Sonoco Case Study

This research systematically looks at HRM practices and organisational behaviours at Sonoco with aims of identifying current conditions, evaluating practices, providing new designs, and ways of implementing best HRM practices.

The company must restructure its HRM strategies in order to promote new initiatives, meet various functions of HRM such as talent management and support of Sonoco growth strategies, and reduce function’s cost by 20 percent or $2.8 million.

Sonoco is a multinational packaging firm that has over 100 years since its inception at Hartville, South Carolina with a capital of $6000. Sonoco has consumer and industrial packaging as its main business categories. Between 1980 and 1990, the company achieved tremendous success.

However, in the 1990s, Sonoco experienced challenges due to global issues. These factors resulted from the decline in the US manufacturing export economy due to Asian financial crisis of 1997 and 1998. Globalisation created operational challenges and business opportunities to Sonoco.

Sonoco was a highly leveraged company because of its many plants. Therefore, any slight change had severe financial impacts. For instance, between 1995 and 1995, sales fell by six percent (from $2.7 billion to $2.5 billion).

In the same period, the net income increased by 14 percent. Still, Sonoco stock prices fell, which resulted into heavy pressure of restoring shareholders’ value.

Diagnosis

Sonoco HRM Situation

Sonoco HRM practices have been highly fragmented. The corporate HR roles are still traditional in which every HR manager focuses on its own initiatives. The HR did not link individual goals and business initiatives.

Instead, performance and appraisal systems focused on individuals’ benefits rather than the company’s performance. The compensation system depended on the general manager (GM) who used it to favour their employees. In fact, the company lost revenues from these diverse compensation systems.

Analysis

Cindy Hartley’s Objectives for Changes at Sonoco

The role of Cindy Hartley as a senior vice president of HR was to introduce new HRM policies that would change performance management, compensation, development, and succession planning.

The aim of this project is to reduce cost, enhance accountability on talent management, and define the role of HRM in supporting strategic business objectives.

The HRM roles have changed to strategic human resource management (SHRM) and strategic human resource development (SHRD) within a global context (Yorks, 2004; Barney and Griffin, 1992; Vaiman, Scullion and Collings, 2012; Scullion and Starkey, 2000; Becker, 1994).

Based on a resource-based theory, the HR manager can use human resources to create competitive advantage that can support Sonoco strategic business objectives (Noe et al, 2012).

According to Barney, strategic advantage entails “when a firm implements a value creating strategy not simultaneously is being implemented by any current or potential competitors” (Barney, 1991, p. 100).

This observation also supports human capita approach, which emphasise the role of HRM in developing human resource for competitive advantage. This implies that Hartley must apply SHRM in HR developments.

Currently, some of the Sonoco employees (free riders) perform below the accepted standards. Such employees depend on the performance of other members of the organisation.

First, Hartley must initiate changes in which all employees must provide value and returns to the organisation. HR management must spread various talents across the organisation. Thus, various departments can benefit from diverse knowledge, skills, expertise, and experience of different employees (Mello, 2010).

Second, highly qualified human resources in Sonoco are resources with rare capabilities, which organisations must manage or protect. At the same time, Hartley must insist on high-levels of skills and qualifications of potential recruits.

Wright and McMahan observed that such qualities are scarce due to general distribution ability (Wright and McMahan, 1992). Hartley must ensure that selection and recruitment activities focus on recruits with high qualifications and skills, who can promote Sonoco needed changes and a culture of performance.

Hartley must ensure that HR departments consider changes needed in the organisation (Schuler and Jackson, 1987).

Third, according to Ulrich employees for creating competitive advantage must have inimitable quality (Ulrich, 1991). In this sense, HRM practices must focus on ensuring that Sonoco employees have inimitable qualities.

Finally, Sonoco must reorganise its compensations and reward structures. Currently, every division manager decides on what is best for his team, which leads to excessive spending on employees’ benefits.

The system is prone to manipulation. Still, the performance management also makes it difficult to retrench redundant on non-performing workforce.

Evaluation

Success of the HR Changes at Sonoco and the Sequence of Changes

When Hartley arrived at Sonoco in 1995, she introduced new HRM policies in order to improve performance management, compensation, development, and succession planning. Corporate evaluation shall enable Sonoco to make the required changes in order to realise DeLoach’s Challenges.

Key performance indicators (KPIs) must focus on all line managers and employees in order to create value for Sonoco. Thus, Harley’s focus on key issues shall enable the firm achieve its desired results.

Unlike other HR managers who are unable to define their roles, Harley seems to have identified HRM issues, which affect Sonoco. In order to make her department relevant, Hartley must show values HRM department has achieved through evaluation.

Executives consider HRM initiatives as expenses, which employees must recover in terms of results (Stone, 2010). This argument posits that HRM practices should shape employee’s behaviours and consequently contribute in achieving goals of the organisation.

Hartley can apply Kirkpatrick’s evaluation framework to enable her account for effects of the HRM strategies on performance management, employee development, and succession planning (Kirkpatrick, 1994).

