Sonoco Products Company (a): Building a World Class Hr Organization Case Analysis Essay
Sonoco Products Company (A): Building a World Class HR Organization The major challenge faced by the Human Resources (HR) function of Sonoco was the negative consequences of decentralization tendencies and the shift to a more divisional structure throughout the 1980s, resulting in HR being just seen as an administrative tool ignoring also its importance as cost and productivity driver.
Due to the existence of multiple HR functions in each department, each with its own systems, budgets and performance management, the non-cooperative competition surged among divisions and a loss of morale and motivation between many employees.
In addition the complex staff structures in many departments resulted in an upward manipulation of many performance measurements in order to achieve increases in salaries or eliminate certain employees for individual departments.
The decentralized HR function showed itself incapable of adding value to Sonoco in a new environment marked by uncertainty and with new challenges regarding competitors and customers demanding an each time higher degree of flexibility in production.
Also there was relative lack of alignment of people and Sonoco’s values. By the end of 2000, Sonoco had to take a decision on whether to implement a centralized HR function or a hybrid structure in which the divisions would have more direct involvement with staffing, succession planning, personnel programs, compensation, and benefits.
Sonoco is a diversified organization that has business units competing in different markets (divided into consumer and industrial) and tries to exploit the synergies among them. For these types of business organizations, Shared Services is a new way to organize HR resources. Therefore it will be beneficial on establishing a hybrid structure as it can combine some major strength of a centralized and of a decentralized structure and enable Sonoco to face the new challenges of a more demanding end consumer and industry in general.
Also the control system, including several undesirable bureaucratic procedures, had to be tight in order to maintain the smooth functioning of the company such that the HR function must have a fundamental contribution to strategic competitive advantage of the businesses. There is a need to align the strategy and the value proposition of Sonoco with the HR structure, that is, the structure should reflect the organization of the company. Furthermore, HR management policies and processes in Sonoco must be continuously revised and examined in the continuously changing internal and external environmental variables.
Managers can’t simply choose by the cost savings and efficiency criteria, which would be to centralize all process, because, each of the business units have differentiated needs. Sonoco is a company that operates in different geographies and in a flexible industry. Hybrid structure establishes a positive correlation between the decentralization of the organization and the decentralization of the HR management. Thus allied and diversified organization, playing at different value chains, but with shareable resources, must have a hybrid HR structure.