Nike Inc Labor Policy - Essay Example

?Problem Research Table of Contents Table of Contents Part A 4 The Problem Situation 4 Problem Symptoms 4 Problem ment 5 Part B 5 The Problem 5 Fishbone Diagram 6 Key Findings 7 Part C 7 Problem Statement Testing 7 The Issue (Paraphrase) 7 Opportunity from the Issue (180 Degree) 7 Problem in the Larger Context (Broaden the Focus) 8 Redirection of the Issue 9 Why Ask Why 9 Conclusion 10 Problem Restatement 10 Clarification of Changes 10 Newly Discovered Problem Knowledge 10 Part D 10 Part One 10 Part Two 11 Consolidation of the Ideas 11 Categorize of Solutions 11 Possible Practical Solutions 12 Similar Solutions Provided by the Individuals 13 Combination of the Solutions 13 Unfit Statements 13 Comparison of the Solutions 14 Part Three 15 Reflective Study on Work Team’s Feedback 15 Questions Arising Using the Black Hat from De Bono’s Six Thinking Hats 15 Overview of the Problem 17 Results of divergent and convergent thinking exercises 17 Outcome of devil's advocacy process 18 Potential solution or alternative solution 19 Part E 19 Reference 21 Bibliography 21 Appendix 22 Part A The Problem Situation From the decade of 1990s Nike Inc is facing criticisms from different human rights organizations and government bodies. Nike management is using the sweatshops for manufacturing of the products where the labor law is violated. The manufacturing units of Nike are mainly in the Asian countries like China, Vietnam, Indonesia etc where they can get labor in a relatively lower cost, also they are getting free trade zones there. The minimum wages law is violated there as well as the working conditions are poor there. Some media have also proved that the working conditions are not standard in Nike factories. Also there were claims that Nike is using child labors. Nike is using forced labor as reported by different media. Recently in July, 2011 an article claimed that Nike the employees of Nike factory abused by the supervisors constantly. So the main problem is that Nike management has failed to ensure a standard human resource policy in the company. Problem Symptoms The problem symptoms are as follows: Certain reports are claiming that Nike is not sticking to a standard human resource policy from the 1990s. Some customers are avoiding Nike on morale ground as they are violating the labor law continuously. Problem Statement As in the manufacturing Factories Nike Inc is violated the labor laws, the human resource organizations and the government bodies are protesting this in different countries as well as some customer started to avoid the products in a morale ground. Part B The Problem Nike Inc, a major manufacturer of apparel and sports equipment is violating the labor laws in its manufacturing factories which are situated mainly in the Asian countries. As the labors are not treated well in the factories so the international media is continuously focusing on this matter. They have collected some proves which made clear the fact that Nike is violating the labor laws really. Several issues are against the company, because of which some consumers also avoid using the products of Nike on the moral ground. Fishbone Diagram Key Findings From the fishbone diagram it has been found that several factors are there and because of all these Nike was able to violate the labor laws from the 1990s. The main factor is the management. The human resource policy of the management is below standard, which causes the problem mainly. Moreover the long term strategy of the company is not good at all. If the company continues this type of labor policy then the company can’t make profit in the long term. The government of the respective countries is also responsible for this situation. Nike is continuing this practice from the 1990s, but the respective governments have not taken such hard step so that the company will think about the matter seriously. The government has made the trade free zones for the foreign companies, and it is attractable for the companies as they can do business in low cost. They can also get low cost labor that are not much literate, so they can easily force the labors for doing the job overtime and also have to pay less. The labors also have to agree in such situations as they have not any options. Part C Problem Statement Testing The Issue (Paraphrase) How can the company generate revenue and increase their profit without violating the labor laws and being criticized by the human resource organization throughout the world. Opportunity from the Issue (180 Degree) The problem is about violation of labor laws. But the company is also generating more profit as they can continue their process in a low cost. The labors are available in a low cost, also they are working for more time than the standard and ultimately the company has to pay a low wage than the standard. This certainly decreases the direct cost of the manufacturing. As the direct cost of manufacturing is lower than the competitors and they are selling the product in the same price like the competitors they are able to make more profit. When the competitors have to spend more amounts for labor costing then Nike is able to spend less. This is certainly an advantage for Nike. If Nike hikes the labor wages a little then the criticisms would be lower and they will be able to make the same profit as the customers who are avoiding the Nike product on moral ground may buy the product as the labor condition would better in that situation. Problem in the Larger Context (Broaden the Focus) Nike is violating the labor laws and thus they are achieving low cost manufacturing, as a result they are generating more profit. But this situation can cause problem for the company in the long term. The competitors of Nike; Adidas, Reebok is offering their product same price as Nike is offering. But the labor cost of Nike is low as they are using the low cost labors. But not using these low cost labors the companies like Adidas or Nike were able to achieve the same profit like Nike. This is a matter of concern for Nike. The competitors of Nike are not using the low cost labors instead they are paying the standard wages to them. If the companies start to use the low cost labor, if they offer more compensation than Nike