OK, I hate to say I told you so…but I did. In my newsletter a while back I said that poor morale and bad customer service would result from the firing of “high wage” employees in favor of “low wage” employees. It happened. Circuit city declared bankruptcy this week. How can you make money when your employees are afraid of getting fired and you have fired the people who have been around and are able to answer the customers questions about those high dollar electronics? You can’t and they didn’t.

At the same time they were getting rid of the “high dollar” employees in favor of “low dollar” employees the CEO was getting paid $8 million a year. Rival Best Buy was paying $4 million. Hmm. Oh, the high wage employees were making $10-12 hour and the low wage employees $8-9. I can’t totally confirm all these numbers but I have seen them reported in several locations so I think we can say they are valid.

They also decided to move away from appliances. You know, those big, boring, low margin things like stoves that people need to buy from time to time. They wanted to sell more high dollar electronics, the kind people don’t need to buy from time to time but certainly want to if they can talk to a knowledgeable salesperson. In other words, they got away from a balanced product mix. Not a bad strategy if you can actually execute it. A really bad strategy if your people are demoralized and afraid of getting fired. Oh, I already said that.

Sorry, I just thought it worth repeating. If your employees are not properly led they will not perform at a high level and if they do not perform at a high level today you will fail tomorrow. If you pursue a flawed strategy you will also fail. Just ask Circuit City and ….. Bennigans…and Lehman Brothers…etc etc etc.

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