May 4, 2007

Does Low Wages Equal Strong Management

James O'Toole and Edward E. Lawler III penned an interesting article on They contend that just the opposite is true; that lower paid staff is indicative of weaker management. From the article:

“In almost all industries, productive, higher-paid workers can more than cover the costs of their salaries and benefits, if they are managed appropriately.”

It seems that their article was inspired by the outrageous actions by Circuit City management. As posted in, Circuit City Is Now Hiring – Cheap:
“This just demonstrates that Circuit City is no longer capable of managing a higher quality sales staff and wants to become a K-Mart style retailer.”

For the last four years American business has been growing and expanding, with over-all profits up over 100%. Now that growth has slowed, mangers are looking to cut staffing to demonstrate their ability to maintain bottom line growth. This is only a short term solution and the problem remains on how to win the race, but with fewer and lower quality horses.


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Circuit City is a Fortune 500company. As of March 28, 2007, Circuit City operates 643 Superstores and 12 other locations in USA. sportsbook, Circuit City Superstores range in size from 15,000 to 45,000 square feet (1400 to 4000 m²) and offer a large selection of brand-name consumer electronics, personal computers and entertainment software.

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