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Circuit City lays off 3400 employees because they make too much!

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Circuit City lays off 3400 employees because they make too much!

Old 03-29-07, 10:56 AM
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Circuit City lays off 3400 employees because they make too much!

http://www.latimes.com/business/la-f...track=ntothtml

For Circuit City staff, good pay is a bad thing

The retailer cuts 3,400 who its says earn well above the going rate. They can apply for their old jobs -- for less pay.

By Abigail Goldman and Molly Selvin, Times Staff Writers
March 29, 2007

Circuit City Stores Inc. has a message for some of its best-paid employees: Work for less or work somewhere else.

The electronics retailer on Wednesday laid off 3,400 people who earned "well above" the local market rate for the sort of jobs they held at its stores.

In 11 weeks they'll be able to apply for their old positions which will come with lower hourly wages.

The move put Richmond, Va.-based Circuit City, which has more than 40,000 employees in the United States, at the forefront of a new way of controlling labor costs in the service industry. Employers determine the prevailing market wages for particular jobs in various geographic regions and then find ways to make sure that their workers' salaries stay within that range.

Wal-Mart Stores Inc., for example, last summer capped the pay of its veterans at levels consistent with competitors' top wages. Wal-Mart didn't lay off those who earned above a certain amount but did stop giving them raises, saying that would encourage them to advance through the ranks to higher-paying positions.

Circuit City is being more aggressive about it, said Peter Doeringer, a professor of labor economics at Boston University. "What's unusual is to say we're doing this deliberate swapping of high for low."

Company spokesman Bill Cimino said Circuit City wanted to be honest with its sales associates so they would understand the reason for the layoffs.

"It had nothing to do with their skills or whether they were a good worker or not," Cimino said. "It was a function of their salary relative to the market."

Circuit City expects to reap $110 million in savings in the next year, partly as a result of the layoffs and other changes announced Wednesday, including the outsourcing of about 130 information technology jobs to IBM Corp.

The company's stock rose 31 cents to $19.23. Circuit City shares have fallen 21% over the last 12 months.

Not everyone on Wall Street is sure the layoffs will pay off.

The highest-paid employees can be some of the best and most experienced, and if Circuit City's customer service suffers, so may the company's fortunes against Best Buy Inc., whose reputation for high-quality help has helped make it the industry leader.

"I question whether Circuit City's move is going to do them any good at all," said Van Baker, a media and consumer electronics analyst with Gartner Inc. in San Jose. "One of the things they're doing is getting cheaper employees who are likely to be not as well equipped to address consumer questions."

Warren Bennis, who teaches leadership at the USC Marshall School of Business, agreed, calling the move "demeaning and counterproductive."

Circuit City's Cimino said that higher-paid employees weren't necessarily the most productive. He also noted that only 8% of the workforce was affected.

Among those who lost their jobs Wednesday were 321 people who worked in the Los Angeles area's 44 stores. A total of 621 workers at 90 stores in California were laid off.

Circuit City wouldn't give details about what it paid its nonunion workforce or the prevailing market rates, noting that they widely vary across the country.

Analyst Richard Weinhart with BMO Capital Markets in New York estimated that people who work in consumer electronics stores earned $8 to $13 an hour.

The company said it expected "greater sales volatility" during the first half of the fiscal year partly because of the layoffs.

In a note to clients, Goldman Sachs analyst Matthew Fassler said that after Circuit City's last major pay change in 2003, when it went from commission-based pay to flat hourly rates, Best Buy's sales in stores open at least a year gained significantly while Circuit City's fell.

On Wednesday, customers walking by a Circuit City store in Santa Monica with a "Now Hiring" sign in the window expressed dismay.

"To me it's a slap in the face," said Kenrich Nyvett, a parking lot manager in Santa Monica who went to Circuit City for DVDs.

"I don't feel like it's something good," the 46-year-old Los Angeles resident said. But "everybody needs a job these days."


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This is such B.S. and if it is not illegal, it should be.

Guess who's going to benefit from this decision? The people that made it. The execs will get hefty pay raises and bonuses because they saved the company a lot of money.

So the 3400 workers will have to claim unemployment for 11 weeks and then re-apply for a job that may no longer be there for them.

I hope the employees sue Circuit City and win and hopefully the execs are fired because of this.

Chris
Old 03-29-07, 11:02 AM
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That stinks.....
Old 03-29-07, 11:06 AM
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I agree that it really sucks for the people that lost their jobs, but why should this be illegal?
Old 03-29-07, 11:07 AM
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This is pretty dickish, and may backfire on the company, but I don't see why it should be illegal.

das
Old 03-29-07, 11:13 AM
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Because, if it is deemed to be legal, then more companies will do this, all the while reaping big financial benefits for the people that make these decisions. Government intervention is needed here.

Remember, the execs that are laying off these people were the same people that gave them too much money (in their minds) to begin with. If anyone should be taking a pay cut, it should be these execs.

Too few people in power are making too much money and us regular people are suffering because of it.

Chris
Old 03-29-07, 11:13 AM
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I wish my company did this. We'd purge a lot of worthless sales people.
Old 03-29-07, 11:15 AM
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If CC's competitors (such as BB) is smart, they'll advertise that they're hiring folks let go this way at their old CC salary. Obviously, they can't hire everybody but it would be a great PR move.
Old 03-29-07, 11:16 AM
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Well, if you have people like Jim Nantz working the floor, it's got to be expensive.
Old 03-29-07, 11:16 AM
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Originally Posted by mrpayroll
Because, if it is deemed to be legal, then more companies will do this, all the while reaping big financial benefits for the people that make these decisions. Government intervention is needed here.

