Sonoco Products Company - Essay Example

?Sonoco Products Company Background of the case To become globally competitive in its industry and ensuring the reduction of functions’ cost by 20% or significantly $2.8 million were the primary reasons of Sonoco’s new CEO Harris DeLoach in mandating Cindy Hartley, senior vice president of human resources (HR), to go for alternative restructuring of HR. This significantly is in line with the new CEO’s goal to control companywide cost to support a new business model that is expected to compete in the global setting and would ensure the top-line growth of the said company. It is in line with this that Hartley is faced with two alternative organisational structures for HR, the centralization and hybrid. In either of them, Sonoco’s CEO is concerned with the corresponding cost to be incurred. On the other hand, in either of them, Hartley would be more concerned on meeting three essential objectives in the HR such as the following (quoted from the case): 1. To increase GM’s accountability for talent management. 2. To distribute HR talent and support more evenly across the company’s divisions and make HR systems and process consistent. 3. To optimise HR’s ability to provide customized, strategic support to the GM’s businesses. It is important to implement strategies to meet these objectives considering the fact that the packaging industry was facing major transformation due to evident tough competition. Key players were looking forward to look for their competitive advantage. For instance, heavy manufacturing moved from the United States to countries like China and India where a substantially low labor cost could be possible. Moreover, many firms from the US started to invest outside the country. In addition, packaging companies essentially were able to draw on the full potential of emerging technologies and application of innovative tools. Most importantly, companies learned to appreciate the importance of reducing the initial-packaging-concept-to-market-delivery cycle just like in the case of Hershey which originally relied on hundreds of packaging suppliers but decided to reduce them into 20 by the end of 1990s. These were substantial reasons that Sonoco should consider to formulate effective strategies in order to stay in its business. As a result, Sonoco decided to consider being more attentive to the needs of the end consumer by the late 1990s and not only to the needs of Gillette, Kraft, Nestle and Procter and Gamble. These companies were actually also looking forward to the needs of their customers and what necessarily attracted them. Between 1998 and 2008, customers significantly viewed packaging as more influential than advertising. Thus, it was for this reason that Sonoco should potentially create a move to consider not only the needs of its primary customers but the end customer as a whole just to be able to create the right response in the ongoing trend in its entire market industry. In this paper, the proponent tries to create an important link between the prevailing events in Sonoco’s industry and its eventual moves in the midst of them most specifically from the point of view of its human resources. Diagnosis Unfortunately for Sonoco, talent was not viewed as a corporate resource. Furthermore, compensations were not viewed as costs in need of control or tools that can drive behavior. These are some of the problems faced by Sonoco as impacts of its contemporary organisational structures for HR. It is the primary concern of Hartley to continue formulating important strategies in order to obtain her specific objectives for Sonoco that would be totally beneficial for the said company’s entire business. Thus, this specific concern was reflected on her primary objectives for Sonoco’s HR development. In other words, Sonoco’s existing HR policies should be elaborately considered prior to facing the ongoing competitive challenges in the company’s industry and formulating the best alternative for organisational structures for HR. Analysis In the case of Sonoco, it was shown that in the midst of ever changing trend in its industry especially in challenging times for competition and competitive advantage, human capital was evidently necessary to be focused on in its HR policies. Human capital HR policies are viewed to be powerful design shapers of the successful organisations because these integrate recruiting, socialisation, development, promotion, rotation, performance management and rewarding, which are practices that could be best viewed in professional services firms (Galbraith, 2008). Although Sonoco may not be totally considered as professional service firm, what is important is the fact that it essentially needs to create specific business model with integrated effective HR policies suited to the nature of its entire business. Human capital encompasses the people’s skills, competencies, and experiences in the firm (Galbraith, 2008). Galbraith emphasised that in order for the firm to increase its human capital, the company should make it to the point that it should be attractive to talent, invest in recruiting and selection, and deliver developmental experiences to its managers. Attractiveness to talent would mean companies are more likely to appreciate or create motivating factors for its employees. For example, in the case of Apple Inc., talent was a significant component of human capital prior to encouraging innovation and competitive advantage in the long run as people and work teams are integrated in its research and development strategy (Ireland et al., 2008). Steve Jobs made it a point to consider that each of the employees is unique and has the capacity to be more competitive. He encourages competition as a way to achieve the company’s ultimate goal without compromising the human emotional side. Mr. Jobs appreciated and considered each possible innovation made by each employee as excellent for they were all hired because of their being the best among the other in the first place. The hiring process was tough and only the finest were chosen. As a result of this approach, there was a positive competition in the firm for its entire benefits without touching the human emotional side. However, human capital cannot be entirely executed or initiated without placing it the right way in the firm’s HR organisational structure. This means further that the firm should be able to institute the appropriate