Human Resource Management

Term Paper Assignment

Johnny OOI Chuen Seong [SID: 5310520015]

10

Table of Contents
1 2 Introduction ........................................................................................................................ 1 Company Background ....................................................................................................... 1 2.1 2.2 Human Resource Background ..................................................................................... 3 Human Resources Management .................................................................................. 5 HRM of Nike Inc. & Subsidiaries........................................................................ 5

2.2.1

2.2.1.1 Human resources management and the environment ....................................... 6 2.2.1.2 Acquiring human resources .............................................................................. 7 2.2.1.3 Deloping human resources ............................................................................... 7 2.2.1.4 Labor-management relations and promoting safety and health ....................... 7 2.2.2 HRM of Contracted Factories .............................................................................. 7

Human Resource Management

Term Paper Assignment

1 Introduction
This report is prepared in the intention to comply with the course requirement of Human Resource Management as part of the Master of Business Administration at Prince of Songkhla University. The report outlined the overview and background of a multinational or global company which specifically concentrate on the human resource management aspect of the company. The report will present the various strategies, strength, weakness and recommendation on the human resource management (HRM) in practice by the company at this moment. In the context of this report, the detail of related issues of Nike Inc. is reported. The reason that Nike Inc. was chosen as the subject for this report because of the criticism faced by Nike Inc. in regards to violation of labor laws by its contractor which evince the fiasco in Nike HRM strategies in managing its contractor. In spite of being a global leader in athletic footwear that dominated 31 % of global market sharei with total revenue of US$ 19.17 billionii (2009 Fiscal Year) and net income of US$ 1.49 billioniii. The report is intended to investigate the HRM strategies implemented by the company to manage its contractors in combating child labor, violation of minimum wages and overtime criticism. Furthermore, the information pertains to Nike Inc. internal HRM Strategies will also be included in this report.

2 Company Background
In January 1964, Bill Bowerman and Philip Knight established Blue Ribbon Sports with an initial investment of US$ 500 each which later became Nike Inc. in 1978. Nike Inc. is a major designer, manufacturer and supplier of athletic product which market three main product segments; this includes footwear, apparel and equipment. The products are manufactured in 46 countries around the world with approximately 600 contracted factories. In the whole supply change of Nike Inc. includes its supplier, shipper, retailers, and other business partners in its manufacturing, distribution and retailing of its product around the world, there is a total more than 1 million people involved in this supply changeiv. Nike Inc. markets its products under its own brand coupling with its highly renowned trademarks of the Swoosh logo and the slogan Just Do It. Moreover, the company also market products by its subsidiaries company which includes Cole Hann, Converse Inc., Hurley International LLC. and Umbro Ltd.. In 2009, the sales of Nike Inc. in United States market accommodate to 42% of its total sales figure and the remaining 58% was generated through international market (180 countries around the globe) which has 336 retail stores [John OOI Chuen Seong] | [SID: 5310520015]

Human Resource Management

Term Paper Assignment across United Stets and 334 retail stores around the world. The revenue earned by Nike Inc. in this year amounting to US$ 19.72 million, return on investment of 18.1 %v, profit earnings ratio of 17.68vi (August 2010) and the stock price of US$ 87.73vii (December 6 2010). Nike Inc. World Headquarter encompasses 193 acres with totaling 1.9 million square feet of interior space in Beaverton, Oregon as presented in Figure 1. The headquarter consists of 17 main buildings whose names pay tribute to some of the world legendary athletes: John McEnroe, Joan Benoit Samuelson Center, Michael Jordan, Bo Jackson (gym), Mike Schmidt, Nolan Ryan, Lance Armstrong (gym), Mia Hamm, Ken Griffey, Jr., Pete Sampras, Jerry Rice, Tiger Woods Center, The Joe Paterno and C. Vivian Stringer Child Development Centers, Dan Fouts, Alberto Salazar, and Steve Prefontaine Hall. In the center of the headquarter, it is position with a six acre lake that has a depth of seven feet at its deepest point which is also home to ducks and geese. This harmony and serene sceneries create a healthy working environment for 7,000 Nikes employees that work at headquarter, as this will empower their creativity, innovative and energy to perform their best in assisting the continual growth of Nike Inc. in the competitive market. NIKE WORLD CAMPUS

Figure 1 Map of Nike World Capus at Beaverton, Oregon, USA

[John OOI Chuen Seong] | [SID: 5310520015]

Human Resource Management

Term Paper Assignment

2.1 Human Resource Background

Nike Inc. derectly employed 32,800 employee around the world which 48% of the workforce are concentrated in United States as presented in Figure 2. The human resource department is lead by Chief Human Resource Officer, David Ayre which responsibilities include talent scouting, development, inspiration, retention and infrastructure planing for all employees in Nike Inc. and its subsidiaries company around the world. The HRM group of Nike Inc. can clearly be divided into two major division, one which reponsible for Brand HRM and the other Global HRM. As a global company, obviously David is assisted by numerous assistants in ensuring effectiveness, efficiency and smoothness of human resource activity, this supporter includes Oscar Cardona (Global Human reource), Steve Conroy (Brand Human Resource). Nike Global Employee Breakdown by Region
EMEA, 7710, 24%

U.S., 15858, 48% Affiliates, 3723, 11%

EMEA

Americas, 1385, 4% Affiliates Asia Pacific

Asia Pacific, 4124, 13% Americas U.S.

