Circuit city maximizes the pain/gain ratio

The NYT’s David Carr can certainly provide a punchline:

Last summer, I needed some gadgets for a multimedia project, so I walked in to a Best Buy. A young man walked me around the floor, assembling a bag of components before promising me that it would all work. It did…

In a classic case of extrapolation from anecdote, Carr then concludes that Circuit City, which just laid off 3,400 salesclerks, is going to lose the customer-service war with Best Buy. (This is one of those wars that both sides are likely to lose.) But it’s certainly true that it’s hard to have much faith in a company which can make announcements like this:

Circuit City said it let go of workers who were making 51 cents or more an hour above what the company had set as market wages. It wouldn’t provide specific salaries. The company said the workers, who received severance packages, could reapply for their jobs at lower pay in 10 weeks.

In other words, Circuit City’s most experienced sales people, some of whom were making the grand total of 51 cents per hour more than what the company considers to be “market wages”, all got canned overnight. Carr makes the easy, lazy, and entirely apropos comparison:

If you add up salary, bonus, stock options, and other perks, Philip J. Schoonover, chief executive, and W. Alan McCollough, chairman, received almost $10 million in various kinds of compensation last year for steering the company to its imperiled state.

Actually, $10 million in total compensation between two executives seems almost modest by today’s standards — but still, if you save 51 cents per hour on 3,400 workers working 35 hours a week, that comes to just over $3 million a year. It’s almost impossible to think of a policy which could cause so much pain on the individual level while saving so little money at the corporate level.