Back in March, in a truly boneheaded cost-cutting maneuver, Circuit City decided to lay off 3,400 of their highest-performing salespeople, filling their slots with "replacements willing to work for less".
Here's what we said about the move at the time:
Circuit City pays its salespeople on a commission basis. In other words, the salespeople who make the most are the ones who bring in the most sales. Those are the kinds of people a well-run business tends not to, you know, fire...
Perhaps the most baffling thing about the move is that it makes Circuit City even less distinguishable from its major rival, Best Buy. Have you been in a Best Buy store lately? Trying to find a knowledgeable salesperson there is like trying to find a unicorn. Circuit City could compete with that by hiring smart people and treating them well, but it looks like they'd rather save a few pennies instead. The phrase "penny wise and pound foolish" comes to mind...
One look at that stock chart up there tells you that the market figured out it was a dumb move too: Circuit City stock has dropped by 65% over the year to date.
And as if that wasn't bad enough for the company, now Fortune magazine has included the mass firing in this year's list of "101 Dumbest Moments in Business":
70. 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%.
I guess the only really surprising thing is that they found 69 dumber moments.
