Sonoco 1

Introduction:
Sonoco Products Company was founded by Major James Coker by name Southern Novelty Company up till 1923. It was started by initial investment of $6,000 capital. Its original product was a paper cone used in the textile industry to hold yarn. During those times all the textile industries used wooden cones, so use of paper cones were unique. Even though Sonoco was not the inventor of paper cones, the engineers of Sonoco prepared new processes to automate the production of these cones. It helped them to gain the competitive advantage over its competitors and in a short period of time they became the leader in producing paper cones in the United States. Sonoco also started their credits the use of plastic T-shirt grocery sack in retails stores and supermarkets along with creating Ultra seal, a closure system for Crisco shortening cans which eliminated the need for a can opener (International Directory of Company Histories, Vol. 8 St. James Press, 1994). By the end of year 2000, Sonoco was rated one of the largest packaging companies in the world. With 17,300 employees across 285 operations in 32 countries, their revenue reached $2.6 billion in manufacturing and sales of consumer and industrial packaging (Thomas, Groysberg, & Reavis, n.d., p. 2). In addition Sonoco along with major packaging company, they also prepared their own paperboard, by consuming almost two million tons of paper annually recovered. Sonoco over the years have continued to expand and grow with new operations around the world, expand their product lines (i.e. plastic, flexible packaging, cardboard, aluminum cans, etc.) and had profitable capital on them. However, as Sonoco was growing and expanding, the industries around they also did the same. In the late 1990s and early 2000s when US was enjoying growth along with the packaging industry, Sonocos position began to change. The company was becoming more and more vulnerable to changes in the world economy. The packaging industry began to focus on the following: y y y development and implementation of policies and action programs to meet the consumer needs, including development of innovative packaging containers and techniques production for diversified product types improvement of productivity for cost reduction

Sonoco 2 y y y introduction of higher speed computer technology for quality assurance, 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, 2005).

This made Sonoco to re-evaluate and reinvent itself in the face of the new global marketplace to maintain their position. In this case analysis, this writer will assess the state of Sonoco in years approaching the new millennium (situational analysis), utilize the 7-S Model of organizational alignment as appropriate to examine Sonocos need for planned change (identification of issues), examine proposed options (evaluation of alternatives), and propose plan of action (recommendation).

-------------------------------------------------------------------------------------Situational Analysis
Sonoco began to identify their changes in the business on the new millennium. After maintaining their stability for these many years of enormous growth and successful financial stability, Sonoco began to sense the unstable situation. Their stock prices fell to an eight year low, Sonocos debt was raising high day by day because of acquisitions and continuation of the operations in many plants whereas many competitors had to shift their manufacturing base overseas for cheaper labor. Sonocos main sales area was North America which was 80%, whereas the competitors were operating globally. Sonoco was undergoing difficult challenges internally with their structure and composition. Sonocos operations were cut down to the point that it was not capable to sustain some of the more far reaching strategic initiatives of the company. Mainly, their human resources roles were proving ineffective and were looked as just an administrative

Sonoco 3 support function. In addition, Sonoco were facing challenges of growing changing technology and diversity matters. For example, it now had to challenge with supple packaging that was the new technique of this time and the increasing use of ecommerce as a source of trade. Lastly, globalization as well as the consumers desire and demands were increasingly changing. Production was undergoing huge challenges that made the strategy for the packaging and distributing them was getting more demanding. The changes taking place made Sonoco realize to change their business strategies. Sonoco realized the need for transformational change to make sure their presence in continuously evolving situation. As the situation demanded, Sonoco required performing SWOT analysis to review and build their strengths, identify the available opportunities, improve its weakness and strategically plan themselves to remove their remaining threats. Especially Sonocos main focal point was to get rid of external forces like energy crisis, climate change, environmental destruction, etc., packaging industry, demands of its customers, global market place and mainly its competitors to position, if necessary in their business strategy. Also, Sonoco needed to analyze them internallymission, human resource, technology, culture, structure and plans to processing any change. For these evaluations and analysis, Sonoco should use seven Ss.

Sonoco 4 Identification of Issues For Sonoco to be effective it must have high effective degree for adjustment or arrangement in seven Ss. For this reason, from the case study the writer identifies the following challenges/issues to continue transformational changes at Sonoco: y y y y y y y y y y y y y y y y Stagnant business strategy Growing packaging industry Saturation of market, increased competition Environmental concerns State of economy Globalization E-commerce Expanding product lines Diverse, sophisticated and demanding consumers New and/or improved technology Age of differentiation, brand value, changing image Company culture Evolving role of Human Resources Ineffective organizational structure Management deficiencies Changing policies and/or practices

