The Sonoco Products Company Business Essay
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Published: Mon, 5 Dec 2016
The analysis of this case study is about Sonoco Products Company, a leading manufacturer of industrial and consumer packaging. The company was adversely affected by the financial crisis in the mid 1990s. Due to the financial crisis companies sales came down by 6% during the period from 1995 to 1999. The company re designed its strategy towards industrial packaging industry which brought them the growth through large no of acquisitions. Company’s strategies and the working systems changed drastically due to the impact had with the changes happened considering the needs of the consumers. Due to the notable outcomes of globalization Sonoco also felt the high competitiveness in the industry, uncertainty of jobs of employees and innovations in products which had them think of other avenues to improve on. Further the shareholders of the company also called for a new strategic HR approach in order to increase effectiveness, acquire new set of skills and competencies and HR has to be a more strategic business partner. At the initial stage company made a hit back on to these external challenges by changing the paternalistic culture (which ensured jobs for life and allowed the underperformers to stay in the company ) and also through tightening the performance management system and transforming HR into a more proactive and strategic function changing many HR policies and processes.
Due to the changes occurred in the company they had the privilege of making a more integrated marketing approach which reflected the demanding needs of the end consumer. Further, during tough economic conditions, organisations ‘must continually improve their performance by reducing costs, innovating products, improving quality, productivity and speed to the market’ in order to enhance the organisational performance. (Becker & Gerhart, 1996). Thereafter the Sonoco Company improved and they started reviewing their procedures and internal structures without being product oriented in order to gain maximum competitive advantage in the industry.
The major changing point of Sonoco was the appointment of their Senior Vice President of Human Resources, Cindy Hartley. She changed the whole Human Resources system with some radical and significant changes which were studded into the firm as highly decentralized and which was not consistent at all. They believed the HR as “a strictly back room operation” (Sonoco Products case study). Traditionally Human resources function was viewed ‘as a cost to be minimised’ (Becker and Gerhart, 1996). Initially Hartley discovered that most of the sections or the departments had their own way of doing things. The corporate human resources had very little work to do in the company as a whole, they were another mere department in the organisation which had little influencing power and authority. The main objective of taking Cindy Hartley was to streamline the Human resources function of Sonoco, in order to achieve the goals of creating competitive advantage, to promote best internal practices and reduce the duplication of work. She was identified as the Change Maker of the firm (Sonoco Products case study). The change makers were interventionists with a strategic agenda focused on both the hard realities of business performance and the softer HR interventions designed to enhance employee commitment and motivation. It was this new role that perhaps most clearly differentiated HRM from traditional personnel management (Guest, 1987, pp. 505-9; Storey, 1992, p. 180).
Under the leadership and guidance of Hartley, Sonoco had the luxury of changing its strategy focusing mainly on three areas such as performance management which will directly reflect the contributions made by the employees. She stressed the importance of this as “performance management and compensation were HR fundamentals” (Sonoco Case Study, p5). Thereafter Hartley focus was on Sonoco’s talent development and management system in order to refine employees’ skills and to identify and develop deficient skills. Final was the succession planning that needed to be integrated into business as usual in order to identify and prepare the next generation of leaders. (Sonoco Case Study, p4)
Two business models were presented by Hartley to the Sonoco Company’s executive committee. One was a centralised model which will target, in reducing the cost of administration and increase process improvements in order to gain a $3.1million worth of savings for the company. In this model most of the HR services will be handled by four centres of expertise. The main disadvantages of implementing this model was restricting opportunities to align directly with individual businesses’ needs and interests would make other objectives more complicated. (Sonoco Case Study, p6)
Second option was the hybrid model where the divisions of the firm would retain some direct involvement in staffing, succession planning, personnel programmes, compensation and benefits. The main advantage of this model was that it would leave intact a divisional HR presence on which GM’s could rely on, where by creating a strategic link between corporate HR functions and the businesses (Sonoco Case Study page 6). This model would generate savings of $2.7million for the Sonoco Company. The main question that arose in implementing this model was whether the changes could be effectively driven across the company.
