A Tough Spot

Recently Circuit City fired 3,400 employees who were earning above the defined pay range for the associate position at the big red store. Before I go any further, let me say that I know a guy who manages a department in the local Santa Cruz Circuit City, and I've had the opportunity to talk business with him on several occasions... so I have some sense of the nature of their business.

Stores like BestBuy, Walmart, Costco and Circuit City are in a all hands on deck battle for big ticket sales. The margins on computers and gadgets isn't enough to warrant those big buildings and the flashy adds... it's all about moving those TVs. And at the end of the day, a slick salesman only goes so far. You have to keep cost low if you want to compete. Consider Costco... I can't say I've ever seen a salesman on their TV floor, but maybe I wasn't looking. Certainly not as many as at Circuit City. So, when faced with the prospect of posting huge quarterly loses, Circuit City let thousands go, hired new younger workers with low pay, and told the old workers they could reapply 10 weeks down the road (at lower pay).

Not only were they upfront about the situation with the associates, they were upfront with the public. According to the Seattle Times, in exchange for their openness they are getting a boycott.

Which makes me confused as to what Circuit City should have done here? According to my manager friend, the best Circuit Cities are near colleges and have a healthy churn of college kids who take the associate jobs for a few years, work their way up the pay scale, then leave to make room for a new salesman. The churn ensures the pay never gets too high. But not every town that needs a Circuit City has a college, so some salesmen stick around for longer than is desirable. Strikes me as they have three options:

1) do nothing, post huge loses and file for bankruptcy
2) do what they did, get hit with a boycott
3) do what they did, but keep it private so the public never finds out

Now, of course, #3 is rife with risks for the company. Should they be found out, they would be vilified in the press and likely become the target of... of a... of a boycott?! Wait, isn't that what happens under #2? Guess that makes it worth the risk then, wouldn't you say? Is that what we want? I don't think that having corporations make wide scale employment decisions without any public explanation is a very good idea, but we leave them little choice if this is the response they can expect for their frankness.

It's just like the politician who lies to his constituency. If telling the truth leads to an assured electoral defeat, what possible reason would they have to be honest?

I don't know if there is an easy solution to the problem. We could criminalize the lack of disclosure, I suppose. But that's certainly pretty extreme. We could turn a blind eye to corporate mistreatment of workers... not much of an ideal situation either. I think, ultimately, the best idea is to accept that some stores opporate on a low pay worker model, and if we don't like that we should avoid those companies all together, not just become morally indignant when they have to be a little more ruthless than normal.