Dec 23, 2007

LANL Circuit City

The analogies are fairly obvious.



From this business story:

Santa Claus Comes for Failed Business Executives

The Washington Post had a good story on the dealings of the electronics retailer Circuit City. Unfortunately, it was buried in the business section where no one will see it. It should have been plastered at the top of the front page.

The basic story is that last March, the wise men who run Circuit City came up with the brilliant idea of laying off their more senior salespeople, who get $14-$15 an hour, and replacing them with new hires who get around $9 an hour. It turns out that this move was not very good for business. One of the reasons that people go to a store like Circuit City, rather than buying things on the Internet, is that they want to be able to talk to a knowledgeable salesperson. Since Circuit City had laid off their knowledgeable salespeople, there was little reason to shop there.

Apparently Circuit City came to this same conclusion earlier this fall and tried to hire back some of the people it had dumped. In any case, things have not gone well for the bottom line. The company is now losing money and its share price is down more than 75 percent from its value earlier this year.

We all know what happens when you mess up in the dog eat dog world of big business -- you get retention awards (that's because your stock options aren't worth anything). The Post reports that Circuit City's executive vice-presidents will get retention awards of $1 million each. That's 35 years worth of pay for one of sales clerks who earned $14 an hour. And that's just the bonus.

This touching account of Santa Claus visiting Circuit City's executive suites belonged on the front page of the Post and every other newspaper. What better way to get in the Christmas spirit?

--Dean Baker


Anonymous said...

A comment from Slashdot ( coverage of this story:

"Lay off all the people that were actually making money for the company, and pay big bucks to keep the people who brought the company to the point where it had to lay people off.


Anonymous said...

my brother inlaw worked for them as a sales man when they where paying comission on sales, the brillant management at that time wacked everyone who made over 50,000 a year in sales commisions and then turned the rest of the employees in 10.00 hour drones. He was told if he wanted to keep his job he would have to take the reduction in pay.

Anonymous said...

Sure hope more than a few people other than drones are left at Los Alamos when the dust settles.

Anonymous said...

December 21, 2007, 9:12 am

Circuit City: Profits No, Bonuses Yes - Fortune Magazine

...But don’t feel too bad for the CC brass. In an SEC filing yesterday, the company revealed that it is giving cash awards to senior vice-presidents ($600,000, cha-ching) and executive vice-presidents ($1,000,000, big cha-ching), in order to “ensure the stability of the company’s leadership.” You know, because with talent like that, producing quarters that dissatisfy the CEO, you wouldn’t want them walking out the door.

Anonymous said...

CC's massacre rated 69/101 of Fortune's "101 Dumbest Moments in Business"

"69. Circuit City
Good job. You're all fired.
In a cost-cutting move, Circuit City lays off all sales associates paid 51 cents or more per hour above an "established pay range" - essentially firing 3,400 of its top performers in one fell swoop. Over the next eight months Circuit City's share price drops by almost 70%."

That being said, the analogy's a bit weak. CC's mission remained the same before and after the firings while LANL's mission, from what I gather on this blog, appears to have changed from stockpile stewardship to pit production with stewardship work going to LLNL. Am I missing something?