U21Global MBA 750 Human Resources Management

Sonoco Products Company

Human Resources Changes to Winning Team
Team 1 Sonoco September 2011

2011

OFFICIAL ASSIGNMENT COVER SHEET Cp3651, Jl6625, th7756, xl7312, rm8630

Student Name: Assignment Number: Professors Name:

Student Christoph Daniel Pantel, Jeremy Lu, Xiao Lu, TantyNumber: Herawati, Rajesh Kumar Mishra FP Title: Sonoco Products Company

Dr. Alexandra Ursula Gray Subject Code and Due Date: 19 Sept 2011 Name: MBA-750 Human Resources Management DECLARATION OF ORIGINALITY OF WORK: I affirm that the attached work is entirely my own except where the words or ideas of other writers are specifically acknowledged through the use of inverted commas and in-text references. This assignment has not been submitted for any other subject at U21Global or any other institution. I have revised, edited, and proofread this paper. (To input your electronic signature, double-click on this boxWord and select checked) count: Assessment Criteria 1 Grade Comments S/U* Critical thinking - analysed, critically, the issues using appropriate concepts and methods. 2313

2 3

Relevance ideas and arguments were highly relevant to the problem Originality novel ideas introduced and explained substantial depth and detail were with

4 5

Justification arguments were convincingly supported with relevant readings and data Presentation and articulation ideas were expressed in a clear and concise manner

* S = satisfactory; U = unsatisfactory. ToPercentage: achieve a passing grade, criterion number 1 must be assessed as satisfactory. Name examiner: ofDr. Alexandra Ursula Gray Date:

Contents
Executive Summary Introduction Q1a. How successful were the HR changes at Sonoco? Q1b. Was the sequence of changes the right one? Why/Why not? Q2. What would you have done differently? Why? Consider the consequences of your choice? Q3 Will changes be sustained?

Executive Summary
Sonoco Products Company is an excellent example of successful case of an organization building a world class Human Resources platform in supporting its wide range businesses domestic and international. However, this is not without its challenges and a range of lessons learnt. While Sonocos stock prices were on a strong trajectory up until the 3rd quarter of 1995, it soon faced a reversing trend against the market index (S&P rating) from the end of 1995 through to June 2000. This caused a top down decision for a full review of internal resources in order to once again improve its share price. Adding to this was the changing consumer preference for packaging and the economic slowdown of US exports against Chinese and India counterparts who were offering cheaper options. Sonocos CEO, Harris DeLoach believed that human resource was one of its key success factors to execute its strategy (page 1 case). The rollout of an executed strategy saw the reversing of the share price decline and raising Sonocos profile as one that focuses on its employees as well as its customers. The key target was to reduce functional costs by 20% or 2.8 million through the selection of 2 distinct HR structures.

Introduction
Sonoco has 2 business segments: Industrial and Consumer Packaging. Industrial packaging with 11,000 employees served the textile, paper, and film industries, and generated 55% of Sonocos revenue. Consumer Packaging with 6,000 employees produced paperboard-based composite cans and flexible packaging for snack foods, powdered beverages, cleansers, and frozen orange juice concentrate as well as high-density film. Consumer Packaging generated 45% of Sonocos revenue mostly to big consumer as Gillette, Kraft, Nestle, and Protect & Gamble.

Q1a. How successful were the HR changes at Sonoco?

These are some performance indicators to evaluate if the HR change at Sonoco was considered successful: HR Team met target to present 2 new structures with 2.8 million savings

Hartley and team were able to present 2 possible organizational structures. The Centralized structure could generate 3.1 million dollar projected cost savings, whilst the Hybrid structure would generate 2.7 million dollar projected cost savings. We assumed one of these structures was implemented in 2000, which resulted in better Sonocos performance in 2001-2006. Positive Stock Performance Index after the HR changes in 2001-2006

Below table is the cumulative five year total return attained by shareholders on Sonoco Products Companys common stock relative to the cumulative total returns of the S&P 500 Index and the Dow Jones US Containers and Packaging Index.
31 Dec 2001 Sonoco Products Company S&P 500 Dow Jones US Containers & Packaging 100 100 100 31 Dec 2002 89.14 77.9 107.59 31 Dec 2003 99.52 100.24 128.11 31 Dec 2004 123.99 111.15 153.28 31 Dec 2005 127.04 116.61 152.31 31 Dec 2006 169.27 135.03 170.72

(Source: Sonoco 2006 Annual Report, page 31)

Analysis: From this chart comparison, the blue line of Sonoco Products stock index performance was improved gradually better than S&P 500 companies. Moreover, at the end 2006, Sonoco proved its position as one of the best performers in US Container and Packaging Industry.

