In A World of Pay

1) What do we know about Typware AG? Who are the key players in this case? What do we know about them?

Typware AG is a German software company, attempting to gain a strong place in the highly competitive international markets. The company has about 4800 employees, of which 85% are working within the country. Typware embarked into the international markets in 1996, with most overseas employees being paid the equivalent of their German salaries. However, the expatriate packages have grown complicated over the years, with individual employees asking for varying compensations much higher than usual in accordance with the situation and country they are working in. Typware has no uniform pay system, and has a disorganized approach to dealing with the issues that arise concerning compensation for employees. The key players in this case include Renate Schmidt, the head of human resources at Typware AG who seems to be largely unprepared and unable to come up the solution to the problem the company is having in hiring a new employee. She lacks the knowledge necessary for such an issue, like information on competitors international hiring policies and on compensation packages at other German multinationals. This leads to her difficulties in coming up with an adequate offer for potential hire Anne Prevost, another key player in this case. Anne was the director of marketing at her previous job at Xon Technology, an American software company. She is thought to be an intelligent strategist with a deep understanding of the global software industry which would make her an excellent addition to the Typware organization. Another key player in this case would be the CEO of the company, Thomas Gutschein. He is primarily concerned with growing the companys global market and is of the mind set that they should pay whatever it takes to accomplish that, which leads to a number of expatriate deals without business logic to support them. He seems uninterested in stabilizing the salaries, which vary widely for overseas employees and those working in-country.

2) What arguments can be made in favor of hiring Anne Prevost for this global marketing position? What are the concerns or potential arguments against hiring Anne Prevost for this global marketing position?

Anne Prevost has several of the ideal traits a candidate is required to have for such a global marketing position. With numerous accolades attributed to her marketing creativity and the fact that her division at her previous employment had great performance even during trying economic times, she is no doubt more than qualified. An added advantage is her fluency in German and her experience working at a German multinational sometime in the 1990s. This would help make a smoother transition into Typware AG if she were to be hired. As mentioned previously, she has a great grasp on the global software industry and a lot of knowledge pertaining to it. Typware needs an employee with her kind of international far-reaching experience as they strive for even greater growth in the global markets. There is also the fact that the company has been searching to fill this particular position for some time, without success, until Anne was approached. Another significant point is that if Typware did not hire Anne, a competitor of theirs would and that could be a costly mistake for the company. While it might seem there wouldnt be any reason not to hire Anne Prevost, a few arguments can be made against that decision. With tensions already high among certain employees in the company over the lack of uniformity or structure in the pay system, bringing in a new hire from the United States and paying her significantly more than others working there longer in similar positions, would cause even more discontent in the ranks. Typware AG, with Renate Schmidt as the head of human resources, seems unprepared in dealing with the intricacies involved in putting together an international compensation package. Since Anne Prevost would be the companys first foreign executive to work at headquarters, Typware should have done its

homework and been better prepared for negotiations with Anne. The fact that they lack in this area is a concern as they attempt to fill the marketing position.

3) In your opinion, what are the most important Human Resources issues in this case? The case of In a World of Pay has several human resources issues that have come into our notice. They are as follows:

Pay Structure Guideline- Typware AG does not take into account any structural pay system for both domestic and international employees. As a result several of these expatriates are paid differently in various parts of the world where their company functions. This had created difficulties between the expatriates and management as well as demand for raise by other expatriates when they get informed about this divergence in pay. Hence many unreasonable increases have been made by the authority. None of the employees are paid equally for what they are working for. 85% of Typware AG companys employees are in Germany and the rest 15% is spread across the world. This 85% is paid according to the German market rate. But the expatriates are paid according to their overseas location as well as with enrollment in local healthcare programs, contributions to German social security and retirement plans

Compensation Package- The existence of a well organized compensation package that should be received by both domestic and expatriates does not exist in Typware AG. The expatriate asks for compensation benefits as they desired by showing their logic and reasoning. No particular structure is followed for this package. As a result many of the expatriates give reasons and charge the company with the requirement and hence the company becomes compelled to raise their compensation benefits. As a result these expatriates are paid their demand at the expense of domestic employees receiving less compensation.

Qualities of the Human Resource Head- Renate Schmidt, the head of Human Resources are placed with such an unpredictable problem for the first time and she is reacting to it in a non strategic way. She seems to be least informed about the

situation of the human resources conditions of her competitors in the software industry both part of domestic and international market. Also Renate lacks proper leadership quality because whenever she had been accused by the expatriates to raise their salary and compensation benefits she had been unable to give proper reasoning not to increase their salary and other benefits. Instead the situation was taken to the top level management to be handled by them and salary and benefits were increased accordingly. Also she lacks knowledge about her competitors both in domestic and international market. As a result she is unable to work in the right direction with the lack of knowledge. Another quality noticed about the HR head is that she does not welcome unpredictable situations and feels lost when she does not get any solution to her problems. 4) Is there anything else you would like to know (or do) before presenting a compensation recommendation to Mr.Gutschein? Additionally, what recommendation would you make concerning the offer to Anne as it pertains to her salary and benefits? Before reaching any decision regarding Anne Prevosts compensation package, there are a few issues that need to be clarified with the CEO Thomas Gutschein. It is extremely important to know what are his expectations and business vision. He is willing to go to any extent to achieve an increase in revenue by 10% and gain a foothold in the international arena. However, how does he wish to achieve it is important. Does Typware AG intend to compete as a German company with a global touch or as a global company with a local touch? The answer to this question is crucial in designing the compensation package. If he intends Typware to compete as a German company with a global touch, the compensation package should be based on pay trends and living costs in their host countries rather than on the companys business strategy. In such a situation, there should be a core package to meet Annes financial expectations, based on USs standards for base pay and benefits and a customized package, specifically designed to deal with the problems pertaining to her. The customized package should include provision for elder care for her mother, good health and medical facilities for her younger son who suffered from asthma and various allergies and sending their children to a well-equipped German gymnasium.

Jobs worldwide need to be assessed based on the scope of the job, if Typware intends to compete as a global company with a local touch. Leading multinationals should be surveyed to see how they compensate their employees, so that Typware can provide a business-based logic to guide its international pay system. More information needs to be known about Anne Prevosts previous compensation package at Xon Technologies- her base salary, bonus, stock options in order to design an attractive compensation package that will motivate Anne to accept the offer at Typware AG. All her special executive perks must be entertained by Typware AG, if Anne receives such facilities in her existing company. A 10% increase in base salary over her Xon base, to account for the cost of living differences between US and Germany and exchange rate fluctuations, could act as a good motivator. Anne should also be eligible to receive an attractive bonus based on her performance. Relocation services should be adequately provided for and support for all civic, utility, work permits should be provided. Anne would also need household and day care services for her younger children. One year of language and cultural training should be provided to Anne and her sons to help her and her family adjust to local conditions. Apartment rental may need to be subsidized and loans could also be arranged to help Anne buy necessary household goods. At least two trips should be provided to Anne and her family to the United States every year to visit her mother. Another alternative could be to hire Anne on a temporary assignment basis. This will make Anne more comfortable since she will not need to break off all ties with her home country. Anne could also avoid paying heavy German social security taxes if she enters a contract of less than five years. The issue of double taxation can be avoided. Stock options can be issued. In such a situation, Anne might even accept a lower salary and any resentment by existing employees regarding high salary can be soothed. A specific, consistent and transparent worldwide policy should be applied to avoid any conflict and confusion among employees. Local employees should realize that expatriate policies

need to be flexible, depending on each expatriates unique situation, but they should be equal worldwide.