Nike Hrm Issues and Solutions

Sarawak Campus School of Business & Design HBH225N Human Resource Management Semester 02/2012 Individual Assignment Nike – Human Resource Management Issues and Solutions Due Date: Friday, 30. November 2012 By Katharina Pilgrim, ID: 4310187 Executive Summary In 1964 a company known back then as Blue Ribbon Sports was founded by Bill Bowerman and Phil Knight. 14 years later the US American multinational corporation officially became Nike, Inc. , which is up to today engaged in the development, design and international marketing and selling of sport footwear, apparel, equipment, accessories and services.The company’s headquarters are located in Washington County, Oregon, near Beaverton in the United States of America. Nike’s revenue reached 24. 1 billion USD in 2012 with an operating income of 3. 04 billion USD and employing worldwide more than 44. 000 people. The company is leading in supplying athletic apparel and shoes as well as manufacturing sports equipment an d other athletic and recreational products. Just the brand alone is worth 10. 7 billion USD, which makes Nike the most valuable brand among sport businesses. Its president and CEO is Mark Parker and founder Phil Knight still remains chairman of the board.The company’s name Nike goes back to the Greek goddess of victory, Nike [ni? k ]. In 1971 the graphic-design student Carolyn Davidson drafted the company logo for 35 USD, the international trademark and better known today as the Swoosh. Nike owns a number of subsidiaries, including the four most important ones, the upscale footwear company Cole Haan, the surf apparel company Hurley International, Converse Inc. , makers of the iconic Chuck Taylor All Stars sneakers and sports apparel supplier Umbro (About Nike Inc, 2012). Table of Contents 1. Introduction 04 2. Analysis of HRM Issues 04 . 1 Employee Compensation 04 2. 2 employee Motivation 05 2. 3 Occupational Health and Safety 06 2. 4 Quality of Work Life 07 2. 5 Managing Div ersity 08 3. Implication of Issues 08 3. 1 Employee Compensation 08 3. 2 employee Motivation 09 3. 3 Occupational Health and Safety 10 3. 4 Quality of Work Life 10 3. 5 Managing Diversity 11 4. Recommendations 12 4. 1 Employee Compensation 12 4. 2 employee Motivation 13 4. 3 Occupational Health and Safety 13 4. 4 Quality of Work Life 14 4. 5 Managing Diversity 15 5. Conclusion 16 6. References 16 . Introduction The following report will analyse five major human resource management issues that occurred at Nike Inc. over the past years, relating them to human resource management models and theories, followed by an implication of those issues, which means elaborating on the outcomes or better, what happened to employees or management after the issues occurred and how they impacted the entire company. This will be followed by giving recommendations for those issues by finding solutions using human resource information systems and the theory of change management.In the end an overall con clusion will be drawn, summarizing the major points and solutions found. 2. 0 Analysis of HRM Issues 2. 1 Employee Compensation In 1998 the issue of unfair employee compensation in Nike’s factories in the South East Asian region arose and made its way to the public. Nike ‘s management was accused to use child labour in first place and pay Indonesian kids just 19 US cents per hour (Werner-Lobo 2008, p. 40). Workers complained that their basic monthly salary is not high enough in order to meet their cost of living.There were also complaints concerning unpaid wages and disputed overtime payments. Nike was accused to exploit their workers and use methods of compensation along with the overall treatment that are against human rights (Werner-Lobo 2008, p. 41). Base payment is considered a direct financial reward. Next to the indirect financial rewards and the non-financial ones regarding the job itself and the job environment it comes together as the overall employee compensa tion, which is the most important human resource management function (Kolbe, Burkart & Zundel 2010, p. 2). It can help in order to reinforce the culture of an organisation and its key values. Compensation also facilitates the achievement of the organisation’s business objects and therefore a significant mismatch between the compensation and the organisational strategy can create major barriers (Kolbe, Burkart & Zundel 2010, p. 22). In a compensation program with the employee as the objective, there are four points to take in mind. First, all employees must receive equitable treatment; second, the employee’s performance needs to me measured accurately and rewarded ppropriately. Also an appropriate compensation change needs to be provided as well as performance and compensation reviews on a regular basis (Kolbe, Burkart & Zundel 2010, p. 24). Nike does not see to apply this or any compensation program to their workers in South East Asia, especially in Indonesia and Vietn am. Nike also does not care to pay for performance. Merit pay exists in order to develop a productive, efficient and effective organisation that enhances their employee’s motivation and performance (Kolbe, Burkart & Zundel 2010, p. 25).Nike instead just pays and average minimum wage which neither reflects an employee’s performance nor is enough to survive in some cases (Werner-Lobo 2008, p. 45). 