Contents

Introduction...........................................................................................................................................2

Analysis of HRM Issues........................................................................................................................2

Employee Compensation...................................................................................................................2

Employee Motivation........................................................................................................................3

Occupational Health and Safety.........................................................................................................4

Quality of Work Life.........................................................................................................................4

Managing Diversity...........................................................................................................................5

Implication of Issues..............................................................................................................................6

Employee Compensation...................................................................................................................6

Employee Motivation........................................................................................................................7

Occupational Health and Safety.........................................................................................................8

Quality of Work Life.........................................................................................................................8

Managing Diversity...........................................................................................................................9

Recommendations.................................................................................................................................9

Employee Compensation...................................................................................................................9

Employee Motivation......................................................................................................................10

Occupational Health and Safety.......................................................................................................11

Quality of Work Life.......................................................................................................................11

Managing Diversity.........................................................................................................................12

Conclusion...........................................................................................................................................13
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.

Analysis of HRM Issues

Employee Compensation
In 1998 the issue of unfair employee compensation in Nike’s factories in the
Southeast 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 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 compensation, 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
appropriately. 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 Southeast Asia, especially in
Indonesia and Vietnam. Nike also does not care to pay for performance. Merit
pay exists 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).

Employee Motivation
Another issue that arose at Nike Inc. also in factories in Southeast 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 lose 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 must 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 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 must 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 must 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).

Occupational Health and Safety

In 2010, Nike had to face another issue besides the lack of employee motivation
and the public denouncing Nike due to their general treatment of their
workforce in Southeast 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 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).
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 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 Southeast 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 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).
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 must 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
discrimination, 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 the above has happened
in Nike factories involving male supervisors and female workers, which should
be a great concern for Nike.

Implication of Issues
Employee Compensation
Over 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 their 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 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 to put Nike under pressure to make
a change (Menschenrechte in Asien 2009). Also, 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).

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 to strengthen contract
manufacturers' 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 to understand the top
issues workers are facing and to measure mutual trust and respect in the
factories.

In all factory action plans were developed individually 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 many
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 to employ
managers and supervisors with better human resource management skills and
behaviour (Nike sorgt sich um den Heimatmarkt 2008).

Occupational Health and Safety

After 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 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 introduced.

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 workplace, 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).

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 Southeast 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 “Most Admired
Companies for HR” list, which is an HR-specific recalibration of Fortune’s
“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).

Managing Diversity
The immediate implication of Nike’s issue of harassment when it comes to
managing diversity 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).

Recommendations
Employee Compensation
Considering that Nike does not have a real compensation system in their
production factories in Southeast Asia as stated earlier on, my first
recommendation for the human resource manager would be to implement a
human resource information system 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 many workers
the implementation of payroll is necessary, since it is an accounting system that
can process many transactions.

It is relatively easy to collect the data of how much time a worker spend at the
actual workplace, 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 to also make sure that child labour can be out ruled. 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 Southeast Asia were
not as highly developed as Western countries or as they are today. 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 a 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 must adapt to and change its mentality and treatment
of employees. Basically, the corporate culture, which means the values, beliefs,
assumptions, and symbols that define the way in which Nike conducts its
business need to be renewed to meet human rights standards.

Employee Motivation
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 condition of service of every
employee and supervisor. Working hours can be recorded with a digital
scanning card as well as break times to make sure, an employee gets enough
breaks. The fact, that HRIMS provides transparency, which 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 to solve Nike’s problem of employee’s motivation.

The company must be aware, that over time many factors, internal and external,
will change and they must 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
workforces. 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.

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 daily 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 be outweighed by the

benefits Nike will gain from them. Other than that Nike must adapt to the
incremental change which involves gradual modifications to existing activities.
This means that the change is evolutionary, and Nike must adapt to a certain
health and safety standard that is required today and got developed over the
years. The organisation initially needs to be unfrozen, 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 acting so that the change occurs. They need to practice and
follow those rules, so employees feel and see a difference. In the end this state
needs to be refreeze by continuously reinforcing the desired outcomes, which
are employees who trust the company and feel safe and taken care of.

Quality of Work Life

Considering a general improvement in the work life of every employee, the
management must 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 the 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 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
must 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 must 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 must deal with. Since a high
quality of work life should be a great priority for Nike they need to adapt 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 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.

Managing Diversity
When 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 be taken. The cameras can be linked to the HRIMS 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.

Conclusion
After learning about the variety of human resource management issues that can
occur in a company and 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 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.
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