History of the sonoco packing giant
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Published: Mon, 5 Dec 2016
Sonoco, although a powerful packaging giant, experienced a major challenge faced by the HR function which is negative consequences of decentralization and shift to a more divisional structure throughout the 1980’s resulting in HR being just seen as an administrative tool ignoring also its significance as a cost and productivity driver.
It is largely due to its existence of multiple HR function in each department with its own HR systems, budgets and performance management, the non- cooperative competition surged among divisions lead to complete loss of motivation and morale amongst some employees.
In addition to this, the largely complex staff structures in many departments resulted in an upward manipulation of many performance measurements being tweaked to pass on the advantage to certain employees or to remove certain employees from the system. The challenge for Cindy Hartley here was that the decentralized units of HR appeared incapable of adding value to Sonoco’s new environment which was marked by uncertainty given the aggression of competitors and customers demanding higher degree of flexibility. There was also lack of alignment of people and Sonoco’s values. This also brought in lack of alignment between business strategy and HR strategy within the organisation.
By the end of 2000, Sonoco was at a stage where it had to take a decision on whether to implement centralized HR function or a Hybrid structure in which the divisions would have comparatively higher direct involvement with staffing, succession planning, personnel programs, compensation and benefits.
Answer to Key questions:
Q 1. How successful were the HR changes at Sonoco? Was the sequence of changes the right one? Why / Why not?
After a few months of due diligence, Hartley identified three main priorities. The first priority was changing the compensation and performance system, which can really bring up the true performance of the employees. The second priority was to create an employee development process to further refine the employees’ skill and knowledge so that employees can manage themselves. The third priority was succession planning to identify and develop the next generation leaders. Therefore, a strong talent pool creation was essential to identify the tomorrow’s leaders who will be ready to take up the leadership positions with perfect preparedness required for the position. Linking the HR process with people, culture, values and business objectives has been systematically done under different headings as shown below:
Performance Planning/Feedback and Compensation : Employees’ performances were measured against organizational core competencies and individual key result areas. The performance feedback was taken based on 360O feedback system from supervisor, peer and subordinate. Compensation review aimed at achieving a more diverse but fundamentally collaborative workforce. Compensation review cycle carried out, based on semiannual review of performance, value, ethics, focused on improving quality of work-life.
Identification & Selection of Tomorrow’s Leaders : Career development and panning was done through two-steps process viz., individual career planning and organizational reviews of developmental process.
Development Process : This process executed through development on the job, online performance and learning, on the job training to accelerate business strategies & top-line growth and training for the team skill development and finally reward & recognition to facilitate career movement and development.
In order to understand how successful were the HR changes at Sonoco and whether the sequence of changes is right one or not, we need to first understand the HRM practices are in consistent with each other. Then we must analyze the business performance and growth of the organization vis-à-vis HR practices.
Normally in the successful organization, the bundle of HRM practices is consistent with each other. It means that HRM practices in an organisation must reinforce one another. For example, an organization, which relies on highly-skilled employees finds it necessary to have highly effective recruitment and selection to select the most highly-skilled employees. This needs to be reinforced, however, by developing employee skills after selection, by training them and by using performance management to encourage acquisition of new skills, as well as organising work in ways which motivate them and allow them to use their skills effectively. Proper implementation and execution of HRM practices will have positive impact on employees thereby creating high performance work systems practices. If we compare the HRM practices at Sonoco with the ‘bundle of HRM practices’ shown below, it appears that the sequence of changes taken up in Sonoco is right one.
But the success of the Sonoco’s HR practices must be decided based on the analysis of the effectiveness of its HR practices to create highly High performance Work System to produce superior organizational performances. Therefore, Sonoco must conduct organizational health survey to assess the commitment of employees, their relation with management, their satisfaction level and empowerment to take decision. Though the sequence of changes implemented in HR front by Sonoco was right one but it must have focused on the assessment of its recruitment process such as assessing which recruitment techniques are generating the greatest number of applicants, assessing how long employees who are recruited by different measures stay with the organisation and how well they perform and assessing what proportion of applicants from different sources are actually hired. It must have also focused on the benchmarking of absenteeism and compensation to assess the performance of the organization apart from the turn over alone as the performance indicator.
On the other hand, Sonoco Products Company did not perform any statistical analysis of its succession planning process. Instead, its HR department supported a functional measure of the system to determine whether candidates are being placed in appropriate open positions and whether they are successful in those positions. When the company implemented its process, divisions reported a 75 per cent saving in time, compared to time spent in previous years. In addition, Sonoco has an 80 to 90 per cent success rate in performance and promotability.
Thus it is evident that even though the HR changes at Sonoco were successful and sequence of changes was in right direction but there is a further huge scope for improvement as Sonoco needs to inculcate a strong assessment and review system for its HRM practices especially to strengthen its recruitment and succession planning processes.
Q2. What would have done differently? Why? Consider the consequences of your choice?