Figure 2 Nike Global Employee Breakdown by Region

In 2002, Nike embarked a vision to make the company an Employer of Choice in a five year time frame. The company strongly believe that diversity would nurture positive impact to its business model which Nike Inc. reported in 2005 diversity have articulated a consistent, four pronged business caseviii for diversity includes: A. B. C. D. Diversity drives recruitment of the most dynamic people. Diversity enriches the creativity and innovation that shapes the brand. Diversity grows competitive advantage. Diversity heightens the stature and belief in the brand within the culturally nuanced consumer base [John OOI Chuen Seong] | [SID: 5310520015] 3

Human Resource Management

Term Paper Assignment In accomplish this diversity and inclusion vision, Nike Inc. has set out four strategy which is to: A. B. C. D. Optimize who we are Amplify creativity and efficiency Develop world-class diverse and inclusive teams Deliver revenue and value

Nike Inc. put into practice a constant monitoring program to assess employee satisfaction to the organization by conducting survey. The surveyed data was analyze and reported through its Corporate Reponsibilities Report, in taking employee voice a step further, Nike Inc. shaped their priorities based on the feedback on the work environment, career advancement and various aspect of the organization for workplace improvement. As a result of this effort, Nike Inc. was awarded and recognized as Employer of choice by various organization which includes: Business Week - Rank # 55 on 2007s Top 100 Places to Lunch a Career. Fortune Magazine 2006, 2007 & 2008 on 100 Best Companies to Work For Best Workplaces for Commuters 2004, 2005 & 2006 Oregon Business Magazine Rank # 21 on 2005s 100 Best Companies to Work For in Oregon E. Human Rights Campaign Score 100 on Best American companies for gay, lesbian, bisexual and transgender workers A. B. C. D. In spite of being recognized as employer of choice with multiple award today, Nike Inc. has come through obtacles of being criticized for contracting factories that have violated human rights law includes minimum wages, working overtime, poor working condition and child labor in the 20th century. During 1990, Nike faced criticism for use of child labor in Cambodia and Pakistan in its contracting factories to manufacture soccer balls. In 1997, the workers in Indonesia (PT Hardaya Aneka Shoes Industry), Vietnam (Tae Kwang Vina)ix and China (Wellco) factory go on strike over wagesx. Following this series of critique, an investigation by Australian Channel 7 into Nike Contractors in Malaysia (Hytex Apparel Ltd.)xi discovered major worker rights violation including squalid living conditions, garnished wages and withheld passports of foreign workers. According to Nike Code of Conduct, the act of diminishing workers rights, workers welfare and social responsibilities of its contractors or business partners are prohibited. Nike Inc. stated in its Code of Conduct that the company is committed to collaborate with its contracted factories in building a leaner, greener, more empowered and equitable supply chainxii.

[John OOI Chuen Seong] | [SID: 5310520015]

Human Resource Management

Term Paper Assignment Despite being criticise for its incompetency in handling contracted factories, Nike Inc. was capable of achieving substantial amount of revenue growth and gained multiple recognition to be Top 100 Best Company to Work For among its competitors. This presented that the effectiveness and successfulness of Nike Inc. HRM policies in managing the organizations staff under direct employment that sum up to 32,800 people around the world.

2.2 Human Resources Management

The HRM activities of Nike Inc. are divided into two major categories includes: A. Managing HRM activity of employees under direct employment of Nike Inc. and its subsidiaries. B. Managing HRM activities of contracted factories.

2.2.1 HRM of Nike Inc. & Subsidiaries

In a global corporation of the scale of Nike Inc, the HRM activities play a major role in ensuring that the organization survive and prosper in the competitive market. Organization effectiveness and ineffectiveness in HRM related issues can be classified into criteria and components as performance, legal complaince, employee satisfaction, employee retention, abseentism, turnover, training effectiveness, grievance rates, accident rates and return on investment. Nike Inc. recognize the important of human resources as it is significant factor in topmanagement strategic decisions that guide the organizations future operation. The crucial element in ensuring that the organization is effective includes: A. Organizations mission and strategy. B. Organization structure. C. Human resources Management. Furthermore, Nike Inc. understand that people is the most valueble assets to the organization that fueled the organization with unlimited opportunities, profitable growth in driving innovation and business performance in ascertain the prosperity of Nike Inc. in future. Nike Inc. practice strategy in managing its talent by focuses on critical assignment planning, manager accountability for coaching and mentoring and structured learning via individua and team based classroom or online learning. The orgainization is commited to growing and improving the potential of the people by building leadership capability and constantly evaluate talents of its people. In this evaluation, the leaders and mentors are held responsible for improving subordinates performance, potential, diversity and position [John OOI Chuen Seong] | [SID: 5310520015]

Human Resource Management

Term Paper Assignment continuity. The HRM department of Nike Inc. had made significant investment and contribution in area of sustainable talent practices and infrastructure in ensuring that the organization is fueled with leadership skill required by Nike Inc. to prosper in future. The contribution makes by HRM includes: Helping the organization reach its goals. Employing the skills and abilities of the workforce efficiently. Providing the organization with well-trained and well-motivated employees. Increasing to the fullest of the employees job satisfaction and self-actualization. Developing and maintaining a quality of work life that makes employment in the organization desirable. Communicate HRM policies to all employess. Helping to maintain ethical policies and socially responsible behaviour Managing changes to the mutual advantage of individuals, group, organization and the public. Managing increased urgency and faster cycle time.

