SONOCO PRODUCTS

COMPANY
(BUILDING A WORLD
CLASS HR ORGANIZATION)

By:
Hemant Vasishth
(232008)
Juli Gupta (232009)

SONOCO PRODUCTS
Founded as the Southern Novelty Company in 1899 in
Hartsville, South Carolina
Operates 285 facilities in 32 countries employing
17,300 employees
Company culture Family-friendly, paternalistic,
collaborative, ethical and team-oriented
Very low attrition rate. In 200, over 60% executive
committee members had been with company for at
least 20 years.
Reluctant to hold under-performers accountable.

COMPANY SEGMENTS
Industrial
packaging
Served textile, paper
and film industries
55% company
revenue
11,000 employees

Consumer
packaging
Packaging for food
and consumer
products and highdensity film
45% company
revenue
6,000 employees

PACKAGING INDUSTRY
Packaging industry sales worth $400 billion
Consumer packaging 70% and industrial packaging
30%
Heavy manufacturing moving from US to China, India
due to cheaper labor
Domestic market becoming more segmented as
products were tailored to preferences of distinct
consumer groups
Emergence of one-stop-shop concept

HR SYSTEMS BEFORE HARTLEY

Highly decentralized and siloed HR
Divisional HR managers reported to GM
HR role more tactical than strategic
Each division had their own HR functions
Corporate HR mainly a watchdog to head off legal and
employee relations
Compensation decentralized
Business goals and individual objectives not linked
Evaluations rarely refl ected performance
No succession planning

HARTLEYS OBJECTIVES
Build more professional, business-oriented HR group.
Leadership development on high priority
Performance management systems to be linked and
made consistent and more accurately refl ective of
employees contribution to performance.
Need to create an employee-development process to
refi ne employees skills and to identify and develop
defi cient skills
Succession planning to identify and prepare the next
generation of leaders

HARTLEYS INITIATIVES
Introduced in early 1996
Designed as a cycle beginning with company wide goal setting and
Performance earnings targets and cascaded down to individual performance
management Supervisors and employers agree to KRAs
system

18 salary grades replaced with 5 wider salary bands

Merit rewards based on employees contribution
Compensation Reward individual contributions
system

Leadership
development
& succession
planning

Endorsed a new 4-step leadership development program

70% training on the job via job changes and short-term assignments; rest 30%
formal training and education
Six core leadership competencies: customer satisfaction through excellence,
communication, teamwork, strategic integration, technical/professional skills and
knowledge, and coaching/mentoring
Assessment of managers competencies: performance-management system, 360degree feedback, and succession planning

ISSUES
Sales fell 6% between 1995 and 1999 from $2.7
billion to %2.5 billion
Declining top-line sales
Signifi cant fall of stock prices
Control costs
Rapidly changing packaging industry
Decentralized HR

OBJECTIVES OF NEW
ORGANIZATIONAL STRUCTURE FOR HR
To increase GMs accountability for talent
management
To distribute HR talent and support more evenly
across the companys divisions and make HR systems
and processes consistent
To optimize HRs ability to provide customized,
strategic support to the GMs businesses

OPTION 1 (CENTRALIZED MODEL)

Most HR services to be handles by 4 centers of
expertise
Divisions served by a pared-down fi eld staff .
Each rep to cover 10-15 plants and consults one-onone with line managers on plant-level HR issues
Centralized team responsible for strategic programs
and initiatives.
Cost savings 3.1 million

OPTION 1 (CENTRALIZED MODEL)

VP, HR

Administrati
ve

Payroll

HRIS

Benefits
Center

Recruiting

Relocation

Salary
Administrati
on

Centers of
Expertise

Divisions

Benefits

Compensati
on

IPD/Paper
Crelin

EE Relations

Organization
al
Developmen
t

CPD
Flexibles
HDFP
Prot
Packaging

OPTION 1 (CENTRALIZED MODEL)

Pros
Decrease in cost of
driving administrative
and other process
improvements.
Low complexity
Less time in decision
making

Cons
No active role of GM
Restricted opportunities
to align directly with
businesss needs and
interests
Inflexible and difficult in
coordination
HR may not readily have
its finger on the pulse of
the organization to be
proactive about needed
changes, actions

OPTION 2 (HYBRID MODEL)

Divisions will have direct involvement in staffi ng,
succession planning, personal programs,
compensation, and benefi ts
HR is organized into 2 sectors consumer and
industrial
Each sector is assigned a VP, HR supported by
directors of EE Relations, compensation and
organizational development.
The 3 directors directly involved in sectoral planning
and interact with GM, hence they have fi rst hand
knowledge of business.
They also link the GMs within the sector to Centers of
Excellence.
Each sector also has fi eld HR reps to provide support.
Cost savings 2.7 million

OPTION 2 (HYBRID MODEL)

VP, HR

Administrati
ve

Payroll

HRIS

Benefits
Center

Relocation

Recruiting

HR
Administrati
on

Centers of
Expertise

Benefits

Compensati
on

EE Relations

Organization
al
Developmen
t

Field & Staff

Services
Field Reps &
Complex
Reps

OPTION 2 (HYBRID MODEL)

Pros
A divisional HR on which GMs
could rely
Strategic link between
Corporate HR and businesses
Flexible enough to respond
quickly to environmental
changes, and be able to
participate in divisional level
strategies

Cons
Slower decision making
process
Low cost savings
Inflexible and difficult in
coordination
Ownership issue between
corporate and divisional HR
divisions
Concern whether changes
could be easily driven across
the company with this new
structure
May result in some duplication
of resources if delineation of
duties is not specifically
outlined and understood

THINGS TO CONSIDER FOR

DECISION MAKING
Which option would best suit a changing industry in
which only the fl exible survive?
Which option would better ensure that the right
people were in the right positions?
Which option would better help the company meet its
fi nancial target of providing annual double-digit
returns for its shareholders?
Which option best embodied Sonocos time-honored
principle that people build businesses?

RECOMMENDATION

Based on the case and the options available, we would

recommend to go with option 2 i.e.

HYBRID HR STRUCTURE.

 Mirroring of HR Organization with that of Companys Organization HR will be

organized into two sectors Consumer & Industrial.

Aligns perfectly with Sonocos flexible strategy to meet the changing demands of
its industry and consumers

Presence of field HR reps, who can provide proactive business-related support,

including talent management, succession planning and formal coaching.

Allows for the right people with the right skills to be where they are most
beneficial to the company

Consolidating administrative functions where feasible to result in economies of

scale will save more

Having the appropriate systems in place to get the right people in place and up
to speed will improve productivity, increase employee satisfaction, reduce waste,
and decrease turnover which will result in increased profits on an ongoing basis.

CAUTIONS TO FOLLOW WHILE

OPTING FOR OPTION 2
Have clearly defi ned roles for the Corporate and the
divisional HR departments
Have a clear process to implement any new policies
or reforms across the organization
Ensure 2-way communication between corporate and
divisional HR to avoid duplicity or gaps in
implementation

THANK YOU!