Circuit City Case Study

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In 2007, Circuit City, an electronics retailer who took pride in providing excellent customer service, fired 3,400 employees nationwide (Seitel, 2011, p.217). The company needed to reduce expenses and decided the termination of loyal employees was the only option. The workers were laid-off simply because they were “being 'overpaid”” (Seitel, 2011, p.217). However, according to Seitel (2011) they were paid the average hourly wage of a retail sales associate (p.217). Circuit City’s poor communication with employees proved detrimental and led to the company filing for bankruptcy protection the following year (Seitel, 2011, p.218). First, Circuit City handled the communications of the layoffs poorly because the employees received no prior warning. …show more content…

Employees were fired, but then “encouraged to reapply after 10 weeks severance pay for any openings” (Seitel, 2011, p.217). Seitel (2011) stated Circuit City fired employees in order to hire new workers who would work for far less (p.217). Interestingly, Circuit City prided itself for their excellent customer service and knowledge of products; however, by getting rid of reliable and experienced employees and replacing them with new, inexperience workers your customer service consequently decreases. Also, the way a company treats it’s employees reflects how they treat their customers. Circuit City wanted to portray an image of treating their customers as important and valuable, yet their sales employees did not receive the same …show more content…

Seitel stated Circuit City’s management responded to the CFO’s departure by offering an additional cash in of $250,000 on top of his $1,000,000 a year (p.218). Management was more concerned about losing one high up employee, but did nothing to help preserve the jobs of 3,400 sales employees. Management should have been counseled to treat all employees with equality and dignity regardless of position. Interestingly, “The firings…are expected to reduce expenses for the electronics retailer by $110 million in fiscal year 2008” (Mui, 2007). In comparison, Circuit City’s CFO’s salary was $1 million. One top-level manager’s pay was almost equal to the total expenses that firing employees cut. This showed that lower level employees are dispensable and not as valuable to the company as a higher level employee

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