According to (Chidambaram VijayabanuS and Ramachandran, 2012) success of a company is based on the human assets. This case study report is on Sonoco Products Company and its HR activities under the leadership of Cindy Hartley. It provides an overview of Sonoco Products Company, change requirements in the package industry and their influence on Sonoco's strategy in tune with the objectives of the vice president of the company, analysis of the changes and judging their effectiveness, identifying the problems in Sonoco's strategy with respect to HR management besides identifying ways and means to improve the HRM operations in Sonoco. According to ( Gibb, Stephen, 2003), HRM is essential. Finally suitable recommendations are given to Sonoco for the betterment of its strategies as world class HR organization under the leadership of its vice president Cindy Hartley. With leadership qualities senior management can take higher responsibilities (Jean-Francois Coget, 2011).
About Sonoco Products Company
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In consumer and industrial packaging Sonoco is a global company with around 100 years of experience. In its chosen business, right from the inception from 1980s till initial part of 1990s, Sonoco enjoyed success and tremendous growth financially (Sonoco Products Case Study p1). However, due to its fixed pricing of plants, economic crisis in US markets such as manufacturing exports severely impacted Sonoco. For instance, due to such reasons, sales of Sonoco fell 6% down between the years 1995-1999. Nevertheless, the company, with its strategies to reduce expenses, managed to gain increase in profits by 14% in the period. Afterwards, sales of the company declined and that caused its stock values coming down and pressure was built on the company to maintain credibility with shareholders. At this juncture, new CEO by name Harris DeLoach was appointed by Sonoco. The main challenges before DeLoach were to reduce operational costs; to ensure top-line business growth; restructuring the consumer packaging division; bring about cooperation across the divisions; considering human resources as corporate resources rather than a talent managed under general manager; revamping and restructuring divisions including HR (Sonoco Products Case Study p1).
Since the beginning of Cindy Hartley in the capacity of senior VP of HR division, she was working totally towards the throats of the company's CEO DeLoach. In her tenure she introduced many changes and new policies in order to improve the business performance of the company, succession planning, development, compensation etc. Earlier when the company was in full swing of profits, the managers did not take the inefficient employees seriously as business growth was evidenced. Now it is changed and Cindy Hartley as per the DeLoach's challenge responded quickly and pondered over the problem and improve efficiency in HRM wing. Towards all these things, and reduce the cost Cindy Hartley set forth three important objectives as outlined in other section of this report (Sonoco Products Case Study p1).
Packaging Industry and Sonoco
Sonoco has been into the packaging industry. In 19900 packaging industry was making good revenues. The revenue generated by around 100, 000 companies worldwide was worth $400 billion. Consumer packaging paper and board reported very good increase in its growth. Paper and board recorded 34% revenues while consumer packaging recorded 70% and industrial packaging at 30%. In the later part of 1990s, due to globalization, businesses encountered competitive challenges and also growth opportunities (Sonoco Products Case Study p2). Manufacturing became decentralized as many companies from USA moved to other countries such as India and China where human resources were not costly. Later years i.e. between 1998-2000 there was dramatic increase in the share of five big companies reported at 40% to 60% increase in revenues. Consumer preferences were changed and domestic consumer markets recorded the segmentation of products were changed as per the preferences. When it comes to food industry more evidence is observed. In the retail markets products are even altered as per the customer requirements. Due to customer preferences instead of one version of product seven or eight becomes a common place. Packaging also was playing an important role while branding and thus it attracts more people. In those days in retail business packaging was more influential than advertising for getting new customers and retaining the existing one (Sonoco Products Case Study p2).
As there are many changes in global economy and market conditions in USA, the effect of globalization, it was the responsibility of packaging companies to be more innovative and implement changes in the business as required. As said by an observer to win in the race one has to use emerging technologies as that gives winning edge to organizations. Companies who were into packaging invested a huge amount for making timely changes to their product designs. Afterwards the concept that appeared was one-stop-shop which attracted manufacturing firms, and other related businesses. The issues in the packaging industry include globalization of businesses, fixed price concept of Sonoco, USA firms started investing overseas, adapting to technology innovations, abrupt changes in the product design, decline in sales and revenues etc. The changes in the business arena, especially in the packaging industry influenced Sonoco to change its strategies and focus on more customers and solutions oriented and understood the words of Proctor& Gamble. It also started looking at markets with focused coordination (Sonoco Products Case Study p3).
What were Cindy Hartley's objectives for changes at Sonoco?