approach in securing HR’s activities which include recruiting, socialisation, development, promotion, rotation, performance management and rewarding through a secure HR system or organisational structure. Strengths of Sonoco’s approach to talent The HR Organisational Chart of Sonoco Products Company in 1995 was a clear indication how the company tried to disconnect reward system and desired behaviors. The human resources and administration were completely separated. The administration in the case of Sonoco has the role to take charge of employee-benefits while the human resources would be separately on recruiting, training and employee relations. This structure is a specific strength on the part of Sonoco. HR can eventually add specific strategic value in cases when there is integration between the reward system and desired behaviors (Peshawaria, 2011). This is evident in the case of Sonoco based on its HR organisational structure in 1995 and at present and HR evidently has the capacity to improve its current system. In other words, the prevailing HR system of Sonoco is a specific strength because it would mean that there are still significant strategic values that could be added into it. In most particular case, a specific approach to talent cannot be undermined in here. Sonoco’s approach to talent was evidently clear that it needed more development. As stated earlier, this is its particular strength because in doing extra effort for more improvement, Sonoco’s competitive advantage in its industry could be possibly secured in great level. However, talent development should be driven by managers’ and employees’ learning needs in the future (Rothwell and Kazanas, 2003). It is a fact that managers at Sonoco even Hartley herself were willing to learn more especially regarding with what is best for the firm and its entire HR system. Furthermore, there would be additional savings on investing too much from talent on the part of Sonoco considering that by not integrating the administration and human resources, employees were most likely not to be able to claim for even more monetary rewards. Labor costs and talent are associated (Lawler and Boudreau, 2009). Higher labor costs would mean more focus on talents. As also observed from the prevailing HR organisational structure of Sonoco, the separation of administration and the HR department would somehow create a way to minimize the associate labor costs in employment. Weaknesses of Sonoco’s approach to talent HR planning, strategic HR management and succession planning are closely related to talent management approach (Hatum, 2010). Although Hartley made it to the point to be on the right sequence towards change, still there was a missing part which included strategic HR management which could also give a great detail in strategic approach to talent. Hartley was so focused on building the HR organisational structure and this could mean a general or broad approach towards talent management. Furthermore, as stated earlier, talent management is associated with labour cost which means substantial amount needs to be invested in effectively developing talent under the human capital. In this approach, there is a need to spread equal amount of investment across the entire part of organisations that are associated with talent management (Boudreau and Jesuthasan, 2011). There was certainly a specific gap between the administration and HR at Sonoco which if combined could substantially provide a better picture of saving on the cost to be incurred for investing in talent for human capital development. In its present state, certainly it would cost a large amount of money for Sonoco to focus on talent management. Furthermore, leadership role may be a significant issue at Sonoco. Leadership role is necessary in developing talent (Smilansky, 2007). Hartley was a substantially dynamic leader, but still there would be more need to encourage and develop strong leadership skills among division managers for talent management. Their existing policies and approach to talent after all were not as a corporate resource. Strengths of Sonoco’s approach to compensations The prevailing approach to compensation at Sonoco could be advantageous to top-of-the-line leaders because they all have the ability to declare specific compensation based on their subjective performance evaluation. In other words, the prevailing compensation program at Sonoco was not entirely linked with a standard performance evaluation because of the problem with centralisation. At some certain point, this could potentially bring forward sufficient energy on the entire team as the top leaders would be motivated to perform their function. It is possible that compensation could motivate executives because it could be a control mechanism to increase individual motivation (Jex and Britt, 2008; Bresser, 1998). Furthermore, the prevailing compensation planning approach at Sonoco could also help minimise costs on the part of the firm because it would be only the top leaders who would benefit more rather than the lower working level within the team. Weaknesses of Sonoco’s approach to compensations The separate planning activity for compensation between the human resource and administration was a specific disadvantage on the part of Sonoco because this would imply unnecessary justifications leading to high costs for labour expenses of the company. Compensation is supposed to promote competitive advantage of the firm (Martocchio, 2010; Berger and Berger, 2010). Unfortunately, this was not evident in the case of Sonoco based on its prevailing organisational structure. Furthermore, performance appraisal and compensation at Sonoco was not closely integrated leading to vague justification of an employee’s performance evaluation. Performance appraisal and compensation management should be approached together in equal proportion (Goel 2008). However, this was not the case at Sonoco due to its separate approach for HR and administration management system. Sonoco’s approach to compensation was not part of its way to influence behavior. In fact, compensation is found to influence behaviors, change culture and reflect on various strategic goals (Berger and Berger, 2000). Unfortunately for Sonoco, its current approach to compensation is not the kind that would improve the quality of its human resources. Alternative organisational structures for HR: strengths and weaknesses