Cost Cutting at Circuit City
The demise of Circuit City as the number two consumer electronics outlet in the United States in November, 2008 was in microcosm what General Motors and the real estate market were to the country as a whole during the greatest economic collapse since the Great Depression. One could fault the velocity of economic decline as the primary catalyst causing Circuit City ultimately to decide that liquidation was the only viable option in the face of mounting losses, however there appears to be at least one highly publicized decision suspected to be a precipitator of failure – the firing of more than 3,400 established workers to make way for the hiring of lower skilled, lower paid replacements (Circuit City to fire more than 3,400 workers, 2007).
Faced with mounting losses and stifling competition from competitor Best Buy, as well as lesser consumer electronic outlet competitors such as Wal-Mart and CompUSA (Rosenbloom, 2008), the Circuit City board of directors chose cost-cutting in human resources as the decision alternative best suited to regain a competitive footing (Circuit City to fire more than 3,400 workers, 2007). Against the backdrop of the Rational Decision-Making Model, the choice appears to have been made in a vacuum in that while problem definition may have been straightforward enough (loss of revenue, decreasing sales), one could reasonably question the rationality of the criteria used and the weights assigned to those criteria (Robbins & Judge, 2009). Certainly therefore, the decision had no effect on the company’s misfortune. Worse, it may have precipitated the death rattle.
Circuit City’s decision to dismiss so many employees had a chilling effect not only on the workers (who also happened to be customers), but on the general public at large. Consumers were not only mystified at the move, but were openly contemptuous of