The Role of the Human Resource Department at Sonoco Products - Case Study Example

Name: Professor: Institution: Course: Semester: Date: Sonoco Products is a global packaging company that was started over 100 years ago in Hartville, Southern Carolina. The company had two major business segments namely: consumer packaging and consumer packaging. Sonoco products made very successful milestones between 1980 and 1990 registering consistent growth through the years. However, in the late 1990s, Sonoco products was greatly affected by global issues that were as a result of the major decline in United States manufacturing export’s economy which was experienced during the Asian Financial crisis between 1997 and 1998. The globalization posed both business opportunities and competitive challenges as well. With the changing needs of the consumers, a lot of emphasis was now placed on the packaging as opposed to advertisement as it was earlier (Sonoco Case Study, p2) . Between the year 1995 and 1999, the company experienced a sales decline of 6% which forced the shareholders to put pressure on the management to reduce their fixed costs. Sonoco products began to feel the change after many years of consistent growth as well as financial success. The stock price of the company had started dropping and the company’s leverage was high because of the many acquisitions it had done and its continued operations in many plants and at the same time, many manufacturing companies had started moving oversees in search of cheap labour. Although North America accounted for about 80 of all the sales that the company made, the company’s competitors were operating on a global platform. Sonoco’s internal structure was facing challenges especially eacuse the operations of the company were so decentralized that the structure was unable to support the strategic initiative of the company. In particular, the HR function was viewed as just an administrative support function as opposed to an important function as far as strategy formulation and implementation was concerned. In addition, the company was facing challenges with emerging technology and diversification maters. For instance, as a result of new technology, the company had to adapt to flexible packaging as a new technique and as well as customize them to meet the needs of the consumers. The products that were being produced had to serve all market segments something that made the strategy for the packaging and distributing companies even more challenging. As a result of the challenges brought by the globalization issue, The packaging businesses now had to focus on the following: Developing and implementing action plans to meet the needs of the consumers which included: developing more innovative packaging and techniques, Producing product types that are diversified, Improving the production process so as to reduce the costs and Introduce better technologies for quality assurance purposes and to save on labor. All these changes called for Sonoco Company to reassess itself in the face of the changing global market place so that it would remain competitive. All this issue forced Sonoco to review its strategy initiative for all the functional departments (Sonoco Case Study, p3). The human resource changes that Hartley made were very efficient. She started by identifying the loopholes in the already existing system and then developed a sequential Human Resource strategy that was able to tackle the different issues that were in the organization. The sequence of the changes in Sonoco Products was as follows: first, she had to make changes to the compensation and performance Management Systems. Hartley identified the loopholes in the current system after which she linked the HR function to the rest of the organization by eliminating the bureaucracy in the organization and finally, she put in place a system that would effectively reflect on the contribution of the employees to the overall performance of the company. Next was the creation of a process of employee development (Sonoco Case Study, p4) Hartley knew well the importance of developing the potential of employees and she also understood that developing employee’s talent can be a long term competitive strategy. She also decided to develop an employee development program that would not only help develop the skills of employees but give room to identify future leaders. Next, she needed to develop succession Planning. Sonoco products experience poor performance as a result of poor HR training of the personnel in the top management position. The Human resource system that existed in the past did not analyze data on the employee’s career aspirations and it therefore failed to anticipate the future of the company’s Human Resource (Sonoco Case Study, p4). Finally she had to tackle diversity issues. After Hartley finished putting in place all the important human Resource system, she now proceeded do deal with issues of diversity including age, gender, education, race, ethnicity among other issues. Finally, she adopted the rightful character of a HR manager. She was all approachable and opens to any sort of disagreement which made it easy for her to access all the information about the company and she modeled an excellent Human Resource system (Sonoco Case Study, p4). Cindy Hartley joined Sonoco Products in 1995 as the senior VP, Human Resource and found the HR functions totally broken. As soon as she got into this position, she started working on a plan to bring back to life the HR function and also link the Human Resource processes with the business objectives of Sonoco Products. In 2000, Sonoco Products appointed a new C.E.O Mr. DeLoach who found the need to cut fixed costs in line with the changing industry. He found the need to restructure the HR department so as to cut on the costs. DeLoach instructed Cindy to create a new Human resource Structure. That would help cut cost as well as accomplish Cindy’s three objectives. Cindy’s three objectives included: creating a system that had consistent procedures and policies, increase accountability of mangers to human Resource Development and retention and give customized support to all departments of the business. Moreover, there was need to work on the communication issues that the company was facing (Sonoco Case Study, p4). Cindy’s first challenge was to deal with the unfair compensation system that was brought about by the decentralized HR system. A decentralized HR system was started in Sonoco in the late 1980’s when the Human Resource managers were required to report to the general Managers of the company and to the corporate Human Resource. However, due to the decentralization of the Human Resource function there was intense corporate competition and serious communication issues between different divisions. This had a direct effect on the performance as well as the compensation system. According to Christensen (2006, p.2), decentralization or centralization has a direct impact on the human resource functions including development, retention, planning and even compensation. Cindy also faced the challenge of having a poor performance evaluation system. Performance evaluation was done by the division managers annually based on the result-based assessment. Here, the performance of the employees was categorized into five ratings which did not have a specific major result indicator. Feedback was obtained from division managers which made it easier for them to manipulate the results so as to get a salary increase for their employees. Performance measurement based on results is viewed to be an effective tool to reduce cost as well as improve delivery of services. However, it requires continuous feedback, self-monitoring as well as cross functional teams for it to work well (Kulik, & Perry 2008.p 3). The human resource department of an organization plays a very important role in every business strategy formulation as it contributes towards recruitment, retention, compensation and fringe benefits as well as employee relations. An organization structure is one of the most