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Eurotechnologies Negotiation Case...

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Eurotechnologies, Inc. ROLE POSITION FOR THE R&D SCIENTIST COMMITTEE (PEDERSON, HOFFMANN, BERKOWITZ, SCHMIDT, VAN DER VELDEN, AND BLANK) You are to negotiate a solution to the problem with the Management Team if possible. Assign roles to your group members, which correlate with some or all of the characters listed above. If you have fewer group members than characters, decide which characters to delete. You may choose to use your own names and simply represent the interests of R and D without adopting individual character identities. As stated in the background information, there are six of you who signed the letter as the Research and Development Employment Committee: A. Pederson, age 52, 1 year seniority; has personal and social ties to Munich that s/he does not want to break, and which will be strained by a long commute. T. Hoffmann, age 49, 24 years seniority; is the most likely to succeed the current Vice President for Research and Development. M. Berkowitz, age 42, 15 years seniority; has children in high school and worried about moving them at this point. V. Schmidt, age 47, 22 years seniority; has children in high school and worried about moving his children at this point. P. van der Velden, age 36, 5 years seniority; M. Blank, age 32, 4 years seniority; spouse is employed as a Radiologist at Munich General Hospital near downtown, and does not want to change locations if at all possible. You are interested in saving the company. Your mass defection from the firm would surely end its existence. However, it is clear the Management does not understand how the move to Wasserburg they are considering would affect your morale and reduce your effectiveness in providing high quality research and development for the firm. In going to the upcoming meeting, your Committee has agreed to the following discussion points: Remember that you have offered to take up to a 20% pay cut per person to stay in Munich. Any negotiations should take that offer into consideration. Estimated Euro value of this "give back" is 183,375 for the group. The last thing on your mind is to put the company in a disadvantageous position with its competitors. You believe that you are doing the best thing possible by strongly requesting an alternative to the relocation, so you don't lose the critical professional stimulation that is so vital to your work. Moving from downtown Munich would put you at a significant disadvantage in gaining new ideas, information, and interaction with your peers, particularly those outside of the company. Not only "business lunches," but also informal contact with peers at Munich University and other similar institutions has done more for your group's growth and development than all of the journals and technical seminars you could pursue. This proximity to fellow professionals and to the ideas generated by such interaction is essential to your individual personal growth and to the long-run excellence of the company.

If moving to Wasserburg is the only option, it would require either a very difficult commute for some of you—particularly during a period when you might be spending morning, noon, night and weekends to meet some deadline or solve some problems. In certain cases, houses would have to be sold and families moved. A few of you have children in high school, and do not want to move the children at this time. Others are concerned about the quality of schools in the more rural Wasserburg area. After agreeing to these points, you decided as a group to try to negotiate for some alternative other than moving to Wasserburg. You believe that the money slated for improving the Wasserburg facility would be better spent on an alternative solution, and you wish to explore a creative approach to solving the problem. If you are unsuccessful discovering another solution to the problem, you believe that some members of the R&D staff would agree to the move if the following accommodations from the company were a part of the package. If you can find an alternative to moving, these concessions may be irrelevant. Key items on the list include the following: Annual funding for a research seminar series to attract scientists to Wasserburg, to enhance the stimulating nature of the climate. It is estimated that a well-funded seminar would cost approximately 8,150 annually. Personal days for each employee to visit other scientists in Europe and elsewhere. An allotment of up to 10 "personal enrichment days" has been suggested, plus 2035 per employee per year for travel costs on these days. Improved food service facilities at Wasserburg, including a separate cafeteria for scientists and executives, completed as quickly as possible. Laboratory facilities as good as or better than what currently exist in Munich, with all current equipment moved to Wasserburg, completed as quickly as possible. A group of you is drawing up a list of new equipment needs. Assistance in helping those of you who are willing to move to Wasserburg by providing free real estate services, new mortgage cost, and "matching" the low-rate mortgages currently held by several members. Assistance in helping those of you who do not intend to move their residence and instead will drive to Wasserburg by improving the road and subsidizing personal automobile expenses. Evaluate your interests and discuss them with other members of your scientist team. Be prepared to represent your point of view with the management team you are about to meet. You cannot afford to lose the intellectual contact with Munich a colleague that is so vital to your personal satisfaction and organizational effectiveness. Any solution that saves the company, reduces overhead significantly, and which keeps key employees on board is acceptable if your group can agree to it.