More changes were seen in Sonoco since the appointment of Harris DeLoach, Sonoco’s new Chief Executive Officer. His main ambition was to implement a new business model that would generate a significant growth in the company as well as it will reduce the functional cost which will keep the company more globally competitive among the other firms in the industry. The new model must also reduce the functions costs by 20% or by $ 2.8 Million (Sonoco Case Study page 1). Further, DeLoach gave the task to Hartley with devising two alternative organisational structures for HR that would cost less and support three ambitious objectives, Firstly to increase General Manager’s (GM) accountability for talent management, Secondly to distribute HR talent and support more evenly across the company’s divisions and make HR systems and processes consistent and Finally to optimise HR’s ability to provide customised , strategic support to the GMs’ business (Sonoco Case Study page 1). Also he made the objectives clear saying ‘You can have the best strategy in the world but if you don’t have effective execution by people, it’s going to fail’.
Thereafter Hartley focused on the two models described and Both of Hartley’s alternatives are improvements in the structure of the firm which will change the traditional way of working at Sonoco. Due to these changes the most important change was the high involvement of human resouses personal in the areas which were handled mostly by the GM’s. Therefore, the human resourses fulfilled their objective of controlling HR functions in the firms divisions. Further, it’s understanded that most of the advantages of the centralise solution are disadvantages of the hybrid one vice versa. Due to this one can argued that the centralized model is more suitable for short term progress, since it can help the firm to reduce more than the expected cost cut of 20% which was the wish of CEO, DeLoachs. However, it implies potential dangers for future operation in longer term. In the other hand this morel (centralize) is not that flexible in nature and also not suitable to implement as it will make a considerable change in the structure of the difficult in a highly challenging market. In addition other disadvantage is that the restriction of opportunities to directly align individual businesses needs and demands, which would make other objectives of Sonoco more difficult. In terms of hybrid model, on the other hand looks like not attractive which is not meeting the requirement of expense deduction and may lead to redundancy mainly due to large set of HR personnel being involved, which will lead to an additional expense to the firm. However, if you take the two models the difference in budget is not that significant at all. It’s Just $100,000 where less than 5% as a whole. But in the hybrid model, the potential for longer term is much better than the centralized model. Sonoco will also feel higher flexibility and can adjust to the change of market easier. Also Sonoco operates in 32 countries with different sets of cultural dimensions (Hofstede, 2010). Further, in the hybrid structure, with the feature of decentralization, which will help the company to be more flexible in terms of implementing HR activities which are suitable for each country or territory and by selecting hybrid model cultural conflicts will be minimised. Due to those reasons and also by compairing the advantages and disadvantages, the hybrid model seems to be a better option for Sonoco rather than the centralized structure. In implementing either of these models would have a bigger impact and risk involved to the firm but given CEO’s main objective of making best use of employees, the most suitable choice seems to be the hybrid model.
After the arrival of Hartley, Sonoco implemented a new performance management system and where individuals are accountable for their failures. Accordingly, Performance Management is ‘a process which contributes to the effective management of individuals and teams in order to achieve high levels of organisational performance’ (Armstrong and Baron, 2004). Furthermore, performance management makes a culture in the firm where employees as individuals and also as teams take responsibilities for the continuous improvement of business processes and of their own skills, behaviours and contributions (CIPD, 2011). Therefore, Hartley changed the working culture of Sonoco by bringing in a new HR system. Sonoco made the Setting up the new system was mainly due to achieving of organisational objectives and targets, with individual performance metrics in line with the corporate targets. The targets set out by Sonoco can be measured using number of performance management tools such as, 360degree feedback, learning and development , performance appraisal, setting performance objectives and performance related pay like wise.
Major changes were injected into the Sonoco company. After the introduction of the cyclical model to the firm, it ensured that individual performance objectives and the targets will reflect the organisational goals of the business. Further, in this senario Supervisors and the employees will agree on personal objectives and targets during the performance appraisals. Thereafter the targets will be measured considering their divisional targets. If you take as an example, in division one, each plant manager would have a set of metrics like quality, customer returns ,plant profit, machine downtime and safety. In division two, metrics might be on scrap reduction and to drive productivity (Sonoco Case Study Page 5). Sonoco case study stresses the importance in the foundations of performance management of motivation theory, especially goal setting and expectancy theory. The acceptance of goals by employees and the increasing of difficulty levels of such goals can lead to increased motivation and performance (Locke & Latham, 1984). Further several HR tools were used by Sonoco to drive employee and organisational performance which was MBO. This is a goal orientated management tool in which managers and employees come together to agree upon a set of objectives to contribute to organisational performance, Drucker (1954). Additionally in this system individual employees development needs and personal training and development schedule will be agreed upon. (Sonoco Case Study Page 5).