2. 2 Employee Motivation Another issue that arose at Nike Inc. also in factories in South East Asia was that workers experienced a great lack of motivation, because they were highly dissatisfied with the attitude of their direct supervisor. Again, human rights were violated. In 2007 workers in factories in Vietnam claimed that the treatment of their direct supervisors was inhuman and makes them not want to go to work anymore at all (Harte Arbeit, wenig Geld 2009).Employees for example were just allowed to use the bathroom once a day in a twelve hour shift and drinking water was limited to two glasses per day as well. Supervisors would treat employees like second class people, talk in a rude tone and threaten them as well. As a result of this misbehaviour employees didn’t feel valued as human beings at all and started to loose motivation (Harte Arbeit, wenig Geld 2009). Considering the existing theories of motivation, you can say that Nike’s supervisors practice the X theory, which makes manager’s assumptions directive, narrow and control oriented in their treatment of employees.Theory X is an early theory of motivation and in modern society should not be practiced anymore (Kolbe, Burkart & Zundel 2010, p. 41). Also the little pay workers receive can’t be the only motivational factor, since there is little trust between management and employees and money is viewed just as the sole motivator. The thought process of workers in affected factories looked like this; after they get treated poorly and have to face a difficult workplace environment, they put little effort in their work, so their performance is just acceptable, they receive a low wage with no opportunity in sight for a raise nyways, so they just do the minimum required in order to not get fired (Kolbe, Burkart & Zundel 2010, p. 42). This is not beneficial for the worker himself, since mentally he is also suffering if he has to go to a job every day he is not satisfied with and also not beneficial for Nike, since the worker’s performance will be on a very low level, raising chances for products to be not manufactured in a way the company desires.Taking a brief look at Maslow’s hierarchy of needs, you can see that the physiological need that includes water, food and air is the fundamental of all needs every job has to provide for an employee, since if the base already experiences cracks, everything build on top will be crocked and not function in the way desired (Kolbe, Burkart & Zundel 2010, p. 43). 2. 3 Occupational Health and SafetyI n 2010, Nike had to face another issue besides the lack of employee motivation and the general public denouncing Nike due to their general treatment of their workforce in South East Asia, this time considering the topic of occupational health and safety. In factories in South China, after providing surveys prior to training, 60 to 90% of the employees stated that procedures to obtain permission for sick leave or access to medical care are very difficult. The death of two workers was alleged to be directly linked to the denial of sick leave and access to medical attention (Trouble discovered in Nike’s Indonesian factories 2010).In general you can say, that Nike’s poor OH&S performance equates with poor human resource management and poor legal and social responsibility. Nike needs to establish its organisational health and safety objectives in order for the management to demonstrate commitment and support. Nike needs to be aware of the benefits of a safe work environment such as the improvement of personal safety, the reduction of uninsured losses as well as re-work (Kolbe, Burkart & Zundel 2010, p. 66).Since the key elements of workplace improvement are culture, systems and hardware you can say that Nike’s culture does not value the wellbeing of the entire staff, they do not seem to have a solid system underpinning OH&S as well as their hardware does not include OH&S considerations (Kolbe, Burkart & Zundel 2010, p. 67). 2. 4 Quality of Work Life Vice president of global human resource at Nike’s headquarters near Beaverton, David Ayre, stated in 2011, that growth is the biggest challenge for the company.The challenges for the management are continuously growing as rising global salaries dissipate the easy cost gains from offshore outsourcing (How Nike’s HR pros help the giant company stay competitive 2011). Considering that Nike’s highest concern is their profit, the management tends to forget about the employees and the quality of their workplace. The latest issue with Nike's labour practice that again occurred in factories in Vietnam, are a violation of overtime rules and an excess level of toxic fumes in the workplace.The quality of work life was rated poorly by questioned workers, claiming that there is no safe and healthy environment, no growth and security, no social integration and too little life space in general (Harte Arbeit, wenig Geld 2009). A questioned worker, Miss B. , 32 years old stated, that she is suffering from a constant