to the labors, also not violating the labor laws then they would be able to generate more profit than Nike. So the problem in front of Nike is to achieve more profit than its competitors by compensating the labors more than the present situation, thus ensure that they are not violating the labor laws anymore. Redirection of the Issue As the competitors are offering the same product in the same price and also maintaining the labor laws then there is certainly some problem occurs in the operational activity of Nike, so that they are generating the same profit by using the low cost labor. So the challenge in front of the company is to decrease the other operational cost and increase the labor wages so that they can achieve same profit by not violating the labor laws. Why Ask Why Question: How the company can make profit without violating the labor laws? Answer: The Company should increase the labor compensation and thus they don’t violate the labor laws. Question: How can the company able to retain the market share if they don’t use the low cost labor? Answer: The Company should decrease other cost like the distribution costs as their competitors are doing and thus they will be able to retain the market share. Question: Why the company is not able to decrease the operational cost at present and also in the past? Answer: The company management performance was not good in this matter as there is opportunity to make is better. The company management was not so effective. They were not able to decrease the other operational cost. Conclusion Problem Restatement How the company management’s can be improved as they are not able to generate more profit than its competitors despite they are using low cost labors and violating the labor laws? Clarification of Changes The problem statement has been changed in this part than the part A. This statement has changed because it has been found by the problem restatement techniques that the company was not able to generate more profit when they are using the low cost labors. But the competitors are generating more profit when they are also paying the standard wages to the labors. So certainly there is a problem regarding the other costs of the operation. If the management of the company is efficient then they should be able to control the costs, but this doesn’t happen. So the company’s problem is its inefficient management and the company has to solve the problem. Newly Discovered Problem Knowledge From the problem restatement process it has been found by the researcher that the management needs to change their policies to cut the operational costs. They should increase the labor compensation and thus rectify their image in front of the world. Part D Part One Divergent thinking means a brainstorming session. In a divergent thinking process the persons produce creative ideas about the issue (Pritzker, 1999, p.11). From the researcher’s place of employment 5 individuals have been chosen for a divergent thinking process. They have stated some creative ideas about the issue. The brainstorming session was continued for 15-20 minutes. The notes about the session are attached in the Appendix. The researcher has used the Microsoft Office word software and taken the notes. Part Two Consolidation of the Ideas Convergent thinking means the logical conclusion of an issue which is based on deductive reasoning. In this process certain logical steps is taken by the user for getting the solution (Englander, 2010, p.167). The problem is although the firm is using the low cost labors but their profit is not up to the mark. It means the overhead cost of production is higher for the company. The respondents want that the management structure should be changed, also the view of the board of directors. Tough policy should be introduced by the board that the middle management should comply with the policy or they should explain. The steps should be started by the company management and slowly the costing process should be changed. A respondent also provide a solution that the sales price of the products of Nike should be decreased to attract the new customers. One of the respondents has taken the side of Nike policy and he has argued that if Nike starts to pay more remuneration to the labors then the cost of sales of the company will increase and it will be tough for the company to retain the market share. Categorize of Solutions The solutions offered by the respondents are of different categories. Some of them want an instant solution as they want the management structure should be changed immediately and if it needed then the board of directors also. They want there should be comply or explain situation for the middle management. Some of them want that the process of changing the company policy should be started slowly. The middle management should be given training about how they should behave with the labors. Possible Practical Solutions The possible practical solutions provided by the respondents are as follows: The middle management of the company should be warned for their attitude and some tough step should be taken by the management by the company top management. A tough step taken by the top management will assure the performance improvement of the employees. The top management should start some training program for the middle management about what should be the behavior they should do with the labors. The restructuring steps will not be implemented in just one day, the process will take time, but the process should be start immediately. A training program will help to the employees to cop up with the new policies of the company. The management should look more at the operational costs and overhead costs of manufacturing so that the cost of sales and operational cost of the company decrease and the company become able to generate more profit. Cut in the operating cost and increment of the labor remuneration will help the company to retain the profit as well as sticking to the labor laws. The board should take tough steps. The management persons should comply with the new rule or should give explanation. If their performance will not improve in the near future then they may get fired. The tough step by the company will assure improved performance by the