important elements of a sustainable company. Accountability is also very important for organizational planning in every company. When a manager is put in charge of an already defined set of duties, he or she will try their best to ensure that the duties are carried out successfully. In a situation where many managers are collectively put in charge of a wide variety of tasks, the end result is likely to be less efficient as compared to the situation where only one manager is in charge of everything. As described earlier, Sonoco Products experienced a lot of challenges as a result of globalization, the economy as well as the environment. However, the company’s business strategy was very strong as it was built on capital effectiveness, people, quality improvement and productivity, top-line growth and setting stretch targets and for this reason the company’s strategy is able to survive the challenging times (Sonoco Case study ). its major strategy was to cut on cost through developing an efficient operating structure and match the right people with the right jobs (Conway, & Monks,2010, p11) . For this reason, Cindy Hartley who was the Senior VP Human Resources together with the Human Resource Council which comprised of Human Resources management developed two alternative HR structures that were supposed to reduce the Human Resource cost by twenty percent. The first alternative was to have a centralized Human resource Function. Under this option, each one of the four centers of expertise would be charged with the responsibility of handling all the important services and team of field staff would be charged with the responsibility of serving the divisions. The advantage of this alternative is that it reduces the costs that are related to driving administrative imporovement as well as other process improvement. Under this alrenative, Sonoco would also enjoy economies of scale which would save them money and resources that can be used in other uses. However, it will be difficult to attain some of the obejectives with this kind of arrangement as it gives gives no little or no opportunity for individuals to align the needs of the business with the needs of the individuals. Basically, this structure iss seen as beeing inflexible and itss cordination throughout the company is quite a challenge and especisally in large companies. This structure may result to higher levels of employee dissatisfaction. Of most importance is that this structure results in cost savings which amount to $3.1 million which is above the cost saving of $ 2.8 which the CEO had requested (Ulrich et al, 2007, p11). The second alternative for Sonoco products is to have a hybrid HR structure. Under this structure, all divisions would have some direct particpation as far as the following are concerned: personnel programs, succession planning, compensation and benefits and staffing. The corporate who comprse of the specialists (designers and thinkers) would have the responsibilitynof developing the strategies, Human resource Planning and implementation. On the other hand, the field officers (doers) would be incharge of taking care of all the divisional level issues, consultancy servicesn and be incharge of rolling out initiatives. The main advantage of hybrid structure is that it leaves the divisional Human resource management intact an the general managers can call for help when need be. With this strucure, the Human Resource managers would be able to effectively link the business functions with the corporate HR functions (Garavan, 1995 p 46).). This structure is also flexible enough to respond quickly to all the changes in the environment and it incorporates all the division level strategies. Most importantly, with the hybrid structure, the company will be able to save a cost $ 2.7 million which is in line with what the CEO had directed ($2.8 million). The main disadvantage of this structure is that it may not be easy to drive changes across the company as a result of the decentralization. The hybrid structure may also result to a duplication of duties as well as resources especially if the duties are not delined and are not outlined clearly. Also, this structure does not allow sharing of knowledge between different HR practitioners as they are working in different divisions. Based on the challenges that Sonoco products is facing and the objectives that they aim to achieve, I would recommend that they go for the second alternative and adopt a hybrid structure. Research indicates that for large and complex companies, that work in a dynamic environment( changing consumer taste and preferences, dynamic competitors, dynamic government regulations and changing products ) and with rapidly changing technological environment, the most suitable organizational structure for this setup is a hybrid structure. The hybrid structure will fit perfectly with the flexible strategy that Sonoco Products have and will allow them to meet the changing needs of their consumers as well as those of the industry. In addition, this structure will allow the company to get the right people who have the right qualifications for the right jobs which will benefit the company. With this structure, Sonoco products will be able the attention and development that they require from their employees to get the best results. This structure will also be in a better position to allow them to meet the financial targets that they have set. With this structure, they can consolidate some of the administrative responsibility where it is possible which will then result to economies of scales that will result to further cost saving (Ulrich, Younger, & Brockbank,2008 p 832). By having the right systems put in place and getting the right people, this will lead to higher speeds and more improved productivity, increase the levels of employee satisfaction, reduce the level of labour turnover, and reduce wastage which will all result in increased profits for the company on a continuous basis. With the hybrid structure in place, it is possible to give more attention where it is needed. For instance, while the corporate staff give insight into the high level initiatives, the field staff can work on how to make this initiatives work best for the divisions. The result of this is a Human Resource functions that is proactive to the needs of the business. With this structure, it would be possible for the HR field staff to make observations and advise on which compensation plans will be suitable as they have firsthand information of all their staff and the operations. Finally, the hybrid structure is best suited as it will put into perspective all the critical Human Resource processes at the places that they will work best in the organization. In the end, all these actions will lead to better operations and reduced costs for Sonoco products (Ulrich, & Brockbank, 2005 p 493). According to Garavan, (2007 p 28), for the changes to be sustainable, Sonoco products will have to follow a systematic model of diagnosis, gathering of data and involving all the shareholders. Involving the management support as well as the line managers is very important in implementing any Human Resource initiative. Changes should allow for measurement of employee’s performance using a Human Resource score card which will identify skills, outcome and behavior which will ensure that change is effective and even link the results to tangible impact on the organization. This will ensure that employees feel that they are part of the organization and this will lead to resistance to the change and make it possible to gather feedback on how Human Resource should work. The support from top management will ensure that the Human Resource structure is in line with the organization’s strategy through identification of structural and systematic issues, company’s competencies as well as designing the Human resource around all these dimensions (Elswick, 2001, p4). References Christensen, R. (2006). Roadmap to Strategic HR: Turning Great Idea into a Business Reality. 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