Main Objectives

This case analysis outlines the challenges of Sonoco Products Company to revise its corporate strategy (i.e. products, structure, Human Resources, etc.) to remain competitive and continue its growth in the ever-changing global packaging industry. Looking to cut costs across the company, Harris DeLoach, Chief Executive Officer (CEO), instructed Cindy Hartley, Senior VP Human Resources, to come up with at least two potential new HR structures that would reduce HRs cost by 20%, or $2.8 million. The task being asked of Hartley was to devise a new HR Organization, in addition to costing less , that would support inclusive objectives : 1. Create corporate-wide consistency on how HR systems and process are implemented and used 2. Increase the level of accountability placed on general managers in the business for developing, retaining, and replacing talent 3. Provide customized, strategic support to the business Other pressing reasons for the request include the following: 1. Ensuring top-level accountability for talent management and upgrading. 2. Providing for a more even distribution of HR talent and support 3. Leading the way in supporting the companys new growth strategy, which often meant working across division lines to market and sell solutions to a single large customer.

The Facts (Situation Analysis)

Sonoco must change its business model to enable new top-line growth and to reduce its overall cost structure to be competitive in the face of the new global marketplace, such as : o develop and implement of policies and action programs to meet the consumer needs. o production for diversified product types o improvement of productivity for cost reduction Cost cutting provided an ideal opportunity to rethink how parts of the company were structured, including HR An HR function was highly decentralized, siloed, inconsistent in its process and unequal in the services that exist in the various business, and it was ineffective and viewed as just an administrative support function. Sonoco was in a precarious situation. Its stock price fell to an eight-year low. Sonocos debt was high because of the acquisition and continued operations of several plants

Case Analysis

Strategy - Sonoco need to embrace the growing global marketplace and its people. - Sonoco understood that to be the leader or one of them one had to be continuously flexible in the new marketplace. Structure - In the past, Sonoco experienced a few iterations of corporate structure centralized, divisional, functional, etc. - Sonoco reviewed its structure to ensure its alignment with the current business environment and that it too would aid the organization in meeting its overall goals. - Centralized structure provided economies of scale when centralizing core administrative functions. Sonocos support departments, 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. - With a decentralized structure, the company experienced problems with departments/ divisions becoming their own entities and not tied to the bigger picture. Additionally, this structure probably represented increased cost due to duplication of efforts. Systems Prior to Cindy Hartleys arrival, Sonocos fragmented HR system was unable to operate strategically. From a Human Resources perspective, Cindy Hartley had three main priorities: - Changing compensation and performance management systems to eliminate arbitrary nature and more accurately reflect the employees contribution to the companys performance. - Creating an employee development process to refine employees skills and identify/develop lacking skills. - Building a succession-planning process to identify the next generation of leaders. Sonocos performance management, compensation, and succession planning systems must complement its business strategy. Therefore, A performance management system is change as follows : Reflects the organizations 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, feedback and development Staffing - Sonoco needs to get a tighter control on how a company trains, socializes, integrates, motivates, and manages the careers of its human resources. Over the years, it failed to hold its people accountable and develop them, especially the leadership.

- Sonoco implement the new performance management and compensation systems, the increased focus on leadership development, and most importantly the succession planning process. - It is not only important to have the right people with the right skills now, but to sustain the companys position into the future; - Sonoco has to develop its talent pool and leaders going forward. Skills - Over the years, Sonocos strengths were its strong market position, brand value, product diversification, flexibility, culture and visionary leaders. - The new performance management and compensation systems further reinforce Sonocos commitment to enhancing employees skills to serve the organization. Shared Values These values are evident in all actions taken by the company. Sonocos value revolves around people, culture and values. Sonocos culture has always played a role in its success. Unfortunately, over the years, there was a diminished sense of personal responsibility and accountability that linked into the company. Thus, some financial goals fell short, but some of Mr. DeLoachs and Ms. Hartleys new strategies turned this around.

Evaluation of Alternatives
Senior VP Human Resources, Cindy Hartley along with an HR Council, comprised of HR management, formulated two options in response to Mr. DeLoachs original charge that was to devise two alternative HR structures that would reduce HRs cost by 20%, or $2.8 million. The first option was a centralized HR function in which one of four centers of expertise would handle the majority of services, and a trimmed down field staff would serve the divisions. The advantages - Decreasing costs associated with driving administrative and other types of process improvements. - These economies of scale would free up money and resources for other purpose (would be less expensive). Disadvantage - it would be difficult to achieve some of the other objectives with this structure, since there would be less opportunity align with individual business needs and interests - it is inflexible and coordination from throughout the organization is difficult especially in large companies - This could result in greater customer service issues and employee dissatisfaction - This option results in a $3.1 million cost savings (above $2.8 requested by the CEO)

 The second option was a hybrid organization in which the divisions would have some direct involvement with staffing, succession planning, personnel programs, compensation, and benefits. The strategy development, HR planning, and its implementation responsibilities would are the responsibility of Corporate (the specialists - thinkers and designers) while the field staff (the doers) would handle divisional level issues, assist in rolling out initiatives, perform consulting services. The advantages - it left a form of divisional HR management intact on which general managers could still call for help - It would be flexible enough to respond quickly to environmental changes, and be able to participate in divisional level strategies. - the projected cost savings would be $2.7 million for the hybrid structure, which is in line with the CEOs directive of a $2.8 million dollars cut in costs Disadvantage - It may result in some duplication of resources if delineation of duties is not specifically outlined and understood - 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.

Recommendation
Based on the above evaluation mentioned, we recommend to choose the second option the hybrid organization, with the following reasons : - It is align with Sonocos flexible strategy to meet the changing demands of its industry and consumers. - It consolidates administrative functions where feasible to result in economy of scale will save more - It allows for the right people with the right skills to be where they are most beneficial to the company - Having the appropriate systems in place to get the right people in place and up to speed will improve productivity, increase employee satisfaction, reduce waste, and decrease turnover which will result in increased profits on an ongoing basis. - While the corporate function worked on high level initiatives, the field HR staff could provide insight or suggestions on how to make this best work for the division (HR being proactive to the business needs). - 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. - It would place the critical HR processes into the meat of the organizations where they should work best. these actions will result in improved operations and cost reductions for Sonoco.

Case Analysis of Sonoco Product Company (A) : Building a world-Class HR Organization

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(MaxThinkMus)

Hidayati Husna HT. Malau Asep Kurnia Sugeng R Andi Lesmana Boby Rahman

IPMI

Executive Class July 2011