What I'm sure of is that the announcement itself was badly bungled. Given the decision, the CEO should have explained:
- The problem that needed solving
- Why this was the solution that made the most sense
- The logic behind waiting until just before the transition date to inform everyone
- What the company is doing for the departing employees
It seems to me the CEO missed an opportunity, too. This sort of functional outsource generally reduces both fixed and unit costs (less infrastructure needed coupled with the outsourcer's lower labor rates -- I'm assuming the work went offshore).
So instead of a secret outsource, the CEO could have offered a challenge to the employees:
We're in danger of becoming uncompetitive -- our costs exceed those of our larger competitors which means we can't offer competitive pricing. This puts our whole business at risk. We might have to solve this by outsourcing some business functions. Before we do, we want to see if we can find creative ways to cut our costs without taking that step.
Rather than limit ourselves to the brainpower available in the executive suite, we want to take advantage of the good thinking and creativity of every employee in the company. Here's the target we have to hit. If you have an idea on how we can reduce our costs to get us closer to the target, I want to know about it. We've set up a special e-mail address for this purpose. If we use your idea, you'll be eligible for a special bonus that's equal to 1 percent of the costs we save.
If nothing came of this, it would demonstrate the necessity to employees in a far more compelling way. And you never know -- the employees might have figured it out.
Anyway, I agree with you. Regardless of the reasoning behind the decision, the communication was badly botched.