InternetI read somewhere that a person who has a positive restaurant experience is likely to tell three friends, but if he has a bad experience he’ll tell ten.

This year, Circuit City, a national electronics retailer, fired 3,400 of its highest-paid hourly workers so it could replace them with lower-paid employees. By doing so, it expects to reduce its costs by $110 million annually.

Since management had to know that letting go of its most experienced line-level employees – the ones who answer customer questions — would both damage morale and reduce the quality of customer service, it must have concluded that employee and customer satisfaction aren’t critical.

In the next eight months, its stock price dropped from $25 to $6. Sure, other factors were probably at work there, but cutting customer service is an irrational strategy, especially in a business where customers want and need help.

Home Depot made a similar decision to trim its workforce and replace full-time workers with part-timers. This year its stock price plummeted from $40 to $27.

The long-term costs of failing to invest whatever it takes to create a workforce capable of producing positive customer experiences will always exceed the short-term savings

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