FutureSizing: Positioning for Success | As Published in Leadership Excellence

Facing multiple quarters of profit declines, the leaders of Circuit City, the consumer electronics retail store chain, faced a daunting challenge. If the bottom line did not improve, the company faced bankruptcy. Executives recognized that, though they could not immediately influence profits, they could directly affect the bottom line through decreasing salary costs. The fiscal needs called for quick action. The executive team settled on a strategy of work force reductions, beginning with sales associates whose salaries impacted the bottom line most. The 3,400 most highly compensated sales associates were laid off. After a brief bounce in sales performance, the chain saw steady declines in sales until finally filing for bankruptcy.