Friday, March 30, 2007

Price Swapping Employees -- a New Business Trend?

MSNBC--
Circuit City to fire more than 3400 workers and rehire them at a lower wage

Richmond Virginia -- Circuit City, the nation's number 2 electronics retailer, which has been facing competitors and falling sales said Wednesday that it will lay off more than 3400 store workers immediately and replace them with lower paid new hires as soon as possible.

Analysts and economists agree that the move is an uncertain experiment that could backfire for Circuit City.
“This strategy strikes me as being quite cold,” said Bernard Baumohl, executive director of The Economic Outlook Group. “I don’t think it’s in the best interest of Circuit City as a whole.”

Circuit City claims that the reason for the layoff is that these workers were earning "well above the market base salary range for the role" and that they will be replaced with employees that will be paid at the current market range.
Circuit City’s move, by contrast, “shows they’re positioning for another tough year,” said Timothy W. Allen, a Jefferies & Co. retail analyst. Not only will service levels at the store suffer, he said, but “you’ve lost 3,400 customers-slash-employees.”

The laid-off workers will get a severance package and a chance to reapply for their former jobs at a lower pay after 10 weeks from their termination.

in addition to employee swapping, some companies are laying off employees and leaving the country. For example,

Sony, {MSNBC}--which it be laying off up to 600 workers at the West Moreland County Sony plan which manufactures rear projection TVs will be moving to Mexico because of price erosion and declining sales due to the popularity of the plasma panel television sets.

Haynes, {MSNBC}--which makes underwear, announced that they will close its Stratford Road textile manufacturing plant in Winston-Salem and move production to existing lower cost plants in the Caribbean basin and Central America.

Companies like Circuit City is going to find out a very short period of time in my opinion, is that you can save money by hiring cheaper employees, however, as a saying that I like to say is "the mighty New York Times is nothing without the kid on the bicycle", e.g., it is the people who interact with the customers are the ones that make the business.

If employees do not believe in the company because the company does not believe in the employees, then it is just a job, not a career. the end result for the company is lower sales and eventual bankruptcy. In my opinion, you can make your bottom-line look better in the short run, however, in the long run... a company's bad reputation is a hard one to rebuild.

Myself, I will no longer shop at Circuit City while they hold this attitude.

11 Comments:

Anonymous Laura said...

Sadly, this is not a new practice. Wal-Mart is famous for it. They make regular sweeps and find cheesy reasons to get rid of their highest paid employees. Ever noticed that Wal-Mart faces change regularly? Even the managers are changed every year.
I agree with you, Robin. What makes a business great and gives it staying power is the customer service it provides.....through the workers they appreciate the least. Repeat customers are the bread and butter of retail. Too bad the big bosses forget that when they have million dollar wallets.

6:33 AM  
Anonymous Gullyborg said...

Never buy a television from a place that also sells microwaves.

Support specialty stores, and the customer service that comes with them!

11:29 AM  
Blogger Bobkatt said...

The WalMart model:
"last year, an internal Wal-Mart memo conceded that 46 percent of its workers’ children were either on Medicaid or lacked health insurance. Nonetheless, the memo expressed concern that wages and benefits were rising, in part “because we pay an associate more in salary and benefits as his or her tenure increases.”
"The problem from the company’s point of view, then, is that its workers are too loyal; it wants cheap labor that doesn’t hang around too long, but not enough workers quit before acquiring the right to higher wages and benefits. Among the policy changes the memo suggested to deal with this problem was a shift to hiring more part-time workers, which “will lower Wal-Mart’s health care enrollment.”
“say Wal-Mart executives have told them the company wants to transform its work force to 40 percent part-time from 20 percent.” Another leaked Wal-Mart memo describes a plan to impose wage caps, so that long-term employees won’t get raises. And the company is taking other steps to keep workers from staying too long: in some stores, according to workers, “managers have suddenly barred older employees with back or leg problems from sitting on stools.”

4:01 PM  
Blogger Robin said...

Unfortunately, it appears to be a trend of major American employers these days that they cannot look beyond today as far as investing in their company.

while companies are in existence to make money, some companies would do anything to make a quick profit, including, hiring cheep and sometimes illegal labor to cut the bottom line.

this may help in the short run, however it always sooner or later comes back to bite them in the butt.

and companies are not stupid either. You hear them constantly encouraging their employees to be friendly to their customers, because they know that they will gain repeat business (the heart of any business)if their customers are treated correctly.

However, they forget, that when an employee is investing their time with an employer, that an employee will give 110% of themselves if they feel that they are being treated fairly and that they have a future with this company.

that is the difference between a job (short-term)and a career (long-term), which also determines in some cases the effort that the employee will invest in that employer.

Whether a job is a job or a career, is typically up to the employer. If the employer has the attitude that they do not want their employees to be long-term, then that is exactly the kind of employee that they will get.

We have all been in stores that as soon as we walked through the front doors, you can just feel the tension even before you talk to anybody in that store. These are the stores that the owners are constantly wondering why businesses failing.

Other stores, where the employer treats their employees with respect is evident because the employees are happy and courteous. Employees feel like they are part of the organization and that they have a future with the company.

In short, given the two above examples, which store would you prefer to offer repeat business to?

so if Circuit City wants to play their little game and treat their employees like they are disposable, go for it. Knock yourself out.

however, the only way that companies like Circuit City will ever get my money, is when I go to purchase products from their going out of business sale.

that is very sad and so unnecessary.

8:36 AM  
Anonymous Laura said...

Wal-Mart lets the store managers decide who gets a raise. Although the corporation sends them the money, it is up to the individual store manager to decide who gets what. The end result is some people get nothing or a dime, which is about the same thing, or they get a fat raise because the manager likes them. I have seen hard working people get nothing and STAY because they can't afford to quit. And Wal-Mart is not alone. Safeway is proving to be just as bad. They asked long term employess to choose a buy out and retire early or continue at their same pay. Only problem is, they made outrageous offers. A 25 year employee received an offer of $7,000. THAT is a slap in the face. Of course she can't retire with that so she continues to work, without a raise. Maybe we need secret shoppers that go to businesses and expose them for what they are. Hmmm... there's a job.

5:47 AM  
Anonymous Anonymous said...

for hours of entertainment visit WALMARTSUCKS.COM
It is packed full of current and former employees gripes.

5:49 AM  
Anonymous Anonymous said...

WOW, to my surprise, WalMart took over the walmartsucks.com web site. It is still a blog but I wonder why they wanted it. Probably wanting to fire anyone who posts on it. And the posts were great, too. They are doing some very bad things and the employees are telling!

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