This framework focuses on the trainees’ reaction to training, learning outcomes, changes in job behaviours and performance, and results of HRM practices based on return on investment (ROI).

Hartley must note that effective HRM practices must influence employees’ behaviours and attitude by developing appropriate programmes, which encourage the best performance among employees. Scholars believe that HRM practices can have positive effects on employees and improve a culture of performance in an organisation.

Hartley must perform cost-benefit analysis on her practices. This is necessary because DeLoach wants Hartley to restructure the HR department and save the company 20 percent ($2.8 million).

At the same time, Hartley must recognise that Sonoco is a highly leveraged company due to fixed costs of its many plants. Therefore, HRM initiatives must minimise direct and indirect costs.

The HRM departments must conduct thorough auditing and benchmarking in order to evaluate progress against HR initiatives. Audit ensures that HR department is on track.

This shall enable Hartley to assess current employees’ performance and develop action plans and future objectives for Sonoco. Hartley must collect information from employees for purposes of improving Sonoco strategies and practices.

Design

The Right HR Structure for Sonoco – Evaluation of Centralization and Hybrid Options and Justify Your Choice of Option

Hartley must transform HRM practices at Sonoco. Her new design must meet three objectives:

1. Implementation of a talent development process
2. Even distribution of HR talent across the company’s large and small divisions
3. Support of the company’s new growth strategy with strategic deliverables—all while reducing the function’s cost structure by 20%, or $2.8 million

Given the above objectives, Hartley must align HRM practices with objectives of Sonoco through appropriate design and implementation strategies. Hartley presented two options, which were hybrid and centralised models of staffing Sonoco. Thus, we have to evaluate the best method for the organisation.

Centralised model allows management to have direct control over employees and staffing functions. A centralised model shall allow Hartley to exercise control over processes, strategies, budget, and resources.

On the other hand, hybrid (decentralised model) shall allow line managers to control staffing practices, have local recruitment processes, and create their own strategies and processes at every plant in order to meet their local needs.

Lermusi notes that most organisations favour “centralised model (59 percent) while only nine percent of companies deploy a fully decentralized structure” (Lermusi, 2003). About 32 percent of organisations use both centralised and hybrid models simultaneously. In this case, some aspects of HRM practices take place locally and centrally.

Centralised model shall enable Hartley to pursue a consistent strategy, goals, processes, and achieve economies of scale. Conversely, hybrid model shall allow line managers and other managers to pursue their own needs and give them flexibility in staffing issues.

This model shall create a major challenge for Hartley in terms of establishing corporate strategies, standards, and evaluation of the progress of HRM activities. Nevertheless, it is imperative for Hartley to understand how the HRM department is progressing, in spite of the HRM model chosen.

Therefore, the design of these models must reflect the structure of employees’ functions, effectiveness, and reliability. The model should be:

• Aligned with Sonoco business strategies; this enables the HR department to align corporate business objectives with HRM strategies and then change them into tactics for implementation.
• Consistent; this provides clear ways of evaluation and measurement with specific methods of gathering data for effective comparison.
• Actionable; Hartley must develop a suitable metric that can provide useful information for action.
• Tracked over time; the design must allow for tracking over time in order to obtain HRM information and trends.

Centralised model shall enable Sonoco to have:

• Reduced organisational and transaction expenses
• Concentration of the firm’s skills
• Effective knowledge management and learning
• Effective coordination of organisational main goals
• Cater for organisational skills and needs
• Allow for consistency in practices and processes

However, centralised model can limit globalisation aspects such as various cultural needs, languages, hiring and firing practices, and regional needs.

On the other hand, if Hartley considers hybrid model, she can achieve the following advantages:

• Favours various cultures in the organisation
• Responds to diverse needs of regional managers and regional needs
• May advocate for local talents, skills, and experiences among others

This model may increase organisational costs, limit knowledge and talent management, and provide inconsistent processes and procedures in executing Sonoco initiatives.

Given these diverse pros and cons in both models, Hartley should consider both options. However, she has to centralise most of the HRM practices in order to maximise benefits and reduce disadvantages.

In this sense, Hartley must implement a corporate (central) HRM practices on issues like performance management, compensation and benefits, talent management, and cost management strategies.

HRM must also review its reward, benefits, and recognition design. This should be a centralised practice. Agency theory focuses on tension between employees and shareholders. Executives want to reward themselves heavily as a way of pursuing self-interest and not interests of the organisation (Bernthal and Wellins, 2006).

For instance, Hartley established that most divisional mangers often manipulated performance rating to wangle salary increments for their staff. Costs in Sonoco have increased due to evaluation processes, rewards, benefits, and through other indirect ways, which mangers manipulate (Jensen and Meckling, 1976).

Agency theory aims to ensure that all stakeholders in an organisation are content with reward and benefit systems in the organisation. The HRM must be aware of varied interests in the organisation. From Sonoco, we have observed that it was difficult to link performance with individuals and there were free riders.