Sonoco 2 The 7-S Model forces organisation to pay concentration on systems thinking, which involves appearing at all seven elements at the similar time since they are all interconnected (Kotelnikov, 2001). Therefore, this analysis examines several of the issues above as they relate to the seven Ss. Strategy: Strategy is a companys means to help organization achieve their objectives. Introduction of new products, costs entertainment, introducing new services or any combination of these along with others can be their key strategies. Sonoco mainly during its era used product driven strategy: however with changing environment, the economy, the workforce, social trends and the industrial revolution, it was implementing more solutions oriented approach. Probably, Sonoco had the need to review their business plan they were in, the supplied products, their ability to sustain in ever changing industry, their applicability of different products solutions to multiple situations. In order to overcome this, Sonoco was involved in top line growths on two fronts: organically, which includes market growth, new products and services, 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," n.d.). In addition, Sonoco accepted the need to hold the growing market globally and its people. Incorporation of diversity in every business aspects including workforce, products, suppliers and customers was needed. Flexibility was the main aspect to be the leader or to be one of them in todays market. They changed their corporate mission statement which Sonoco intends to be the low-cost global leader in providing customer-preferred packaging solutions to selected value-added segments, where it expects to be either number one or two in market share supports this point

Sonoco 3 ("Mission statement - Sonoco," 2009). Sonoco did their work (homework), This writer believes that Sonoco was a company that did its homework, which constantly analyze itself to stay competitive. That resulted in reacting fast and minimizing any potential damage to the businesses of Sonoco. The relatively quick move to rethink and revise its strategy at a critical time in the companys history attests to this point. Structure Structure and strategy are closely related to each other. In structuring the organizations framework, there are members of the organization coordination. Applying Structure affects how successfully how an organizational strategy can be implemented. In an organization, the size, environmental uncertainty, technology and business affects its structure. They made some changes of corporate culture structure divisional, functional, centralized, etc in the past. Nevertheless However, key to any strategic business plan is the reassessment of an organizations structure to ensure its alignment with the current business environment. Thus, Sonoco reviewed its structure to ensure that it too would aid the organization in meeting its overall goals. With a centralized structure, 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 (Robbins & Judge, 2008, p. 235). However, this structure provided economies of scale when centralizing core administrative functions. As for the 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.

Sonoco 4 Based on many aspects of Sonocos business environment, 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. Additionally once the overall business structure is in place, reviewing structure on a micro level would be a benefit. Consequently, reviewing structure from a divisional, departmental, and even individual job perspective is important. Interventions such as continuous quality improvement, teambuilding, and job enrichment are relevant options to improve processes, productivity, and morale during structure transition. Systems Society is indeed becoming increasing more technological and systems driven. Thus, company systems, the activities involved in the daily operation of business, also need attention. These systems include business, management, performance management, financial, compensation, and even customer satisfaction. For that reason, Sonoco attempted to restructure its processes/systems in order to more efficiently maintain its market share, increase productivity, and maintain safety goals. 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: 1. Changing compensation and performance management systems to eliminate arbitrary nature and more accurately reflect the employees contribution to the companys performance. 2. Creating an employee development process to refine employees skills and identify/develop lacking skills. 3. Building a succession-planning process to identify the next generation of leaders. (Thomas, Groysberg, & Reavis, n.d., p. 7)

Sonoco 5 Ms. Hartley understood that Sonocos performance management, compensation, and succession planning systems must complement its business strategy. Therefore, she began to implement change. A performance management system is effective if it: y y y y y 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 (Werner, 2006, p. 391)

Cindy Hartleys performance management did include these aspects. According to Hartley, Until you systematize something to ensure that it is done and done correctly, you will never get compliance (Levitt, n.d., p. 9). This interwoven system connected business goals and individual objectives instead of subjective measures of the past, which managers manipulated to get higher pay raises for their employees. As for the new compensation system broadbanding system, it complemented the new performance management system. Broadbanding reduces salary categories to manage career growth and deliver pay. According to Byars and Rue (2008), 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. This system supports the business strategy focused on developing and maintaining the most skilled workforce to meet the companys goals. However, this system places more emphasis on the person not the job, which may be contrary to Sonocos culture of team-orientation. In addition, there is no mention of any incentive awards to encourage teamwork. Although individual accomplishments are good, Sonocos environment is

Sonoco 6 one such that teamwork will be necessary to meet the challenging demands that it faces. Furthermore, this competency is part of the new performance management process. Subsequently, team or group incentives (i.e. profit sharing, gain sharing, etc.) could prove useful and balance out the compensation portfolio. These incentives involve employees in a common effort to improve organization performance (Byars & Rue, 2008, p. 283). Staffing With a companys strategy, structure, and systems defined, the companys human resources are what hold it all together. It includes details on how a company trains, socializes, integrates, motivates, and manages the careers of its human resources. Sonoco needs to get a tighter control over this component. Over the years, it failed to hold its people accountable and develop them, especially the leadership. Sonoco realized this fragmentation led to ineffective succession planning and leadership development that only harmed the company. Hence, the implementation of 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. Additionally, Sonoco took advantage of the concept of incorporating diversity into its business. It appreciated the diversity of its workforce, its suppliers as well as its customers. Skills Skills refer to what a company and its personnel do best. 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

Sonoco 7 reinforce Sonocos commitment to enhancing employees skills to serve the organization. Sonoco based expectations for all employees on satisfying customers through six core competencies: excellence, communication, teamwork, technical/professional skills and knowledge, strategic integration, and coaching/mentoring (Thomas, Groysberg, & Reavis, n.d., p.97). Shared Values The anchor of all the 7s is 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. Safety, integrity and respect for the individual are hallmarks of its culture ("Strategy for Growth," n.d.). 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.

