit City. I bet employee shrinkage just went through the roof!
posted by klangklangston at 10:27 AM on March 29, 2007

This line is tragic:

"For some of them, I could see them being OK without this job," she said. "For others, it was their only job."

posted by misterbrandt at 10:29 AM on March 29, 2007

“They don't seem to *get* that a bookseller with five years of experience is more productive and can generate twice as many sales as a bookseller with no experience.”

Yeah, they also don’t get that it’s nice to pay employees enough to afford things at your store. As said (just above) employees can be customers too. Weird how Henry Ford figured that out 100 years ago. (And of course, Ford, y’know, big communist) And today of course American carmakers are in the toilet. Gee, wonder why. So these CEO goofs, they did take history classes right? They do know if things really go into the toilet $100 million is going to maybe buy a loaf of bread right?
posted by Smedleyman at 10:32 AM on March 29, 2007 [1 favorite]

not that i endorse such a thing, but:

don't these corporate types realize that employee theft will shoot thru the roof? i can just imagine black markets popping up in whatever town this happens to. it's not like all these people are stupid, they've been around for years, they've learned all the in's and outs of the store. CC probably had tons of loyal staff who wouldn't have considered such a thing since the job meant so much, or bought into the bullshit "with hardwork comes advancement" they were told about at the interviews and reviews. now they set themselves up with people that want revenge, know they better cover their asses, cause at any moment they could be thrown out. now they probably spend lunch devising plans on emptying the warehouse.

renting an xbox 360 at CC. best rates ever, yours for 30 days.
posted by andywolf at 10:32 AM on March 29, 2007

The stockmarket creates a system where thoughts of humanity are completely taken out of the equation and instead everything becomes about shareholder value. Decisions no longer need to be considered from ethical standpoints as they are looked at with the simple "will this increase shareholder value?"

I think it's not the stock market itself which creates the problem, it's the short term focus on stock prices. What Circuit City is doing here will actually make their stock price go down in the long run.
posted by storybored at 12:19 PM on March 29, 2007

Many comments along the lines of "don't they realise..."

Three things come to mind immediately.

1. The notion of shareholding as ownership of a business, rather than a ticket in a lottery, has virtually disappeared, resulting in poor oversight of management. In a lot of companies the consequences of poor performance for the most senior management are barely noticeable. So the answer for some managers to "don't they realise..." is yes, but they don't care.

2. In the west generally, but particularly in Anglosaxon countries, the primacy of financial considerations in business means that people have started believing that management is a discipline whose practitioners need no understanding of operations, only of finance. So the answer to "don't they realise..." is no, a lot of them don't. They began as pure managers, usually with an accounting or finance background.

3. Corporations reward antisocial behaviour for those who can do it quietly and effectively. Many large organisations have people at the top who care neither about workers nor customers nor stockholders or their colleagues. Such people's actions are motivated only by their effect on themselves and nothing else.
posted by i_am_joe's_spleen at 3:51 PM on March 29, 2007 [1 favorite]

good points i_am_joe's_spleen

I remember talking to a buddy of an acquaintance of mine who (said he had) dumped some used motor oil into Lake Michigan. I said “You realize that’s our drinking water don’t you?”
For some reason he couldn’t make the connection. He thought some sort of magical business took place where they just purified it and it had nothing to do with him or his tax money or health or anything. Just something he could ‘get away with’.
F’ing bizarre that these kinds of people are even able to clothe and feed themselves.
posted by Smedleyman at 4:40 PM on March 29, 2007

For other Brits who read this and are wondering how it compares - $7.75 is £3.94 and our minimum wage rates, by comparison are:

£5.35 ($10.50) per hour for workers aged 22 years and older
£4.45 ($8.74) per hour for workers aged 18-21 inclusive
£3.30 ($6.48) per hour for all workers 16-18

I'm pretty amazed by this as I thought our wages sucked.

Is the difference wiped out by a lower cost of living in the US? I know petrol is cheaper, but with health insurance etc. I'm not sure how it all stacks up.
posted by BishopsLoveScifi at 5:24 PM on March 29, 2007

Oh, come now, you do understand that almost no hourly workers in US retail operations qualify for employer-subsidized health insurance, right? It's rare for employees in large stores to get enough hours to qualify for full-time benefits, for one thing.
posted by pax digita at 7:12 PM on March 29, 2007

I'm going to give the argument that this makes good business sense.