Cindy Hartley had identified the three priorities in Sonoco Products Company
1. Compensation and Performance Management System.
2. Employee Development Process.
3. Succession Planning.
Performance Management System and Compensation
As per my view that HR strategy to be governed by corporate HR policies and these strategies are designed to govern on Business performance, economic scenario, growth etc. Group HR provides specialist services to the businesses in the areas of staffing, management development, leadership development, rewards and benefits, job analysis and evaluation, performance management, organisational development, ERP platform, etc
Corporate strategies are drilled down to all other Business level.
Business strategies depending on Competitions, Customer needs, and economic feasibility, market and social risk, environmental issue, process and service capabilities etc, This Business strategies are percolated to Unit level strategies. Unit level strategies are broken down into Key Result Areas ( KRA’s ) of individual.
The KRA’s and smart goals of individual are derived through X matrix for linkages with the Unit Strategies. Based on guidelines derived from Vision, Mission and Policies the strategic initiatives are derived into highest level targets. The deployment starts from linkage of CEO objectives (Objectives of the organisation) with that of Vice Presidents’ (Functional objectives) and so on.
The control points of a level are considered as management points of sub-ordinates and accordingly activity deployment reaches to the last person in the organization. Mid-term and annual reviews, revisiting and performance evaluation is carried out for all employees. PMS exercise culminates with a feedback from all employees for more transparency and strengthens the system.
The compensation shall be directly linked to Business performance, Unit performance and Individual performance. This transparent PMS system will create a healthy competition between employees to give better result and performance. A systematic plan to be required for Non performers to improve their performance. An Employee rated below average are motivated to improve through counselling, training, coaching etc
Compensation, performance appraisal and motivation in an international
setting may differ from the national setting due to legal requirements, cultural
issues and geographical issues. Monetary incentives are not the only tools available to management for motivating performance. There are other factors than money – in particular, the job satisfaction, career growth, recognition, other incentives/benefits, job security etc also to be considered. An incentive system designed for one cultural context may be inappropriate when transferred to some other. Using cultural models, organisations can understand and identify the differences in motivating factors across cultures and implement appropriate incentive approaches.
Employee Development Process
It’s people who make the difference. This difference is evident through competencies, value adherence, entrepreneurship, ability to lead, networking and team working culture. The Organisation to be builds partnering relationships with employees through an approach of empowering people with well defined responsibilities, authorities and accountabilities. Ownership concept is promoted
through people involvement in all spheres of management. Initiatives are driven through people oriented processes wherein performances are measured and recognized. Career Paths: Identified through Competency Assessment and Discussion Document (CADD). The organization shall have a system of identifying skill levels of all employees through an Annual Competency Assessment process. Gaps identified are bridged through planned training and development programs. The organization will be focused on multiskilling its employees for ensuring alignments with changing technology and business scenario. Cross Functional Multiskilling is promoted through systematic job rotations and on-the-job training and deployments. The organization will implement various systems of competency assessment through Q12, 360° feedback & CADD. Gaps are filled through training, systematic cross team exposure, assignments, KIPs, higher education & coaching etc. The Organisation may focus is on creating a learning organisation through systematic approach of identifying training needs, imparting training and measuring its effectiveness to continuously enhance the skill & competency levels of its employees.
Succession planning ensures the availability of experienced and capable employees that are prepared to assume these roles as they become available. Succession planning is a necessary part of an organisation’s ability to reduce risk, create a proven leadership model, smooth business continuity and improve staff morale. Succession planning has to ensure that the right people with the right skills are in the right place at the right time. It can be done in three ways: role-based, individual-based and team-based. The first is about identifying key positions, the second focuses upon key people, and the last involves replacing a section of people or resources.
The other essential factors are: (a) accountability, as the succession planning programme requires ownership at all levels in the Organisation. Each manager should be responsible for assessing and developing the talent in his or her team. (b) Constant attention, as it can be tempting to overlook the need for succession planning in the face of more immediate needs. Keep the succession process simple and rely on coaching and development are two best practices. The Organisation has to develop a system to nurture and retain the talents through the structured methodologies for competitive advantage.
Proper succession planning in all functions across the organization needs to be done concretely to face the future competition especially in the globalization of business. The bench strength of current and future leaders gives a competitive edge to every organization.
In a highly competitive environment, the enduring source of competitive advantage is the ability of organization to continually generate new advantage. To be skilful at generating new advantage organisation have to learn, restructure their internal and external relationship, and apply new knowledge and insight to everyday functioning. An organization needs to collectively learn new ideas, values and behavior for change to take place. The organization shall be able to create, identify, retain and leverage knowledge on a continual basis to remain competitive in global deregulated market place of today. Learning organisation address the issues of organizing principles and practices so as to maximize their ability to collect and interpret relevant information and act accordingly. In such dynamic context, several issue such as higher productivity, efficiency, innovation, flexibility, creativity etc have gained immense importance. The organization have to addressed the Learning challenges on marketing, operation, work force capability, professional top management, work culture, adoptability, HRM, organizational structure, financial strength etc.
