Sonoco 1 Running head: Sonoco Products CompanyCase Study Analysis Sonoco Products Company (A): Building a World-Class HR Organization Joycelyn Jones McDaniel College ) to remain competitive and continue its growth in the volatile. 1). Mr.. Hartley was well on her way. etc. Human Resources. Ensuring top-level accountability for talent management and upgrading. DeLoach soon recognized concerns with HR as well as overall business strategy in light of the changes to the industry. Human Resources.8 million. Leading the way in supporting the company’s new growth strategy. Other pressing reasons for the request include the following: 1. Groysberg. Consequently. Providing for a more even distribution of HR talent and support 3. or $2. & Reavis. Cindy Hartley. Senior VP. Human Resources to meet its financial goals and HR meet goals. which often meant working across division lines to market and sell “solutions” to a single large customer (Thomas. This analysis outlines the challenges of Sonoco Products Company to revise its corporate strategy (i. n. Sonoco’s diminishing returns. evaluate the alternatives and recommendations for course of action for the Senior VP.e. Harris DeLoach became the newly appointed Chief Executive Officer (CEO) in 2000. 2.Sonoco Products Company (A): Building a World-Class HR Organization. explore the issues and/or opportunities related to the company and the CEO’s request. structure. p. he instructed Cindy Hartley. ever-changing global packaging industry. In 1995. Senior VP. came to Sonoco and found the Human Resources (HR) function broken. This case analysis utilizes the 7S Model of organizational alignment to perform the situational analysis. As Ms. etc. products.d. Human Resources to among other things devise two alternative HR structures that would reduce HR’s cost by 20%.Sonoco 2 Abstract This is an analysis of the Harvard Business School case study -. She soon began working on a plan to rejuvenate HR and link HR processes to Sonoco’s business objectives. . Its revenues reached $2. Sonoco Products Company continued to grow with new operations around the world. In addition to being a major packaging company.000 of initial capital. serving customers in 85 nations with a wide array of industrial and consumer packaging solutions (Thomas. Founded by Major James Coker with $6. Sonoco also adds to its credits the use of the plastic “T-shirt” grocery sack common in supermarkets and retail stores and the creation of Ultraseal. Since most of the textile cones of that time were wooden. began in 1899 in Hartsville.e.300 employees across 285 operations in 32 countries." 2009).) and become remarkably profitable. with 17. a closure system for Crisco shortening cans that eliminated the need for a can opener (International Directory of Company Histories. n. Over the years. diversify its product line (i. p. consuming almost two million tons of recovered paper annually. its engineers invented new processes to automate the production of these cones. Sonoco produced nearly all of its own paperboard.d. plastic. cardboard. Sonoco was one of the largest packaging companies in the world. Vol. 8 St. This automated manufacturing gave Sonoco a competitive advantage.. paper cones were unique.Sonoco. and the new name of Sonoco uses the first two letters from each word of its original name ("Mission statement .Sonoco 3 Introduction Sonoco Products Company. Although Sonoco did not invent the paper cone. as Sonoco grew and changed. flexible packaging. and it soon became the leading producer of cones in the United States. Its original product was a paper cone used to hold yarn in the textile industry. etc. 2). a global packaging company. Sonoco’s original name until 1923 was the Southern Novelty Company. However. aluminum cans. James Press. While the United States was enjoying economic growth during the late . Groysberg. 1994). During its history.6 billion through the manufacture and sales of consumer and industrial packaging. & Reavis. so did the world and industry around it. South Carolina. By 2000. so was the packaging industry. utilize the 7-S Model of organizational alignment as appropriate to examine Sonoco’s need for planned change (identification of issues). 2005) This called for Sonoco to reassess and reinvent itself in the face of the new global marketplace to remain competitive. The company was becoming increasingly more susceptible to changes in the world economy. however. Its stock price fell to an eight-year low. In this case analysis. Sonoco was in a precarious situation. Sonoco began to recognize a change in its business. examine proposed options (evaluation of alternatives). this writer will review the state of Sonoco in years approaching the new millennium (situational analysis). Sonoco’s position began to change. including development of innovative packaging containers and techniques production for diversified product types improvement of productivity for cost reduction introduction of higher speed computer technology for quality assurance. Sonoco’s debt was high because of the acquisition and continued operations of several plants while many manufacturing plants were moving overseas because of cheaper labor. After enduring many years of continuous growth and financial success. North America accounted