head and stomach ache, since she is working in the gluing section of the factory. The glue smells, sticks to skin and clothes and pain killers are not even working anymore (Harte Arbeit, wenig Geld 2009).Nike is known for making its equipment in countries which are in the developing phase, having very cheap labour, authoritarian government, a lack of human rights appeal and union movement (How Nike’s HR pros help the giant company stay competitive 2011). It does not seem that Nike has introduced quality of work life programs which incorporate principles of job enrichment and sociotechnical enrichment in a comprehensive effort in order to improve the quality of the work environment. The company does not seek to integrate employee needs with higher productivity (Kolbe, Burkart ; Zundel 2010, p. 50).Instead spokesman like David Ayre make excuses in public to justify the poor quality of work life in Nike’s South East Asian factories. If quality circles would exist, work-related issues could be identified and solved, but this would require training, commitment, support and relevance to a range of organisational members (Kolbe, Burkart ; Zundel 2010, p. 51). Besides the toxic fumes, tables and chairs were not appropriate in order to sit on them for twelve hours and even longer, plus the entire work atmosphere was not rated as comfortable as stated in the paragraphs above (Case Study for Nike 2009). . 5 Managing Diversity Nowadays managing diversity is highly important in any company. Unfortunately Nike also experienced problems in this field. 2001 female workers at factories in Indonesia reported incidents of sexual harassment and abuse. After the initial incident, when women reported that they were just allowed to go to the toilet with a supervisor watching, further investigations were undertaken. The outcome was that 30% of all respondents had personally experienced at least verbal abuse; nearly 8% of total workers reported unwanted sexual comments.At two factories, there were reports of ‘deeply disturbing’ incidents of sexual favours demanded in return for employment (Reaktion auf Ausbeutungs-Vorwuerfe 2001). Discrimination against women in companies is a great problem human resource management has to deal with. Discrimination can occur when unreasonable condition ore requirements are set, just as it happened with the female workers using the bathroom. Harassment is a particular form of discr imination, where the behaviour is designed to make a person feel unwelcome, offended, humiliated and intimidated.These entire factors apply to Nike’s supervisors and male managers who are involved in those accusations. Sexual harassment is considered physical, visual, verbal and non-verbal behaviour of a sexual nature that is uninvited and unwelcome (Kolbe, Burkart ; Zundel 2010, p. 103). All of the above has happened in Nike factories involving male supervisors and female workers, which should be a great concern for Nike. 3. Implication of Issues 3. 1 Employee CompensationOver the years Nike has become very skilled at showing its own side of the story, when it comes to accusations regarding their employee compensation and overall labour practices. A direct implementation of the discovered low wages in Indonesia in 2008 and additionally employees expressing their inability to live of their current salary, Nike published a section called ‘Transparency 101’ on thei r website www. nike. com, with all details of their remediation plan, as well as a link to the full report at the Global Alliance site.The Global Alliance is a union of companies and public groups, which includes Nike, The Gap, and The World Bank amongst their members (Menschenrechte in Asien 2009). The Centre for societal Development Studies at the Atma Jaya Catholic University in Jakarta carefully produced and conducted the report on behalf of the Global Alliance. Researchers conducted one-on-one interviews, surveys and focus groups that involved more than 4,450 workers in nine factories in order to show an effort to solve the problems considered child labour and unsatisfying wages (Werner-Lobo 2008, p. 8). Another outcome of this discovery was raising public awareness of Nike’s methods and damaging their image in the long run. Human rights organisations raised their voices for the employees in Indonesia and Vietnam that could not do so themselves and made the issue spread world-wide on public media in order to put Nike under pressure to make a change (Menschenrechte in Asien 2009). Also in order to show an effort Nike fired several managers in affected factories.The employees itself remained silent, means there were no strikes or a high number of resignations to be found. Further independent audits have been commissioned to ensure that all factories are paying the new minimum wage and that workers understand the wage and overtime calculations (Werner-Lobo 2008, p. 98). 3. 