Sonoco Products Company (A): Building a World-Class HR Organization Sonoco Products Company is a global packaging company that began in 1899 in Hartsville, South Carolina. During 1990’s Sonoco was one of the largest packaging companies in the world with revenues reached $2. 6 billion through the manufacture and sales of consumer and industrial packaging, with 17,300 employees across 285 operations in 32 countries, serving customers in 85 nations. During 1990’s the United States was enjoying economic growth during the late 1990s/early 2000s, so was the packaging industry; as a result, Sonoco’s position began to change.
Sonoco was becoming increasingly more susceptible to changes in the world economy, and the packaging business began to focus higher speed computer technology for quality assurance that improvement and labor saving, production for diversified product types, and implementation of policies and action programs to meet the consumer needs, including development of innovative packaging containers and techniques. Thus, Sonoco realizes that it needs reinvent itself in order to remain competitive in their market.
Hartley has to answer several questions from Sonoco’s CEO, Mr. DeLOach. Between the two plans Hartley presented as a possible solutions fro the company, the horizontal or hybrid structures, she has to prove which one is the best one would fit with the company’s goals. Being in a dynamic market, Sonoco needs a structure that reacts fast to changes in the market, so, a hybrid structure in which the divisions would have some direct involvement with planning, personnel programs, compensation, and benefits.
The advantage of this structure is that it would leave a form of divisional Human Resources management intact on which general managers could still call for assistance. Moreover, these new group of Human Resources managers would be able to provide the strategic interact between corporate Human Resources functions and Sonoco’s business goals. Thus, a hybrid structure would be flexible enough to respond quickly to environmental changes, and be able to participate in divisional level strategies.
Thus, the hybrid structure suits perfect to a complex organization like Sonoco with advanced technology and dynamic environments such as changing products preferences by costumers and competitors, and as well changing government regulations affecting its business. This hybrid structure aligns perfectly with Sonoco’s flexible strategy to meet the changing demands of its industry and consumers. Furthermore, Sonoco’s members have to choose which option would better ensure the right people were in the right position. Sonoco’s value revolves around people, culture and values.
Sonoco’s culture has always played a role in its success with safety, integrity, and respect for the individuals are the roots of its culture. However, since the mid 80’s there was a diminished sense of personal responsibility and accountability that linked into the company. So, some financial goals fell short, but DeLoach’s and Hartley’s new strategies turned this around. Sonoco needs to get a tighter control over this component. During the 1990’s, Sonoco 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. Thus, the implementation of the new performance management and compensation systems, as well 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 company’s position into the future; Sonoco has to develop its talent pool and leaders going forward.
As a result, a hybrid structure in which the divisions would have some direct involvement with staffing, succession planning, personnel programs, compensation, and benefits would allow to have the people in the right positions at Sonoco. In this hybrid structure, basically the strategy focus on Human Resources Department to planning, and its implementation responsibilities would primarily rely on the top HR Corporate level while the field staff would handle divisional level issues by assisting in rolling out initiatives, performing consulting services.
Moreover, besides which option would be more flexible or ensure that the right people were in the right positions, Sonoco as a profit corporation is also looking for the most profitable strategy so the company’s shareholders would be satisfy. Between both structure, the centralized and the hybrid options, the best structure for profitability perspective is the hybryd structure. Even though, the centralized structure projected cost savings is higher thatn the hybrid structure with $3. 1 million for the centralized option compare to the $2. million for the hybrid structure; however, the hybrid structure on the long run would be fair better because consolidating administrative functions where feasible to result in economies of scale would in cure in a bigger savings. Also, 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 during the years which also helps to reduce employee turnover ratio which means that Sonoco would safe on training programs for new employees.
Last but no least, Sonoco has to select the structure that matches the organization’s principle that “ people build businesses”. This phrase is true, but no organization can win business if the people in the organization are not in the right position or there is lack of communication with in the organization. It is really important that a company’s strategy, structure, and systems are well defined, so that the Human Resources would hold it all together which includes details on how a company trains, socializes, integrates, motivates, and manages the careers of its human resources or also known human capital.
So, the hybrid structure would best fit Sonoco’s principle “people build business” Sonoco realized this fragmentation led to ineffective succession planning and leadership development and it would harm the organization. It is not only important to have the right people with the right skills now, the most important is that the people are in the right positions in order to build businesses which with a hybrid structure the divisions would have some direct impact on how people are motivated with in the organization which would lead to a high performance from each departments and the company as a whole.
Additionally, Sonoco took advantage of the concept of incorporating diversity into its business, which would bring new ideas to the business, and that workforce diversity would play as a competitive advantage against competitors. In conclusion, due to Sonoco’s complex organization with advanced technology and dynamic environments typically fair better with a hybrid structure. This structure aligns perfectly with Sonoco’s flexible strategy to meet the changing demands of its industry and consumers.
Moreover, a hybrid option allows for the right people with the right skills to be where they are most beneficial to the organization; so, this way they get the development and attention that they need to produce the results top management and shareholders expects. In addition, as far as meeting Sonoco’s financial targets, the hybrid structure would over time fair better than the centralized option due to the flexibility to changes in he environment. Thus, 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 would result in increased profits on an ongoing basis for Sonoco, and with the hybrid structure in place, more attention could be given where needed.
To illustrate, while the corporate function worked on high level initiatives, the field Human Resources Department staff could provide insight or suggestions on how to make this best work for the divisional managers. This being said, Human Resources would be acting in a proactive way to the business needs. Furthermore, the Human Resources field manager could also observe and communicate what compensation plans may work best since they would have firsthand knowledge of operation and the staff. Ultimately, these actions will result in improved operations and cost reductions for Sonoco.
References 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. Mission statement – Sonoco. (2009). Retrieved November 15, 2010, from http://www. sonoco. com/sonoco/Home/About+Us/cor_mission_statement. htm