for approximately 80% of the company’s sales. The packaging business began to focus on the following: • • • • • • development and implementation of policies and action programs to meet the consumer needs. competitors were operating on a more global basis. During this time. The internal structure and composition of the company were facing challenges as well. improvement and labor saving creation of websites for the entire industry cooperative efforts of the entire packaging industry for e-commerce individual packaging/logistics (Taylor.Sonoco 4 1990s/early 2000s. Sonoco’s operations . and propose plan of action (recommendation). Situational Analysis Upon approach of the new millennium. Sonoco 5 were decentralized to the point that it was unable to support some of the more far reaching strategic initiatives of the company. Furthermore. Products had to serve all segments. This tool provides a structure with which to consider the company as a whole. Sonoco realized the need for transformational change to ensure its sustainability in a continuously evolving environment. Lastly. structure. etc. Specifically. . Specifically. environmental destruction. Sonoco needed to conduct a SWOT analysis to assess and build on its strengths. To this end.). demands of its customers and especially its competitors to ensure alignment. so that the organization’s problems may be diagnosed and a strategy may be developed and implemented. packaging industry. For example. Sonoco’s focus was to evaluate external forces (i. These variables as well as others propelled Sonoco to revisit its business strategy. improve its weaknesses. which made the strategy for the packaging and distribution of them more demanding. culture. climate change. and diversity matters. and strategically plan to eliminate pending threats. energy crisis. Sonoco needed to analyze itself internally -. it now had to contend with flexible packaging that was the new technique of this time and the mounting use of ecommerce as a source of trade. global marketplace. Sonoco had to face the growing challenges of fast changing technology. globalization as well as the wants and desire of its consumers were challenging. technology and processes prior to considering any change. with its business strategy.mission. human resources. identify the available opportunities. Particularly.e. its human resources function was ineffective and viewed as just an administrative support function. if necessary. Additionally. this analysis utilizes the 7-S Model to analyze Sonoco’s situation. the economy. it must have a high degree of fit or alignment among all the seven Ss. Sonoco’s strategy was product driven. this analysis examines several of the issues above as they relate to the seven Ss. 2001).Sonoco 6 Identification of Issues In order for a company to be effective. and the applicability of product solutions to multiple situations. Thus. During most of its existence. which involves looking at all seven elements at the same time since they are all interconnected (Kotelnikov. Sonoco needed to review the business it was in. its ability to sustain in a changing industry. due to changes in the environment. Therefore. it was adopting a more solutions oriented approach. however. cost containment. brand value. the industry. or a combination of these and others. sophisticated and demanding consumers New and/or improved technology Age of differentiation. Key strategies can include the introduction of new products or services. Strategy Strategy is an organization’s means to help management achieve its objectives. . Consequently. the workforce. the products it supplied. changing image Company culture Evolving role of Human Resources Ineffective organizational structure Management deficiencies Changing policies and/or practices The 7-S Model propels companies to pay attention to systems thinking. its differentiation relative to its competitors. and societal trends. increased competition Environmental concerns State of economy Globalization E-commerce Expanding product lines • • • • • • • • Diverse. this writer identifies the following issues/challenges as possible reasons to initiate or continue transformational change initiatives at Sonoco: • • • • • • • • Stagnant business strategy Growing packaging industry Saturation of market. As a result. Sonoco recognized the need to embrace the growing global marketplace and its people. .). They incorporated diversity into all aspects of business including products. and geographic expansion and through acquisitions and joint ventures that complement existing businesses and meet the changing needs of the markets it serves ("Strategy for Growth. Additionally. key to any strategic business plan is the reassessment of an organization’s structure to ensure its alignment with the current business environment. etc. Structure is the framework in which the activities of the organization’s members are coordinated. where it expects to be either number one or two in market share” – supports this point ("Mission statement . Structure Closely related to strategy is structure. divisional. functional. which includes market growth. The relatively quick move to rethink and revise its strategy at a critical time in the company’s history attests to this point.Sonoco. However. the corporate mission statement which -.