2 Employee Motivation Considering the issue Nike has with motivating their employees in the right way, which means not with rules that touch their human rights or inacceptable punishment, there are several implications to be found.Nike’s answer to their dissatisfied and unmotivated workers is a new system of training they introduced. In eight factories in Vietnam and eight factories in Southern China since 2008, Nike offers workshops in order to strengthen contract manufactur ers' HRM systems and support lean manufacturing implementation (Workers and Factories 2011). Before the actual workshops take place, in each factory employee satisfaction surveys were completed in order to understand the top issues workers are facing and also to measure mutual trust and respect in the factories.In every factory action plans were developed individually in order to address core HRM areas, including supervisory skills, employee turnover, incentive structures, and employee satisfaction (Workers and Factories 2011). Another outcome from employees raising their voices and speaking up about the inhuman rules and treatments in their factories, is greater supervision of Nike from the government and human rights organisations, to make sure, Nike is on the right path (Fair Labor at Nike 2012).Other than that, Nike had to face a lot of complaints from retailers, since a large amount of manufactured jerseys were poorly stitched and had manufacturing mistakes, since employees did not put a lot of effort in their work anymore and started to glue, stich and sew inaccurately. This cost the concern a lot of money which they rather should have invested in training or the recruiting process in order to employ managers and supervisors with better human resource management skills and behaviour (Nike sorgt sich um den Heimatmarkt 2008). 3. 3 Occupational Health and SafetyAfter the death of two workers and the entire workforce in South China showing their dissatisfaction with Nike’s care for their employee’s health and safety, Nike again, responded very quickly after the incidents occurred. The company promised to upgrade their sanitation and to implement food service standards in all factories in order to ensure a healthy and hygienic environment (Trouble discovered in Nike’s Indonesian factories 2010). Also supervisors in affected factories were replaced and a special officer just dealing with occupational health and safety issues was introduce d.The two deaths were further investigated and Nike didn’t get pressed with legal charges since a direct link could not be made out 100% (Trouble discovered in Nike’s Indonesian factories 2010). Furthermore Nike changed its policies when it comes to sick leave and allows their employees to leave their work place, go home and see a doctor after talking to the OH&S officer and getting his approval, which is an improvement considering no leave at all was permitted (Trouble discovered in Nike’s Indonesian factories 2010). . 4 Quality of Work Life Since Nike has a lot of human resource management issues to deal with, they became professional over time how to deal with them. So the first outcome of the issue, that in factories in South East Asia working quality is very poor and on the lower edge, Nike has constructed an elaborate program to deal with labour issues in the 900-odd supplier factories (none owned by Nike) that churn out its products in some 50 countries ( Nike 2010). By developing several initiatives, Nike landed at the No. spot in 2012 on Fortune magazine’s â€Å"Most Admired Companies for HR† list, which is an HR-specific recalibration of Fortune’s â€Å"Most Admired Companies† list (Case Study for Nike 2009). Because of the poor working environment and work life in general the turnover rate in factories in China was dramatically higher than in factories of competitors and a significant number of workers would not show up in the morning without excuses, which created a major problem for Nike since production slowed down (Nike sorgt sich um den Heimatmarkt 2008).Also in the specific case of Miss B, she received a bonus of five dollars monthly and protective clothing, but she will suffer from lifelong breathing difficulties, skin irritation and sterility (Harte Arbeit, wenig Geld 2009). 3. 5 Managing Diversity The immediate implication of Nike’s issue of harassment when it comes to managing diversit y and having few women under just male supervision, Nike implemented an harassment training for managers and workers using local resource people, and initiated a grievance system for workers to bring forth issues without fear of retribution.The women who were sexually harassed were helped by providing psychotherapy (Reaktion auf Ausbeutungs-Vorwuerfe 2001). Other than that, cameras were installed at bathroom entrances to monitor people going in and coming out, trying to give employees a feeling of security. No legal charges were pressed against supervisors or Nike itself (again), although an employer can be held vicariously liable for the discriminatory acts of his employees against others. Nike also created an employee council, workers can speak to anonymously when problems occur so a solution can be found together (Reaktion auf Ausbeutungs-Vorwuerfe 2001). 4.Recommendations 4. 