company management. Similar Solutions Provided by the Individuals One of the respondents want to take the board some tough steps immediately as well as they want to middle management should be warned by the top management for their behavior and a notification that some tough steps would be taken by the top management if the middle management will not maintain that. Another solution says that there should be some comply or explain process for the middle management. These two solutions are identical. Combination of the Solutions The solutions of the problems as per the respondents may be as follows: The board of director should change the policy. They should mandate it that the middle management should change their behavior to the labors. The management should take measures to cut down the operating costs of manufacturing. The labor remuneration should be increased by the top management and they should stable the profit by cut down other costs and if some managers behave badly with the labors then proper steps will be taken against him. Unfit Statements Some unfit statements were also made by the respondents. These are as follows The board of directors should be changed. It is not applicable in this situation. If such steps have been taken by the shareholders then it would send a negative sign to the investors. The stock price of the company would come down. It will also send a negative sign to the employees also. The employee turnover may get higher. Nike should cut down the sales price of the products. It is also not a solution in this situation as the target segment of Nike is the higher class people. A little price decreasing would not matter for them. The main problem is that some customers are not using the product of Nike on moral ground. Cut off in sales price will not attract them also. Comparison of the Solutions The solutions provided by the respondents are reviewed in this part by the researcher. Some respondents have argued that the board of directors of the company should be changed which is not a practical solution in this situation. A respondent suggested that the selling price of the product should be decreased to attract more customers. In the current scenario this is also not a solution for the company. Some respondents have argued that the management structure should be changed which is a solution that can be criticized by many people. But the researcher has also got some practical responses like the process of changing the policy should start right now. Some of the respondents have argued that the policy should be started right now and the management should take some tough steps immediately. There should be some comply or explain policy for the management, if they don’t stick to the policy of the management to treat the labors well. But the best solution among the bunch was that the management should increase the remuneration of the labors as well as decrease the operating costs of the company, so the profit of the company will not get hampered. The reputation of the company will improve and as a result probably some customers will get attracted for buying the product of the company. Part Three Reflective Study on Work Team’s Feedback From the discussion of the group I have understood the need of convergent and divergent thinking. The session was a divergent one. The participants have produced some brainstorming ideas. There was a person who was in support of the present policy of Nike. So the discussion turned into a debate. Because of the contradictory statements from the individuals some practical ideas was come out. After the person who was acted as the devil’s advocate start to take part in the discussion then the ideas came out was practical, but before his participation some ideas was not at all practical. Thereby I have understood the need of debate type discussion, after that I have used convergent thinking. Through the convergent thinking process I have sum up the ideas and suggested a possible and practical solution to the company management. Thereby I have understood the need of convergent and divergent thinking. Questions Arising Using the Black Hat from De Bono’s Six Thinking Hats Why should this solution be implemented? The solution should be implemented by the company for improving the reputation. The company is continuing to violate the labor laws from the 1990s. Despite of using these labors the company is not making more profit than their competitors which indicates that the management of the company is not so efficient. The company has to take some measures so that they can decrease the operating cost and maintain the labor laws properly, so the researcher has suggested the solution As a result the company will achieve the lower operating cost and the labor law would be maintained properly. The company can make profit like the present scenario and the customer base would also increase as they will not violate the labor laws. What could go wrong if this solution is implemented?  It is not sure that the company can generate the same revenue or make same profit like the present scenario if they change their policies. One person in the group has said that the customers who are not using the Nike products on moral ground may be they are loyal to other brands. So it is possible that the customer base may not increase. Also the solution suggests that the company management should decrease the operating cost. The company can increase the remuneration of the labors easily but decreasing the operating cost may not be an easy task for them. If they become failed to decrease the operating cost then the total cost of manufacturing will increase and the profit of the company will decrease and the company will lose its market share. What are the weaknesses and risks of this solution? The risk of the solution is one question. The management of the company was not able to decrease the operating cost in so much years, will they be able to decrease the cost now onwards. If they become failed to do so then it will be tough for the company to retain the market share. How else could this problem be resolved? This problem can be resolved by a proper planning. The top management of the company should make a proper plan so that the company will surely get success. The