There were only two alternatives for organisational structures for HR that Hartley and her team had to choose from, the centralized and hybrid. Sonoco is a large organisation, which in this case it would be essential for its HR activities to be performed at all levels (Begin, 1997; Price 2007; McCourt and Derek, 2003). However, Begin added that there is a need for some HR activities to be centralised in order to create a company-wide coordination especially regarding with labour relations, compensations and benefits, and training. In the case of Sonoco, it directly catered on its corporate staff especially on HR planning, but its case should have to consider as well the responsiveness of its HR policies on the prevailing needs of each of its business segments. Thus, there is a sense of more thorough investigation needed for selecting which alternatives between centralised and hybrid HR model should Hartley select for the firm in order to meet her very objectives and the CEO’s competitive corporate goal. The centralised model is an advantage especially in the development of talent because it would basically help ensure company-wide coordination on labour relations, compensations, benefits and trainings. This structure was also foreseen to reduce administrative costs and process improvements. However, this model could not actually ensure that managers may eventually enjoy the same level of HR service due to the prevailing business culture of the firm. Furthermore, this model should still need to potentially consider the actual service quality to be provided to the end customers. The hybrid model on the other hand would help ensure that GMs could still rely on the presence of HR presence particularly on issues regarding staffing, succession planning, personnel programs, compensations and benefits. However, in this model there is still a need to find out whether changes could be effectively driven across the company and the identification of which functions to be performed by corporate and divisions. Furthermore, the respective savings on cost for centralised model is expected to be $3.1 million and $2.7 million for the hybrid structure. Based on these two alternatives, there is a sense of flexibility on the hybrid model although it saves on cost relatively lower than the centralised structure. What is important with this model is the fact that there is still a good room for improving the entire system for categorising functions to be performed by corporate and divisions, making it flexible for the relatively changing needs of the end customers. Evaluation State-of-the-art best practices versus Sonoco’s case Talent management today has been widely driven by a large portion of leadership imperative (Schweyer, 2004; Silzer et al., 2009; Gilley and Maycunich, 2000). This alone is highly contradictory to the prevailing treatment and approach of Sonoco with its human capital particularly on talent and compensation management. Modern effective succession planning on the other hand ensures leadership continuity and building talent from within the firm (Rothwell, 2010). This specifically has been ultimately started by Hartley but her vision needs to be embraced by the general managers down to the lower level area of execution. As observed, the modern approach in handling human resource includes the fulfillment of high leadership skills. This is the very thing which has already been started by Sonoco, and it needs to further continue explore in this area in order to obtain more advancement in the future. Design Move to improve Sonoco’s existing HR policies, best practices and systems There were only two options for the right HR structure for Sonoco – centralized and hybrid. With anyone of these options, Hartley was positive that it would create a significant move to improve Sonoco’s existing HR policies, best practices and systems. In doing this, Sonoco in particular would be able to appreciate more the value of talent as a corporate resource and compensation as a way to influence behavior. Talent and compensation are essential elements in HR system and any other complex organisations. These could substantially provide a way for managing performance, productivity and the actual level of organisation’s interaction with the market and anything it values the most prior to achieving competitive advantage (Chowdhury, 2002; Bebchuk and Fried, 2006; Walker et al., 2009; Society for Human Resource Management, 2006; Lawler, 2008). Sonoco should be able to adapt a hybrid structure for its HR system just to be able to improve how it serves its end customers by integrating the concept of coordination within the team and applying leadership principles in the process. In particular, Sonoco should formulate a strategy to allow easy acceptance of the introduction of new culture and policies. In this way, there is a clear implementation of things applicable in the corporate or in the division level. Implementation The role of DeLoach Deloach’s role is to remain focus on its general and corporate objectives. He certainly was on the right path knowing that he believes these were all in line with achieving their competitive advantage in a challenging competitive situation in their industry. Porter (1998) argued that competitive strategies are necessary in the achievement of certain corporate goal in the midst of challenging and competitive industry. Thus, Deloach’s move to tap Hartley on issues regarding their current HR organisational structure was the right move. After all, this is an area where competitive advantage could possibly be generated as by product of whatever effective strategies to be formulated. The role of Hartley Hartley on the other hand as the one trusted by Deloach to create a significant change at Sonoco was on the right path as well. The very point was her ability to showcase a high level of leadership which basically should be integrated in some of their HR practices especially to managing talent and treating compensation in general (Schweyer, 2004; Silzer et al., 2009; Gilley and Maycunich, 2000; Rothwell, 2010). References Bebchuk, L. A., and Fried, J. M. (2006) Pay Without Performance: The Unfulfilled Promise of Executive Compensation. Harvard: Harvard University Press. Begin, J. P. (1997) Dynamic human resource systems: cross-national comparisons. New Brunswick, NJ: Walter de Gruyter. Berger, L. 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