Q1b. Was the sequence of changes the right one? Why/Why not?
Exhibit 7 shows the time line of HR changes in Sonoco.
Date Jan 1996 Action First HR Council Meeting. Explanation why we agree with the sequence Agree. It is important to ensure internal HR alignment.

Feb 1996

Letter from Hartley about standardization Right step, as Performance Management System Sonocos Performance Management (PMS) in one division was different from another. System (PMS). Standardize and clear PMS gave motivational spirit for high performing staffs. This is also in line with idea that all processes in Sonoco should be designed to support same business objectives. Corporate HR communication of New PMS system. Sonoco start development and leadership After understand how PMS works, staff learnt how he guidelines. could be developed to be a future leader. Implementation of Sonoco first Corporate task force to focus diversity issues. Implementation of Sonocos salary band program. Implementation of PMS Training Process. Succession action steps and candidate pool analysis. Next, salary range information is essential to motivate staff. Start PMS manually. The information on how to choose future leader candidate is the right following step after knowing the guidelines in April 1996. First audit manual PMS. Follow up Leader development. After all the process are well accepted by many parties, especially business unit heads, HR invested IT systems to increase speed of service in HR.

March 1996 April 1996

July 1996

Jan 1997 Aug 1997 Fall 1997

Nov 1997 Dec 1997 Dec 1997

Initial audit New PMS. Next steps Leader development. Full Integrated IT systems in HR processes.

Jan 1998

New electronic 360 processes selected forElectronic 360 reviews is a follow up of manual PMS next implementation. system to speed up staff and leader development process. Communication linking HR strategic After all the tools available, systems were accepted, process to Sonocos people, culture, and and then Hartley dared to link the Business Objectives values to Support Business Objectives. to each PMS, Salary Band, Future leadership. At this time, there would be minimum disturbance to overall organizational processes.

Feb 1998

HR changes should be done in order to support business objectives. We are aware Hartley took a safe steps to change HR internally first and then overall organization process related to HR linkage to achievements of companys objectives. Putting ourselves in Hartley shoes we come to conclusion that the sequence was right. Sonoco was exist and in a down position in 1995 due to low stock performance index. Hartley did not jump immediately to change the Performance Management System, Salary Band, consequences to bonus or future leader opportunities if target Business Unit were not achieved. By doing step by step, introduction and implementation each new HR system was well accepted by all parties in organization. This is a good approach to balance the support to business unit operation in critical situation

and to introduce new system which can help management to linkage all processes to overall organization targets.

Q2. What would you have done differently? Why? Consider the consequences of your choice?
If we got the chance to do the HR changes differently, we would do some different approaches as follows: Timing of implementation should be faster. Despite the right sequence of actions, Hartley and team took too much time to take actions. They could have implemented all those steps such as Salary Band, Performance Management System, Leadership Development Program, and new Organizational structure within 1 or 2 year time. With full support from top management in new organization structure, Human Resources department could have power to ensure compliance across divisions and use incentive plans to support business target achievements. New organizational structure should be implemented and enforced immediately to ensure conformity in execution of the new HR policies and initiatives (i.e. PMS, Leadership Development Program, Talent Management) throughout different divisions. We will choose Hybrid organizational structure for implementation as it gives more support to Business Units faster decision making process. The projected cost savings from this structure was 2.7 million dollars, slightly less than 2.8 million dollars target. However, the two Human Resources Vice Presidents could contribute and decide human resources matters in each business units meetings. This will speed up reaction of business unit towards changes in external environments.

Q3 Will changes be sustained?

A successful organization like Sonoco will always face changes as its daily operational life. As a support to business objective, changes in HR will also be as dynamic as business objectives. This flexibility and continuously adjusted organizational structure to support current business objectives would be one of Sonocos competitive advantages to win competition. It is also fair to say that some HR practices may become obsolete or redundant in the new state of play and that change is the only constant. Thus, any policies which may exist but are a hindrance to operating in a competitive global economy, should not be sustained or act as road blocked; but give way to more agile and flexible practices that allows Sonoco to reach its HR and financial targets. The proposed organizational restructure becomes a factor in the momentum and consistency of the changes implemented being sustainable. Whilst the requirement for change is absolutely necessary considering the companys stock market performance against the market index, it does open up potential for divisional line managers to subvert back to the original state .Hartley may be wise to consider the advice offered by Maurer (2005) which talks about sustained commitment for a major change. Extrapolating from information provided in the article, some recommendations to ensure that changes are sustained include: Ensure that Hartleys senior line reports also act as change champions and that remained an important agenda item in the rollout of the organizational reform.

