Friday, April 06, 2007

A Very Expensive Way to Save Money

It seems that Circuit City is choosing a very expensive way to save money; by firing 3400 of their highest paid (= most productive, most experienced) employees. In doing so, they appear to have opened themselves up for age discrimination lawsuits in California--a state where tort law is notorious for awarding billions on flimsy evidence. Ouch.

Along these lines, I had a discussion about this kind of thing with an older gentleman at my church. He used to sell appliances for Sears and quit because they cut his pay to the point where it wasn't worth it to him anymore--about 20 years back. A lot of his colleagues quit as well, and were replaced by young men in their teens and twenties who, charitably speaking, had never bought an appliance in their lives and had the knowledge to prove it.

The result? A store that used to sell more appliances than any other in the state (one of the tops in the nation) is now a virtual ghost town. The man who left? He still drives a bus part-time and is one of the most spry 80-year-olds I've ever seen. He could be selling a lot of Kenmore appliances if they made it worth his while.

Just like with Circuit City, Sears chose a very expensive way to save money. Hopefully it'll open up opportunities for their competitors to clean their clock.

8 comments:

Marklark said...

Of course, he might not be so spry if he were still in the Sears... :^/

Driving the chillerns around might be just what he needs to stay young. :&)

Shawn said...

...an important consideration here is that CC fired people who were being paid over their market rate, and offered to hire them back at that rate.

What's wrong with this? If, as a landscape architect, I was making 2x my salary (my salary being pretty standard for someone w/ my experience in my city) with a particular company, wouldn't they be completely in the right to fire me (or, less drastically, offer me a pay cut to my market salary)?

If i REALLY was that good, I'd have no problem finding a better paying job at a competitor; perhaps not as much as i was making at company 'a' when I was being OVERPAYED, but more than market rate.

Bike Bubba said...

Shawn,I'd simply point out that they probably weren't being overpaid when compared with other experienced salesmen who actually knew the products they were selling.

Just like at Sears, and just like at Radio Shack, or at your local hardware store. You get rid of the old-timers who know what they're doing, and the business will suffer.

Put differently, one of the weaknesses of modern management is that they treat workers as "warm bodies" (commodities, really), even in the knowledge professions--and then wonder why obvious problems were ignored in the new product cycle.

Shawn said...

you assume that they were being overpayed relative to their know-nothing younger proteges. I assume that they were overpayed compared to another comparable electronics store's similarly experienced employees.

Basis for either assumption?

If it's what you're proposing, then yes, that was foolish (not unethical or wrong, but foolish). If it's what I'm reading, they were being overpayed anyway, what's everyone bitching about?

Bike Bubba said...

Well, some of it's just class warfare, and some of it's the fact that CC probably has gotten a lot of tax breaks from towns in exchange for "good-paying jobs." So when the company fires 3400 for earning (actual #s from an employee) $10.10/hour instead of $9.50/hour, it seems like quite the kick in the teeth.

The company is also misleading journalists about how much it'll save; they're claiming $110 to $140 million, but half a buck an hour (their difference noted) for 3400 workers is only about $3 million annually.

OK, so if they can't accurately represent how much they're saving, should we really assume that their salary comparisons are valid?

Bike Bubba said...

BTW, here's how you know the comparison was to "all salespeople" or "junior salespeople"; they only let the more senior, higher paid people go. If they only wanted to get rid of the overpaid, they'd do so at all levels of compensation, not just those earning a bit more.

Anonymous said...

lets be brief....inspire to do well.negotiate contracts with unions(we are fighting for your future),climb the work ladder and progress within the company?who's idea is it to do these things?.wonder how much bonus the ceo is getting this year?.I am involved in such a class action myself. This is telling the workforce of America.it don't pay to be a team player and be rewarded for your service in the workforce. It don't pay to climb the ladder.or to improve the company your working for....your reward???...you've improved us tooooo much.now you are overpaid???.over paid??.what is that these days in middle class America where most still are just above poverty level

Shawn said...

oh my.