Employment branding is in which the employer tries to get the best brains in the business to work in his organisation so that they can deliver better customer value. The organization shall have two branding missions – the product and the workplace branding. Organisation will try to build them as Dream Corporation to work for through employment branding. The goal; of employment branding procedure is performance improvement through hiring and keeping the top talent. Therefore employment branding is a way to make sure that what the company and its employee deliver matches to the promise made to the external customers
The Organizational Health Survey is used to improve employees’ working experiencing and thereby increasing their satisfaction, motivation, commitment and performance. Healthy organizations feature high employee engagement, effective dialog between each level of the company, meaningful team and individual development, and the ability to sense and react to important changes in customers, markets, and regulation.
The Organisation has to make a system to measure and monitor employee satisfaction on various parameters of the organisation through Organisation Health Survey (OHS) which to be conducted once in 2 years besides annual dipstick study conducted at Unit level every year. The employees of the organisation will give their feedback on various issues. The results of OHS are addressed for actioning through task force formulated for addressing specific improvement variable.
Work Life Balance
More stress to perform better under intense competition has creped into the individuals as compared to earlier. Balancing work and family life is one of the areas of high priority for organization to respond with various programs. The Organisation has to make a system focused emphasis on improving Quality of Life to build lasting partnership with employees including their family. The employees of the organisation shall spent quality time with their family and friends leads to increase their productivity.
Q3: Will changes be sustained? What should Cindy Hartley attend to next? Why?
Cindy was given the responsibility of creating a more professional, business oriented and contributing HR function. After the first few months Cindy identified the following 3 key priorities: –
1. Changing the performance measurement and management system and linking compensation to the same.
2. Employee development and upskilling them
3. Building a succession planning program to identify talent and leaders
4. Ensuring progress within diversity
To address the 4 priorities, Cindy brought about some significant changes in HR policies and structure. Mentioned below are some of the key highlights and whether the changes are sustainable: –
1. Creation of an HR Council – This was a senior HR forum with representation from Central HR as well as Business HR representatives. The formation of this council brought about cohesion and standardization in approach in HR related matters. All HR verticals would come onto the same page. It retarded disjointed approach and was critical when major changes were on the anvil. This was the right thing to do and very much sustainable as then the initiatives are being taken forward with a majority consensus and after having evaluated diverse opinions.
2. Performance Management – The critical change here was to link business goals with individual objectives. A 6-section Performance Management system was rolled out. Formal appraisals as per stipulated timelines were mandated. Performance measurement metrics were outlined jointly with the supervisor and employee. Personal and Career development formed a key element of the new framework. This was the right thing to do and very much sustainable as metric based standardized evaluations reduces perception-based appraisals.
3. Linking Rewards to Performance Management – changes were made to link the two. The 18 grades were collapsed into 5 grades, which made the structure flatter and sharper. The change provided greater managerial flexibility in differentiating and awarding merit increases. Managers were made more accountable to evaluate performance in a merit-based manner and give rewards accordingly. This was the right thing to do and very much sustainable as it rewards the good performers and identifies under performers.
4. Leadership Development & Succession Planning – The GM’s along with HR Team blessed a 4-stage process (I) Assess (ii) Identify gaps (iii) Build development Plan (iv) Implement. The development plan was to be 70% on the job and 30% through other methods. Assessment of a manager’s ability to meet the core competencies were based on 3 elements (a) the performance management system (b) the 360 deg feedback (c) succession planning. This was the right thing to do and very much sustainable as without a continuous pipeline of talent and leaders, no initiative can survive long.
With the above-mentioned changes implemented, Cindy can expect to see the following results in the next 12-18 months: –
– The new performance and compensation-based system would throw up a new set of talent and leaders, which would assist in succession planning.
– Under performers would exit making way to bring in fresh talent or grow from within the ranks.
– Expect productivity to increase.
– Expect to see Managers taking more accountability on people development and talent retention.
– HR Council would bring in standardization in approach.
– More creativity and ideas coming up.
– Better management of diversity
Some of the key items she should attend to going forward are as below :-
1. The Future HR structure – As brought out in pages 10,11 of the case study, Cindy has to decide amongst the 2 possible models, centralised or hybrid. All the good initiatives would be non sustainable without a robust HR structure to drive them forward. The final model should be with the buy in of the GM’s.
2. Rigorous reviews and measurement – with so many good initiatives launched, it is imperative for Cindy & Team to constantly evaluate progress and if the same has added value and increased productivity. Approach should be recalibrated to review progress.
3. 360 deg feedback – It would be good for Cindy to engage the GM’s periodically and get 360 deg feedback from them if the GM’s feel that all the HR changes are adding value and making a difference on ground.
4. Employee Engagement – Highly engaged teams give better results. In my organisation for the last 7 years, the Gallup Q12 framework has been very efficently used to enhance engagement The difference is visible and engagement is now part of the DNA.
5. Diversity & Inclusion – Should build on this further as it would reduce concentration and bring about scalability and creativity. It would enhance the organisations capabilities to manage change and grow across borders.
This is no easy task with the organization as vast and as strong as Sonoco needs to go through a change, it’ll certainly be huge but it is indeed attainable.
Cindy will have to focus on the key priorities in a systematic manner. Her priority will be to improve the entire chain of HR activities and in the following manner:
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