Human Resource Management Policies applied in Nike, Inc - Case Study Example

Human Resource Management Policies applied in Nike, Inc. About Nike Nike is majorly a publicly traded sportswear and equipment supplier in the world. It is based in the United States of America having its headquarters in Portland which is situated near Beaverton. It is the world’s major supplier of sports equipments which include sport shoes and attires. It controls more than 36% of the market share of sport shoes for athletics in the United States and 33% of the international market of sport shoes. It is also the largest manufacturer infrastructures used in sporting activities earning revenue of $18.6 billion USD in its fiscal year 2008 .This company was formed in the year 1964 and by then was identified by the name Blue Ribbon Sports. It was formed by two people, Bill Bower and Philip Knight. In 1978, it was officially named Nike, Inc. It products are marketed widely because of the brand name which is well known by a majority of people in the world. Additionally, this company offers sponsorship to sports men, sports women and teams which perform highly in the world. Nike manufactures a numbers of sports infrastructures for athletics such as shoes, jerseys, shorts and baseliners among others. The most current editions of shoes include Nike 6.0 and Nike SB which are specifically made for skateboarding. It has also introduced cricket shoes known as Air Zoom Yorker which are lighter by 30 percent than those of their competitors hence boosting their market. In addition, it has also produced Air Jordan XX3 which are specifically made for basketball to enable lofty performance in the field. The company is involved in offshore outsourcing of its HR practices since all of its products are manufactured and produced by more than 800,000 workers in its distributed factories in the world. This is achieved by Nike designers creating the products and then relies on the suppliers who further produce a resemblance of the produce. This takes place once the specifications of designs are made available to all the suppliers around the world. In addition, Nike was founded on the basis of a handshake. Its main goal is to build business with their collaborators founded on total trust, respect among them, joint effort and commitment. It is greatly involved in management practices that honour the rights of all employees not regarding their positions in the Company. It is also committed to providing a safe and healthy workplace and promoting the well-being of all the employees working for the company (Fei Qin et.al, 2007). Nike, Inc. has various Human Resource policies that make its employees the most profitable resources they have. It shows that employees represent the company, bring knowledge, skills and experience to the company which are intangible aspects of the company but are priceless. The HR policies also protect the rights of employees by ensuring that they work in conducive and fair working environments. The policies further minimize the costs associated with high employee turnover, give job security to employees and ensure that they receive fair wages. The HR policies also give opportunities to employees to learn new skills and acquire more knowledge. Generally, most firms have a tendency of focusing much effort in making much profit but fail to maintain the various aspects of the firms’ responsibility like human resource management over its employees and outsourcing its management. However, this is not the case with Nike Company because it takes pride in being an ethical company which upholds its employee’s well-being. This came to be after the crisis it had in the 1990’s whereby Nike was being criticized about poor working conditions in low wage countries. At that time, employees did not always seem to be the most important stakeholder in the company. After the crisis, Nike came up with programs to improve the labour standards of its employees Nike allows random factory inspections by the Fair Labour Association which is a monitoring outfit founded by human rights groups and companies. This makes the company to be up to date and critical on how the workers are treated (Carroll and Buchholtz, 2008). Nike has been involved in outsourcing human resource greatly with the aim of reducing the cost of manual labour and the human resources that the company uses to increase its profits. A majority of the labour intensive jobs are based in developing countries because the employees can go for low wages due to scarcity of well-paying jobs. Another reason is lack of proper rules governing the rights of human beings in these countries. However, the Nike Company has been involved in paying its workers in developing countries poorly, hiring underage children to work in the factories and offering hazardous working environments to its workers. These lead to the tarnishing of Nike’s image and brand (Locke, 2007). Brand image also becomes vulnerable when it loses its credibility. This was highlighted when a 13-year-old activist stated, ‘Nike, we made you, we can break you’. Due to this, Nike announced that the minimum age of footwear factory workers worldwide was to be eighteen and sixteen years for clothes production. However, the existing under-age employees were not to be dismissed (Hummels and Timmer, 2004). Nike’s involvement towards child labour was majorly to reduce the cost of labour which happens to be lead to the destruction of the brand image. About half of the world’s Nike soccer balls were produced by Pakistan children who are underage. This takes