Sonoco Products Company is a packaging company started in 1899 South California. Major James Coker is founder of this company with former name Southern Novelty Company which is derived from first two letters of each word ("Mission statement - Sonoco," 2009). The main product of Sonoco was paper cone used in textile industry. These paper cones were unique as textile cones were made of wood. Sonoco's engineers just introduced new processes for the production of these paper cones. Soon it became a leading company in the field of paper cones in United States. Meanwhile, Sonoco also introduced its new products in markets like T-shirt and Ultraseal which was a closure system designed for Crisco. So, Sonoco gained title of world's largest packaging company at the end of 2000 as it revenues $ 2.6 billion through their products (Thomas, Groysberg, & Reavis, n.d.).
With the globalization, packaging industry experienced many problems which affected Sonoco. These were mainly due to the financial crisis in Asia as packaging industry had shifted in Asian countries. In such situation, there was a need of new strategy which would not only take out Sonoco from this disaster but to give solutions too. Academics show that changes in organizations are reinforced by many authors. Becker and Gerhat (1996) supported this argument that organizational changes are needed by improving quality, reducing costs and speeds to the market. Sonoco started to target solutions rather than product oriented.
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In this situation, Cindy Hartley was appointed as Vice President for Sonoco. She was actually appointed to make effective changes or in other words to act as a catalyst. Sonoco knew that its HR is declining drastically because of the poor HR management. They viewed Hartley as a change maker. This is exactly in line with views of HR academia; HR and its functions as a strategic role in organizations are infact a change maker (Ulrich 1995,1997). So, Hartley worked exactly as she was expected by Sonoco that result in turning point for this company. She realized that HR function is inconsistent as managers and employees were considering HR as a strictly back room operation. Business units of Sonoco were acting separately and in this way, there was not a single unit working together as a whole. This is supported by academics as well like Becker and Gerhat said that Human resource function is viewed as a cost to be minimized.
When Hartley joined Sonoco in 1995, she had clear objectives. Her main objective was to strengthen the leadership development. She declared very clearly that it would be her very first priority. Secondly she said that compensation and performance management systems should be linked effectively to improve employee performance. According to Hartley, company was in need of employee development process which will eventually contribute to their performance. Thirdly succession planning was needed for good leadership in future. She was clearly hired to bring change in this company. Mr DeLoach suggested Hartley to add these three key things in her objectives which are increase in GM's accountability, distribution of HR support equally in all departments and optimization of HR's ability to cooperate with GM's business. Moreover, DeLoach advised to reduce cost functions by 20%. Several HR heads denied her strategies and objectives but she withstood with them and in early 1996, a new performance management system was initiated. (Sonoco case study)
Hartley soon realized deficiencies of Sonoco so she started implementing her strategy. She said that Sonoco's performance, management and planning should complement to its strategy. Also, motivation is needed to improve performances which are of great concern for organizations since 1930 (Locke & Latham, 2004). Motivation for new change is difficult for managers (Nohria & Lee, 2012). Her objective was to make performance management system effective for that she suggested factors affecting are Organization's culture and values, Senior management, Focus on performance management, Organizational compensation system and Employee development (Werner, 2006). These are also supported by various researchers. Hartley said that without systematizing things, you cannot get desired results (Levitt, n.d). Business goals were connected with individual objectives rather than subjective matters. The empowerment culture was suggested by (Rendolph, 2000). A culture of friendship, teamwork and cooperation should be developed to improve performance (Monga, 2008), it was also supported by (Guthrie, 2001). By improving HR department, things can be made better according to Hartley. She was appointed in Sonoco for change purpose. She worked attentively on her set goals which helped Sonoco in retaining back its original position. With the increasing demand of packaging items, the changes desired by Hartley were well satisfying and there was a need of quick response from every individual in this regard. Managers' involvement is important in employee learning (Gibbs, 2003). The performance of each individual counts but it is not easily measured as work results in group form (Siders, 2001). For this purpose, experienced and skilled workforce is required (Shiryan, Shee & Stewart, 2012). In short duration, new performance management system was initiated as suggested by Hartley. Of course, some of the executives went against her decisions but the structuring models and performance management systems proved them wrong. Hartley suggested two proposals for organizational structure. The first was centralized model in which HR services were handled by four centers and this division was subjected to pare down field staff. The main goal of this model was to reduce costs of administration and other process improvements. In short, the concept of centralization of HR was proposed. The second proposal was hybrid structure in which divisions have direct correspondence in staffing, planning and compensations. This hybrid structure would leave integrated HR which can be relied by GMs. The new HR managers will be a link between HR functions and business (Cummings & Worley, 2008).
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In centralized structure, Sonoco was supported by departments in which human resource management was not in strategic focus that why it gave less support in planning for the divisions (Robbins & Judge, 2008). But this structure provided economic scale. Whereas in decentralized model, company had a lot of problems in departments which started to work as an individual entity. It resulted in increasing cost because of the increased efforts. Sonoco is indeed in need of some combinational structure that will improve customer services and cost issues. Using centralized model, $ 3.1 million could be saved that was above the cost savings $ 2.8 million suggested by CEO of Sonoco Mr. Harris DeLoach but the main disadvantage of this model was that it was restricting in cooperating with individual business whereas the cost savings in hybrid structure would be $ 2.7 million which is nearly equal to CEO's estimation. Hybrid structure is flexible to give quick response to environmental changes. However, hybrid structure could drive changes easily or not that was a question as it can result in duplication of resources (Sonoco case study).