finance department of the company should make the policy so that the company would be able to increase the remuneration of the labors and cut down the operating cost, but the profit not get affected by that. If they are able to maintain the labor laws then probably they can attract some more customers which will increase the revenue of the company. Who might resist? For implemented the solution the company management might face some resistance from some people of the management itself. From the inception of the company the management is using the policy about the labors. The concerned employees have failed to control the operating cost throughout the years, so it would be tough for them to adjust in the new situation. They have to cut the operating cost urgently which will be not an easy task for them. So they can make resistance for implementing the new policy. What is not being considered that should be? In the discussion of the group it has not been considered that the employees who have failed to cut the operating cost for so many years from the inception of the company how can they become able to cut the operating costs in some days. This is a matter which should be addressed in the discussion. Overview of the Problem The problem is that despite of using the low cost labors the company is unable to make more profit than its competitors. The competitors of Nike is not using the labors, not also paying them lower wages, but they are able to offer their products in the same price as offered by Nike. From the analysis the researcher has derived that there must b a problem regarding the operating cost of the product. Here the efficiency of the management is come under question. In this situation the researcher is trying to find a way so that the labor laws would be maintained properly as well as the company will retain the market share. Results of divergent and convergent thinking exercises The researcher has invited five people and organized a session where they have produced creative thinking, which means a divergent session has been organized by the researcher. From the session many solutions have been presented by the respondents. Some of the solutions are not practically applicable in this situation; some of the solutions were repetitive. There was also a person who was arguing for the current policies of the company. Applying the convergent thinking all the solutions has been combined. The solutions which are not practically applicable are being omitted by the researcher and the applicable solution has been combined. Considering the practical situation and the respondents’ responses a potential solution has been suggested by the researcher. Outcome of devil's advocacy process A devil’s advocate is the person who has taken the opposite side of the argument for the sake of the debate and here person 5 is that respondent who has acted as the devil’s advocate (Helterbran, 2008, p.30). The person 5 has stated that if the labor cost would increase by the company then the cost of sales will also increase and the profit of the company will decrease. Moreover when the present process is continuing then Nike is not in the position of decreasing the overhead cost and the operating cost as they are habituated in this policy from the introduction of the company. Suddenly a change will hamper the process of the company. The company will lose the market share. It was argued by a respondent that if Nike would increase the remuneration of the labors then the customers who are now avoiding the Nike products on the moral ground also buy the products. But the person who was acted as the devil’s advocate responded that it is not sure that the customers will buy the product of Nike as they are already loyal to the brands of the competitors. The person also argued that if the management structure would be changed then the management persons also get de motivated and this would hamper the work process of the company. The person is totally against to change the policy. His main point of argument is that if the company changes the policies then the cost of sales will increase and thus the profit of the company will decrease. Also the company is not in the position to cut the operating costs of the company so the present process should continue to retain the market share. Potential solution or alternative solution The potential solution of the matter has been derived after considering all the alternative solutions represented in the brainstorming session by the five respondents. Some solutions offered by the respondents were not practically applicable. A respondent argued for restructuring of the board. If the board has been altered in the present situation then the stock price of the company will decrease as well as the employee turnover rate may get increased. So this solution is not acceptable in this situation. Some of the respondents also argued for taking some tough steps from right now but that would also not applicable as a restructuring from right now may create problem on the employee motivation. If such process is started from right now then it would be tough for the company as the operating cost of the company can’t be decrease in one day, though the remuneration of the labor can be increased in one day. If it would be done then the company will lose profit and so the market share. So a potential solution in this situation is the company management should take measure for decrease the operating cost and the remuneration of the labor should be increased step by step, so that the company will be able to retain the market share as well as maintain the labor laws perfectly. Part E Weighted Ranking Matrix Alternative Solutions Changing Management Structure Provide Training Program to the Management Cut the operational Costs Tough steps for misbehaving with the Labors and Increase Labor Remuneration Board of Directors should be Changed Criteria Weight Rating Score Rating Score Rating Score Rating Score Rating Score Increment of Labor Remuneration, maintaining Labor Laws 0.4 1 0.4 3 1.2 4 1.6 5 2 1 0.4 Attract Customers 0.1 2 0.2 2 0.2 2 0.2 4 0.4 1 0.1 Profit Increase 0.2 2 0.4 1 0.2 5 1 3 0.6 1 0.2 Creating a Good Reputation 0.3 1 0.3 1 0.3 1 0.3 5 1.5 1 0.3 Total 1.3 1.9 3.1 4.5 1 Rank 