“Sonoco intends to be the lowcost global leader in providing customer-preferred packaging solutions to selected value-added segments. Sonoco was pursing top-line growth on two fronts: organically. Sonoco experienced a few iterations of corporate structure – centralized. The organization’s size. new products and services. technology. and workforce. Thus. Structure affects how successfully a company can implement its strategy. which continuously diagnosing itself to stay competitive. consumers. Sonoco understood that to be the leader or one of them one had to be continuously flexible in the new marketplace. environmental uncertainty and even products/business significantly affect its structure." n.Sonoco 7 To this end. suppliers." 2009).d. Thus. – in the past. they were able to react to and minimize any potential damage. This writer believes that Sonoco was a company that did its homework. Interventions such as continuous quality improvement. However. performance management. reviewing structure from a divisional. company systems. reviewing structure on a micro level would be a benefit. Additionally once the overall business structure is in place. increase productivity. and even individual job perspective is important. 235). and job enrichment are relevant options to improve processes. this structure provided economies of scale when centralizing core administrative functions. compensation. Additionally. teambuilding. For that reason. Sonoco’s support departments. As for the decentralized structure. financial. especially Human Resources were not able to be strategic in focus and therefore provided little support in the way of long-term plans for the divisions (Robbins & Judge.Sonoco 8 Sonoco reviewed its structure to ensure that it too would aid the organization in meeting its overall goals. management. productivity. and morale during structure transition. also need attention. . the activities involved in the daily operation of business. Consequently. this structure probably represented increased cost due to duplication of efforts. Based on many aspects of Sonoco’s business environment. p. These systems include business. Sonoco attempted to restructure its processes/systems in order to more efficiently maintain its market share. Thus. the company experienced problems with departments/divisions becoming their own entities and not tied to the bigger picture. Systems Society is indeed becoming increasing more technological and systems driven. this writer believes that Sonoco is in need of a combination structure that will allow it to create more synergies between business units to leverage resources for greater cost effectiveness and customer service. departmental. and maintain safety goals. 2008. With a centralized structure. and even customer satisfaction. n. which managers manipulated to get higher pay raises for their employees. “Until you systematize something to ensure that it is done and done correctly. Building a succession-planning process to identify the next generation of leaders. p. Sonoco’s fragmented HR system was unable to operate strategically. Therefore. p. 9). 391) Cindy Hartley’s performance management did include these aspects. p. n. A performance management system is effective if it: • • • • • Reflects the organization’s culture and values Has senior management actively involved Focuses on the most important performance/business measures Links to an organizational compensation and rewards system Includes employee coaching.. (Thomas. she began to implement change. 3. According to Hartley.Sonoco 9 Prior to Cindy Hartley’s arrival.d.d. compensation. and succession planning systems must complement its business strategy. 7) Ms. feedback and development (Werner. . Cindy Hartley had three main priorities: 1. From a Human Resources perspective. Hartley understood that Sonoco’s performance management. Creating an employee development process to refine employees’ skills and identify/develop lacking skills.. it complemented the new performance management system. 2006. Changing compensation and performance management systems to eliminate arbitrary nature and more accurately reflect the employee’s contribution to the company’s performance. As for the new compensation system – broadbanding system. Broadbanding reduces salary categories to manage career growth and deliver pay. This interwoven system connected business goals and individual objectives instead of subjective measures of the past. you will never get compliance” (Levitt. 2. Groysberg. & Reavis. Staffing With a company’s strategy. but to sustain the company’s position into the future. Although individual accomplishments are good. Sonoco has to develop its talent pool . It is not only important to have the right people with the right skills now. broadbanding works especially well in companies that are fast moving and undergoing persistent change because it provides less formal structure and allows the company to react quicker. socializes. which may be contrary to Sonoco’s culture of team-orientation. Subsequently. especially the leadership. there is no mention of any incentive awards to encourage teamwork. However. p. Furthermore. this system places more emphasis on the person not the job. and manages the careers of its human resources. the implementation of the new performance management and compensation systems. structure. the company’s human resources are what hold it all together. 