A new compensation system broad banding was introduced in compliance with the performance management system. Broad banding systems are good for companies which are fastly growing and experiencing continuous changes as it offers less formal structure (Byars & Rue, 2008). Such system helps in focusing on business strategies which develops to meet company's goal.
This type of system emphasis on individuals that can be against Sonoco's culture as Sonoco has different culture. Teamwork is preferred in Sonoco's environment rather than individual rewards although it is a good thing but it is not in Sonoco's culture. This company is famous due to its teamwork efforts which were started to demolish at one time but after the arrival of Cindy Hartley as vice president of Sonoco, things changed completely. Sonoco can work with existing strategies made by Hartley for certain time; however amendments can be made if necessary with the changing packaging industry environment. But trainings are always needed in organizations (Grossman & Salas, 2011). It is time taking process so Sonoco will face turbulent times ("Sonoco Products Company (SON)," n.d). Hartley and DeLoach supported this argument that
human resource management plays an important role in managing the organizations. Its relevance is seen in many academic researches and organizations. The role of human resource management is crucial in the development of any organization but most of time; HR strategies are not taken as value creation (Becker & Gerhart, 1996). In most organizations, HR is not seen is context of performance management which results in devastating effects like Sonoco faced in 1990s. Hartley's strategy was targeting performance management of employees and workers of Sonoco as they were not being attending properly as HRM requires. Researches show that in 80s, the approach from personnel to HRM started which showed that organizations have started to consider their employees as a resource (Guest 1987). The research based view has greatly affected strategic human resource management according to Wright and Snell. For specifying HRM role in employee performance, 360 feedbacks was a good approach as it calculates organization and individual performance separately. The coherence of 360 feedbacks is well supported by academia. Carson (2006) says that 360 feedbacks should be used by organizations and stake holders which are better than harm.
In Sonoco's context, expatriate selection would be beneficial as it involves exchange of different cultures as well as ideas and technology views. Expatriate selection has been adopted by many organizations and defended by many research papers. The management of expatriation has become more important with the increase in number of organizations (Anderson 2005). Expatriate selection is a matter of good luck than good management, according to Anderson (2005). The role of technology software in expatriate selection for improving HR selection procedure is crucial as depicted in academics. The advancements in technology have great affect on businesses as many organizations rely on a mix of traditional methods and technology solutions (Chapman & Webster, 2003).
Human resources are managed through company's strategy, structure and system. It takes account of every minor details of company including training, socialization and management of careers. Sonoco needed improvements in HR department as it was greatly neglected that resulted in declining popularity of Sonoco. It led to failure in planning and leadership management which damaged the company. The incorporation diversity in business was used by Sonoco. Somehow, Sonoco managed to get over these problems as suggested by its vice president Cindy Hartley.
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Sonoco's basic strength was its market position, products flexibility and brand value. Managing by objectives is a tool in HRM used to bring out the best from employee and organizations. Drucker (1954) supports MBO as a goal oriented tool in management which compels managers and employees to agree on objectives in order to improve organizational performance as in case of Sonoco. The benefit of MBO is that it focuses on individual employees' development needs (Sonoco case study, 5). The new changes in performance management helped in empowering employees' skills that reinforced in stabilizing its reputation. The most important thing is that these changes were made at right time. Sonoco expected its employees to meet these six competencies; excellence, communication, teamwork, technical/professional skills and knowledge, strategic integration, and coaching/mentoring (Thomas, Groysberg & Reavis, n.d). For over years, personal responsibility and attitude was lacking in Sonoco. Its culture was based on safety, integrity and respect for each other ("Strategy for Growth," n.d).
Sonoco was looking for some good strategic theory like resource based theory. This theory is developed by Barney (1986, 1991, 1995) and supported by Pfeffer (1994), Wright, Dunford and Snell (2001) and Becker and Gerhart (1996). RBV shows that organizations can develop competitive advantage by creating value that is difficult for others to compete (Becker & Gerhat, 1996). Creating value means to set such a competitive goal for other competitors in addition to finding solutions for your organization. Human resource strategies can be a source of competitive advantage (Becker & Gerhat, 1996). Meanwhile Pfeffer (1994) says that management of people is becoming more important as other sources of competitive advantage are less powerful. Such changes are supported in organizations by academia. Empowerment of people which are infact employee of any organization are key part in uplifting it. Hartley soon realized this lack of performance in terms of declining employee and managers' correspondence. RBV has taken a wide place in academic research in finding out that how organizations manage people for competitive advantage. Sonoco created a friendly culture and compensation was seen in terms of entitlement instead of costs to control drive behavior (Sonoco case study, 4).
Human resource management is crucial in developing organizations. I have conceived that it is extremely important for organizations to understand proper meanings and importance of HRM models. Employees are an effective part of human resource management as their performance is what on which organizations rely. This module has certainly improved my HRM models knowledge in addition to critical analysis skills. Leadership depends on several factors like HRM and performance management. Sonoco case study has revealed positive aspects of HRM in terms of performance management. How Sonoco was losing its fame in 1990s and then they bounced back under the leadership qualities of Cindy Hartley. Organizational structures are based on HRM that was unfortunately lacking in Sonoco. Changes and theories implemented in this case study have increased my wisdom of HRM. Without motivating employees, organizations can not expect quality work from them. The basic problem with Sonoco's HR department was lack of link with employees and business units working separately. It has showed me the importance of teamwork which is a key component in organizations. The engagement of employees for competitive advantage has key role in making organizations. Sonoco case study showed that how people can be managed using HRM practices. I feel superior knowledge and advantage over my other fellows who are not aware of the importance of HRM in organizations. On completing my education, I will be able to engage in HRM related areas or maybe one day I can run my own organization.