1 Employee Compensation Considering that Nike does not have a real compensation system in their productio n factories in South East Asia as stated earlier on, my first recommendation for the human resource manager would be to implement a human resource information system in order to collect and store data about the employee’s productivity and therefore what type of compensation and especially salary they deserve individually. Since Nike employs a large number of workers the implementation of payroll is necessary, since it is an accounting system that is capable of processing a large number of transactions.It is relatively easy to collect the data of how much time a worker spend at the actual work place, how many items he produced and how accurate his outcomes are with a scanner or by taking samples. Storing all this data for each employee is manually almost impossible, therefore is the use of a HRIMS beneficial because it increases the communication on all levels and includes data on employees, jobs and work condition as well as position, leave and the management in order to also make sure that child labour can be outruled. Another recommendation for Nike would be the consideration of the general change and how to manage it. 0 years ago, Nike might already let their employees work under the same or worse condition as they do today, but back then the general interest in this subject was relatively small and countries in South East Asia were not as highly developed as Western countries or as they are today. In order for an organisation to succeed they must respond to the pace of change, that means the human resource manager especially need to take the role of an change agent and needs to be aware of external factors and how the companies culture needs to adapt.The change in government regulations, which today are more concerned about child labour and correct payment and treatment of employees, is a force Nike can’t walk away from, but has to adapt to and change its mentality and treatment of employees. Basically the corporate culture, which means the v alues, beliefs, assumptions and symbols that define the way in which Nike conducts its business need to be renewed in order to meet human rights standards. 4. 2 Employee MotivationIn order to avoid dissatisfied and unmotivated employees as well as poorly skilled supervisors and managers the usage of human resource information system in the future would be a great help. With HRIMS the company will experience enhanced communication across all levels of the organisation, which gives the employees in a factory in Vietnam the chance to communicate their feelings as well as reporting incidents that occurred with their supervisors directly to the headquarters in Oregon. With HRIMS next to individual data and previous experience you can store and manage the ondition of service of every employee and supervisor. Working hours can be recorded with a digital scanning card as well as break times in order to make sure, an employee gets enough breaks. The fact, that HRIMS provides transparency, wh ich means informs those who are monitored, will be helpful in letting supervisors know immediately, when they are acting wrong. Also the surveys Nike conducts before providing training, can easily be made, stored and evaluated with a HRIMS. Other than that the development of performance management systems can be a great help in order to solve Nike’s problem of employee’s motivation.The company has to be aware, that over time many factors, internal and external, will change and they have to adapt to this. Perhaps 30 years ago, employees accepted such behaviour of their supervisors, but not today anymore, since the country itself developed over the years as well as its people’s self-confidence. Nike needs to understand how important human resource management in general is in today’s work life and managers need to promote trust among their workforce. They need to ensure that human resource policies and practices are fair and equitable since the employee†™s voice is critical to performance improvement and innovation. . 3 Occupational Health and Safety Considering Nike’s issues with their health and safety policies I would recommend them to implement this section in their HRIMS. The newly introduced officer for occupational health and safety can create a policy catalogue via HRIMS all employees and supervisors as well as managers have access to. It can keep a record of what illnesses a worker had or what medicine he is required to take on a daily bases so Nike can make sure to provide those needed, since HRIMS increases flexibility by adapting to present and future requirements.The costs these implementations bring along would definitely be outweighed by the benefits Nike will gain from them. Other than that Nike has to adapt to the incremental change which involves gradual modifications to existing activities. This means that the change is evolutionary and Nike has to adapt to a certain health and safety standard that is re quired today and got developed over the years. The organisation initially needs to be unfreezed, which means it needs to be prepared for the change with the implementation of new OH&S rules in the HRMIS, the exchange of existing supervisors or an intense training for the existing ones.This is followed by taking action so that the change actually occurs. They need to practice and follow those rules so employees feel and see a difference. In the end this state needs to be refreezed by continuously reinforcing the desired outcomes, which are employees who trust the company and feel safe and taken care of. 4. 