Strategic HRM at Nike: Global vs. Local Practices

Introduction

The human resource of the modern-day organization is no longer merely the force operating machines; employees represent the creative force behind organizational ideas and plans. Staff members bring increasing value to the firm through their intellectual capital, and today they are widely regarded as the most important organizational asset (LaDou, 2004, p. 636).

Given the importance of employees, organizational leaders recognize the need to develop and implement comprehensive human resource strategies. These strategies serve multiple purposes and govern the relationship between employer and employee from before the employment contract is signed through to its conclusion. Human resource strategies focus on recruiting, hiring, and retaining the best-skilled employees, while also striving to motivate staff and enhance their performance. Overall, the general scope of strategic human resource management (SHRM) is to align the individual goals of employees with the overall goals of the organization, thereby ensuring that organizational objectives are best achieved (Salaman, Storey, and Billsberry, 2005, p. 328).

The field of strategic human resource management has grown exponentially in recent years as academics and practitioners alike have become increasingly interested in the mechanisms of managing people. The current paper extracts some of the more notable ideas from the specialized literature and then applies them to international sports apparel manufacturer Nike Inc. Within the Nike context, focus is placed on four specific dimensions of human resource management: standardization of HR practices, differences in approaches, global application of practices, and the strategic advantages of HRM measures.

The concept of strategic human resource management has been approached by numerous researchers, yet the academic community has not arrived at a universally accepted definition. Some of the more notable definitions include the following:

Literature Review

"Strategic HRM is an approach that defines how the organization's goals will be achieved through people by means of HR strategies and integrated HR policies and practices" (Armstrong, 2008, p. 34).

"Strategic HRM provides the all-important framework for applying people management practices to achieve business outcomes. It is concerned with the intentions of the organization on the overall direction it wishes to take in order to achieve its objectives through people" (Armstrong and Baron, 2002, p. xv).

"Strategic human resource management can be defined as the linking of human resources with strategic goals and objectives in order to improve business performance and develop an organizational culture that fosters innovation, flexibility, and competitive advantage. In an organization, SHRM means accepting and involving the HR function as a strategic partner in the formulation and implementation of the company's strategies through HR activities such as recruiting, selecting, training, and rewarding personnel" (Sinha, 2007).

In essence, strategic human resource management can be understood as an effort to integrate the management of employees in a manner that best meets the organizational goals of the employer (Durai, p. 24). SHRM draws heavily on its parent discipline of human resource management, but distinguishes itself through its emphasis on the strategic dimension of HRM implementation. In this regard, Mike Millmore identified four specific principles of strategic human resource management:

Strategic human resource management is essential to helping a company achieve its objectives. In the context of the modern dynamic marketplace, however, economic agents face mounting pressures — among the most significant being globalization. The forces of globalization compel firms to face greater competition, to adapt to new markets, and to place even greater emphasis on efficient human resource management. Accordingly, the application of strategic HRM by firms operating internationally is increasingly pivotal.

Multinational corporations face a dual challenge in the global environment. On the one hand, they must align their HRM practices with their organizational goals and business principles. On the other hand, they must also align those practices with the specific characteristics of the industries in which they operate. To serve this dual purpose and build global competitive advantages, firms are advised to pay close attention to five critical issues: adapting strategic HRM practices to local differences; exploiting economies of scale; exploiting economies of global scope; identifying optimal locations for resources and activities; and maximizing knowledge transfer throughout the organization (Schuler and Jackson, 2007, p. 140).

Within the field of globally applied HRM, a distinct concept has emerged: strategic global human resource management (SGHRM). Though rarely formally defined, SGHRM is understood as the application of strategic HRM within the conduct of international business operations. As forces of globalization intensify, the role of SGHRM is expected to grow.

In this context, Timothy Kiessling and Michael Harvey note that the global business community has generally based its HR practices on theoretical frameworks developed in more economically advanced Western nations. These models, however, were constructed within Western cultural values and behavioral norms. As the international business community becomes more integrated, the wholesale application of Western HRM practices may no longer be appropriate. Kiessling and Harvey therefore propose a mixed-methods approach — combining both qualitative and quantitative methods — for exploring HRM within the international community (Kiessling and Harvey, 2005).

Overall, strategic global human resource management reflects functions similar to those of traditional HRM, with added complexity arising from differences in local cultures, industry contexts, and managerial orientations toward global strategy. Rebecca Johnson (2009) argues that the key success factor is balancing integration with adaptation to local conditions: "The key issue for organizations is to effectively balance the needs for the whole organisation to be integrated and controlled as one, while simultaneously allowing the subsidiaries to differentiate themselves in order to adapt to the local environment" (Johnson, 2009, p. 77).

Standardization of HR Practices at Nike

Nike Inc. is one of the largest corporations in the world, known to consumers for its wide range of high-quality sports shoes and apparel and recognized by economists for its highly influential business model. Nike's core strategy has revolved around offshoring as many operations as possible. The company produces no apparel within the United States; all products are manufactured in developing countries where cost efficiencies can be achieved.

This approach has drawn substantial criticism, including accusations of exporting American jobs and perpetuating poverty in outsourcing countries through minimum-wage salaries and difficult working conditions in its overseas factories (Beach). Regardless of public perception, Nike remains an emblem of the successful American multinational corporation.

The standardization of human resource practices is a complex undertaking with both positive and negative implications. According to Pawan S. Budhwar (2004), the more notable benefits of standardized HRM include the following:

Alongside these advantages, Budhwar also identifies notable disadvantages:

Nike's international operations are primarily focused on manufacturing, while marketing, managerial, and design functions are performed within the United States. Given the similar functions carried out across manufacturing plants, several HR practices could reasonably be standardized. At the same time, because the plants are located in different regions, adaptation to local conditions — including minimum wage requirements in each country — remains essential. HR practices that could be standardized across Nike's international plants include recruitment and selection processes, personnel training for both line workers and line managers, compensation packages (base salary plus additional incentives), and organizational culture.