Wednesday, November 12, 2008

Circuit City Short-Circuits

As many of you know, I love technology--the smaller the better. Oh, and pens (mmm, pens...), but I digress. So it should come as no surprise that some of my early dates with Garland, my fabu-hubs, were to Best Buy, Comp USA, Office Depot and the like.

Better than dinner and the movies. Yeah, Garland got off cheap.

So, I hate it when a tech retailer struggles. I also hate it when that bad feeling I have about a business turns out to be right. Circuit City, never a personal fave (and, people get this: I'm pretty catholic in my tech retail tastes...just give me stuff to covet) announced last Wednesday that “it will immediately close and liquidate 155 stores and lay off thousands of employees as it struggles to survive an increasingly dreary holiday shopping season” (read the rest of the WSJ story here).

Circuit City, the nations second-largest electronics retailer assured investors that it won't be closing, but that it “planned to reduce about 17 percent of its domestic work force, and slash operating, payroll and marketing expenses. Circuit City currently operates 721 stores and outlets in the U.S. as well as 770 mostly smaller locations in Canada, and employs roughly 55,000 workers including holiday help.”

I'll say it: Yipes! CC’s PR plate twirlers have got their work cut out for themselves in spinning this as one of those Martha Stewart "good things" in advance of the lucrative holiday shopping season. Second thought, with K-Mart ramping up a "buy lay-away" campaign (Lay-away is something I remember from my childhood...when we were poor) and Wal-Mart expecting banner sales, they may have seen the writing on the wall in choosing to weigh anchor and run.

In a (begin snark) brilliant move (end snark) to cut costs, CEO Philip J. Schoonover, thinking that floor sales in his company was something a trained chimp could do, decided to cut jobs--starting with his most senior, most experienced (read: most expensive) workers, leaving the stores to be operated by demoralized, dispirited, underpaid workers who were waiting for the next axe to fall (they didn't have to wait all that long).

Dumb. No, shortsighted and dumb.

The market's immediate response to the 3,400 employee restructuring? Customer defections due to poor customer service (that was me) with falling earnings for dessert. Here's my question: while Schoonover was making HR policy willy-nilly, where the sweet hell was his Chief HR Officer? This from the Circuit City website:

Mr. Jonas joined the company in 1998 as director of associate relations. He was promoted to assistant vice president of corporate human resources services in 2000, was elected vice president in 2003 and was elected senior vice president in 2004. Prior to joining the company, he was employed by Toys "R" Us, a worldwide retailer of toys, baby products and children's apparel, from 1985 until 1998, including serving in the position of director of human resources for the Babies "R" Us division from 1996 to 1998.

Seems like a skilled enough kind of guy, but what in the name of the Great Pumpkin would have had Schoonover make such a sweeping HR decision, seemingly, without consultation with (and, well, the cooperation of) his top HR pick. This seems to be the issue.

After the early successes of Jack Welch at GE with his Pareto Principle-based rank and yank mandate (the top 10% get raises, the bottom 20% get pink slips and the 70% in the middle get a continued paycheck), CEO's who had never spend so much as a week in the HR trenches began making sweeping HR decisions--decisions based on corporate earnings and not based on human capital management (got to find another term for that). Curiously, no one said a word when, at GE, the people in the middle began leaving in droves taking their knowledge assets with them, worried that the bottom of the barrel was rising fast, and the remaining staffers, fearful of collaborations with team members who could supplant then, began hoarding information and sabotaging one another. Morale is strangely low there and it’s only the high prestige and perks that keep people in the saddle.

HR leaders like the strangely silent Mr. Jonas could do well to smack their Chief Execs on the side of the noggin, yelling "wake up, stupid!" until they get their attention. Then they should point to the business plan and demand how the hairy hell the company is expected to reach those heights when CEO expectations for the HR function are so low. But, aw shucks, you can't be a champion of solid, far-reaching, business-focused people strategy if you're cravenly trying to protect your job.

Here's a home truth: Business plan minus well-trained, confident contributors equals an interesting idea. CEO’s with said interesting ideas should be shortlisted for re-deployment… maybe on the shop floor at Circuit City.

But, I have to say that we, in the HR field, have done this to ourselves. We’ve settled for MBA programs that don’t teach the value of a solid HR function (which includes guardianship, visionary, strategic, operational and tactical elements–not just the tactical), MRHM programs that don’t teach future leaders to scrap for a seat at the table (and one where they aren’t taking notes or arranging the coffee service) and a professional organization, SHRM, that is more worried about building its brand and stuffing its membership coffers than in building the profession in the minds of CEO’s and HR leaders alike.

But, sadly, what’s predictable and almost certain is that around the corner will come another CEO with his six shooter (ammunition: cut, cut, cut, cut, cut, cut) backed by a simple minded CHRO who will cower to keep his gig.