4 Quality of Work Life Considering a general improvement in the work life of every employee, the management has to make sure, that there is autonomy, the degree to which the job provides freedom, independence and discretion to the individual as a safe and healthy environment amongst others.Human capabilities need to be developed and a social integration needs to take place. Using t he HRMIS for this purpose it again can be very beneficial since the system can easily create routine reports, exception reports, on-demand reports and forecasts which all will work together as a whole in order to help the management in improving the work environment and an employee’s satisfaction by increasing the work life quality. It is a strategic and competitive tool which has to be customized for Nike and contain data of an employee’s satisfaction level, of legal advice and regulations, feedback and survey outcomes.Other than that again, change has to be taken into consideration, since the workforce has changed its character and is dominated by change, as well as the needs employees crave nowadays for and what work environment is acceptable to do the required work. Globalisation, technological change and changes in government regulations are external forces Nike has to deal with. Since a high quality of work life should be a great priority for Nike they need to ad apt to the transformational change, since it produces revolutionary shifts in Nike’s strategies, culture and structure.A general problem Nike has is that they still manufacture their products in low-cost countries with very low standards for their workers. As an American corporation they should not downgrade the standards that would exist in a factory in the US to the countries general standards, but change the way of thinking. Their business strategy is, to produce at factories not owned by Nike itself, at the cheapest price possible in order to increase the profit. Maybe it is time for a change and taking a worker’s life and soul more into consideration than just thinking about the revenue. 4. 5 Managing DiversityWhen it comes to Nike’s problem of managing diversity and discriminating minor groups such as women, HRIMS can also be helpful and beneficial. Since it is enhancing communication across all levels, problems can be communicated faster and actions can b e taken. The cameras can be linked to the HRIMS in order for the footage to be accessible easily and not just within the factory itself. Workers can use HRIMS to report incidents anonymously so solutions can be found. Nike also needs to take its strategic human resource objectives into account, since they affect all aspects of the workplace relations.Nike’s workforce should experience open communication, procedural justice and organisational support when problems occur. The corporate cultures, which means the values, beliefs, assumptions and symbols that define the way in which Nike conduct its business, needs to focus more on fighting discriminatory behaviour and how to fully integrate minorities. With training they need to raise awareness of what has happened and through communication, participation, counselling and certainty the issues need to be solved so they do not repeat themselves. 5.Conclusion After learning about the variety of human resource management issues that can occur in a company and actually did happen at Nike Inc. , you can see that managing your employees is a sensitive field, where mistakes easily occur if you do not pay enough attention to your employee’s wants and needs. Today it is really important for every company to have a human resource management department, with a human resource manager who in first place and most importantly has the role of the employee champion as well as the one of a change agent.Nike showed an effort by reaching out to their workforce immediately after every incident occurred and tried to improve where mistakes were found. Further improvements can also be made by implementing a HRMIS and considering the power of change. The winning companies of the future will be those most adapt at leveraging global talent to transform themselves, their industries, and creating better jobs for everyone. 6. References About Nike Inc, 2012, Nike Inc. , viewed 20 November 2012, . Case Study for Nike 2009, viewed 2 0 November 2012, . Fair Labor at Nike 2012, viewed 15 November 2012, . Harte Arbeit, wenig Geld 2009, Stiftung Warentest, viewed 17 November 2012, . How Nike’s HR pros help the giant company stay competitive 2011, HR Communication, viewed 20 November 2012, .Kolbe, M , Burkart, B & Zundel, F 2010, Personalmanagement: Grundlagen und Praxis des Human Resources Managements, 2nd edn, Gabler, Deutschland. Menschenrechte in Asien 2009, Forum, viewed 18 November 2012, . Nike 2010, viewed 18 November 2012, . Nike sorgt sich um den Heimatmarkt 2008, Financial Times Deutschland, viewed 15 November 2012, .