Reference no: EM133502019

Case: A reasonably stable government exists in Amethyst Island. The government has been managing its affairs successfully. It has a population of approximately 150,000 persons. Amethyst Island imports over 50% of its goods and services. Therefore, it must earn the necessary foreign exchange to meet its high import bill. About five (5) years ago, an international recession began to impact negatively on its main sources of foreign exchange, viz., tourism and international business. The country has begun to experience financial difficulties and government has had to initiate several cost saving and revenue earning measures. Despite this, it has found difficulty in paying outstanding loan installments on schedule. After several downgrades by a number of international agencies, government has been unable to raise additional external loans and has been forced to seek financial assistance from the International Bank for Reconstruction and Development (IBRD). As part of the conditions for financial assistance arranged with the IBRD, government has been forced to cut its employee payroll costs by fifteen (15%), achieved by:

1) cutting overall government employee numbers by 12% 2) reducing remaining employee wages by 6%. At the same time, in order to dampen overall consumer demand, the private sector has been requested to freeze all salaries and wages at existing levels for the three-year period of recovery agreed to by government and the IBRD. However, private sector companies that have already begun negotiations for new revised collective agreements are exempt from the wage freeze conditions imposed by the agreement between the government and the IBRD. ABC International, Inc. is a large private sector organisation, providing an essential service to the country of Amethyst Island. It is well respected in the country and for years has established standards of employee relations and customer service which have made it an exemplar in the country.

Until recently about half of its employees were unionised. The unionised employees comprise mainly, the operating staff. However, the union has been actively seeking unsuccessfully to organise the junior administrative staff which comprise about 30% of the workforce. Collective agreements between the company and the union usually cover a two or three year period. One year prior to government's financial arrangement with the IBRD, the ABC International, Inc. began to negotiate a new collective agreement with the union. This means that any agreement reached would not be subject to the conditions imposed by the arrangement between the government and the IBRD. At this time, a large international organisation has recently taken over ownership of ABC International, Inc. and senior management has decided that the company should set an example in the community by freezing salaries and wages at all levels, including senior managers, unionised and non-unionised employees. This situation has led to the successful organisation of the previously unorganised administrative staff and dissatisfaction among supervisors at all levels. The Union is demanding a wage increase and has threatened strike action on the grounds that discussions for a new collective agreement had begun ahead of the arrangement between the government and the IBRD. As HR Manager

Question 1) How will you prepare to deal with the overall situation?

Question 2) From whom will you seek advice?