The agency theory shows that some employees have habits of limiting their outputs and relying on roles of other employees (free ride) in cases where the organisation does not provide incentives to motivate them.

Therefore, HRM practices must include motivational practices by understanding behaviours of various employees in order to empower them (Randolph, 2000). As such, HRM must implement effective ways of motivating all employees.

Therefore, HRM must ensure that there are KPIs for evaluating performances and developing appropriate reward and benefit systems for such staff (Mathis and Jackson, 2011).

Hartley must strive to integrate HRM design with succession and development of employees in order to promote growth of Sonoco. Growths and cost reductions are the main priority of DeLoach. Thus, the only solution for Hartley is to integrate talent management with the HRM design.

Talent management is difficult in a large organisation like Sonoco. Talent management goes beyond the traditional roles of HRM and may create difficulties for some HR managers.

Talent management meets employees’ needs and serves organisational needs (Vaiman, Scullion and Collings, 2012). First, Hartley must design a talent management model with all essential elements.

• Talent acquisition
• Training
• Career planning
• Performance management
• Talent retention

These elements must demonstrate relationships among themselves.

Second, HRM department must establish the scope of talent management model. This is because organisations have various ways of defining talent management. For instance, some firms may view talent management as a way of attracting and retaining high performing workforce.

Others may consider it as a method of attracting and retaining senior executives while some firms take it as an organisation-wide practice.

These methods have implications for HRM practices on talent management. Hartley must consider her three objectives in her design.

• To increase GM’s accountability for talent management
• To distribute HR talent and support more evenly across the company’s divisions and make HR systems and processes consistent
• To optimise HR’s ability to provide customised and strategic support to the GM’s business

Hartley must develop the best model for Sonoco. This may focus on succession planning and aggressive training of existing staff.

Third, Hartley must also consider the available resources for implementing talent management model. Sonoco is a large organisation that may require a complex model (Evans, 1986).

Lastly, Hartley must determine appropriate ways of talent management necessary to ensure effective implementation of the model. The GM must conduct regular performance appraisal for the entire organisation (Marchington, and Grugulis, 2000).

Therefore, all line managers must be accountable for their employees’ talent and performance because they have strong influences on employees’ behaviours and attitude (Purcell and Hutchinson, 2007).

Implementation

Sustaining Changes Based on Advise for Cindy Hartley and Harris DeLoach

The focus is on how GM shall implement and sustain HRM initiatives. In this sense, we can apply the vertical, horizontal, and temporal linkages of Gratton, Hope-Hailey, Stiles, and Truss (Gratton, Hope-Hailey, Stiles and Truss, 1999).

The model shall help GM accounts for different HR practices. These include performance management, rewards and benefits, training and development, recruitment, selection, retention of employees, talent management, and succession.

The main aim is to link these practices with HRM strategies for positive productivity and employee retention (Guthrie, 2001). This is a vertical relationship. Conversely, a horizontal linkage accounts for HRM practices and their relationships to one another.

Therefore, the HRM department has a significant function to play in the implementation of HRM practices for sustainability. However, this requires all line managers and employees to play their roles for successful implementation of HRM initiatives organisation-wide.

Effective implementation requires a 360-degree feedback mechanism, which should minimise cases of employees’ dissatisfaction (Carson, 2006).

The GM must centralise important aspects like employee recruitment, selection, and retention in the entire organisation. GM shall also ensure that employees learn strategic objectives and culture of Sonoco in order to add to value strategic goals of Sonoco.

Performance management and development must focus on individual employees, strategic objectives of Sonoco, and motivational needs of employees (Miner, 2005).

Line managers must actively participate in the implementation of performance management, appraisal, talent management, and needs of individual employees.

Therefore, GM must make them accountable for talent management in their divisions. This shall enable such managers identify employees for succession, those who need improvement, and employees for retention and dismissal.

Employees’ performance is the main indicator of success in the organisation (Becker and Gerhart, 1996). Therefore, performance management must reflect effective KPIs of Sonoco. Divisional managers must be responsible for performance appraisal and designing of effective KPIs.

Sonoco must link its reward and compensation system to performance. This shall enable the company to save costs. This is because managers shall not be able to manipulate the process to increase salaries of their preferred employees.

Reflection

This case study has provided an opportunity to understand the role of HR in a real organisational setting. It shows that roles of the HR have changed due to globalisation issues and economic conditions. Therefore, the core roles of HR managers have become formulating strategic business objectives.

Analysis of the case reveals how different factors, which relate to employees’ selection, recruitment, performance management, and retention, can influence the overall business outcomes.

However, these roles have become ambiguous, complex, and shifting in directions of other business needs, workforce’s welfare, change agent, and leveraging human capital. It shows that HRM requires clear planning and set objectives based on realistic practices. This enables the HR manager to gauge outcomes based on the objectives.

This cases study shows that the future roles of the HR shall change based on prevailing economic conditions. Therefore, it highlights how functions of HRM shall be crucial in future for achieving strategic business objectives. In addition, it also highlights the need to work closely with line managers and senior managers to manage their staff effectively.

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