Sonoco 8 Evaluation of Alternatives Sonoco experienced growth and prosperity as well as a decline in a few key results during the late 1990s/early 2000. As described previously, there were a myriad of challenges to include globalization, the industry, economy, and environment to name a few. However, Sonocos business strategy was solid. Built on people, capital effectiveness, productivity and quality improvement, top-line growth and establishing stretch targets, Sonocos strategy would endure turbulent times ("Sonoco Products Company (SON)," n.d.). Its basic strategy was to reduce cost, develop a more efficient operating structure and put the right people into the right jobs to carry out its strategy. With this in mind, 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 to this structure would be the 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. Thus, this structure would be less expensive. On the contrary, 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. Typically, the view of this structure is that 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. Additionally, HR may not readily have its finger on

Sonoco 9 the pulse of the organization to be proactive about needed changes, actions. However, more importantly, this option only results in a $3.1 million cost savings, which is above the cost savings of $2.8 requested by the CEO. The second option was more of 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 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. These new group HR managers would be able to provide the strategic link between corporate HR functions and the businesses (Cummings & Worley, 2008, p. 321). It would be flexible enough to respond quickly to environmental changes, and be able to participate in divisional level strategies. Lastly, 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. The main disadvantage to this option stemmed from a concern over whether changes could be easily driven across the company with this new structure. This structure may result in some duplication of resources if delineation of duties is not specifically outlined and understood. Logistically, 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 specifics of the case and the research conducted, this writer would choose option 2 the hybrid structure. Research suggests that large, complex organizations with advanced

Sonoco 10 technology and dynamic environments (i.e. dynamic competitors, continually changing products preferences by customers, changing government regulations affecting its business, etc.) typically fair better with a hybrid structure. This option aligns perfectly with Sonocos flexible strategy to meet the changing demands of its industry and consumers. Besides, this structure allows for the right people with the right skills to be where they are most beneficial to the company. This way they get the development and attention that they need to produce the results that Sonoco wants. As far as meeting its financial targets, this option would over time fair better. Consolidating administrative functions where feasible to result in economies of scale will save more. 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. With this structure in place, more attention could be given where needed. For example, 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 (with corporates guidance, if necessary). This would result in 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. Lastly, this structure would place the critical HR processes into the meat of the organizations where they should work best. Ultimately, these actions will result in improved operations and cost reductions for Sonoco.

Sonoco 11 References Byars, L. L., & Rue, L. W. (2008). Human Resource Management (Ninth ed.). Boston, MA: McGraw-Hill. Cummings, T. G., & Worley, C. G. (2008). Organization Development & Change (9th ed.). Mason, OH: South-Western Cengage Learning. International Directory of Company Histories, Vol. 8 St. James Press. (1994). Sonoco Products Company. Retrieved February 1, 2009, from http://www.fundinguniverse.com/companyhistories/Sonoco-Products-Company-Company Kotelnikov, V. (2001). 7-S Model A Managerial Tool for Analyzing and Improving Organizations. In Corporate Leader Business Architect. Retrieved February 12, 2009, from http://www.1000ventures.combusiness_guide/mgmt_inex_7s.html Levitt, T. (n.d.). What Business are you in?: Classic Advice from Theodore Levitt. In Harvard Business Review. Retrieved January 17, 2009, from http://harvardbusinessonline.hbsp.harvard.edu/hbsp/hbr/articles/article.jsp?articleID=R06 10J&ml_action=get-article&print=true Mission statement - Sonoco. (2009). Retrieved February 1, 2009, from http://www.sonoco.com/sonoco/Home/About+Us/cor_mission_statement.htm Robbins, S. P., & Judge, T. A. (2008). Essentials of Organizational Behavior (Ninth ed.). Upper Saddle River, NJ: Pearson Prentice Hall. Sharma, S. (n.d.). Organizational Development-A Basic Research Report. In Organizational Development-A Basic Research Report. Retrieved January 16, 2009, from http://www.bpoindia.org/research/organizational-development-research-report.shtml

Sonoco 12 Sonoco Products Company (SON). (n.d.). In Wikinvest.com. Retrieved February 1, 2009, from http://www.wikinvest.com/stock/Sonoco_Products_Company_(SON) Strategy for Growth. (n.d.). In 2000 Annual Report. Retrieved February 1, 2009. Taylor, B. (2005, June). Long-range vision: started more than 100 years ago, Sonoco has risen to packaging and recycling prominence in the Southeast. In Manufacturing Industry. Retrieved February 1, 2009. Thomas, D., Groysberg, B., & Reavis, C. (n.d.). Sonoco Products Company (A): Building a World-Class HR Organization [Review of Harvard Business School]. 1-25. Werner, J. M. (2006). Human Resource Development (4th ed.). Mason, OH: Thomson SouthWestern.