Group project Negotiation.pdf

7/23/2019 Group project Negotiation.pdf

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Mechanics Corporation

‘the biggest reorganization’



Introduction & Setting the Scene 1/2Case

Cross-cultural negotiation between a US company and the employees of the Swiss branch regarding a

restructuring plan that will eliminate 90% of employees’ facilities.Company

Mechanics Corporation is a US headquartered company manufacturing machine tools for thepackaging industry. The average selling price of their standard product is around 500,000 CHF. TheSwiss branch counts 500 employees for 3 BUSD total sales, and worldwide the corporation counts35.000 employees with a total sale of 25 BUSD.

Economic environment

The packaging industry is getting into a downturn in 2012. The industry is cyclical and thisphenomenon is well known for the corporation, but the level of the this downturn is reaching records.No new orders are coming and new shipments are not expected to occur before the year 2012. Working environment

Tensions are increasing as the rumors of a restructuring are being heard. Medias already talk aboutcompetitors based in Europe who are closing down factories due to the rapid decline. Most of thefactory workers are not occupied at work. A first plan of “Reduced Working Hours” had already been

implemented several months before, so that regular factory staff do not work more than 50% ofnormal hours.



Announcement

July 1st 2012, all the employees of the company are called to an assembly. The intent of restructuring is

announced and all employees of the branch will be impacted either by a loss of their job, or by aredefinition of their job description. The management announces that they are open to discussion andthat they are willing to open the negotiation with the employees, represented by their representatives.

Parties going to be involved in the negotiation:

Employees of Mechanics Industries - 500 employees.

Employee Representatives - 10 persons (our client): The representatives are the persons whonegotiate directly on the table with the management, and they are representing the interests of all theemployees.

Trade Union - 4 persons: they are the advisors to the employees and their representatives.

Local US management* (expats based in Switzerland)

Corporate management (based in the USA) Local Government – economic branch of the state: the final agreement must be affirmed by them.

* The employee representatives and the Local US management will be

the only parties to take place in the face to face negotiation.

Introduction & Setting the Scene 2/2



Negotiation Preparation: Culture*

Swiss / French Local Employees• Harmony vs. Constraint: consensus for

Swiss, strikes for French.

• Hierarchy: need for instructions and

importance of status & titles

• Communication: respect to the older /senior for Swiss and importance of non-

verbal signs for French

• Swiss are competitive with outside world

but cooperative inside.

• Swiss:

single focus/fixed /past-future:efficient, careful planning, caring aboutlong-term and sustainability. French have

a relaxed attitude towards time.

• Swiss: conservative, process oriented

American Management• Control: everything to be planned

• Equality: little micromanagement, flat

management structures

• Address issues openly, face conflictdirectly. Informal communication style.

• Compete for personal remuneration and

organizational rewards

• Single foc

us/fixed /present: tend to focus

on short-term results and one task at atime

• Flexibility and freedom to innovate,adaptability, not being constrained

Take advantage of the US time sensitivity: promise quick close if our conditions are

accepted, threaten to delay the process if negotiation isn’t going in the right way



Negotiation Preparation: Information to learn

What’s wrong with the industry? Why this company? Why us? Why now?

How many of us “at risk”? What is the timeline and notice period ?

What are the selection criteria? Who is the decision maker? Has it happened before?

What specific role(s) and/or function(s),to keep? How can we save more jobs?

What are legal rights of Swiss employees? What negotiation leverage do I have?

What are the payment criteria (service profile, level, function)?

What other remedies are available?

Extras package: keeping benefits as health insurance / school for kids / housing

Outplacement agency (CV review, interview practice)

Trainings, re-education, MBA at Thunderbird

Yearly bonus and other financial payments (shares, dividends) What support in finding new job? Networking, job certificates and references

What is the total company’s budget for this reorganization?



Negotiation Preparation:Relationships - How it is Now

More specifically :

No clarity regarding which jobs will be saved, generatingdoubts and rumors.

High level of secrecy : smaller number of employees

involved in strategic decisions Timeline for redundancies finally communicated after

months of speculations

General slow-down in the industry further feedingemployee’s anxiety (I.E Daily news of the issue are not

clear) Employees are still suspicious on role and genuine

interest of Labor Union and Employee Representatives.

Employees are resentful towards Local Management

Employee Representatives and Labor Union are united

• General negative atmosphere of anxiety and stress for the past 6 months.

• Uncertainty and lack of transparency regarding reorganization

• Lack of trust among all parties

Local

Management

Employees Employee

Represent.

Limited Trust



Negotiation Preparation:Relationships – Where we want it to be

More specifically:

General Respect of employees (treat them like individual humans not numbers)from all

parties Employees’ Representatives raise priorities with employees and commits to defend them

Local Management commits that employees’ interests will be taken into consideration

Local Management commits to all employees that they will be treated equally

Granting of good compensation packages : Responsibility from Local Management vis a

vis employees Reduce level of rumors generated by employees with increased trust in employee

representatives

• More transparency and trust between all parties

•Reach a point where Employees have the feeling they were heard

• Increase and Prove Accountability of Employee representatives



Negotiation Preparation: Closing the GAP

Decrease uncertainty and transparency:

Give Feedback to Employees of the Progress of negotiation

Increase Accountability:

Involve and consult employees in decisions when options arise

Leverage on Trade Unions’ experience

Increase Trust :

When Milestone is reach have local management communicate it toall employees



Negotiation Preparation: Interests - Employees

• Job cuts due to relocation of operations to China, Italy, India , and Malaysia

– Of 500 jobs, 425 layoffs are anticipated. Employees want to reduce the number of layoffs.

