Reference no: EM132303855

Thompson Technology

Alan Thompson Founder

Howard Kessler CEO

Jack Albright COO

Scott Montgomery CHRO

Elizabeth Schiff CFO

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. Thompson was fascinated by its constant evolution, and he understood its creative possibilities well before the rest of us caught on. Thompson didn’t start his career in technology. As a teenager, Thompson worked at the local bank where his father was the branch manager. Banking helped pay his way through college, and although he never liked working there, Thompson admitted that it was the beginning of his career success. Technology captured Thompson’s imagination. He said his real career path started in the cluttered techno cave he carved out of a cramped space in his parent’s garage. He set up his first computer on a makeshift table squeezed between the lawn mower and the garden tools. It was there where he tinkered with programming and computer code. He designed simple accounting software at first, but he didn’t stop there. Each new innovation made his software better and faster. When he realized his systems were far better than anything available in the banking industry at the time, he knew he was onto something. In 1988, he left banking and launched Thompson Technology. By the mid-1990s Thompson Technology was a major player in the design and maintenance of specialty software for the financial industry; Thompson products were at work behind the scenes at most major financial institutions across the U.S. and Canada.

The early years of Thompson Technology were characterized by innovation and growth, and it was soon known as a great place to work. 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 wasn’t 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. As majority shareholder, Alan Thompson maintained control of the company, but he turned the day-to-day management of the organization over to Howard Kessler, Thompson’s new CEO. Kessler came to the company with a strong background in international finance, and Thompson believed Kessler was the ideal choice to expand the company beyond North America. Thompson Technology began to change with Kessler at the helm. He hired Jack Albright as the new chief operations officer (COO), and Elizabeth Schiff became the new chief financial officer (CFO). Scott Montgomery remained as Thompson’s chief human resource officer (CHRO). 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 wasn’t 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 nation’s banks. As the financial industry adapted to the new banking practices, demand for Thompson Technology software dropped precipitously. Sales plummeted, and Thompson Technology’s 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. Thompson’s stock price was falling. To address those issues, upper management held an intensive three-day strategic planning retreat off-site. The retreat included Kessler, Schiff, Albright, Montgomery and all the functional area directors. Before the retreat, the management teams spent many hours cloistered behind closed doors analyzing the various departments’ strengths and weaknesses and assessing budgetary and revenue forecasts. Kessler mandated that everyone come to the retreat prepared to make some difficult decisions regarding Thompson’s 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 retreat. The biggest worry was that the organization would downsize U.S. operations and move jobs offshore, even though Thompson took pride that its products were built and serviced entirely in the U.S. When managers returned from the retreat and remained tight-lipped about the results, employee tension increased as everyone waited for an announcement. Finally, on a Wednesday afternoon, Kessler 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. For information sharing and discussion of our strategic initiatives, all employees are asked to meet with their area directors on Friday morning at 9:00. Further information will be shared at that time.

As always, thank you for the good work you do and for the outstanding service you provide to Thompson customers. Thompson employees are the foundation of our success.

Howard Kessler

CEO

Thompson Technology

The rumor mill was instantly at full speed as heads popped up from cubicles and employees clumped together in speculation. Staff meetings were common at Thompson, but there had never been anything like this before. “What does it mean? “This must be a major announcement. Why else would all departments meet at the exact same time? ”Have we been bought out? “Are we shutting down? ”I didn’t think things were this bad! “Productivity plummeted. Except for a lot of talk, the employees accomplished nothing from the time they received Kessler’s e-mail to 9:00 Friday morning.

9:00 Friday Morning

Employees met with their area directors as scheduled. Some arrived early, but in contrast to the usual staff meetings, nobody arrived late. Coffee service at staff meetings had been discontinued months ago as a cost-cutting effort, so when coffee and pastries were set out for the morning meetings, it only raised anxiety levels. Speculation continued as employees filled coffee cups and forked pastries onto paper plates. At exactly 9 a.m., everyone dispersed to their designated meeting areas. In conference rooms across the company, chairs were full, speculation ceased and employees waited. Of course, things are never as bad as rumors suggest. In most areas, relief could be seen in employees’ faces as directors reiterated the organization’s commitment to employees, but the directors left no doubt that the future would be different. 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.

Scenario a: Restructuring after a hiring freeze

Players: Scott Montgomery, CHRO

Sally Werner, technical support supervisor

Maria Gonzales, payroll specialist

Betsy Reynolds, customer service employee

David Adams, accounting employee.

