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Baxter Negotiation Scoring System

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Name:         Aidoo Isaac | Hassan Joana | Hu Linhong | Sun Jingbo


Negotiation:             Round 1               Role:                Adam Baxter Company        

What issues are most important to you? (list in order of importance)

1. Worker autonomy and target production levels in new plants

2. Group incentive system

3. Escalator clause

4. Location of the new plant

5. Wages and benefits

6. No-strike pledge

Scoring System (Full system is attached in [a]the last page)

1. worker autonomy and target production level in new plant. Weight: 40%.

As the mentioned in the case, worker autonomy and target production level in new plant is the most important issue to management because first, Baxter now operates at an industry level of 80% in production level, which makes Baxter hard to compete with competitors like non-union IFP. Second, increase production level can help reduce the incentive payment to workers because the incentive system is based on production targets. Third, professional management team can utilize new equipment more efficiently in the new plant than worker autonomy can do. Under the current severe competing environment, we would like to assign 40% weight to the worker autonomy and target production levels in the new plant in our scoring system.

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Specifically, we view production level and worker autonomy two parts that can be negotiated separately. The case mentioned that we don’t have specific production targets can be set at this time, and our current production level is only 80% of the industry average. It’ll be great to set the target with a limitation over 150% of industry average, which basically means no limitation comes from Local 190. But at least, we have to reach an agreement over industry average to adequately reflect capital expenditures on new technology.

As to the worker autonomy, it’s not as important as production level because the production level can control the worker autonomy in some kind, so the weight to worker autonomy is 30% while the production level is 70%. It’ll be ideal if we can get the full control over autonomy, however, there may be situation that some constrains are added to the control, which we leave it flexible to change based on what the constrains are. The worst situation is that we can’t get any control over worker autonomy.

2. Group incentive system. Weight: 25%.

Group incentive system is another important issue to Baxter because currently Baxter Deloitte plant pays workers another 60% of base pay in incentives. The incentive program is not existed in other Baxter’s plants, not to say in competitors’ plants. Baxter in Deloitte should take advantage of this cost. However, as the cost can be eliminated or reduced by improving production level, and Baxter can’t maximize its profit by only eliminating the incentive system but keeping the current production level, we decide to assign 25% weight, which is lower than production level but still overall competitive to other issues.

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Options for incentive program are how much the incentive payment can up to. It’ll be ideal for Baxter to eliminate this payment completely, however, if we can keep the production target high, it may still be good for us to have some incentive payments. The incentive payment shouldn’t be higher than 30% of its base salary, otherwise it doesn’t make sense for Baxter to build the new plant in Deloitte from a financial perspective.

3. Escalator clause. Weight: 15%.

Escalator clause can generate automatic increase in wages based on CPI, usually between 5% to 10% each year. This cost is lower than what incentive system will generates, however, as this automatic increase is out of control and seems to be high these years, it’s necessary for Baxter to eliminate or at least contain it. Considering it’s not as costly as incentive system, we assigned it a 15% weight.

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