Face to the Customer Organization Design – A Critical Decision. Farewell to Circuit City
By Michelle Malay Carter on January 25, 2009
A Solid Relationship
Two decades ago when I graduated from college and moved 10 hours from home with nothing more than what would fit in my car, Circuit City and I built a relationship.? As my paycheck would allow, I would visit my favorite salesperson, Darren, and add electronic items to my entertainment center.? I knew little about electronics, but Darren did.? I trusted him, and he never steered me wrong.
Shifting from Work Level 2 Face to Customer to Level 1
A few years back, I remember hearing that a struggling Circuit City was slashing the pay of its salespeople.? Looking through my Requisite Work Levels goggles, I knew this meant that they were also unwittingly reducing the work level capability of their salespeople – their face to the customer.? I remember thinking, there goes Circuit City.
Felt Fair Pay
Because of the felt fair pay phenonmenon and its relationship to work level capability, when you reduce pay, you reduce the work level of your candidate pool.? Simply put, the more you pay, the higher the cognitive level of your candidate pool.? There are times and places where a level 1 face to the customer is appropriate, but shifting backwards is dangerous.
How Does This Feel to Customers?
Anecdotal evidence says Circuit City had been employing mostly level two capable people.? This means they were capable of picking up MULTIPLE bits and pieces of information from their customers,?DRAWING CONCLUSIONS?and offering products that ALIGNED with their customers’ needs.
Analysis Burden Shifted to Customer
When Circuit City reduced their pay, they began attracting level one capable people who follow procedures and consider bits of information INDEPENDENTLY.? Essentially, the analysis burden?was shifted to the customer.? For someone like me who is not electronics savvy, I need a salesperson to help me with my analysis.? Suddenly, I found it frustrating to shop at Circuit City because I had grown to expect something else.
Incidentally, if you’ve noticed a shift in the level of service you receive from Home Depot these days.? They walked this same pathway.
The Unintended Consequences of Cutting Pay – It’s About Structure!
Cutting the pay of your organization’s face to the customer is not just about numbers!!!? It is a huge strategic decision.? That is why organization design must be an executive level leadership accountability.
Level Shifting
Generally, deciding to increase the level of your face to customer can give you a competitive edge and pleasantly surprised customers, but it will increase your payroll costs.? Lowering the level of your face to the customer will disappoint your customer and drive him away, but you will have lower payroll costs.?
Farewell, my estranged friend, Circuit City.? I’m OK.? You’re OK.? Let’s fix the system.
Have You Experienced This Phenomenon?
What other companies have recently lowered the pay of their front line?? Have you noticed a shift in the level of service you receive from them?
Filed Under Accountability, Executive Leadership, Felt Fair Compensation, Organization Design, Requisite Organization, Strategy, Talent Management, Work Levels
Comments
4 Responses to “Face to the Customer Organization Design – A Critical Decision. Farewell to Circuit City”
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One other thing that the less capable and less experience sales staff were not able to do was sell add-ons, such as service plans and extended warranties.
Hi Wally,
Thanks for stopping by and for the comment.
Yes, the key word is sell. Many companies have proceduralized the simple OFFERING of these items, which is level 1 work. Would you like fries with that?
But offering a list of reasons why it make sense given the circumstances, i.e. selling it, is a higher level task.
Michelle
(The link to the prior article is broken.)
Radio Shack, another US-based electronics retailer, did something similar a few years back. They didn’t reduce base pay for floor salespeople: they raised it. But they changed the commission structure. It meant that the top sales people, some of whom made $100k annually, made considerably less. It seemed like such a good idea. Here, at least, all of the top salespeople went to Best Buy.
Perhaps another lesson is that when your competition does something stupid like that, it’s time to add to the cream in your organization.
Hi Forrest,
I got the link fixed, thanks. Yes, Circuit City moved from commission to hourly wages, the net effect was slashed by for the high performers.
Yes, I think your passive poaching strategy has merit.
Michelle