Study this short case and then answer the following questions:

The case of Thomson Technology

Alan Thompson, founder of Thompson Technology, was always an idea man. Whenever something new came down the road, he jumped on it, took it apart, transformed what was there and created something different. He also embraced technology. Each new innovation made his software better and faster. By the mid-1990s Thompson Technology was a major player in the design and maintenance of specialty software for the financial industry. When the company grew and prospered, employees did too, with generous compensation and benefits that rewarded creativity and employee engagement. When 1999 turned to 2000, Thompson Technology greeted the new century with enthusiasm; it seemed that there wasnt a dark cloud on the horizon. Thompson Technology made its first public stock offering in 2006. By then, the company had 800 employees and new headquarters in Denver, Colo. Besides new management, other things were different as well; now there were shareholders to satisfy. In addition, the company underwent a major reorganization in 2008 that realigned departments and reassigned a number of employees. Some employees saw the reorganization as an opportunity for growth and new energy, but not everyone was happy. It wasnt just Thompson Technology that was changing. In 2008, the U.S. economy went into a severe recession, and the U.S. Congress responded with increased regulation and stricter scrutiny of the nations banks. As the financial industry adapted to the new banking practices, demand for Thompson Technology software dropped precipitously. Sales plummeted, and Thompson Technologys culture of easy profits and sky-is-the-limit employee perks morphed into a new era of cost containment and belt tightening. Every department was affected, but employees were hardest hit when a financial analysis showed that labor costs were not sustainable. The year ended with the implementation of a companywide hiring freeze to curtail labor costs and, it was hoped, squelch the need for more drastic measures. The hiring freeze was successful in reducing the number of employees. By late 2010, business in the finance industry had evened out, but Thompson was still not on easy street; increased competition in the marketplace caused sales to remain flat. Thompsons stock price was falling. To address those issues, upper management held an intensive three-day strategic planning meeting off-site. Before the meeting, the management teams spent many hours cloistered behind closed doors analyzing the various departments strengths and weaknesses and assessing budgetary and revenue forecasts. The CEO mandated that everyone come to the meeting prepared to make some difficult decisions regarding Thompsons long-term future. Managers armed themselves with statistical data to defend the viability of their departments. Employees were on edge, and rumors were rampant because of the uncertainty about the future and the changes that might occur as a result of the meeting. When managers returned from the meeting and remained tight-lipped about the results, employee tension increased as everyone waited for an announcement. Finally, on a Wednesday afternoon, the CEO sent the following e-mail to the staff: All Staff: As you are aware, senior managers spent several days in important strategic planning discussions regarding the future of Thompson Technology. It is important that we continue to meet the needs of our shareholders, our customers and our employees as we move through these difficult times. Keeping those needs in mind, we recognize that some changes are necessary at Thompson Technology. Managers had agreed that further cost-cutting measures would have to be taken. Employees were told to expect changes in working conditions as the company tried to cut labor costs by 10 percent. In addition, efforts would be made to increase sales revenue by exploring new markets. But for now, at least, the company was ready to move forward with no plans to lay off employees. Its been three years since Thompson implemented the hiring freeze. Scott Montgomery had hoped Thompsons revenue stream would improve so the hiring freeze would be enough to keep labor costs in line with profits, but that has not been the case. As the economy continued to spiral downward, so did demand for Thompsons software; revenue have fallen short of projections for the past two years. As a result, a number of measures were implemented to further reduce labor costs. Departments were restructured and staff was reassigned to redistribute the workload left by departing employees. They are asking for an additional 10 percent reduction in force, straight across the boardas soon as possible.

Q2 Anticipate two scenarios for the reactions of the employees to the CEOs email.

Q3: Anticipate two scenarios for the CEOs response to employees reaction.