Jared Bernstein offers a fanciful take on the recent Circuit City layoffs: Short Circuit, including a link to the chain's own press release. The company's prose is as crooked as their twisted little hearts:
The company has completed a wage management initiative that will result in the separation of approximately 3,400 store Associates. The separations, which are occurring today, focused on Associates who were paid well above the market-based salary range for their role. New Associates will be hired for these positions and compensated at the current market range for the job.
Bernstein, rightly, marvels at the audacity of announcing this in a press release:
Given the times, their rationale for making big changes made sense. Their stock price … was off by a third. But, despite their claims to the contrary, their workers already made the pretty low market wage of about $11.50 and hour, and it was clear at the time their tactic was a recipe for lousier service, fewer sales, and lower profits. …
What's amazing here … is that the firm though it was a good idea to advertise this practice. They were a retailer, with stores in people's neighborhoods, not some behind-the-scenes player. Did they really think this was the message consumers wanted to hear? Did they really believe people would shop at a place where their fellow citizens were treated this way?
I have long complained about the narrow, shareholder-focused tunnel vision of the Business section in most newspapers. Corporate decisions that affect millions of consumers are reported on from the perspective of how those decisions will affect mere thousands of shareholders. This is a foolish, self-defeating way to try to sell papers.*
This same focus is reflected in Circuit City's press release, which boasts — boasts! — that the company is willing to screw over its best workers and its customers in an attempt to bump up its share price.
Bernstein notes that many people are likely to choose not to "shop at a place where their fellow citizens [are] treated this way." I've heard that very reaction — and not just from fair-trade, eco-friendly, organic-everything liberal types. These layoffs are an insult to consumers' sense of fairness.
That insult is a mistake, but it might not be a fatal one, since consumers are not primarily driven by a sense of a fairness to others. The larger mistake, and the more direct insult to customers, is the other point Bernstein makes, that by firing all of their most experienced and most knowledgeable staff, Circuit City has created "a recipe for lousier service." The press release does not say that the chain is cutting back on customer service in order to pass the savings on to consumers. They're cutting back on customer service to pass the savings on to shareholders.
Lousy service + same prices + unfairness to others is a foolish, self-defeating way to try to sell electronics.
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* Consider, for example, the news that taking Vioxx involved greater-than-reported risk of heart failure. That was really big news for the many consumers who were taking the drug, but there were no headlines reading, "You Might Be in Danger of Heart Failure." Instead, there were dozens of headlines reading, "You Might Want to Sell Your Shares in Merck." The "you" of the second headline referred to a much smaller group, and carried a much less urgent message, but that's (stupidly, indefensibly) how the Business section works. The much larger group, which needed to hear a much more urgent message, was forced to read between the lines in dozens of shareholder-focused stories that didn't so much bury the lede as render it tangential to what they believed was most important: how increased risk of heart failure would affect share prices.
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