Scoring System for Adam Baxter Company PDF

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Scoring system for ABC negotiation year 2020/21...

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Scoring System for Adam Baxter Company Issue 1: Worker Autonomy and Target Production Levels  Maximum value: 30 points.  Eliminate worker autonomy, increase daily targets and productivity by 70% – 30 points.  Decrease worker autonomy, increase daily targets and productivity by 65% – 20 points.  Slightly decrease worker autonomy, set daily targets, and increase productivity by 50% – 10 points.  Maintain worker autonomy, set daily targets, and increase productivity by 20% – 0 points.

Issue 2: Group Incentive Systems  Maximum value: 25 points.  Completely eliminate incentive payments (0% of the base pay) – 25 points.  Significantly reduce incentive payments (10% of the base pay) – 20 points.  Reduce incentive payments to 20% of the base pay – 15 points.  Reduce incentive payments to 30% of the base pay – 10 points.  Reduce incentive payments to 40% of the base pay – 5 points.  Preserve incentive payments as 60% of the base pay – 0 points.

Issue 3: Location of the New Plant  Maximum value: 20 points.  Locate the plant outside Deloitte, eliminate worker autonomy, decrease wages, eliminate incentives, 100% productivity – 20 points.  Locate the plant outside Deloitte, eliminate worker autonomy, decrease wages and incentives, 95% productivity – 15 points.  Locate the plant in Deloitte, eliminate worker autonomy, decrease wages and incentives, 100% productivity, no-strike pledge – 10 points.  Locate the plant in Deloitte, decrease worker autonomy, wages, and incentives, 80% productivity – 0 points.

Issue 4: Escalator Clause  Maximum value: 15 points.  Stop automatic increases in wages depending on Consumer Price Index (CPI) – 15 points.  Reduce increases in wages to 30% of CPI – 12 points.  Reduce increases in wages to 70% of CPI – 10 points.  Defer increases in wages until the new plant starts operating – 5 points.

 Maintain automatic increases in wages – 0 points.

Issue 5: Wages and Benefits  Maximum value: 10 points.  Increase wages to $12/hour and eliminate bonuses – 10 points.  Increase wages to $11.5/hour and decrease bonuses by 50% – 8 points.  Decrease wages to $8/hour and preserve bonuses – 5 points.  No changes in wages ($10.69/hour) and bonuses – 0 points.

Rationale and Analysis Worker autonomy, productivity, and group incentives are scored highly because of their priority for Adam Baxter Company. The next important issue to discuss is the location of the new plant which can influence the company’s profitability. The escalator clause and wages are scored lower as the absence of positive changes in these areas is not risky for the company in comparison to the above-mentioned issues. The target for worker autonomy and production levels is associated with the complete elimination of employees’ autonomy and the increased daily targets and productivity. The reservation point is associated with decreasing worker autonomy, raising daily targets, and increasing productivity by minimum 65%. The option related to moderate decreases in autonomy and increases in productivity can be viewed as a trade-off. After discussing worker autonomy, it is important to focus on achieving the complete elimination of incentives which is the target for the management because of their negative impact on profitability. The reservation point is the reduction in incentives to 10% of the base payment to avoid demotivating workers. The next important issue is the location of the new plant, and the target is the location outside Deloitte. Still, it is possible to agree on locating the plant in Deloitte while increasing production levels and eliminating worker autonomy. For the escalator clause, it is preferable to stop automatic wage increases completely, but the reduction in wage increases to 30% of CPI is also acceptable.

It is more profitable to increase wages of workers without depending on incentives. Therefore, the target is the increase in wages without adding bonuses, and the reservation point is the decrease in wages while preserving bonuses.

Planning Document: Negotiation: Adam Baxter Company Role: Baxter Management team What issues are most important to you? (list in order of importance) 1.

Worker

2.

Group

3. 4.

Location

Autonomy Incentive of

and

System

the new Wages

plant

Target

(eliminate in

Production or

the most and

Levels

drastically

reduce)

Profitable

location Benefits

5. Eliminating the Escalator Clause (indexes wages to CPI) What

is

your

BATNA?

If Local 190 is not willing to agree to our terms of negotiation we have the alternative of building the plant outside of Deloitte. Considering that over 200 food processing companies have gone out of business because of the seasonality feature of the business the management is willing to do whatever it takes for the company to survive and potentially grow in the future. Reservation

Price?

With regards to the issues presented above, at a minimum scale, the management wants to achieve the following: Moderately reduce autonomy levels of the employees and increase production levels to at least 95% form the current 80%. Reduce incentive structure to a maximum of 20% of base pay in incentive payments Reduce wage adjustment to only 30% of CPI, or defer payment until the new plant is operating at full capacity Increase wages to ($13.69) and reduce other pay programs by 90%, maintain benefits We are willing to be located in Deloitte as long as we are able to agree on the above as well as receive a no strike pledge from Local 190

Target? With regards to the issues that are described here we are aiming at: Completely eliminate worker autonomy /increase production level to 100% in the new plant Completely eliminate the incentive payments to 0% of base pay in incentive payments Stop the automatic increase in wages completely Keep the headquarters in Deloitte and locate plant outside of Deloitte Increase wages to ($14.69) and eliminate other pay programs , maintain benefits It should be noted that within our target plan we would want to construct the plant outside of Deloitte would result in substantially lower costs given that we could form new employee. However this would mean that all employees would have to be replaced which would delay starting the new plant by at least 52 weeks given the prior notice that its required. We ourselves are not too keen on proceeding this way given that the towns prosperity has always entwined with Baxter’s profitability – however this can be used to our advantage as an alternative during the negotiation. What are your sources of power? Propose the possibility of developing the plant outside of Deloitte which could result in replacement of most of the current employees Even if the new plant was proposed within Deloitte, the company can lay off workers by giving them a 52 week notice, and potentially hire new workers with better negotiated terms that what is currently set up. What issues are most important to your counterpart? (list in order of importance) 1. Location of the new plant – and what will happen with the current workers 2. 3.

Worker

autonomy Wages

4. Group 5. Escalation clause

and

target and

production

incentive

What is your counterpart’s BATNA? Reservation Price? Target?

levels benefits system

1700 of the 2000 total employees are members of the Local 190. If they do not receive what they want they could simply go on strike which would jeopardize Baxters operations and impact its profitability considerably given that 75% of Baxter’s operations are produced in the Deloitte plant. Local 190 target agreement: Keep current headquarters as well as plant within Deloitte (without the no strike pledge) Maintain same level of autonomy/maintain production level at 80% Maintain same wage ($10.69) and same pay program and benefits Maintain current incentive structure at 60% of base pay in incentive payments Maintain the current automatically have wages adjusted to CPI Reservation price: What are your counterpart’s sources of power? Majority of the workers are under Local 190, they could start a strike. In 1940 Baxter and the Deloitte local union arranged a permanent “working agreement’ on base labour contract hence only added modifications can be made to the permanent working agreement. The company is still profitable even though they have a great employee working agreement in place hence no need to be more stringent What is your opening move / first strategy? Overall both parties have had a mutually beneficial and long lasting relationship between each other. It is important for the management to achieve its desired agreement without starting a strike. Request a “No-Strike” pledge if the plant is located in Deloitte Other Baxter

important employs

information 25%

of

the

/ population

considerations of

Deloitte

There has never been a strike since the workforce Unionized in 1933; relations are good Approval: we negotiate, Baxter top management ratifies, Union votes for a majority (of 1700) 551 have already been laid-off Even though Adam Baxter Company was a profitable and once a family run business, not the economic environment has changed and its becoming more competitive....