May 26, 2022

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Fine Art Of Business

Nike Insiders Describe Layoffs Under CEO John Donahoe

4 min read
  • Nike laid off more than 700 employees after a 2020 reorganization.
  • Numerous current and former employees characterized the layoffs as “cold.”
  • Nike announced the layoffs months before executing them, which employees said was stressful.

About six months into his tenure as Nike’s CEO, John Donahoe unveiled the Consumer Direct Acceleration. The CDA, as it came to be known, was basically a sweeping reorganization to promote direct and digital sales. It cut layers of corporate bureaucracy, an effort, the company said, to become a “nimbler, flatter organization.”

While few argue with Nike’s need to streamline operations and push harder into digital sales, the plan included layoffs that continue to reverberate throughout the company. 

It’s unclear how many employees Nike laid off as part of the reorganization. In a mass-layoff notice filed with its home state of Oregon in 2020, the company said it would part with 700 of the 12,800 workers at its headquarters, many of them with decades of experience. 

Nike listed 11,700 employees at its world headquarters on its most recent annual report, down from 12,800 in 2020. 

Donahoe is the second outside CEO in the company’s history, and his plan for a future of direct and digital sales is impossible to achieve without rearranging the company’s organizational chart and eliminating head count. Insiders acknowledged that reality and the success Donahoe has had, but some characterized the layoffs as “cold,” a departure for a company known for employee longevity. 

“I felt like it was very scripted,” an employee who was among those laid off said. “There was a cue card in front of the VP reading off.”

Unlike in previous reorganizations, employees weren’t given the option to take early retirement or accept lower positions to stay with the company, another former employee said. Multiple employees said the layoffs seemed indiscriminate and not reflective of employee skills or value to the company. 

“It seemed like a spreadsheet exercise,” a former employee said. 

Insider spoke with 15 current and former employees, as well as industry analysts, about the reorganization and Donahoe’s tenure as CEO. Insider granted anonymity to Nike employees who were not allowed to speak with the media without approval. Former employees were given anonymity to allow them to speak freely and not jeopardize professional relationships. Their identities are known to Insider.

Nike announced the layoffs in July 2020, but didn’t complete them until January 2021, according to the mass-layoff filing. 

“It was clear it would affect certain groups of people, but it wouldn’t take place until X time. So it was like people were sitting in a boiling pot,” a current employee said. 

While some insiders defended the lag as a way to give employees time to prepare, others said it provoked unnecessary tension and stress.

“The message was, ‘Hey, you might get laid off in six months,’ so you fight to the death in between those six months to prove you’re not someone who should get laid off,” the current employee said. 

The laid-off employee who spoke with Insider said the company provided adequate resources to those who lost their jobs, including severance and résumé-writing help. 

“They do want to help,” the former employee said. 

Nike did not respond to requests to interview Donahoe, but in a 2018 talk with a group of Bay Area entrepreneurs, Donahoe said layoffs were part of the CEO’s job.

Donahoe said it was healthy for growing companies to have regular turnover at the highest level, a departure from Nike’s roots.

“My job, if I don’t do it, I’m holding the team back,” he said. “I’m the sports coach. I have to pick who the starters are. I have to choose who plays. And at some point, you have to put the best players on the field.” 

Donahoe served as CEO of the consulting firm Bain early in his career and attributed his position on layoffs to those formative years.

“I have fired so many people in my career,” he said. “Remember, I grew up at Bain. For every 10 people we hired, we managed half out within two years, we managed 75% out within five.”

In conversations with Insider, current and former employees said this was a shift from how the Nike cofounder Phil Knight handled layoffs, which have historically been rare at the company.

In 1998, Knight, then the CEO, stood in front of the company’s employees with a quivering voice and apologized for laying off 1,600 of the company’s 21,800 employees. At the time, Nike had $9.5 billion in annual revenue.

“We were stunned to hear the CEO say it was his fault and he was sorry,” a former employee who was in the audience that day said. 

Knight even apologized for the layoffs in the first paragraph of his annual shareholder letter that year.

“This year produced considerable pain,” Knight wrote. “Soft markets, sagging futures orders, sliding economies, operating profits down 37 percent. But, the most painful by far was the layoff of 1,600 friends and co-workers, people whose lives and plans were changed. It was an agony felt in every corner of the company.”

Do you work at Nike or have insight to share? Contact reporter Matthew Kish via the encrypted messaging app Signal (+1-971-319-3830) or email ([email protected]). Check out Insider’s source guide for other tips on sharing information securely.

https://www.businessinsider.com/nike-layoffs-john-donahoe-2020-reorganization-2022-1

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