Create symbolic acts by having the CEO or Hartley attend each of the sites in the various countries is to create a more profound impact. Continue to paint and repaint the vision and to communicate this down the line through managers. Ensure that the mandate for the centers of excellence track and report on change developments and compliance with HR policies, perhaps through the establishment of a project management office. Extend the 2 days managers change workshop into a periodically run training and development tool that communicates the change process and how things are considered and reviewed. Embed the change process into as many systems as possible so that it ishard wired. Create standard metrics across all areas irrespective of geography and division, e.g. continue reporting on the 4 leadership core competencies identified and continued systemized ocean of the online performance and learning tool. Measure the Health of the change initiatives beyond the self-administered online tools to include face-to-face sessions to support findings of survey data. Of the 2 options, it can be argued that the centralized model will be the better choice for consistent policy development and embedded HR systems. As suggested by Asch 2002, such Bureaucracy encourages impersonality, discourages nepotism and arbitrary decision-making; it is highly efficient for the administration of large-scale complex but routine tasks. This seems to fit the model with the Sonoco product line. The lack of a more localized HR team may also create less avenues for employees to access HR support and the culture which currently exists (collaborative, family friendly, paternalistic, ethical and team orientated: Case study) becomes lost in the centralized model. Alternatively the hybrid model may not return the double digit figures for shareholders as a mandated target and there is a possible risk that silos return to the fore despite having a discrete function reporting line. The impact on the changes so far will require less indirect pressure if HR managers are more widely distributed to continue to champion and effect changes. Asch (2002) also argues that while the client facing model, with its market based focus appears attractive on the surface may not offer the same psychological contract with employee commitment and acknowledgement which comes as a feature of an internal labor market with extensive and clear career ladders, explicit development and succession systems, with investment in training and development, and frequent welfare provision This concept of effectiveness of change for localised communication and increased relevance is further backed up by Conway and Monks (2008). The next focus.... Hartleys role over the next phase is going to be a challenging one. She must consider change management process in light of the organisations focus on top level accountability, improved shareholder value and effective shared services support and succession planning. Her next focus will be to make a recommendation to the executive committee about what actions are needed before committing to a structural change. No matter what choice is made, there is likely to be an erosion of trust, especially from the veterans who have long served the organization with tenures of over 20 years. Their employee voice, though singular, may have the greatest impact. Understanding the current corporate culture will means that divisional managers will either see HR building partnerships with them through a localised hybrid model, that aims for consistency or a divestiture in support in exchange for bureaucratic efficiencies and cost savings. Both shifts represent a radical change which will be best managed through a planned approach against each change targets ( in this case, structure, culture, people and objectives)

Undoubtedly, Hartley will need to consider the obstacles and challenges to change, which in this case, includes: Restricted budget (in fact cut backs are needed) Re deployment of staff and change of job titles and functions Matching shared services support to division and manufacturing type needs Shifting away from a paternalistic culture to one that is more profit focused Creating a solutions orientated workforce that was flexible in work practice from a workforce that is generally driven by manufacturing paradigms Dealing with cynicism if Sonoco was to move back into a decentralized model, and how it would continue to manage a consistent message and approach to compensation and rewards. Ensuring that Council approval was obtained on the choice and implementation of the HR strategy Ensure that the HR policies continue to be tied into the organization's overall goals. The recommendation for Hartley therefore is to fully evaluate both models and to take into consideration the above issues before making recommendation to Council. It may prove wise to validate the overall goals and objectives of the Council before considering the more suitable model. A full consultation plan should then be initiated following an announcement by the organisation as it restates its objectives, to allow employees to provide input into the plan as well as identify any obvious and inherent barriers to change (forcefield analysis). Only when the feasibility of the selected model is tested, should Hartley then move to develop a change management plan with the Executive Team. References: 1. U21Global, 2011. MBA750 Human Resources Management reading material.
2.

Sonoco, Sonoco 2006 Annual Report, page 31, available at http://phx.corporateir.net/External.File? item=UGFyZW50SUQ9NTgwMDB8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1). Maurer, R., 2005. Sustaining commitment to change. The Journal for Quality and Participation, 28(1), 30-30-35, retrieved from http://search.proquest.com/docview/219107458?accountid=35207

3.

4. Asch, David. n.d. 2002. "The challenge of change." European Business Journal 14, no. 3: Pro Quest: ABI/INFORM Global (SRU), EBSCO host (accessed August 27, 2011) 5. Conway E and Monks K, 2008, HR practices and Commitment to change; an employee-level analysis, Human Resource Management Journal, 18(1), pp.72-89. 6. D. Thomas, B. Groysberg, C. Reavis, Sonoco Products Co. (A): Building a WorldClass HR Organization, Case No.: 9-405-009, Date 22 September 2005, Harvard Business School Publishing.

THE END