Eurotechnologies, Inc. ROLE POSITION FOR THE MANAGEMENT TEAM (PRESIDENT PIETER JENSEN, VP FOR RESEARCH AND DEVELOPMENT, VP FOR HUMAN RESOURCES, AND OTHERS) You are to prepare to negotiate a solution to the problem with the Research and Development committee if possible. Assign roles to the members in your group inventing appropriate roles in addition to those specified above. Alternatively, you may choose to use your own names in this simulation and simply represent management's interests without adopting these specific character identities. As the management group for Eurotechnologies, Inc., you are interested in saving the company and you recognize that the loss of the majority of your Research and Development staff would be a crippling blow to the firm. Your fundamental interest is in Eurotechnologies' survival. Several things are on your mind as you attempt to discover a solution to the relocation problem: 1. You are currently on very "shaky" ground with GYRO, your parent company, because of the reduced competitiveness of Eurotechnologies, Inc. The loss of top R&D personnel and continued high operating costs would make the situation even worse. 2. Regardless of your company's technical leadership, your customers will not award any more contracts to Eurotechnologies, Inc. if overhead costs are not reduced. You see the relocation of the facility to Wasserburg as the obvious way to accomplish this cost reduction. That relocation would create considerable difficulty and you would prefer to minimize those problems. If there are viable alternatives, you have not discovered them, but you are willing to keep searching. 3. You have tried to be as fair as possible in managing the possible relocations for those affected. You believe that getting the R&D personnel to move is one very important element of the plan. So far, you have not sensed organized resistance from any other employee group; some may be waiting, however, to see how this group's resistance is handled. Even if no other group assumes a similarly rigid position, you must be conscious of the issue of fairness to other employees, as making additional concessions to this group could exacerbate the morale problems that already exist and enhance the perception that Munich employees always receive favorable treatment. 4. You know that you will have extreme difficulties in replacing the R&D personnel. If they all decide to leave the firm, the largest single problem will be in maintaining progress in R&D while new people are being hired and trained. 5. Some members of the Research and Development group, particularly Pederson and Hoffmann, may not really be willing to leave the company. Pederson is getting on in years, and you have heard that s/he has just bought a new home; Hoffmann is a close personal friend of the company President and is strongly connected in Munich social circles. One of you (the Vice President for Research and Development) has announced plans for early retirement a year from now, and people have been openly talking about Hoffmann as a

replacement. You know that s/he is keenly interested in the job. Finally, do not hesitate to appeal to the professional responsibility and loyalty of all of these scientists—particularly the older ones. This is a time when the whole company will have to pull together to solve the financial crisis. 6. You are concerned about the subcontracting (consulting on behalf of the company) that has been done by this group in their Research and Development work. On the one hand, it does bring in revenues, it does have a good ROI, and it has been much more convenient than using the Wasserburg facilities. On the other hand, it has fostered morale problems for the Wasserburg group. Constant duplication of equipment and materials, as well as morale problems, will be reduced if the group moves to Wasserburg. 7. You are all aware of the personal strains that a move will create. Your own families are personally attached to Munich as well, and some of you will be required to move your homes in order to minimize the "impossible" daily commute. 8. You are aware of the advantages that Munich offers in terms of the abundant scientific, academic and technical resources in its environment. You must deal with the employees' claims that a move to Wasserburg would destroy Eurotechnologies, Inc. research and development advantage by diminishing the "intellectual stimulation" that the environment provides for these people. Dealing with the Committee's Position In spite of the above concerns, you would be willing to listen to any proposal that reduces overhead costs by a figure close to the 6.5 million Euro target. It is clear that significant savings can be achieved with the Wasserburg move and you are willing to make some concessions in order to change the R&D department's mind about relocation. Your primary interest in this negotiation is to find a way to save the company through drastic cost reduction while maintaining technical quality. One major concern is to find a way to save the company money without losing key personnel. If moving everyone to Wasserburg becomes the only viable plan, you are prepared to consider some of the concessions that appear below. Cost savings are a primary factor, so don't concede to do more than is absolutely necessary. Also, explore alternatives for "packaging" concessions and tradeoffs wherever possible. However, if you can find a viable alternative to relocating everyone to Wasserburg that satisfies your primary interests, these modifications in the Wasserburg site will be irrelevant to this negotiation. Cafeteria, Food Service, etc.: The cafeteria, banquet facilities and other facilities for the professional staff at Wasserburg are scheduled for renovation in 6 months at a cost of 163.000 . In a pinch, facilities could be renovated in as little as 4 months, but 20-30% additional cost expenditure would be required. Renovation of laboratory facilities: You intend to completely renovate the Wasserburg R&D labs over the next 8 months, at an estimated cost of DM 203,750 . Reduction of any duplicate equipment and machinery will only occur with the consent of the scientists. All revenue from the sale of existing apparatus will go to improving the new

laboratory. Renovation of the lab could be speeded up to 4 1/2 months, but would increase costs by as much as 50%. For those moving to Wasserburg: You agree to provide real estate assistance, information about schools, and limited financial assistance (e.g. paying points for new loans and offering second mortgages at 2% below market rates). In a pinch, you might also agree to payment of real estate agent's fees for sale of one's own primary residence. Covering agent's fees would cost about 5000 for each employee who chooses to move. You are already negotiating with the regional highway authority to improve the road; they have promised a response soon. You would be willing to help organize a car pool for drivers from the same location. Under pressure, you might be able to provide a company van and driver for a vanpool. Scholarly interaction: A research seminar series to attract visiting scholars to Wasserburg would cost approximately 5,000 annually. You might also offer increased flexibility in work hours and a program of "personal days" for the scientists to meet with colleagues in Munich or other locations. Under significant pressure, you might be willing to double the seminar fund and provide approximately 1500 for the scientists to travel to professional meetings. Cash incentives for employees to move: Only as a last resort, you might be willing to offer a flat cash outlay of 1500 per employee for "relocation expenses," paid to the employee directly, with no strings attached. Evaluate your interests and discuss them with other members of your management team. Be prepared to represent your point of view with the committee you are about to meet. You must close the Munich facilities in their current highly expensive form; that is an inevitable fact. If some other form of a Munich facility is needed and cost effective, you may consider such a proposal. Any solution that saves the company, reduces overhead significantly, and keeps the majority of key employees on board are acceptable if your group can agree to it....