More than 20 years ago, former General Motors vice chairman Bob Lutz made an appearance on Moneytalk radio show. At the time, Lutz was promoting his new book, Car Guys vs. Bean Counters: The Battle for the Soul of American Business. If you couldn’t tell from the title, Lutz’s position is clear and potent: American businesses should be run by product-oriented people with a passion and vision for creating a superior customer experience, NOT by cost-conscious MBAs.
At least for now, Nike appears to have turned that page with the recent retiring of CEO John Donahoe and the promoting of Nike veteran and culture champion, Elliott Hill. Nike’s stock jumped 9% on the news of Donahoe’s departure. Employees were reportedly so ecstatic over the change that they took the rest of the day off and celebrated.
Donahoe came to Nike with a wealth of experience—just not the right kind of experience. He got his MBA from Stanford’s Graduate School of Business and then worked for Bain & Company—one of the “Big Three” management consultancies that later became Bain Capital. In 2017, he was named president and CEO of ServiceNow, a Silicon Valley developer of cloud computing platforms. Donahoe also relinquished his chairmanship of PayPal’s board of directors, a post he occupied since 2015. If this is beginning to sound like the rap sheet of a left-brain individual, just remember–I only report the facts.
Donahoe made three massive blunders in his tenure as Nike CEO. Refusing to abide by the old adage, “If it works, don’t fix it,” he wasted no time in making dramatic changes to Nike’s core strategy. Instead of sticking to the company’s previous organization around individual sports and enhanced performance, he adopted a new model that segmented the business by men’s, women’s, and children’s products. The result destroyed Nike’s individuality by making them look like every other sports fashion brand. The reorganization also caused Nike’s product innovation to stall.
Donahoe also failed to realize the importance of its independent retailers in pushing goods through the channel. Instead, he put more sales focus online. Not only did independent retailers help Nike move merchandise, they were critical players in ensuring that customers stayed loyal to the brand. When Donahoe left these indie retailers hanging, Nike’s competitors moved in and picked up the dance.
Probably Donahoe’s biggest blunder was to initiate massive layoffs in an attempt to control costs. By May of this year, he had succeeded in cutting Nike’s global workforce by 5%. July saw another 750 layoffs, 40% of which were of director-level employees or higher. The layoffs not only broke the brand’s spirit, but also created a talent famine. Meanwhile, as Nike lost ground, some consumers shifted to more on-trend brands like Hoka. Sources said that Nike had lost its ability to resonate with Gen Z, who began to take interest in these smaller and more appealing newcomers.
The ripple effect to Donahoe’s mismanagement extended beyond the mothership. Three of Nike’s top creatives from Wieden and Kennedy (Ryan O’Rourke and Alberto Ponte, global creative directors; Dan Sheniak, media director), who had done stellar work for the brand for two decades, jumped ship in March to form their own agency. Though these guys are too classy to say it out loud, it’s more than likely that Nike’s precipitous decline in creative spirit had fueled their departure.
Fast Company’s Mark Wilson, in a profile on Donahoe, gave this blistering epithet: “He’s more calculator than creator.”
But be not dismayed. This story may have a happy ending yet. Replacing Donahoe at the helm is Elliott Hill. Hill’s remarkable story with Nike started humbly enough. In 1988, he was a lowly sales intern with the company. But by 2020, Hill had worked his way up to president, consumer and marketplace. He even got close to the top post, but Nike gave Donahoe the job when Mark Parker stepped aside as CEO to become executive chairman. At that point, Hill left the company—probably in disgust.
I, along with Nike’s remaining 84,000 global employees, am glad that Hill is back. Time will tell if he can repair the damage to Nike’s DNA done by his predecessor. The moral of this story: never hire a bean counter to run a creative company. I’m betting that Elliott Hill can genetically engineer a Nike comeback. I’ll leave Elliott with a brief word of encouragement before I sign off—an inspirational tagline from an older Nike ad: “It’s a hill. Get over it.” Swoosh.
