Writing at the Forrester blog for information and knowledge management professionals, (no longer online) analyst Connie Moore thinks the now out-of-business Circuit City is not so much a victim of the credit crunch as bad management.
In 2007, the company was feeling financial stress and, like many corporations, decided to off-load 3,400 employees. But not just any employees. The company deliberately got rid of its highest paid workers and replaced them with lower paid employees. It invited the higher paid workers to apply for their old jobs at the new, lower, wages.
No doubt the witless morons playing with Excel spreadsheets calculated this would result in greater savings. It probably did. They should have looked at the bigger picture.
Those higher paid workers were experienced sales people. As Moore writes, they interacted daily with customers. They knew how things worked. They knew how to make the business work. Their incoming replacements didn’t.
Moore argues, admittedly without any deep analysis, this was probably the cause of the company’s downfall. I don’t have access to the facts and I’ve never previously heard of Circuit City. Yet her reasoning sounds plausible. Circuit City wouldn’t have been the first company to, metaphorically cut out its brain and then wonder why everything else failed to work properly.
While those sacked workers may have been at relatively low-level compared with the masters-of-the-universe strolling through the deep pile in the executive suite, they held the real knowledge about how the business worked on a day-to-day basis. Sacking knowledge workers, even if they are just humble shop clerks, means dumbing down the business. That’s not a viable long-term strategy.