In 1977, the television show Happy Days ended a three-episode story arc by having the popular character Fonzie perform a stunt in which he jumped over a shark on water skis. The episode changed the show’s direction, morphing it from a sunny comedy about life in 1950s Milwaukee into a melange of anachronistic pop culture references.
The episode marked the beginning of the end for “Happy Days,” but it also gave birth to the term “jumping the shark,” which is now used to describe a poorly thought-out and out-of-the-ordinary event that eventually destroys the very thing that it was meant to help save. Circuit City jumped the shark in the spring of 2007 when in a cost-cutting move the retailer decided to fire its veteran in-store workforce in favor of cheaper workers. Though the public relations industry can learn from Circuit City’s failure, the company faced an outcome far worse than your standard PR disaster.
“[Circuit City] took flak last year when it laid off thousands of workers, including most of its more senior sales representatives in an effort to cut costs,” I wrote in a research note issued to my company’s clients in January of this year. “Analysts worried at the time that the company was shooting itself in the foot by trading experienced, though higher paid, workers for pimply faced teenagers. They were right, and [Chief Executive Officer Philip] Schoonover admitted that Circuit City underestimated the impact of cost-saving programs on sales. In television parlance, Schoonover jumped the shark, and few companies ever recover from such a move.”
Circuit City recently filed for bankruptcy, backing up my assertion that the company wouldn’t be able to recover from an ill-conceived idea. It didn’t take a genius to recognize that shoppers would be turned off by sales and customer service people who have little product knowledge, or that veteran salespeople typically generate more sales than newbies.
In examining layoffs and buyouts at newspaper publishers, David Carr of the New York Times used Circuit City as an example of what can go wrong when you trade veteran talent for cheap workers.
“It is not the young fresh faces that are getting whacked – they come cheap – but the most experienced, proven people in the room, the equivalent of the sales clerk who could walk you through a thicket of widescreen television choices to the one that actually works for you,” Carr wrote. “Using clerks as an analogue may not be the most flattering comparison, but I have always thought of journalism as more craft than profession and tell students that it is the accumulation of experience and technique that makes a journalist valuable, not some ineffable beckoning of the muse.”
Last week, I heard from a friend that her former employer, an East Coast public relations firm, was closing down. The firm had fired most of its veterans 18 months earlier, replacing them with younger, cheaper, and less experienced PR reps and account executives. The firm also jumped the shark from a strategic point of view, repositioning itself from a boutique public relations firm into some sort of new age communications specialists.
A slew of economic data released in November showed that consumer prices retreated in October by -1 percent, the biggest drop since record-keeping began more than sixty years ago. Construction of new homes and apartments fell -4.5 percent in October, the steepest decline since the recording process began nearly 50 years ago. Times are tough economically, and though the public relations industry has yet to feel the pain that a lot of other industries are feeling, there is little doubt that things will get worse before they get better. The recessionary economic environment is bad for every industry and eventually public relations will have to deal with an inflationary environment.
Whether it’s because of cost-cutting or a strategic change of direction, public relations firms should not view jettisoning higher paid veteran workers as the best solution.
I argued in favor of experience over cost several years ago when I was a consulting for an internet company. The company needed to cut costs in order to position itself for a sale, and when the chief financial officer gave me a list of the people who were to be laid off I was stunned to find that the plan was to leave the company with only three veterans and three dozen low-paid workers. Another consultant and I reworked the plan, swapping out seven low-paid workers for three seasoned workers and arguing that although the company would recognize lower near-term cost benefits that the end result would be a higher sale price because the veteran workers would generate more revenue.
When the company was sold nine months later the price was 25 percent higher than originally anticipated despite the fact that the economy had deteriorated badly in the interim. The main reason was that the company generated revenues that were nearly 30 percent higher than expected because of the veterans we kept on. In addition, the veterans had agreed to take reduced salaries in exchange for bonuses based on the sale of the company, which alleviated some of the pressure of keeping them on the payroll.
In the end, the veteran workers proved more adept at solving problems and implementing innovation under pressure. They were also better at adapting to the reality of the situation, and their hard work boosted morale among the younger workers, most of whom had never experienced working for a company under siege or in a down economy.
As Circuit City learned, as I’ve learned, and as newspapers are currently learning, there really is no substitute for experience. Public relations firms that believe otherwise will find themselves jumping the shark and ending up on a scrapheap worse than that of late night syndication.
This article, written by Ben Silverman, originally appeared in PR Fuel (http://www.ereleases.com/prfuel), a free weekly newsletter from eReleases (http://www.ereleases.com), the online leader in affordable press release distribution. To subscribe to PR Fuel, visit: http://www.ereleases.com/prfuel/subscribe/.