In managing more than 32,000 employees of Nike Inc. and its subsidiaries, the element and component of HRM activities includes: A. B. C. D. E. Human resources management and the environment Acquiring human resources Rewarding human resources Developing human resources Labor-management relations and promoting safety and health

The next section will further evaluate and describe the above element and component pratice by Nike Inc.

2.2.1.1 Human resources management and the environment

Nike Inc. strongly embraces diversity and inclusion as its core strategy in scout, retain and explore the fullest potential of its people. In managing the HRM environment, the ARDM (A=Acquiring, R=Rewarding, D=Developing, M=maintaining and Protecting) human resource model was fully exploited by Nike Inc., the model prescribed four specific steps in ensuring the effectiveness of HRM practice which includes (1) diagnosis, (2) prescription, (3) implementation and (4) evaluation. 6 Every two years, Nike Inc. conducts a global employee survey to measure the key factors that motivates and engages employees. The latest survey was conducted during October, 2008 which focused on measuring employee engagement and manager effectiveness. All Nike Inc. [John OOI Chuen Seong] | [SID: 5310520015]

Human Resource Management

Term Paper Assignment employees were invited to participate in the Web-based survey, which was available in 29 languages. Page 148 full cr report 09

2.2.1.2 Acquiring human resources

2

2.2.1.3 Deloping human resources

2frd

2.2.1.4 Labor-management relations and promoting safety and health

2 activities and its subsidiaries employed more than 32,000 employees, among this The human resource management strategies that is in practices by Nike Inc. inlcudes: Diversity and Inclusionxiii Work Life Balance program On-site child Care Paid Sabbaticals Development Program Benefit
Management of peoplea system to not only track and correct wage, overtime, and minimum age violations, but also provide education, conflict management, and other opportunities for factory employees, and improve the relationship between management and workers through training and other assistance

2.2.2 HRM of Contracted Factories

M-Audit

No 100% Health care COverage 7

[John OOI Chuen Seong] | [SID: 5310520015]

Human Resource Management

Term Paper Assignment

Weakness Expatriate training Too much emphasis on leadership and diversity, Nike should also provide technical skill related training. 100% health care coverage http://www.usatoday.com/money/industries/retail/2008-08-01-nike-malaysia-laborviolations_N.htm

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Human Resource Management

Term Paper Assignment

Nike Inc. (NKE) Wikinvest 2010, <http://www.wikinvest.com/stock/Nike_(NKE)>

ii

Wikimedia

Foundation

Inc.,

30th

November

2010

Nike, Inc. (NKE) Company Financials, The NASDAQ Stock Market, 6th December 2010 <http://www.nasdaq.com/asp/ExtendFund.asp?symbol=NKE&selected=NKE>
iii

ibid

iv

Nike Inc. (2010, January 22) Nike, Inc. Corporate Responsibility Report FY07-09. Retrieved November 26, 2010 from http://www.nikebiz.com/crreport/content/pdf/documents/full-report.pdf
v

ibid

vi

The NASDAQ Stock Market. (2010). Stock Report - Nike, Inc. (NKE) Retrieved December 6, 2010 <http://www.nasdaq.com/asp/quotes_reports.asp?symbol=NKE&selected=NKE>
vii

ibid

viii

Nike Inc. (2007, June 26). Nike FY05-06 Corporate Responsibility Report. Retrieved November 19, 2010 <http://www.nikebiz.com/responsibility/documents/Nike_FY05_06_CR_Report_C.pdf>
ix

The World Bank. (September 16, 2003). Nike in Vietnam: The Tae Kwang Vina Factory <http://siteresources.worldbank.org/INTEMPOWERMENT/Resources/14826_Nike-web.pdf>
x

Campaign for Labor Rights. (1997). Strikes at Nike factories in Indonesia and Vietnam. <http://www.clrlabor.org/alerts/1997/three_strikes_nike.html#3>
xi

You Tube. (July 22, 2008). Nike Contractor in Malaysia using forced labour. Retrieved November 17,

2010 <http://www.youtube.com/watch?v=9Qzm7MCusGM&fmt=18>
xii

Nike Inc. (August 17, 2010). Nike Inc. Code of Conduct. Retrieved November 15, 2010 <http://www.nikebiz.com/responsibility/documents/Nike_Code_of_Conduct.pdf>
xiii

Fortune Magazine. (2008). 100 Best Companies to Work For 2008: Full list | FORTUNE <http://money.cnn.com/magazines/fortune/bestcompanies/2008/full_list/index.html>

[John OOI Chuen Seong] | [SID: 5310520015]