Thursday, April 5, 2007

One more on Circuit City

Knowledge@Wharton has also weighed in on Circuit City's firing of 3400 employees in an April 4 article titled "Short-Circuited: Cutting Jobs as Corporate Strategy." Here are a couple of comments from the Wharton School profs featured in that piece:

Peter Cappelli, management professor and director of the Center for Human Resources at Wharton, says Circuit City may have valid reasons for having to reduce costs, but the way it treated the 3,400 workers was highly unusual. "That's the most cynical thing I've heard about in a long time," Cappelli says. "I like to think I'm cynical, but sometimes it's hard to keep up."

According to Cappelli, Circuit City's decision to replace the terminated workers with lower-paid people is like saying: "We made a mistake in compensation by paying them more than they were worth for their performance, so we're going to get rid of them." Cappelli adds that he "had never heard of that before. Companies have always done sneaky things like getting rid of higher-wage workers with two-tier wage plans, but this ... takes the cake."

Wharton management professor Daniel A. Levinthal points out that Circuit City's decision to cut 3,400 veteran sales people "sounds like a massive de-skilling" of the company. Since the people who will be hired to replace the laid-off workers probably will not know the merchandise as well as the workers who were dismissed, customers who want to know how to set up a high-definition TV or why one music player is better than another might not receive the best advice.

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