I'll start with the quote:
"In 2005, W. Alan McCollough raked in $5,470,049 in total compensation including stock option grants* from Circuit City Stores Inc..
...

And W. Alan McCollough has another $20,773,329 in unexercised stock options from previous years."

Okay, now consider if you are Alan McCollough. You tried to get rid of commissions and it failed miserably. The company is sinking fast. How do you squeeze some more drops from it before they throw you out on your ass?

First, implement a stock buyback--taking the corporate assets and basically paying them to yourself (in increased stock price). Second, what are the expenses? The buildings. Sell off a bunch of the stores. What's left? The employees, of course.

In this light, this action makes perfect sense.

From the stockholder point of view, canning this one ahole would actually save the company more money than firing all the experienced salespeople, and you might have something in the end that is worth something.

Stockholders always need to be on the lookout for CEOs who want to cash out a company to enrich themselves, but they never do until it is too late.
posted by eye of newt at 9:37 PM on March 29, 2007

eye of newt, it's a symptom of our celebrity culture, as well. Big companies are convinced they need "rock star" CEOs. It's just not good business, but the shareholders love it, I guess.
posted by maxwelton at 10:57 PM on March 29, 2007

Oh, come now, you do understand that almost no hourly workers in US retail operations qualify for employer-subsidized health insurance, right?

While that may be true of Walmart, I worked part time at both B&N and Target and had health insurance.
posted by drezdn at 6:13 AM on March 30, 2007

the problem [is] the short term focus on stock prices. What Circuit City is doing here will actually make their stock price go down in the long run.

Update: it didn't take long for the other shoe to drop. After an initial one day rise in the stock price, Circuit City's share price has fallen below the level it had before the announcement of these silly layoffs.
posted by storybored at 9:37 AM on March 30, 2007

Oh, come now, you do understand that almost no hourly workers in US retail operations qualify for employer-subsidized health insurance, right?

I qualified for health insurance at Panera Bread. I didn't sign up for it because I was in college and therefore still on my mom's, but it was there.
posted by dagnyscott at 12:26 PM on March 30, 2007

I think Eye of Newt is spot on.

I am surprised that no one has mentioned worker theft yet. These douchbags running the companies are losing, if the info from my google search is even close to correct, up to 40 freaking billion dollars a year due to worker theft. And is it any wonder? Some poor worker drone comes home from 8 hours on his feet to see the latest news report on his company's CEO compensation package. (Talk about worker theft!) The next day he comes home from work with a new flatscreen. Workers feel like they, oh hell, workers see that they are being exploited so they give themselves a five finger discount. Or perhaps I should say a five finger raise. Why shouldn't they when they have no security what so ever?

I have a feeling CC is going to be loosing a lot of stock from the backroom in the next few weeks.
posted by Belle O'Cosity at 1:38 PM on March 30, 2007

It may be interesting to expand on this and note that this exact procedure occured before (at least at some stores) some time before/around the commission restructuring. I have only heard the story reported through a friend who was working with the company at the time, and I've always had a bit of doubt that it actually happened... but I suppose this proves it.
posted by pokermonk

I was working at CC about 4 years ago when they cut commissioned sales. However, at the time, they figured they couldn't just get rid of their entire sales staff nor cut their pay considering this is how many people had been working at the company for 10-15 years. So what they did was doctor people in at their average hourly, myself included (they took your commission rake over the last 6 months and divided by total hours worked to get to this number). This meant a great hourly for many people - mine ended up being something like $18/hr. However, it was too good for some people. Our best salesman, who had an average hourly of something like $27, was offered a managerial position or else leave. Considering he would be making about the same hourly in the long run for the management position and working way more hours, he decided to leave for another electronics store (Crutchfield, which at the time, was still doing commission, I don't know about now). This was common for the top 1 or 2 sales people at most stores in my area at the time - they were given the same offer in most cases, while some weren't even given a managerial offer just asked to leave.

Furthermore, it seemed management was much stricter on those who were doctored in at their average hourly vs. new hires. We had different performance metrics than new employees, and if we ever left the company for any reason, if we were ever hired back it was at the new hire rate (something like $7 at the time).

I'd say there was a definite decline in customer-oriented thinking after they got rid of commission. Most salespeople didn't care about the sale nor the customer anymore given that they were guaranteed pay per hour no matter what. It was bad news then, and it looks like more bad news for CC now.
posted by kurmbox at 12:56 PM on April 2, 2007