Circuit City’s ‘Wage Management Initiative’ Could Affect Reputation

Shock and “Aww”: Employee rewards are the last thing on the minds of management at electronics retailer Circuit City Stores Inc. The Richmond, Virginia-based retailer is being reviled for the way it handled the layoffs of 3,400 employees in March, describing the move in a news release as a “wage management initiative” aimed at removing employees “who were paid well above the market-based salary range” for their jobs. Moreover, the fired workers are eligible to reapply for their old jobs, albeit at lower wages. All of this prompted human resources expert Peter Capelli, a management professor at the University of Pennsylvania’s Wharton School, to describe the decision as “the most cynical thing I've heard about in a long time,” in an article published in Wharton’s online business newsletter. An Associated Press article said Circuit City is “risking a public backlash by implying that its wages are as subject to discounts as its flat-screen TVs.” Circuit City has defended the cutbacks as necessary to contain costs and fend off fierce competition from other electronics retailers.