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Cindy Hartley, after becoming VP or HR department of Sonoco, she set forth three objectives to be achieved which were in tune with the thoughts of the new CEO of the company who wanted to cut short expenses of the organization more than 20% (Sonoco Products Case Study p1). The objectives are as given below.
Making GMs accountable for managing talent and ensure that inefficient employees are not entertained.
Considering HR talent as corporate resource rather than GMs talent and utilizing the human resources evenly across divisions. Developing consistent practices towards HRM.
Optimizing HR to support business objectives of GM.
Before she took office, employees were given salaries even when they are not performing. It does mean that as the company was in good profits, it ignored the HR best practices towards people who do not perform well. Cindy Hartley in the capacity of VP under the guidance of CEO wanted to make this organizational change to see that human resources are optimally utilized. GMs were made responsible for optimal usage of human resources and considered HR talent as corporate resource instead of just looking at it GM's manpower (Sonoco Products Case Study p1).
HR Changes at Sonoco
When Cindy Hartley was hired as new VP of HR window of Sonoco, she identified many problems with HR function as it was ruined and not consistent. The organizational structure in 1995 has some inherent problems. The focus on HR was different in those days. They thought it as something like back-room operation (Sonoco Products Case Study p4). The organizational structure was tactical in nature rather than strategic. In 1990s large divisions in the company have their own HR functions which are individual and not aligned to the overall corporate HR function properly. There were inconstancies in payroll related activities and also confidentiality was not maintained in such matters. The main problem was that corporate HR was seen in different perspective. It was seen as an entity that simply takes care of recruitments and relationships between employees and organization. Strategic planning was not possible due to staff structure which was complex. GMs of divisions exercised discretion and make mistakes in the process of providing compensation to staff members (Sonoco Products Case Study p4). The reporting structure of the company has less useful things and HR people were taking things for granted. The process of compensations was considered entitlements rather than looking them at in practical cost related perspective. Sonoco's employee appraisal strategy was also not perfect. The timing of it and the encouraging merit employees was not flawless. There were cases of manipulation of performance reports. The performance evaluation was not actually reflecting the efficiency of employees. At the same time experienced employees are an asset (Barbara A. Anderson, 2005). Worst case is that the best performed employees were fired due to reasons other than performance. There were not action plans, and there were complaints from the employees with respect to their career (Sonoco Products Case Study p4).
When Hartley took office in 1995, she was determined to build HR group with much focus on business orientation and professionalism. Priority was given for making leaders in the organization. It does mean that leadership traits were taught to HR people. The company's growth strategy, cash flow, working capital management was given focus. Favourable work conditions also play a role (ISIK U. ZEYTINOGLU GORDON B. COOKE KARLENE HARRY JAMES CHOWHAN1, 2008). The priorities set by Hartley to set the things right are as shown below (Sonoco Products Case Study p4).
The compensation strategies and measuring performance of individualos is given top priority as this ensures that the best performers are given right compensation.
Planning for making good number of leaders for the ensuing generation.
A robust employee development process that ensured that employees' skills are improved constantly.
Organizational performance results in financial growth (Brain becker and barry garhat, 1966). From the perspective of changes in the organization she was regarded as a change maker. She was well known among her colleagues as a good manager. A counsel was built to help in HR management. When she stared change management, many in the organization did not allow it. For instance HR heads of the divisions resisted her actions towards making changes in HR strategies (Sonoco Products Case Study p4). The first problem tackled was compensation and performance management as they are fundamental issues of HR. In 1996, HR management was revised again to make it more effective. Its main focus was on alignment and consistency. For change management all stake holders are convinced. For each plant manager specific set of metrics are given. For Instance the metrics are safety, customer returns, quality, machine downtime, plat profit etc. The metrics of individual units are aligned with overall business objectives of the company. In 1997, the Sonoco Products Company adopted a shared vision with respect to performance management. In other words Sonoco discussed the performance management strategies with employees as well (Sonoco Products Case Study p4). The compensation management and salary system are combined. The mangers were encouraged to follow guidelines and educate employees so as to make them to give best services and also measures value addition of individuals. With respect to succession planning and leadership development the strategies are to be agreed up on by divisional senior management. And advisory team was built by Hartley for improving the system (Sonoco Products Case Study p4). The six leadership traits are recorded. They include coaching and monitoring, knowledge management, teamwork, strategic integration, communication and customer satisfaction through excellence. Sonoco followed three sources for assessing the capabilities of managers. They include succession planning, performance management system and 360-degree feedback. HR function is improved every year. By 2000, almost all fundamental changes were made to the organizational HR function. Hartley revamped aspects like IT systems, performance management, compensation, diversity and succession planning. However, it has must to do to make strides in business growth. Intensive and basic compensation plans were subjected to major changes (Sonoco Products Case Study p1).
