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Developing a Relocation and Severance Package for all Employees in Brazil

Developing a Relocation and Severance Package for all Employees in Brazil

After W-L, Inc., Mr. Gonzalez moved to PepsiCo in Rio de Janeiro, Brazil. His first role was to lead the move of the Latin America HQ from Rio to South Florida. Mr. Gonzalez was in charge of every aspect of the move, including building policies to pay those relocating and those staying behind. PepsiCo had a policy for traditional one-to-one moves, but none for a massive move of this kind. The 35 families in Rio were all paid as expatriates — free housing, free home leaves, cost-of-living allowances, paid schooling, fully paid cars, first-class travel everywhere. As an American company, PepsiCo did not pay expatriate benefits to executives based in the US.


The Actors

  • The most successful Division CEO in PepsiCo at the time
  • 34 executives used to being pampered by the Company in Brazil
  • 8 local employees, mostly low-level administrative staff
  • Corporate PepsiCo, which set policy across the Corporation

The Stakes

The security situation in Brazil was critical — the prior vacation season had seen multiple home break-ins, and the CFO of Citibank had been kidnapped in São Paulo and returned safely only after negotiators secured his release. The overhead cost of the office was extremely high due to Brazil's hyperinflationary environment at the time. And the extra time required to travel intra–Latin America — which required a connection through Miami to reach any capital in the region — meant each employee's minimum travel cost represented 150% of their annual base salary.


The Situation

The Pepsi Cola Latin American Division was the best-performing unit in all of PepsiCo, and the executives were all experts in their franchise fields. The Corporation was therefore willing to flex on the treatment of this unique move.


The Solution

Mr. Gonzalez built a relocation and severance package to convert all the expats into the American system, while the 8 administrative employees in Rio would lose their jobs. He presented the plan to the Head of HR and the Division President and secured their approval, but since it would impact the executives, he was asked to present it to the VPs directly for their acceptance — terms that would severely impact their income relative to the alternative of a Green Card and eventual US citizenship. He was told not to make waves, as this was sensitive and the Company did not want to lose these executives. The meeting took place in the conference room adjoining the Divisional CEO's office, with the CEO working just next door.


Mr. Gonzalez presented a very generous package: three-year transition payments on housing and car costs, retained home leaves to the executives' country of origin, and Company support obtaining visas for domestic staff — important to the executives' spouses — though schooling privileges for their children would end. The terms were good enough that the executives agreed in principle. But when he presented the severance terms for the Brazilian administrative staff, one executive violently opposed it. After multiple attempts to convince him, Mr. Gonzalez lost his temper and told the executive his position was "immoral" — that he was trying to take money from the administrative staff to give it back to the executives. The meeting ended abruptly.


The shouting had been heard around the office. Mr. Gonzalez had to report to the Head of HR and the Division CEO — he'd been asked not to create waves, and he had just done exactly that. The executive in question was critical to the Corporation, and the Head of HR didn't know what to do; while he agreed the executive had behaved badly, calling him "immoral" seemed to go too far. The CEO then called a face-to-face meeting to get to the bottom of it.


The CEO already knew what had happened — the executive had gone to complain about how he'd been treated. But the CEO, who had overheard the meeting from his office, told the executive he expected more of him as the senior person in the room, and demanded he apologize to Mr. Gonzalez — who had secured conditions for the executives far beyond what the Corporation would otherwise have offered, and whose proposal for the administrative staff was fair recognition of their loyalty and service to PepsiCo. When Mr. Gonzalez and the Head of HR went into the CEO's office, concerned about the gravity of the situation, they were given the good news instead: the executive would have to apologize, not only to Mr. Gonzalez but to the staff who had witnessed the confrontation.


This is another example of a multiplayer game where the goal is a solution that maximizes benefits for all while minimizing losses for all. This baseline solution earned Mr. Gonzalez the support of every actor but one — and that was enough to carry the day.