places even when Pakistan has laws against child labour and slavery because the laws are weak and the government does not ensure that they are exercised (Faraz, 1999). In 1998, Nike, Inc launched a series of new initiatives which included: introduction of new minimum age requirements, adoption of the US Occupational Safety and Health Administration (OSHA) indoor air quality permissible exposure limits for all footwear factories, expansion of education programmes for footwear workers and the inclusion of NGOs and other stakeholders in current independent monitoring. The company has more than 70 individuals who are working on corporate responsibility issues all over the world. The managers and inspectors visit suppliers’ footwear factories on a daily basis. In the apparel sector, given much larger numbers of suppliers, Nike managers conduct onsite inspections on a weekly or monthly basis depending upon the size of the firm. The Corporate Responsibility division is an integrated group whose main objective is to bring Labour Practices together. The labour practices involve; the Nike Environmental Action Team (NEAT) and the Nike Foundation and Global Community Affairs. The Corporate Responsibility division was also founded to ensure the Nike Company presents a consistent corporate responsibility to its employees all over the world and its surrounding community. About half of Nike’s corporate responsibility group comprises labour and environmental compliance people base in 10 major countries. This includes countries with the largest share of production and labour intensiveness such as China, Indonesia, Vietnam and Thailand. Systems and Processes for Monitoring Labour Practices Following the various labour problems, Nike developed monitoring systems to be able to monitor employees closely and gauge the level of working conditions which the factories offer its workers. This involves the various potential suppliers of the company going through a number of audits. The audits involve an assessment of the environment where the factory is situated, an examination of the health and security issues of workers and the management that controls the factor. All these audits are carried out within certain periods of time. An analysis of the ratings of various suppliers of Nike shows that the working conditions that there is a variation in the working conditions and the rights of employees. Factories situated in areas where the rights of workers as human beings are properly addressed are highly rated in the audits made. Contrary to this, the factories in regions that do not have proper rules to govern the rights of human beings are found to have low scores in the audits. The low score of the regions with less human right is because of the problems it faces such as poor wages and bad working environments (Locke and Romis, 2007). In his comparison between two suppliers of the same region of Mexico, Locke (2007) states that the standard score of ratings of the location was 50 percent because it includes the high-quality scores of some suppliers that are situated in areas that have strict human rights and government laws. The company also expanded its independent monitoring system to include nongovernmental organizations such as Amnesty International which were empowered to make checks on Nike subcontractors. Additionally, all the twelve footwear factories in Indonesia hiked salaries by up to 15 percent to protect the staff from worst effects of the Asian financial crisis. Nikes’ development of code of conduct for labour practices was aroused out of a mixture of internal concerns and aspirations for improvement of labour conditions, external media and activist pressure on the company. In the aftermath of Andrew Young’s Asian visit, Nike hired a new labour practices manager while former body shop campaigner Harsh Saini became the company’s Asia spokesperson on labour practices. The major constituencies of Saini was the NGO engagement which would lead to the establishment of formal partnerships with other NGOs to address the educational, health and safety needs of the workers of Nike. In an effort to involve NGOs in the monitoring and auditing system, Nike has gone ahead to asking PwC to help create partnerships with NGOs to strengthen the social component of the process. The partnership in meant to involve the exchange of information and generation of new ideas concerning local labour conditions; review and critique of the labour practices monitoring standards and process; training of monitors and the execution of some of the components of the monitoring visits. However, even with the efforts of Nike to collaborate with NGOs, criticism about the company’s labour practices has not stopped. For example, some NGOs and labour groups have endorsed the Fair Labour Association while others have refused to participate in the association. In addition, Nike’s support for the global Alliance is also facing great scrutiny. For example, some NGOs have argued that the proposed council which of advisory may undermine forms of social organization within the factories concerned may increase conflicts. They have also argued that there is great potential for activists of the Global Alliance to adversely uphold efforts to promote freedom of the association at the factory level. Nike’s critics suggest that the project teams should be able to empower the managers of the factory and prevent its workers from forming their own association with the purpose of seeking improvements of their working conditions (Greenhouse, 1998). The relations of Nike with NGOs