Another Outsider Falls Casualty to Nike's Insider Culture

By MICHAEL BARBARO and ERIC DASH

Nike executives, who are fond of starting meetings by playing videos of Olympic runners triumphantly crossing the finish line, say that it takes 20 years to become an insider at the famously insular sneaker company.

William D. Perez, Philip H. Knight's hand-picked successor as chief executive and an avid marathon runner, was given 13 months - enough time for a sprint.

After repeated clashes with Mr. Knight, Nike's founder and the father of the company's clubby, competitive culture, Mr. Perez stepped down and will be succeeded by the co-president of the Nike brand, Mark Parker, who has been at the company for more than 25 years.

One area of disagreement was Mr. Perez's effort to strengthen ties with Nike's biggest retail clients. Mr. Knight rarely spoke with executives at national chains such as Finish Line. In one of his first gestures as chief executive, Mr. Perez visited the headquarters of several chains, charming the stores but upsetting Nike's sales staff.

Mr. Knight, in a conference call yesterday, said that Mr. Perez had failed to "wrap his arms around this place" and that his tenure was "a situation where the cultural leap was too great."

But according to several former executives and industry analysts, the reasons for Mr. Perez's abrupt resignation - which Mr. Knight effectively ordered - say as much about the inability of Mr. Knight to adapt to his role as chairman as it does about Mr. Perez's ability to fit in.

"It is more about Phil Knight's ego than Perez's performance," said Jeffrey A. Sonnenfeld, an associate dean at the Yale School of Management who had spoken to Mr. Perez about once a month over the last year. "It is a question about identity. Some people won't relinquish until they die."

For his yearlong tenure, Mr. Perez will receive a compensation package worth more than $14 million, with Nike reimbursing him $150,000 for club memberships and spending $3.6 million to buy his house in Oregon and pay for remodeling.

Mr. Perez quarreled with senior executives over several issues, but at the heart of the disputes, according to several people briefed on the matter, was his failure to adapt quickly to a culture that prizes product innovation and the sanctity of the Nike brand.

Mr. Perez, for example, believed that the Nike brand had largely saturated the high-end market - Nike controls 90 percent of the market for sneakers priced over $100 - and should grow by introducing more exclusive lines to lower-end retailers.

So he lowered the minimum purchase requirement for chains like Famous Footwear and Shoe Carnival to 10,000 from 25,000. But some Nike executives believed the move "cheapened the brand," said John Shanley, an analyst at Susquehanna Financial Group who tracks the company closely.

At the same time, Mr. Perez upset both of Nike's co-presidents, Mr. Parker and a fellow veteran of more than 25 years, Charlie Denson, by seeking a review of the company's operations, particularly its European businesses, which have lagged behind those in the United States.

"Anything he was asking, anything he was looking at was upsetting the two co-presidents," Mr. Sonnenfeld said. "Basically, anything he did was not the way it was done."

Mr. Perez, the former head of S. C. Johnson & Son, the consumer products company behind Ziploc bags and Windex glass cleaner, was credited with trimming expenses at Nike while cultivating its brand in China, where Nike made products but had not sold them.

His short-lived tenure sheds some light on the cult of personality around Mr. Knight, who has become as much an icon of Nike as the swoosh that appears on its shoes. He stepped down as chief executive in 2004, but executives said he remained a dominant figure behind the scenes.

As a result, outside executives have been kept on a short leash - and, when they challenge the Nike orthodoxy, find themselves sidelined or forced to leave.

Ellen Turner, recruited by Mr. Knight in 1999 from Kinko's to become Nike's chief marketing officer, lasted six months. George Porter, persuaded to leave his job as president of Levi Strauss in 1997 to run Nike's American operations, only made it 11 months.

"It is a very insider culture," said one former Nike executive, who left the company within the last five years and spoke on condition of anonymity, citing a new employer's rules prohibiting media interviews. "If you don't win them over quickly, you're in trouble."

Mr. Parker, who succeeds Mr. Perez, is a consummate insider. He joined Nike in 1979 and has crisscrossed the company, holding management positions in design, product development and marketing.

Mr. Knight, who acknowledged that he sought the resignation of Mr. Perez, said that Mr. Perez's trouble fitting in at Nike "led to confusion."

"We were operating at 80 percent, and I did not see that getting any better."