Nike’s Human Resource Management Challenge
Over the years, the speedy changes in the field of Information Technology have played a major role in the growth of various national companies into Multinational Corporations (MNCs). Also, the changes have contributed to the development and operations of the worldwide Information Systems (IS). MNCs or global companies have their operations spread in more than one country, and a good example is Nike. Nike is one of the biggest virtue companies which heavily rely on production outsourcing with only designing done at the head offices. The company is arguably the largest athletic shoe producer globally, with a market share of close to sixty per cent in the United States (Frisch, 2013, p. 32). The global company was founded by Phil Knight and Bill Bowerman in 1964. When the MNCs develop their IS worldwide, there are different challenges faced like different cultures, laws, foreign exchange rates, languages, and capital spent on IS (Tavani, 2013, p. 14). Despite its significant growth around the world, Nike has been faced with the challenge of human resource management for many years, due to its outsourcing strategy.
The main challenge that has faced Nike over the years, has been managing its human resource across the world. Nike is one of the many multinational companies known to outsource their production activities from other countries spread across the world (Frisch, 2013, p. 35). The sport goods companies normally have two options in the manufacturing of their products. The companies can outsource from other companies or operate from their factories. The outsourcing facilities are either domestic or foreign. Notably, outsourcing from the domestic factories presents the advantage of easy monitoring, the same labour rules, and a skilled workforce (Bragg, 2006, p. 45). On the other hand, outsourcing from foreign countries could pose numerous challenges but is preferred because of the significant costs saved on labour. The foreign factories which offer cheap production are commonly known as sweatshops.
The problem of sweatshops in the Asian countries came to the public domain in 1991 when press reports reported on the poor working environment and low wages in Indonesia (Frisch, 2013, p. 45). Although the company responded to the issue by introducing a code of conduct, more publications were released in the following years indicating the poor conditions faced by Nike employees. Until 1998, the company remained hesitant to change the working conditions of its suppliers, but with the declining sales and a destroyed name, some radical measures had to be taken. The then-CEO Phil Knight understood clearly that Americans were not interested in buying products associated with pathetic working conditions, slave wages, and child labour.
For over two decades the company has developed relations with various firms around the world, which are mainly located throughout Asia. The main outsourcing countries for Nike include China, South Korea, Indonesia, and Taiwan among others (Hill, Schilling, & Jones, 2016, p. 20). The above Asian countries are famous for providing cheap labour as well as the necessary raw materials. However, the outsourcing strategy by the company has minimized its ability to regularly monitor production processes as well as the workplace conditions in the factories.
The process of outsourcing by the company has been the main source of all the human resource-related issues including child labour, sexual harassment, poor working conditions and unfair pay. Most of the countries from where the company outsources from are in their developing phase and, characterized by cheap labour due to poverty, corruption, high unemployment levels as well as the absence of adequate rules to govern on human rights. With the continued habit of outsourcing, Nike has faced numerous criticisms from human rights individual activists and groups, due to serious issues like child labour in Pakistan and Cambodia, the poor pay of workers in Indonesia as well as well as poor workplace conditions in Viet Nam and China (Hill, Schilling, & Jones, 2016, p. 24). Various protests have been raised by universities and various anti-globalization groups. In 2011, the company claimed that close to seventy per cent of the factories producing its various shoe products failed to meet the minimum worker treatment standards. In the same year, various press articles indicated that Nike employees at a company in Indonesia suffered from constantan mistreatment under the watch of their supervisors. The various events starting in the early 1990s to date and, relating to the human resource of the company have greatly tarnished its image leading to declining popularity and sales over the years (Frisch, 2013, p. 52).
It is important to admit that Nike has made tremendous strides in its different efforts to redeem its fading image and market share, especially in the United States. To begin with, the company established a monitoring system to understand the factory working condition through various extensive audits. The audits for the supplier factories included the normal environmental audit, safety, and health audits, based on the American standards where the parent company is based (Gibson, Coyle, Bardi, & Novack, 2016, p. 397). The company sought the help of various independent non-governmental organizations to carry out the auditing independently including the Fair Labour Association (FLA). The FLA organization was established in 1999 by Nike and comprises of various companies in the same industry as well as different labour representatives (Frisch, 2013, p. 66). The company has tirelessly pushed for other organizations to join the organization and is famous for pushing for the sixty-hour work per week.
In 2005, Nike made a significant step by becoming the first company in its industry to publish a list of all its supplier factories (Gibson, Coyle, Bardi, & Novack, 2016, p. 398). In the same year, the company also published a report detailing the pay and working conditions of all its factories in the Asian countries. However, although the enhanced monitoring, which the company has adopted over the years has helped in minimizing the human resource issues, there remain some challenges.
Firstly, although the Code of Conduct exists, the company should ensure that its implementation is a top priority. The application of the established laws should be placed at a higher lever even than cost and quality. Also, the company managers should ensure that all the supervisors reported misusing the employees face the full force of law. All the supplier factories must respect the workers.
Secondly, it is vital that the company imposes heavy monetary fines on noncomplying suppliers. The supplier companies should be held accountable for their mistakes to discourage further violations of the various set laws. Companies tend to respond appropriately when there is the introduction of monetary fines (Tavani, 2013, p. 34). Also, imposing fines on various suppliers by Nike will ensure that’s it consumers feel pleased with its operations.
Thirdly, Nike should ensure that it is viewed as a trustworthy corporate citizen in the different Asian countries. The company cannot assume that the creation of low paying jobs is a good strategy. The various Asian countries it has suppliers and their supports from around the globe cannot be grateful for the jobs created and forget about the terrible working conditions. Additionally, it is, by all means, unjust for the Nike shareholders to profit handsomely because of the lower wages paid to workers in the supplier countries.
Fourthly, the company should work directly with the various human activist groups in the supplier countries to ensure that there is a neutral observer of the working conditions. Also, the human activist groups are in a better position to receive any complaints from the workers because they feel secure. When workers are in the work environment, they are likely to be very fearful and fail to comment on their working conditions (Tavani, 2013, p. 43). Also, the activist groups offer an effective platform for educating the workers on their different rights and privileges.
Finally, the company should carry out extensive research to identify how to design and implement enhanced labour practices. Importantly, the research should focus on ensuring that workers work in the safest environments and are provided with an adequate medical cover. Provision of medical covers would help the employees to feel secure and as a result become more productive.
In assumption, by facing all the allegations raised against it instead of denying, Nike has been successful in overcoming one of the toughest phases in its history. The lessons learned by Nike can help other companies that heavily outsource their products in dealing with the various challenges it raises. It was significantly embarrassing for Nike to have its name associated with the sweat shops in Asia. Nike is a brand that mainly makes massive sales simply because of its name and must strive to protect that image.
References listTop of Form
Bragg, S. M. (2006). Outsourcing: A guide to– selecting the correct business unit– negotiating the contract– maintaining control of the process, second edition. Hoboken, N.J: J. Wiley. Bottom of Form
Frisch, A. (2013). Story of nike. Place of publication not identified: Jaico Publishing House.
Gibson, B. J., Coyle, J. J., Bardi, E. J., & Novack, R. A. (2016). Transportation: A global supply chain perspective.
Hill, C. W. L., Jones, G. R., & Schilling, M. A. (2016). Strategic management theory: An integrated approach. Australia: South-Western.
Tavani, H. T. (2013). Ethics and technology: Controversies, questions, and strategies for ethical computing. Hoboken: John Wiley & Sons, Inc.