283). profit sharing. Sonoco’s environment is one such that teamwork will be necessary to meet the challenging demands that it faces. gain sharing. Sonoco realized this fragmentation led to ineffective succession planning and leadership development that only harmed the company. In addition.) could prove useful and balance out the compensation portfolio. These incentives involve employees in a common effort to improve organization performance (Byars & Rue. and systems defined. integrates. team or group incentives (i. Over the years. 2008. motivates.e. This system supports the business strategy focused on developing and maintaining the most skilled workforce to meet the company’s goals. It includes details on how a company trains. etc. Sonoco needs to get a tighter control over this component. Hence. it failed to hold its people accountable and develop them. this competency is part of the new performance management process. and most importantly the succession planning process. the increased focus on leadership development.Sonoco 10 According to Byars and Rue (2008). These values are evident in all actions taken by the company. some financial goals fell short. but some of Mr. its suppliers as well as its customers.d. Sonoco based expectations for all employees on satisfying customers through six core competencies: excellence. Sonoco’s culture has always played a role in its success. Safety. Over the years.d. Groysberg. Hartley’s new strategies turned this around. strategic integration. brand value. technical/professional skills and knowledge. Skills Skills refer to what a company and its personnel do best. Additionally. The new performance management and compensation systems further reinforce Sonoco’s commitment to enhancing employees’ skills to serve the organization. there was a diminished sense of personal responsibility and accountability that linked into the company. Thus. p. n. Shared Values The anchor of all the 7s is shared values. integrity and respect for the individual are hallmarks of its culture ("Strategy for Growth." n.97).). flexibility. Sonoco took advantage of the concept of incorporating diversity into its business. Sonoco’s value revolves around people. & Reavis. Unfortunately. over the years. Sonoco’s strengths were its strong market position.. product diversification. culture and values. teamwork. It appreciated the diversity of its workforce. .Sonoco 11 and leaders going forward. culture and visionary leaders. communication. DeLoach’s and Ms. and coaching/mentoring (Thomas. The advantages to this structure would be the decreasing costs associated with driving administrative and other types of process improvements. or $2. These economies of scale would free up money and resources for other purpose. The first option was a centralized HR function in which one of four centers of expertise would handle the majority of services. comprised of HR management. the industry.d. formulated two options in response to Mr.8 million. economy. Typically. Cindy Hartley along with an HR Council.). Sonoco’s business strategy was solid." n. On the contrary. This could result in greater customer service issues and employee dissatisfaction. capital effectiveness. Thus. Senior VP Human Resources. there were a myriad of challenges to include globalization. the view of this structure is that it is inflexible and coordination from throughout the organization is difficult especially in large companies.Sonoco 6 Evaluation of Alternatives Sonoco experienced growth and prosperity as well as a decline in a few key results during the late 1990s/early 2000. this structure would be less expensive. However. develop a more efficient operating structure and put the right people into the right jobs to carry out its strategy. DeLoach’s original charge that was to devise two alternative HR structures that would reduce HR’s cost by 20%. since there would be less opportunity align with individual business needs and interests. it would be difficult to achieve some of the other objectives with this structure. and environment to name a few. With this in mind. HR may not readily have its finger on . and a trimmed down field staff would serve the divisions. Built on people. top-line growth and establishing stretch targets. Its basic strategy was to reduce cost. productivity and quality improvement. Sonoco’s strategy would endure turbulent times ("Sonoco Products Company (SON). As described previously. Additionally. succession planning. assist in rolling out initiatives. HR planning. 