South-Western - Management  
Another Outsider Falls Casualty to Nike's Insider Culture
Topic Internal Environment and Culture
InfoTrac Reference A141196536
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Key Words Insider culture, cult of personality
Introduction Nike is known for its insider culture. Executives with the company often say it takes 20 years to become an insular part of the team there. When William Perez, the chief executive chosen to replace founder Phillip Knight tried to change the way things were done at the company, he was shown the exit after only 13 months in charge.
News Story

Nike executives are known for saying it takes 20 years to become an insider at the notoriously insular sneaker company. William D. Perez, who was hand-picked by Phillip Knight, the founder and father of Nike, as his successor and the company’s chief executive, lasted only 13 months. He will be replaced by Mark Parker, who has been at the company for more than 25 years.

Mr. Knight, Nike’s charismatic founder, rarely talked with executives at national chains that sold his shoes. In one of Perez’s first gestures on the job, he visited the headquarters of several chains, upsetting Nike’s sales staff. Mr. Knight has said that Mr. Perez failed to “wrap his arms around this place” and that he was put in “a situation where the cultural leap was too great.”

But several former executives say that the abrupt resignation, which Mr. Knight effectively ordered, was more about the inability of Mr. Knight to accept his role as chairman, and no longer as acting chief executive. The founder is unwilling to give up the identity that he has established in his way of running the company.

Perez quarreled with Nike executives over several issues, but at the heart of the disputes was his unwillingness to adapt to the culture, which prizes product innovation and the sanctity of the Nike brand. As an example, Perez believed that the company had saturated the high-end sneaker market and should grow by introducing more exclusive lines to lower-end retailers. Some executives felt this strategy “cheapened the brand.” On the positive side, Perez was credited with trimming expenses during his tenure at Nike and cultivating sales of the brand in China.

Perez’s short tenure at Nike sheds some light on the cult of personality around Phillip Knight, who has become an icon at Nike. Even though he stepped down as chief executive in 2004, he has remained a dominant figure, keeping executives on a short leash. Those who challenge the Nike way of doing things find themselves sidelined or forced to leave.

Questions
1.

1. How is a company’s culture established?

2.

The article suggests that Nike has an “insular culture.” Define this type of culture and name at least two ways that you would recognize this type of culture in action.

3.

Mr. Perez wanted to court lower-end retailers by offering them exclusive lines, which others at the company saw as getting away from Nike’s established culture of product innovation and the sanctity of the Nike brand. From your readings about the ways that cultures are established and changed, suggest some methods Mr. Perez might have used to win over his colleagues at Nike to try his way of thinking

Source “Another Outsider Falls Casualty to Nike’s Insider Culture,” The New York Times, January 24, 2006, page C4(L).
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