John Donahoe had a lot of work ahead of him. In January 2020, when he started as CEO of Nike, the sneaker giant was facing its #MeToo moment and a series of scandals.

That's when the pandemic hit. Industry insiders wondered how an outsider could navigate Nike's insular culture and fast-paced organizational structure at such a dangerous time.

But in the face of all the financial results, Donahoe has held up. The company's shares have risen 46% since it began its journey, generating more than 75,000 million for shareholders (just over 66,000 million in euros). Additionally, the company's quarterly dividend is up approximately 25% to $0.30 per share.

For some, however, success has come at a cost. Some experts worried about an exodus of Nike veterans, which would mark a turnaround at a company known for employee longevity.

So the question is no longer whether Donahoe can navigate Nike's culture, but how he is changing it.

Donahoe's predecessors, co-founder Phil Knight and former CEO Mark Parker, were famous sports fans and sneaker lovers. Donahoe, by contrast, has been described as a "technocrat" and relatively oblivious to the sneaker culture that he defines as the Nike base.

Nike employees and analysts agreed that Donahoe has established himself as a change agent and financial success. He has conducted the largest corporate review in Nike's recent history during a global pandemic while dealing with global supply chain chaos.

Insider has spoken to 15 current and former employees for this story, as well as industry analysts. This medium granted anonymity to Nike employees who cannot speak to the media without approval. Former employees were given anonymity to allow them to speak freely and not jeopardize professional relationships.

Nike, for its part, has not responded to emails seeking comment for this story or requests to interview Donahoe.

A new beginning and then a crisis

On the first day of Donahoe, January 13, 2020, Nike was still mired in the aftermath of a workplace scandal that erupted in 2018 when The Wall Street Journal and The New York Times exposed claims about a toxic culture of worked.

Financially, Nike was about to fall $12.6 billion short of its goal of reaching $50 billion in sales by 2020, a mission announced in 2015 by Donahoe's predecessor, Parker.

Donahoe, then 59, offered the opportunity for a fresh start, since although he had been on the company's board since 2014, he was not associated with the scandals.

In addition, his resume included a succession of CEO roles: first at the Bain consulting firm; then eBay and later cloud computing company ServiceNow. All of this combined with the digital skills Nike needed to address seismic shifts in consumer behavior.

However, his predecessor, Parker, was not far behind: he almost tripled the company's income to 39,100 million dollars (34,464 million euros) in 14 years, while generating an increase of 800% in the price of the company's shares. However, many felt that Donahoe's skill set was a better fit for the current time.

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Though Parker, who now fills his role as chief executive, remains popular at Nike, some have characterized him as aloof. Donahoe's outgoing and affable personality, coupled with his willingness to make tough decisions, seem like the necessary tonic.

So when Donahoe took office he embarked on a world tour, visiting China and Japan in his first week. He also spent time with the design, innovation and product teams. The following month, the manager participated in a star-studded event in New York City.

Current and former employees congratulated Donahoe on this round and said he created goodwill. However, early critics noted that Donahoe comes off as a "technocrat" who doesn't connect with the company's culture.

In fact, at the company's 2019 takeover, Donahoe listed one of his favorite Nike products: a pair of golf pants.

But looking unfashionable to sneakerheads quickly became the least of Donahoe's problems. On March 15, Nike had to close stores in Western Europe and the United States in the face of the global advance of the pandemic.

Even Donahoe's harshest critics gave him credit for his handling of the early days of the crisis.

Nike's radical response included philanthropic donations, manufacturing protective equipment, closing stores ahead of the competition, and continuing to pay retail workers -- including bonuses at the end of the fiscal year, despite disrupted sales and profits. .

"Salary continuity was important," said a former employee.

In mid-2020, as the Black Lives Matter movement gained traction, Donahoe and Nike announced a $40 million commitment to black communities, with the company's Jordan brand pledging a $100 million matching investment. , respectively).

Also, in response to continued criticism of the lack of internal opportunities for black employees, Donahoe stepped up hiring and promotion. Some current and former employees said Nike still has a lot of work to do while others praised the progress.

In its most recent corporate responsibility report, Nike said that 26.9% of directors or above are racial or ethnic minorities, an increase of more than 5 percentage points in 5 years.

"He's done a lot to give voice to some of the social issues," said a current employee. "Nike is trying to push it forward, and it seems to be giving the platform to the people who are working on it."

"I've fired a lot of people throughout my career"

In June 2020, Nike reported a quarterly loss of 790 million (696 million euros), the second largest in the company's history, due to store closures as a result of the pandemic. A small gain was expected on Wall Street.

"It's a huge mistake," Edward Jones research analyst Brian Yarbrough said at the time. "I don't think anyone expected them to have a loss."

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— .Tris Tue Feb 02 21:49:07 +0000 2021

At the subsequent conference call with analysts, Donahoe had a plan ready: He announced Consumer Direct Acceleration, an enhanced version of the company's previous business plan, which focused on increasing direct and digital sales.