The hiring freeze was successful; the overall staff numbers were down by about 5 percent. As Scott Montgomery had expected, however, simply reducing staff by attrition wouldn’t ensure that reduction goals would be met or that reductions would occur in needed areas. Some departments had suffered serious talent loss when key personnel resigned, but other departments still had excess staff and duplication of effort. Reorganization was needed. After the strategic planning retreat, Montgomery scheduled a series of meetings with COO Jack Albright and several department managers whose areas suffered most from the labor imbalances. Montgomery had a reorganization plan in mind, but he wanted input and agreement from those who would be affected before he implemented it. He knew it wouldn’t be easy getting agreement. From discussions during the retreat, it was clear that everyone recognized the need to realign and further cut costs, but some managers seemed more interested in protecting their turf than designing a feasible plan. It took a lot of negotiation, but a plan was finally agreed to and approved by Kessler. Montgomery’s HR staff was ready to move ahead with implementation. Like the previous reorganization, work groups were again realigned, teams were re-formed and job assignments changed. Even the facility changed. Partitions were removed and cubicles disappeared to reconfigure the office into an open floor plan. It was expected that the open plan would foster a sense of unity and ease communication among co-workers and managers. The managers would no longer be isolated in private offices; they would sit side by side with those they supervised. A number of managers objected to the open floor plan. They didn’t like giving up their personal work space or the status inferred by a private office. “How can I talk privately with a staff member when I’m out in the middle of the floor and everybody’s hanging around listening?” Sally Werner, a technical support supervisor, grumbled to her friend Maria Gonzalez, a payroll specialist. “You’re the only one left with a private office, Maria, and that’s just because you do payroll! “Well, there are private conference rooms on each floor,” Maria replied. “You can always use those. “They’ve all got windows that look right out onto the floor. Everyone knows who you’re in there with. As soon as I call someone in for a private conference, everybody will assume they’re getting reprimanded.

“I hadn’t thought of that. If that’s the assumption, Sally, maybe you have an image problem,” teased Maria. “It’s not funny,” Sally said. “I just think this whole thing is a lousy idea. And what are those people in marketing going to do? They bring their dogs to work. Before this, they had to keep their dogs in their cubicles. How’s that going to work now? ”I don’t know,” said Maria. “Maybe there won’t be any more dogs around. “I suppose, they’re cutting back dogs, too,” Sally grumbled cynically. “Just like everything else—even our benefits are going away. No more tuition reimbursement, no more free coffee. This place is just not what it used to be. There is less of everything around here except the workload. That gets bigger all the time. ”Well, I’m swamped too,” said Maria. “HR’s really scrambling with so many people reassigned. Scott’s desk is piled high with requests from employees for compensation reviews. Everyone thinks a little change in job assignment means more money. The only ones not complaining are the dogs! ”Well, what did they expect?” said Sally. “I’ve never seen such a dispirited, burned-out bunch of people. You know, Maria, it’s never a little change—it’s a lot! Most of us are working longer days, and no one even says thank you anymore. You know David Adams in accounting? He told me he hasn’t had a performance review in nearly two years. ”Wow! How can that be?” asked Maria. “We’re supposed to have one every year. “I know, but managers aren’t doing them. David said every time he asks his boss about it, his boss just shakes his head and says he has so many people to supervise now he just doesn’t have time to do performance reviews anymore. David thinks they’re really just trying to delay everyone’s raise so they can save a little money. ”Maybe so, but that’s terrible!” said Maria, “I’m surprised Scott lets them get away with that. “Well, maybe he doesn’t even know. I think he’s pretty out of touch with what’s going on around here. What about that ridiculous policy telling us not to talk about compensation? How do they think they can enforce a policy like that? Everybody’s talking, and some people are just plain angry. Betsy Reynolds in customer service has already had three different job assignments in the past year. Each time someone leaves, she moves into a new position, reports to a new boss and just gets more work piled on. She’s working longer and longer days just to keep up, but there’s never any more money! She told me she’s had it. She’s looking for a new job! ”Betsy?” asked Maria. “She’s been here for years. She knows everything about the company. She’s the best customer service person we have. ”I know, but management doesn’t even notice what’s going on. If she leaves, it’s just one less body on the payroll, and that seems to be what they want. Frankly, I don’t think we can take any more reorganization!”

“I know, but management doesn’t even notice what’s going on. If she leaves, it’s just one less body on the payroll, and that seems to be what they want. Frankly, I don’t think we can take any more reorganization!”

Respond to the following questions based on the Case

Background Information and Scenario A:

A Total Rewards Strategy focuses on the need to develop a compensation strategy that best fits the needs of the company. In other words, there is no one-size fits all approach. However, the consensus is in order to create and keep a competitive advantage, organizations must recognize the role a total rewards strategy plays. This means before a compensation strategy can truly be successful organizations have got to understand employer, employee, and customer needs. This is not an easy task because each of these entities are always changing and they are different for every organization. Therefore, HR professionals must constantly ensure that compensation aligns with business strategies.

1. Based on the scenario how should Thompson Technology try to identify a rewards strategy that is meaningful to its employees but still allows them to meet their objectives of expanding into new markets while reducing expenses. Examine this question from the employer and employee perspective.