4 3 2 1 5 The researcher has built a weighted ranking matrix for making a decision in the current situation so that the company can solve the problem. In the weighted ranking matrix the possible solutions recommended by the participants of the discussion is in the 1st row. The criteria required in the problem are listed in the row. The criterions are given certain weights by the researcher. The main problem of the company is the working condition of the labor. The increment of labor remuneration and maintaining the laws are given the weight 0.4; the criterion creating a good reputation was given 0.3 weights. The total of the weight of the criterions are equal to 1. The alternative solutions of the problem are given certain ranking with reference to the criterions. The possible solutions given here are changing the management structure, provide training program, cut the operational costs, changing the board of directors and increase the labor remuneration and taking tough steps against the persons who are behaving bad with the labors. The researcher has given rating to the solutions against the different criterions. Each alternative has been given the rating 1 to 5. 5 rating is given to the solution which is best fit with the criteria. 1 rating has been given to the least fit solution. The score of each alternative solution with respect to each criterion has been calculated. At last the total scores for each alternative solution have been calculated. The total score was highest for the alternative of increasing the labor remuneration and taking the tough steps against the persons who are misbehaving with the labors. The next highest score was of the alternative cut the operational costs. The other alternative solutions have got low scores. So the best solution from the weighted ranking matrix is the alternative that the management should increase the labor remuneration and take tough steps against the management persons who are misbehaving with the labors. Analyzing the result of the weighted ranking matrix the researcher suggested the company that they should increase the labor remuneration and stick to the labor laws and for compensating the extra remunerations provided to the labor the operating cost should be decreased by the management. Reference Pritzker, S. (1999). Encyclopedia of Creativity. United States of America: Elsevier. Englander, M. (2010). The Nature and Nurture of Learners: From the Perspective of Educational Psychology. United States of America: AuthorHouse. Helterbran, V. (2008). Exploring Idioms: A Critical-Thinking Resource for Grades 4-8. United States of America: Maupin House Publishing, Inc. Bibliography Jones, M. (1998). The thinker's toolkit: fourteen powerful techniques for problem solving. United States of America: Three Rivers Press. Appendix Group Discussion (Divergent Thinking) The Problem: How the company management’s can be improved as they are not able to generate more profit than its competitors despite using low cost labors and violating the labor laws? Person 1: The Company Management structure should be changed Person 2: The middle management of the company should be warned for their attitude and some tough step should be taken by the management by the company top management. Person 3: The board of directors of the company is not taking sufficient measures about the violation of labor laws in the 20 years. There must be some problems in the board. Person 5: If the labor remuneration would be increased then the cost of manufacturing would increase and so the total cost of sales. So the management should not take the decision to increase the labor remuneration Person 2: The board of directors of the company should be changed. Person 1: The top management should start some training program for the middle management about what should be the behavior they should do with the labors. Person 3: The management should look more at the operational costs and take some measures to cut the cost. Person 2: Nike should cut down the sales price of the products. So the customers may get more interested in Nike products. Person 4: Nike should cut the overhead costs of manufacturing and thus decrease the total costs of manufacturing. Person 5: Nike is not in the position of decreasing the overhead costs of production at present. If the management takes the step immediately then the profit of the firm decrease and Nike will lose the market share. Person 3: The restructuring steps will not be implemented in just one day, the process will take time, but the process should be start immediately. Person 2: New customers also are there as the company would take care of the labor laws. Person 5: It is not sure that the customers who are now not using the products of Nike because of the moral ground will use this product if Nike starts to take care of the labor laws. They are the already loyal for some other brands. Person 1: This process should be changed. It is the factor that the labor is working for more time, but they are not efficient, so the product quality is also hampered. Person 5: The Company should not change the practices. If Nike doesn’t treat the labors like present then there may be a chance that the competitors start to use these low cost labors. Person 4: The competitors would not use these low cost labors. If they want to use so, they may use them already. If they use it in future then the reputation of the competitors’ would be hampered and Nike would attract new customers as they will not break the labor laws. The reputation and the market share will increase. Person 5: If the management structure would be changed then the management would get de motivated, the company process will be hampered. Person 1: The labors are an integral part of the company; the company should think about them and take some remedial measures. The management should be restructured. The board should take tough steps. The management persons should comply with the new rule or should give explanation. If their performance will not improve in the near future then they may get fired. Person 4: The process should start from the board of directors. They should motivate the middle management. They should try to minimize the overhead costs and improve the labor conditions. Read More