Further, Sonoco’s changed the previous eighteen salary grades and it was changed into a very simple and easy system of five salary bands in order to ‘enhance managerial flexibility in differentiating among employees and awarding merit increases’ (Sonoco Case Study Page 5) These changes were implemented by Hartley in the new performance management system at Sonoco Products also stressed the importance of an universal compensation system within the firm. Also with the implementation of performance related pay system, it gave an incentive for the high performing individuals at Sonoco Products. The main objective of this was to benefit or reward to individual contributions while within the market guidelines (Sonoco Case Study Page 5). Further, apart from the individual financial benefits, they also permitted managers at Sonoco to think of the contributions that the employees are making in order achieve the desired business objectives (Sonoco Base Study Page 5). Nevertheless, in order to be successful, effective arrangements must be in place to ‘define measure, appraise and manage performance’ (CIPD, 2011). As mentioned in the case study, reward or compensation strategies has to be divided into both intrinsic rewards and extrinsic rewards. It is very important for Sonoco to implement a variety of compensation strategies, not only focusing on performance related pay where it will help the firm in order meet employee and organisational performance objectives successfully.
Due to the new performance management system, Sonoco Company is experiencing some radical changes in its firm currently. It’s notable to say that the firm needs more changes or improvements in order to sustain in the competition with the others in the global market. In terms of improvements Sonoco needs attention in the areas of talent management and succession planning for them to get the best in terms of growth. More importantly hybrid model has to be developed and implemented successfully for the firm to get the intended growth and the reducing of cost. Therefore in order to gain the expected organisational performance, engagement with the GMs and line managers has to be strengthened. , Engaged employees have a ‘sense of personal attachment to their work and organisation; they are motivated and able to give of their best to help it succeed – and from that flows a series of tangible benefits for organisation and individual alike’ (MacLeod & Clarke 2009). Further it’s important that Hartley interact with the entire workforce rather than engaged only with the managers to get the best out of the employees. Because, in reality without a motivated and engaged workforce, whatever the best HRM practices used you can’t generate a high performing culture. Therefore the importance of employee engagement is a vital factor in a high performance culture within the workplace. It is important for organisations to implement a thorough and inclusive policy of employee engagement to create a high performance culture.
Reflection and summary
By learning The Managing Human Resources module has provided me a very strong foundation and useful insight into the key components and practices which are in the world of Human Resources. It gave me a total understanding of both the techniques and theory behind some of the critical themes within HR. Also it gave me a competitive advantage over some of my colleagues who do not possess a HR related qualification. I believe that it is very important for any future leader to obtain a comprehensive programme of study that relates to the field of HRM as it has demonstrated how important the HR function is in contributing to both organisational and employee performance. This module has certainly enhanced my performance as it has enhanced my knowledge on HR, improved my critical analysis skills, enriched my knowledge of both soft and hard HRM models and also improved my verbal dialogue by having some useful, interesting, stimulating, debating sessions during seminars. Further, it has also informed my judgement on how important employee participation is to the success of the organisation. Engaging with employees is a crucial component in generating a high performing culture. It is this concept that has influenced my analysis of the Sonoco case study, as HRM practices and models cannot be successfully implemented without a motivated and engaged workforce. In my personal view, the HRM module, at first, stresses the importance of managing people which I have to do when running a business of my own or working for a firm. Unlike financial management, inventory management etc., in HRM I should not rely on machine or outsourcing but to act flexibly on my own, especially when dealing with skilful and knowledgeable employees. However, thanks to HRM module, I will know how to choose and apply best HR models on their organizations.HRM will help me to identify potential strengths and weaknesses of staffs. A variety HR tools can provide a comprehensive understanding about peoples capabilities and desires etc. in order to provide them with suitable environments, and through this, fully exploit their contributions. Moreover, to have best use of staffs, I will know how apply development methods to increase their productivity. An organization is more a community than a group of separated persons. Through researching organizational behaviour, I can be aware of relations and interactions among all staffs. Organizational behaviour is not only for providing necessary skills training, but also for allocating people in teams in order to achieve their synergy. Compensation and reward management, in connection with performance management, help me to comprehend the working motivation and know how to promote it for the benefit of both employees and organization.
Finally, I believe that this module has provided me with the foundations of becoming a future leader in my organisation.
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