Remember, the execs that are laying off these people were the same people that gave them too much money (in their minds) to begin with. If anyone should be taking a pay cut, it should be these execs.

Too few people in power are making too much money and us regular people are suffering because of it.

Chris
only reason they do this is because best buy hires morons who's only training is to sell you overpriced accessories. if you want highly paid sales people then buy the snobby expensive stuff. circuit city and best buy are mass market and that is how things go
Old 03-29-07, 11:17 AM
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Wow, that makes me want to shop at Circuit City

Sounds like they dropped anyone who might know what they're doing.
Old 03-29-07, 11:17 AM
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Originally Posted by ChiTownAbs, Inc
I wish my company did this. We'd purge a lot of worthless sales people.
It often takes a while, but people who earn disproportionate to their value are eventually jettisoned from smart companies.
Old 03-29-07, 11:23 AM
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What the memo neglected to mention was that the employees being let go also were not loyal to Bush.
Old 03-29-07, 11:28 AM
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Originally Posted by j123vt_99
Well, if you have people like Jim Nantz working the floor, it's got to be expensive.

Originally Posted by Bushdog
It often takes a while, but people who earn disproportionate to their value are eventually jettisoned from smart companies.
Every time I get a raise, my job becomes less secure, because there could be some up-and-coming hotshot who could do what I do for less money. It's my responsibility to continue to increase my value proportionate with my salary, and in my industry there is no upper limit to how much I can learn and how valuable I can be. However, the value ceiling for a floor employee at Circuit Shitty has to be incredibly low. Once you reach the level of basic competence, how much more valuable can you get? This mass layoff is a PR nightmare, but the base concept is felt by pretty much everyone in the work force.

das
Old 03-29-07, 11:31 AM
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Hmmmm, I take a different view. It should be illegal to pay people more than they are worth. At least that seems to have as much merit as it being illegal to let these people go. But I do agree that it is a dickish move.
Old 03-29-07, 11:35 AM
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Originally Posted by mrpayroll
...

Remember, the execs that are laying off these people were the same people that gave them too much money (in their minds) to begin with. If anyone should be taking a pay cut, it should be these execs.

...

Chris
sounds like the Washington DC area Metro subway system in a nutshell.
Old 03-29-07, 11:37 AM
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I don't think CC customer service would suffer. All CC would need to do is replace the floor employees with cardboard cut-outs and maintain, if not improve the level of service they provide.


*YMMV
Old 03-29-07, 11:39 AM
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I'm a former Circuit employee who survived the "Black Tuesday" firings when Circuit went from commission to hourly. I lost my job as warehouse manager a year later for the same reasons. They took my job ($14/hr) and spread it out to part-time employees and overloaded our operations manager. I have several friends who are probably now out of work, at our ocal store they are cutting 11 people. There goes the last knowledgeable, hard working people at that store (Asheville, NC).

I feel bad for them.
Old 03-29-07, 11:44 AM
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Originally Posted by das Monkey
Every time I get a raise, my job becomes less secure, because there could be some up-and-coming hotshot who could do what I do for less money. It's my responsibility to continue to increase my value proportionate with my salary, and in my industry there is no upper limit to how much I can learn and how valuable I can be. However, the value ceiling for a floor employee at Circuit Shitty has to be incredibly low. Once you reach the level of basic competence, how much more valuable can you get? This mass layoff is a PR nightmare, but the base concept is felt by pretty much everyone in the work force.
Well said.
Old 03-29-07, 11:47 AM
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It certainly seems like the employees might have a basis for a wrongful termination lawsuit at least... it depends on how their contracts are set up. If they wanted to do this, then they should have either capped or cut the salaries, at which point the people would have to make a choice to stay or leave. That would have also alleviated CC from having to pay unemployment.

So, if I read that right it means that all CC stores are going to be understaffed for 11 weeks!?!
Old 03-29-07, 11:57 AM
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Yeah, I wouldn't have a problem if they had decided to 'freeze' their salaries for a year or two, but to basically 'fire' them because they are making too much money is wrong.

Hell, here at Disney I get an approx increase of 3% to 4% each year. I am more than happy with that, but I am even more grateful that I have a job, live less than a mile away and only work 40 hours a week.

Chris
Old 03-29-07, 12:06 PM
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This sucks but...

...so may the company's fortunes against Best Buy Inc., whose reputation for high-quality help has helped make it the industry leader.
I'm sorry, that's the highlight of the article. I've never received good help at a Best Buy. I've even been offered a job by a supervisor because I helped a customer more than the salesperson.
Old 03-29-07, 12:10 PM
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Ronald Reagan's "trickle down" (and fuck the working man ) Voodoo Economics still at work and "trickling" )

Trickling = Pissing on the working mans head)
Old 03-29-07, 12:14 PM
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Originally Posted by CinemaNut
Ronald Reagan's "trickle down" (and fuck the working man ) Voodoo Economics still at work and "trickling" )

Trickling = Pissing on the working mans head)
No kidding. Especially when people are owed a job by society.
Old 03-29-07, 12:15 PM
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Originally Posted by CinemaNut
Ronald Reagan's "trickle down" (and fuck the working man ) Voodoo Economics still at work and "trickling" )

Trickling = Pissing on the working mans head)



You sound like Roseanne on Real Time the other night.
Old 03-29-07, 12:29 PM
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Originally Posted by Bushdog
It often takes a while, but people who earn disproportionate to their value are eventually jettisoned from smart companies.
You are implying that I work for a smart company.

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