• Content of Compensation packages

– Payment of full salaries for two years.

– Job placement services.

– Job training assistance for transition to new jobs.

• Timing of layoffs – Slow the process down. The longer they are employed, the better

• Allowances for special cases such as: those close to retirement. single parents,

couples working for the same company.

• Structure of the new organization – Employees remaining with the organization in Switzerland need assurances of their role in

the restructured organization. (General manager, directors, goals, projects, future?)

– Use the uncertainty for Engineers who will be staying on to buy time in the negotiation forthe benefit of other employees.



Negotiation Preparation: Interests - Management

• Job cuts:

– Cut majority positions to reduce expense and financial loss.

• Timing of Layoffs

– Bring operations to a close as soon as possible since it is losing money.

– Transfer of knowledge must take place during the restructuring so the timing is “ASAP.”

– Management believes 6 months is reasonable.

• Content of Compensation packages – Respect the restructuring budget given by the corporation - can be flexible within $40M.

– Ideally, under-utilize the budget given.

– Ensure the government will give final approval with no complications. (“fair enough” )

• Allowance for special cases:

– Other than early retirement packages, there is no allowance for special cases.

• Structure of the new organization – It is not an issue for employees being laid off. Management will discuss the on-going

structure of the organization with the engineers who will agree to stay.



Negotiation Preparation: Goals Settings

Issues Comments Offers & Options (from employees perspective)

Job cuts 425 cuts out of 500. 75

employees will be part ofthe remaining structure.

Save the maximum of jobs on site in the R&D activities

and relocate people in different roles within HQ or otheroperations worldwide.

Compensationpackage

Should cover the loss ofrevenue over theunemployed period of

employees.

Adapt and/or tailor compensation package according to:age, years of experience in the company, grade/title/position, family situation (kids & partner working or not).

Timing of layoffs

(closure ofoperation in CH)

Management mentioned

a spread over 24 months.

Negotiate a delay in layoffs to buy time to look for a newposition vs. management’s expectation which is early

closure to save costs.

Specific cases Retirement, couples working together in the

company.

Compensation package to be looked at separately (seesection on compensation package).

Structure of neworganization

General manager,directors, goals, projects,

future?

What are the structures and/or positions? How will vacancies be filled and what are the requirements and/or

selection criteria's? How many roles will be newly created?How will the remaining structure operate?



Negotiation Preparation: Value Creating Options

• Voluntary leaves

– Immediate savings for company



Negotiation Preparation: BATNAEmployees Management

BATNAs - Save some jobs (e.g. retain engineers) by

explaining the necessity in order to support

the R&D center post restructuring andprovide a descent leave package and re-employment aid;

- Identify opportunities within HQ or new

product development in Switzerland

Quick resolution of issues and obtain agreement

from employees representative on terms of

restructuring based on defined packages (bothmonetary and non-monetary) that’ll compensate for

job losses due to closure of operations.

Ways to

improveBATNAs

- Leverage support from trade union to

understand employees’ rights;- Facilitate knowledge and/or ideas sharing

amongst employees (whether they are

made redundant or not) and leverage the

information to our advantage

N/A

Ways to

test and/or to worsenBATNAs

N/A - Threaten to strike and/or not to train & transfer

know how to China, India, Italy & Malaysia- Find another job quickly and leave company prior

to closure of operations;

- Employ passive aggressive behavior (e.g. be

uncooperative, unproductive, inefficient and deliver

poor quality of work) during transition period.



Negotiation Preparation: Other Alternatives

• Improvement of employees leverage in the negotiation & sharing this

leverage with management – Make management aware and/or realize that talent, efficiency and transfer of know how

during the transition period is critical to the business and that an enhanced compensationpackage will be required to retain and/or to keep key employees motivated for them to want to stay to support the company until the end.

–

Make the management understand that employees have the control of the resources, andthat they could use this power if they are not satisfied with the negotiation

• Alternatives for the employee in case of negotiation failure – If no opportunities within HQ, proactively look for a new job;

– In case of unfavorable negotiations, leverage the state’s guaranteed unemployment

benefits (70-80% of salary for maximum period of 2 years) until a new job is found.



Milestones of NegotiationStep Date Management Offer Employees Offers Comments

1 July 10th

2012

*10 MUSD + 75 jobs

saved

80 MUSD + 200 jobs

2 July 12th2012

13 MUSD + 100 jobs 30 MUSD + 150 jobs

3 July 15th2012

13 MUSD + 100 jobs 30 MUSD + 150 jobs

4 July 17th2012

13 MUSD + 100 jobs 30 MUSD + 100 jobs On view of the negotiationprocess blocked, employee rep.organize employee assembly and vote. The strike is considered asan option.

5 July 18th2012

20 MUSD + 100 jobs 30 MUSD + 100 jobs Management is made aware ofthe issue. They organize ameeting with all employees.

6 July 18th2012

20 MUSD + 100 jobs Employees vote ACCEPTANCE

* Total envelope



Negotiation Review: De-brief & Conclusions

• Baris, can you please highlight a couple of personal learnings

from this process• Are we happy with outcome of negotiation?

• What have we learned during this process (reflections fromclass concepts, etc)?

• Everyone will comment / add based on your key points

• THANK YOU!



THANK YOU

Baris AlevJason Yap

Irina

Pamina

Sharon Saxelby



Negotiation Scheme

500 employees.

*10 Employee rep.4 rep. Trade Union

* Negotiating members

Zone Of

Potential

Agreement

*9 local US management

Corp. Management

Group project Negotiation.pdf

Documents

Transcript of Group project Negotiation.pdf