HR Structure Recommendation for Sonoco
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HRM efficiency is possible through right personnel (Y. Paul Huo, Heh Jason Huang, and Nancy K. Napier, 2002). Hartley wanted to restructure HR function. There are two models for structural organization of HR division. They include centralization model and hybrid model. In the centralization model many HR activities are handled by four centers of expertise. These divisions are managed by field experts who have wealth of knowledge. It helps in the reduction of administrative and other costs pertaining to process improvement. However, it faces fewer opportunities when it has to be aligned with individual businesses (Sonoco Products Case Study p7). Centralization requires clever way of handling HRM (Asma Zaineb, 2011). The second option is named as hybrid structure. In this approach the divisions have provisions in the involvement of compensation, personnel programs, succession planning and staffing. It leaves the individual HR manager on which GM's rely. The both structures meant for implementing HR strategy that is common in both. The HR changes done by Hartley are sustainable as they are meant for reducing expenses and improve large scale business opportunities (Sonoco Products Case Study p7).
For HR structure of Sonoco I recommend centralized model as it has many advantages over hybrid structure (Heidi Cardenas, 2012). The advantages include reduction in operational costs, concentration of HR skills, sharing of knowledge, optimization processes and organizational support. Centralized human resources model can save operational costs for various activities of HR such as recruiting, benefits and compensation management, and recruiting. Sharing of knowledge among the divisions is possible through centralized computing. Technology should be used in recruitments (Derek S.Chapman and Jane Webster, 2003) Centralized HR managers are easily accessible and one can get faster service (Heidi Cardenas, 2012). It promotes HR skills improvements. Business processes can be optimized effectively using centralized HR model. It facilitates easy and consistent development of processes for various activities like performance management, recognition, recruiting, and payroll. It's easy to develop companywide aspects such as resource processes, easy to develop communication with all places in the organization. Another advantage of centralized computing is better organizational support for company. Centralized approach well suites organizations where staff members are trained as to how to communicate effectively. The approach provides (Heidi Cardenas, 2012). SHRM also gained popularity (Patrick M. Wright, Benjamin B. Dunford, Scott A. Snell, 2001). Nevertheless, centralized model of HR has its limitations such as administration causing inequalities, strict conformity of official norms etc. and dictatorship which does not take employees into confidence while making policies (Asma Zaineb, 2011). Size of the organization also has consideration for HRM strategy (GEORGE CALLAGHAN AND PAUL THOMPSON, 2002).
Fig. 1 - Centralized Model for HR Structure
As can be seen in fig. 1, the HR structure of Sonoco has VP at the top of the hierarchy. The single rooted hierarchy with administrative, experts and field staff services.
The study of Sonoco's business scenario and HR function closely from the views of Hartley and CEO of the company, there was lot of improvement in its functioning due to the efforts of Hartley. However, it can be said that it needs further improvement. The following are the recommendations for Sonoco.
First and foremost importance has to be given to a centralized mode of HR structure as it has many advantages. It reduces costs of process improvement activiti4es and also administrative costs. As Sonoco VP of HR and CEO of the company want to reduce the operational costs, the centralized model is best suited.
The existing practice of linking HR operations and processes with business objectives of Sonoco, culture and values has to be continued with further changes if required. HR influences many key systems (Coro Strandberg, 2009). The best practices are pertaining to it such as organizational core competencies, performance management, 360 degree reviews, building tomorrow leader through career development and training, organizational reviews, learning by doing, online performance and learning, training for sales and marketing people, team skill development, reward and recognition including broad banding, and centennial shares. There is relationship between training and organizational performance (Salem Shiryan, Dr. Himanshu Shee and Deborah Stewart, 2012). And training makes organization stronger (Rebecca Grossman and Eduardo Salas, 2011).
The HRM module has given me adequate insights into the HRM activities that help me in putting in into use in my future endeavors. Understanding certain concepts of HRM has led me to know the fundamentals of HRM. From the study it is understood that human resource department is not meant for acting as back-room while it has tremendous utility when harnessed properly. The study also let me know the important structure for HRM such as centralized hybrid models. Moreover Sonoco case study has given me in depth understanding possibilities in realizing the case with respect to HR management. From this experience I came to know certain facts related to HR structures known as centralized and hybrid. No changes can be implemented without people involving in the process. This is the reason continuous education and training is required to staff members in order to improve quality in service and also produce leaders for future generation.