The plan included cutting ties with retailers, many of them small businesses that had helped build the Nike brand for decades. But its greatest impact fell at the employee level.

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Nike is known for a complex organizational structure. The change Donahoe introduced was meant to remove layers of corporate bureaucracy and make decisions more streamlined. This helped products get to market faster and better keep up with changing consumers.

It's unclear how many employees Nike laid off as part of this reorganization, but in a mass layoff notice filed in its home state of Oregon, the company said 700 of its then 12,800 workers at its headquarters had been laid off, many of them They have decades of experience.

"Unlike previous reorganizations, employees were not given the option to retire early or accept lower positions to stay with the company," a former employee has noted. Several workers said the firings appeared indiscriminate and did not reflect the employees' skills or value to the company.

"It looked like an Excel sheet," said one former worker. The contrast was stark with Knight's handling of layoffs, which have historically been rare in Nike's history.

In 1998, Knight, then CEO, stood before company employees with a trembling voice and apologized for laying off 1,600 of the company's 21,800 employees. At that time, Nike had 9,500 million in annual revenue (8,373 euros).

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

"I've laid off a lot of people in my career," he said in a 2018 talk with Bay Area businessmen. "Remember, I grew up at Bain. For every 10 people we hire, we get half done in 2 years, and 75% in 5."

Donahoe's supporters admit the reorganization was a "little cold" but noted that it took place during a pandemic while most people were working remotely.

"We had a reorganization that absolutely needed to be done, but it wasn't clean and it still isn't clean," said a current executive. "But the problem is that any time you do something that big, it's not going to be easy."

Some Donahoe supporters also said that criticism of the reorganization's execution misses the most important point: the new strategy works.

Direct and digital sales prove it: In North America, online sales increased 40% in the company's most recent quarter. Direct sales now represent 48% of the North American market.

To further drive those gains, Donahoe is investing heavily in technology across the company, many of which are unseen improvements to the company's supply chain.

Nike has also dived into the metaverse and acquired digital companies, including RTFKT, which is at the forefront of digital collectibles. Recent patent infringement lawsuits against Adidas and Lululemon show that Donahoe is willing to spend money to protect Nike's intellectual property, which is another way for him to capitalize on the company's technology.

Donahoe's Next Big Challenge

Nike

As his two-year anniversary approached, Donahoe again faced challenges, starting with China. Nike reported a quarterly sales drop of 24% in China in December.

"Clearly there is a nationalist movement in China to support Chinese brands, and it's a problem for all brands. Before the pandemic, most brands were getting virtually all of their growth out of China," said Matt Powell, senior advisor at NPD Group, to Insider.

It's even more worrying for Nike given reports of Chinese consumers burning sneakers after Nike said it would not use cotton from the Xinjiang region, where there have been allegations of forced labor.

China accounted for nearly 19% of Nike's revenue in the most recent fiscal year, but more than 48% of pre-tax revenue. Last week, HSBC downgraded Nike, highlighting weakness in China.

"They have to get China right," said Poonam Goyal, industry chief and senior e-commerce and entertainment analyst at Bloomberg Intelligence.

Donahoe will also have to address the losses of Virgil Abloh and Travis Scott. The former died unexpectedly of cancer in November, and Nike halted its collaborations with Scott after a tragedy at his Astroworld festival, leaving Nike without two of its most popular sponsors.

Donahoe will meet these challenges with a significant loss of institutional knowledge. In the first half of 2021 alone, at least 20 senior executives left the company. And the exits seem to be picking up speed. At least 20 other director-level executives have left in the past three months.

Several voices compared the situation with the loss of "1,000 years of experience" in just 18 months. "It's happening in all the big companies," said one current executive, adding that Nike is not escaping.

The company's insistence on sticking with its back-to-the-office plans hasn't helped boost morale or attract new hires, especially in-demand tech workers.

On December 15, Nike employees received an email telling them to return to the company offices on January 11, despite the fact that only 54% of employees indicated in an internal survey that the plan gave them enough flexibility.

The company changed course 2 days later when Omicron fired. It was one of the last big companies to delay its plans to return to the office.

Employees and analysts said the brain drain could affect Nike's product line, the cornerstone of the business. NPD Group's Powell argues that "the pace of innovation has really slowed down." "There really hasn't been any major innovation from them this year," he said.

Experts worry that the brain drain will affect product development. It usually takes 18 months to design new shoes. A former designer said the loss of shoe talent would not be visible on store shelves for at least a year.

"You'll start seeing it probably around the fall or holidays this year," the former designer said. "What Donahoe does next will be crucial, Nike watchers say.

"You're at that point where you need to figure out what's critical to the success of the company," said one former employee. "You didn't get to where Nike is without having this intangible thing that you're not going to read about in a business book. It's that magic. It needs to figure out how to preserve that."