Pay-For-Performance Hardball Where You Least Expect It - Publix
Performance Review Time - Paula Abdul (Your Manager) Says You "Sometime Exceed"

The Talent Commodity Trap @ Circuit City...

Stop me when you determine you have heard this one before...Company A builds product/service from the ground up, and the product/service provided is wildly acclaimed as cutting edge and a must have for early adapters and ultimately, society in general.  Page 2 - Other companies identify the success and move to get involved in the marketplace, carrying plans to spend as much cash as necessary to buy market share and/or use gargantuan size to step on vendors to create margins on price per unit that Company A can't match.  Company A reacts to the pressure on margins and market share by eliminating every expense possible, which ultimately results in cuts that impact people - layoffs, wage concessions, etc...Circuit_city

Sound familiar?  It should, since it has happened in multiple tech industries, most notable from my experience in the Cell/Wireless industry.  Additionally, Wal-Mart tends to take over entire industries on the scale model - see the trend in supermarkets, and most recently in consumer electronics...  That's where the recent developments at Circuit City come in:

From the LA Times:

"A new plan for layoffs at Circuit City is openly targeting better-paid workers, risking a public backlash by implying that its wages are as subject to discounts as its flat-screen TVs.  The electronics retailer, facing larger competitors and falling sales, said today that it would lay off about 3,400 store workers -- immediately -- and replace them with lower-paid new hires as soon as possible.

The laid-off workers, about 8 percent of the company's total work force, would get a severance package and a chance to reapply for their former jobs, at lower pay, after a 10-week delay, the company said.

While other companies, such as Caterpillar Inc., have introduced two-tiered wage systems, where newer workers make less, firing workers and offering to rehire them at a lower wage is very rare.

Circuit City Stores Inc., the nation's No. 2 consumer electronics retailer behind Best Buy Co., says the workers being laid off were earning "well above the market-based salary range for their role." They will be replaced with employees who will be paid at the current market range, the company said in a news release.

It's a Talent Commodity Trap.  The pressure has turned all or a majority of Circuit City's business into a commodity.  If you lower the caliber of worker interacting with your customers, why should they come to you?  Or more importantly in the case of Circuit City, why would they come to you when they can go to Wal-Mart to get their groceries and toys at the same time?  Do you follow the path of your product by downgrading your workforce or do you try and make that workforce the differentiating factor to your product?

It's a interesting talent situation.  Compare and contrast this reaction to that of Publix, another Wal-Mart competitor, which faced with the same pressures, is focusing on Performance Management and having tough conversations with employees about what it takes to be customer centric.   Which route to competitiveness creates the culture you would want?  Which one is easier?  Is it worth the effort to work hard on Pay-For-Performance vs. just laying a bunch of people off?

Additionally, Seth Borden of KMB and the Union Free Employer is riffing on Circuit City - citing orgs like the AFL-CIO pointing to the Circuit City layoffs as reasons workers need protection in today's global economy.  From the capitalist point of view, they don't need protection, just brave employers to have conversations with them about how to protect the brand and be "different"/add value when compared to the Wal-Mart's of the world....


The comments to this entry are closed.