Circuit City Files Bankruptcy ... Here's Why

Circuit City announces bankruptcy . An article by AP states in part,

"Circuit City, which has had only one profitable quarter in the past year, has faced significant declines in traffic and heightened competition from rival Best Buy Co. and others. The company laid off about 3,400 retail employees last year and replaced them with lower-paid workers, a move analysts said could backfire, hurting morale and driving away customers."

Boy, did that strategy ever backfire.

Why did it backfire?

The executives of Circuit City ignored the importance of emotional intelligence. By laying off their highest-paid floor staff and hiring low-paid workers, they demoralized the sales staff, creating an enormous amount of emotional disengagement (for more on emotional disengagement, see my book LEADING PEOPLE THE BLACK BELT WAY: CONQUERING THE FIVE CORE PROBLEMS FACING LEADERS TODAY).

As a consequent of emotional disengagement on the part of the sales staff, service suffered. I can personally attest to this, as several recent trips to Circuit City left me frustrated by either the unavailability or incompetence of the sales staff.

I'm not alone in these thoughts, either. This article by TIME magazine has the following to say about Circuit City's service:

"For many consumers, however, Circuit City's most obvious failing was its customer service. In March 2007, it announced plans to lay off its highest-paid hourly employees, including salespeople, and replace them with cheaper workers. That same year, then CEO Philip Schoonover received some $7 million in compensation. It may come as no surprise, then, that a quick Web search on "Circuit City complaints" brings up hundreds of thousands of entries."

A word to the wise to CEO's: Rather than focusing on your yearly bonus, focus on building emotional engagement in your staff ... especially those in sales.