and other external stakeholders appear to be in a period of transition. Although Nike’s recent efforts to partner with some NGOs appear to be raising new concerns and challenges for the company, Nike’s participation in the Fair Labour Association, Global Alliance and the Global Compact are indicative of the kinds of positive relationships with civil society groups that Nike aims to build increasingly in the years ahead(Klein, 2000). Nike’s partners are also bound by specific standards of conducts as stated below. Contractors are not to use any kind of forced labour to get employees in their factories. The contractor is not allowed to employ any person below the age of 18 to produce footwear and also employ any person below the age of 16 to produce apparel, accessories or equipment. If at the time of Nike production begins, the contractor employs people of the legal working age who are at least 15, that employment may continue. However, the contractor will not hire any person who is younger than the Nike or legal age limit. To ensure that the age standards are followed, the contractor does not have any structure of homework for Nike production. The contractor provides each employee with payments that are fair depending with the kind of work they do. He or she should employ a clear, written accounting for every pay period and does not deduct from the pay of the employee for disciplinary infractions. The contractor provides each employee all legally mandated benefits. The contractor complies with working areas as stated in the laws governing workers; compensates the employees fully if they work overtime as stated in the law; when recruiting employees, they should clearly state the conditions that will force employees to work overtime. The contractor has written environmental, safety and health policies and standards and implements a system to minimize negative impacts on the environment, reduce work-related injury and illness and promote the general health of employees. The contractor maintains on file all documents that show that the rules governing the company are followed to the latter ensures that the documents can be effectively accessed by the management of the company or for monitoring and agrees to submit to inspections with or without prior notice (Qin, Fei et al, 2007). Limitations of Nike’s Ethical laws There is an increasing debate over Nike’s ethical laws. This is because the information that is collected through factory audits is done by Nike’s employees’ credibility of the data and may therefore become less accessible by any NGOs or any human rights organization. In addition, it is evident that the voluntary monitoring of the firm takes place under the pressure of developing NGOs and other human rights organizations. This however, creates stern debates stressing that the codes of conduct was not basically developed to protect the rights of underage children employed in the factories or improve the employees environments of working but instead it was made to prevent the damaging of the reputation of the company. (Esbenshade, 2004). Recommendations Nike Company should improve its Human Resource Management development. This can be achieved by increasing the effectiveness of monitoring and problem finding along with solutions over its vast suppliers. It will also be necessary if the company had an external monitoring system of every aspect of the company. This involves implementing a system where external auditors visit in every quarter and make sure that every aspect of the company be reviewed and critically evaluated. They should also ensure that the results of the assessment made are in line with the Company’s code of conduct. The company should also ensure that the results of the audit are made available to both the top level and the lower level of the corporate structure. Conclusion In conclusion, it is clear that Human Resource management is important in the running of a company which solely depends on the labour of employees. Human Resource Management policies are vital in a company and they should be designed to favour its employees. The policies should ensure that the well-being of the employees is paramount. It should be concerned with the working conditions of the employees, the wages they receive and should be able to ensure that underage children are not employed in the Company. Works cited Archie, Buchholtz and Carroll, Archie. Business and Society: Ethics and Stakeholder Management. New York, NY: South-Western College Publishers. 2008. Print. Esbenshade, Jill. Monitoring sweatshops: workers, consumers and the global apparel industry. Philadelphia, PA: Temple University Press. 2004. Print Faraz, Azam. Nike shoe and child labour Pakistan, American edu ted case study. Retrieved on March 9, 2014 http://www1.american.edu/ted/nike.htm. 1999. Greenhouse, S. ‘Two more unions reject agreement for curtailing sweatshops’ in New York Times, November 6, 1998. Print. Harry, Hummels and Timmer, Diederik. Investors in Need of Social, Ethical, and Environmental Information. Journal of Business Ethics 52 (1): 73 – 84.2004. Print. Klein N. No Logo: taking aim at the brand bullies. London: Flamingo. 2000. Print. Richard, Locke and Monica, Romis. Improving working conditions in a global supply chain. MIT Sloan management review. Vol 48. 2007. Print. Richard, Locke, Thomas, Kochan, Monica, Romis and Fei, QIN. Beyond corporate codes of conduct: Work organization and labour standards at Nikes suppliers International Labour Review146 (1-2): 21. 2007. Print. 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