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Sonoco Products Company A Building a World Class HR Organization Case Solution
Sonoco reorganized the HR organization due to several factors that were affecting the company in the late 1990s, including the changes in the Packaging Industry. Over the years HR organization at Sonoco became highly decentralized and as a result, there was a lack of coordination among different divisions in the company. This along with other issues with HR led to Hartley reorganizing it and implementing new policies. These include performance management, succession planning, and the development of employees. Different policies were introduced and modifications were made to the existing systems to make the business operations more effective and to help the company achieve its objectives. These reforms helped to improve the HR organization but weren’t able to fully deal with all the problems. Hartley proposed two models, one of which could be adopted by the company to further improve the operation of HR one of which was a centralized HR function and the other was a hybrid organization.
Following questions are answered in this case study solution
What are the overall key issues at the broadest level reflected in the case?
What was the industry environment and how did that effect Sonoco’s strategy? What was the company’s strategy in the early years and thereafter?
What were the objectives/reasons for reorganization of HR? Which were the key areas of HR covered under the reorganization?
What were the inconsistencies in HR processes found by Hartley when she joined Sonocco Products as Vice president HR?
What was the new role envisaged for HR function? What are the broad salient features of new HR initiates introduced by Hartley?
What are the salient features of new performance management system? What are its strengths and weaknesses?
Case Analysis for Sonoco Products Company A Building a World Class HR Organization
1. What are the overall key issues at the broadest level reflected in the case?
The case elaborates on the fundamental issues faced by Sonoco Products Company primarily due to its organizational structures and the industry environment. The company was aiming to cut its costs and the vice president of HR was asked to come up with two plans that would help save $2.8 million. Along with this, there was a need to restructure because of other issues as well, which included a need to create an environment that will ensure accountability of those who handled the recruitment and development of employees, a uniform distribution of talented HR employees, and aligning the goals of HR with company goals one of which was growth.
In early 2000, the company had an all-time low stock price for the last 8 years. It was essential to completely transform the way the company operated to ensure its competitiveness in the market. Due to the increased competition, it was essential to adopt a differentiation strategy. The culture at Sonoco led to a lack of accountability for those who weren't performing well, and this had to be dealt with in the late 1990s as the company faced several new challenges. These included increased competition, and the packaging manufacturers got overcrowded in the US. There was a need to change the focus of the company. There was a need to analyse external and internal forces which were impacting the company.
To support the company goals, it was imperative to reorganize parts of the company. HR also needed restructuring as it was not aligned with company objectives, primarily due to the issue of talent management, and how talent wasn’t seen as a company asset. Moreover, the decentralization of HR in the 1980s led to a limiting of the role of HR, as each division had its separate HR system. This led to HR operations being limited to their divisions. Moreover, the compensation and performance management systems were greatly flawed and didn’t reflect the true performance of employees.
2. What was the industry environment and how did that affect Sonoco’s strategy? What was the company’s strategy in the early years and thereafter?
Sonoco was founded in 1899. Initially, the company focused on growth as the primary objective and achieved it by carrying out acquisitions. It focused on diversifying its product line and ensured effective functioning across the world. As mentioned in the case study, in 2000 the company had revenue of $2.6 billion and had two main divisions, consumer which accounted for 45% of the revenue, and industrial packaging which accounted for 55% of the revenue. The company operated in around 32 countries.
However, the scenario changed in the late 1990s, as the packaging industry now had around 100,000 companies around the world, which meant greater competition. Companies started to move their manufacturing overseas, as it resulted in lower costs, while those companies which decided to continue manufacturing in the US had to face very high competition. Due to these circumstances, the focus of the companies now shifted towards adopting a differentiation strategy. Moreover, newer technology-enabled companies access suppliers from across the world. People could now buy things using the internet and this also impacted the packaging industry. The customer needs were changing consecutively during this period, as different customers had different needs. As a result, the packaging industry made different products to meet the demands of different customers, and several variations of the same product were now available to cater to a greater number of customers. Companies started investing in equipment that enabled them to produce a variety of products.
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