What Was Radio Shack Thinking?

This is a bit off the usual Financial Rounds beaten trail, but some things just deserve comment.

RadioShack (RSH) has had some hard times lately - sales have been down, and the price of their common stock has dropped from the $20 range in early April to a low of less than $14 in June (it has since rebounded to $18).

RSH 1-yr chart:

click to enlarge

But they just informed some 400 employees (mostly in their home office) that they were to be laid off immediately - BY EMAIL!

What were they thinking? This has to be one of the crassest, classless and most tone-deaf corporate moves I've seen in a long time. And that says a lot, since as a finance professor, I'm staunchly pro-business.

Check out this piece at Captain's Quarters where Captain Ed pretty much nails it:

Consumers may want to rethink their loyalty to Radio Shack after this decision. If this is how they treat their employees, imagine what Radio Shack thinks of their customers.

It's an inexcusable business decision. Managers who lack the fortitude to communicate terminations directly should not serve in that capacity. I can tell you from long experience how upsetting a termination can be for the manager involved, but in well over a decade of management, I have never once been tempted to do it by mail, e-mail, or semaphore. Even the worst employees deserve to have their manager take the time to sit down with them and explain the decision to terminate employment.

I agree - RadioShack management should figure out how to grow the necessary "equipment" they seem to be sorely missing.

Comments

[CrossProfit_:]

This shows that there is a total disconnect between management and employees. Any retail operation’s biggest asset is its employees. Without them you might as well live in a cave and try guessing what is going on in the business.

Perhaps shareholders should insist that management be notified of their immediate departure and leave the 400 employees in place to turn this company around! Then the new management can decide if, when, where and how cuts need to be made. Based on the current track record, new management couldn’t do worse.

Disclosure: This is a personal comment by a CrossProfit analyst and may not reflect the opinion of CrossProfit.com.
www.crossprofit.com

2006 Sep 03 12:44 PM

[Kevin Yoder:]

The employees let go at RadioShack did not have direct impact on Retail operations. These employees were very smart and talented individuals who supported middle and upper management.

2006 Sep 04 03:03 AM

[Kevin Yoder:]

It is unfortunate that The Unknown Professor is quick to blog on a subject short on facts. My friend who is an employee at RadioShack in Fort Worth TX reports that management called a meeting of all employees who were at risk of being terminated. Management gave the employees the option of selecting the method of notifications. According to my friend, the employees selected email as the method of notification.

When the notification came via email, the employees preceded in an orderly manner to the appointed location for a meeting with Human Resource staff members who presented the severance packages, answered questions, etc. RadioShack also organized a job fair for those who lost their jobs in order for them to find other employment opportunities.

Two weeks ago when I personally met with members of RadioShack upper management, it was evident that this move, which was also communicated to RadioShack store managers and Dealer/Franchise managers in Las Vegas, would have a deep and somber effect on the RadioShack family.

If The Unknown Professor had taken the time to investigate deeper into the issue at hand, management of all corporation have an obligation to the Shareholders; and the natural tension that exists between shareholders, management, and employees has its roots in profitability. Clearly the employees terminated were not at fault, but every employee in every unprofitable company must have the foresight to prepare themselves for alternate employment opportunities should their current company right size the workforce as part of any return to profitability strategy.

2006 Sep 04 02:59 AM