International Expansion Blog

International HR: Amazon’s German Woes Offer a Lesson for Labor Relations Abroad

By Michelle Mendykowski, PHR, Manager, Advisory Services

Michelle Mendykowski, PHR, Manager, Advisory Services, High Street PartnersWhen setting up international operations, American executives often don’t anticipate that their relationship with foreign employees can be very different from their relationship with employees at home. In both law and custom, labor practices in foreign countries frequently differ from those of the United States, in ways that are not always favorable to the employer. Amazon is learning that lesson the hard way in Germany, where conflicts over unionization expose a cultural rift that threatens not only to disrupt the online retailer’s operations, but also inflict long-term brand damage. 

Trouble in Germany
In recent months, Amazon has been hit by strikes at multiple warehouses across Germany — its second-largest market — over its classification of employees as warehouse workers rather than as retail staff, who are entitled to higher pay. All sides agree, though, that the pay issue is a proxy for a deeper conflict over Amazon’s posture toward its employees.

In particular, Amazon has shocked Germans by opposing unionization at its German sites. Amazon’s business model depends on constantly improving its warehousing and shipping practices to increase its value to customers. The company’s leadership believes unions will bog down that rapid pace of innovation and actively discourages them. In the United States, that strategy has proceeded without significant pushback, but it has caused problems in Germany as collective bargaining agreements would mean increased benefits and entitlements to staff.

So far, Amazon has been able make adjustments to prevent the strikes from causing crippling disruptions of its German operations. Under pressure, Amazon has made some concessions to its German workforce on issues like bonuses and overtime scheduling. Nevertheless, if Amazon hopes to continue expanding in Germany, it will have to bridge the gap between its corporate culture and German labor norms.

During a June strike at an Amazon warehouse in Leipzig, one labor organizer provided a window into the conflict: “We are not going to let a big American company come here and play Wild West,” he told picketing workers. “This is a clash of cultures.”       Protest

Lessons for Labor Relations Abroad
Amazon’s problems illustrate the importance of understanding different labor practices when targeting and moving into foreign countries, but don’t let strong unions alone scare you away from a market. Amazon is more exposed than most businesses to labor issues because it employs a large number of blue collar workers and is seen as being intensely demanding of them.

And powerful unions don’t necessarily translate into an antagonistic workforce. Germany’s unions, after all, haven’t prevented the country from creating one of the world’s most dynamic economies. In fact, many other countries have found a balance between powerful unions and successful businesses. Two-thirds of Swedish workers belong to unions, for example, compared to just over a sixth of the U.S. workforce. In Sweden, the relationship between organized labor and management is less confrontational and much more cooperative than in the United States.

When accounting for labor practices in your plans for international business expansion, it’s not as simple as looking for the destinations most similar to the United States. Instead, seek to understand a target country’s business practices and determine how compatible they are with your own business model. If the practices would force you to make serious adjustments, you’ll have to decide whether the costs outweigh that market’s growth opportunity.

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