2008. Lastly.8 requested by the CEO. compensation. personnel programs. The second option was more of a hybrid organization in which the divisions would have some direct involvement with staffing. it does not readily support the sharing of knowledge between HR practitioners because some of them are working in one division and the others are working in other divisions. perform consulting services. actions. These new group HR managers would be able to provide the strategic link between corporate HR functions and the businesses (Cummings & Worley. and be able to participate in divisional level strategies.thinkers and designers) while the field staff (the doers) would handle divisional level issues. Recommendation Based on the specifics of the case and the research conducted. the projected cost savings would be $2. which is above the cost savings of $2.1 million cost savings.7 million for the hybrid structure. Logistically. and its implementation responsibilities would are the responsibility of Corporate (the specialists . and benefits. The main advantage to this structure was that it left a form of divisional HR management intact on which general managers could still call for help. this writer would choose option 2 – the hybrid structure. It would be flexible enough to respond quickly to environmental changes. which is in line with the CEO’s directive of a $2. The strategy development. This structure may result in some duplication of resources if delineation of duties is not specifically outlined and understood. 321). complex organizations with advanced .8 million dollars cut in costs.Sonoco 7 the pulse of the organization to be proactive about needed changes. p. However. this option only results in a $3. more importantly. Research suggests that large. The main disadvantage to this option stemmed from a concern over whether changes could be easily driven across the company with this new structure. more attention could be given where needed. changing government regulations affecting its business. continually changing products preferences by customers.Sonoco 8 technology and dynamic environments (i. This way they get the development and attention that they need to produce the results that Sonoco wants. this structure allows for the right people with the right skills to be where they are most beneficial to the company. Lastly. Having the appropriate systems in place to get the right people in place and up to speed will improve productivity. This would result in HR being proactive to the business needs. As far as meeting its financial targets. Ultimately. The HR field manager could also observe and communicate what compensation plans may work best since he/she would have firsthand knowledge of operation and the staff. the field HR staff could provide insight or suggestions on how to make this best work for the division (with corporate’s guidance. etc. this option would over time fair better. Consolidating administrative functions where feasible to result in economies of scale will save more. and decrease turnover which will result in increased profits on an ongoing basis. This option aligns perfectly with Sonoco’s flexible strategy to meet the changing demands of its industry and consumers. reduce waste. For example.) typically fair better with a hybrid structure. increase employee satisfaction. With this structure in place. if necessary). these actions will result in improved operations and cost reductions for Sonoco.e. while the “corporate” function worked on high level initiatives. . dynamic competitors. Besides. this structure would place the critical HR processes into the “meat” of the organizations where they should work best. Retrieved January 17. L. Upper Saddle River. from http://www. L. P. S.harvard. MA: McGraw-Hill. Cummings. (1994). & Judge..). (2008). T. (2008). Retrieved February 1. & Rue. from http://harvardbusinessonline.sonoco.Sonoco.hbsp. & Worley. Human Resource Management (Ninth ed. 2009.com/sonoco/Home/About+Us/cor_mission_statement. 2009.). Sonoco Products Company.1000ventures. International Directory of Company Histories.fundinguniverse. James Press... Retrieved February 12. G.). 7-S Model A Managerial Tool for Analyzing and Improving Organizations. L. NJ: Pearson Prentice Hall. What Business are you in?: Classic Advice from Theodore Levitt.). (2009). Boston.Sonoco 9 References Byars. T.edu/hbsp/hbr/articles/article.d. T.combusiness_guide/mgmt_inex_7s. . In Corporate Leader Business Architect. C. OH: South-Western Cengage Learning.com/companyhistories/Sonoco-Products-Company-Company Kotelnikov. Essentials of Organizational Behavior (Ninth ed. Vol.jsp? articleID=R0610J&ml_action=get-article&print=true Mission statement . from http://www. Organization Development & Change (9th ed. Mason. W. from http://www. (2008). (n. G. Retrieved February 1.htm Robbins. 8 St. 2009. 2009. V. A. (2001). In Harvard Business Review.html Levitt. B.bpoindia. In Wikinvest. 1-25. Retrieved February 1. Thomas. OH: Thomson SouthWestern. M. Human Resource Development (4th ed. In Organizational Development-A Basic Research Report. Sonoco has risen to packaging and recycling prominence in the Southeast. Werner. In Manufacturing Industry. In 2000 Annual Report. Retrieved February 1. (n. 2009. J.. Taylor.wikinvest.).). from http://www.com. 2009.. Sonoco Products Company (A): Building a World-Class HR Organization [Review of Harvard Business School]. (2005. June). 2009.d.). Organizational Development-A Basic Research Report. Long-range vision: started more than 100 years ago.). Retrieved January 16. & Reavis. (n. (2006). S. (n.). D. 2009. C.d. Mason. from http://www. Retrieved February 1. Groysberg.d.com/stock/Sonoco_Products_Company_(SON) Strategy for Growth. B. (n.Sonoco 10 Sharma.shtml Sonoco Products Company (SON).org/research/organizational-development-research-report.d. . Sonoco 11 Appendix 1 .