Sonoco HR HR Policy Transformation at Sonoco

Describe how the HR department was organized and its effectiveness before the re-organization.

During its 100-year history, the industrial and commercial packaging company Sonoco has experienced myriad organizational and philosophical shifts. Among them, its HR orientation has been in a constant state of evolution since its inception in the 1970s. During its first two decades of operation, the HR department at Sonoco was chiefly an administrative arm of the company which operated at the corporate level and offered very little direct or meaningful support at the operational level of the firm. This would prompt a shift toward the organizational orientation that Hartley would find upon her arrival in the 1990s. From the mid-80s onward, Sonoco had begun to embrace a more decentralized approach to HR policies and priorities. This was done in order to improve the ability of divisions and their management personnel to properly compensate and reward performance quality as well as to provide meaningful support and mediation to personnel conflicts or grievances.

However, this method of organization would ultimately prove only partially effective, sacrificing central control over HR policies in favor of more positive employee experiences and end-user results. According to the case history provided on Sonoco, "decentralization of the HR function became so entrenched tat by the mid-1990s each of the big divisions, specifically paper, industrial, and consumer, had its own HR function with separate HR systems, budgets, performance management processes (used largely to determine compensation), development, and leadership and training programs. The smaller divisions often shared HR services with the bigger divisions. As one corporate HR executive recalled, 'The divisions were left to create whatever type of HR function they wanted.'" (p. 5-6)

What prompted the change to HR?

The primary force driving change in Sonoco's HR Department would be the cost imperative created by the company's leadership core. In a meeting with HR director Cindy Hartley, senior personnel at the firm requested that she find ways to cut HR operating costs by roughly...

Simultaneously, Hartley viewed it as her responsibility to do so while improving HR functionality at the firm. To that juncture, she had already been responsible for instituting several progressive shifts in the area of HR management. Among them, Hartley had helped to institute performance management strategies, more consistent compensation opportunities, career development paths and succession planning.
By and large, these HR practices would mark an improvement in the internal orientation of the company. However, these would be overshadowed by negative trends in the external economy for Sonoco and its counterparts in the packaging industry. According to the case history provided for Sonoco, it would experience a sustained downturn in profitability during the 1990s owing to global shifts in the fiscal behavior of the packaging industry, especially in the face of such events as the Asian market crisis of 1997 and 1998. According to the case history, Sonoco was, like many of the other packaging firms which had enjoyed positive economic expansion from the 1980s onward, highly leveraged by the number of plants in operation and the fixed costs necessary to keep them in operation. These fixed costs typically did not adjust to changes in global market behavior, meaning that Sonoco was experiencing a diminishing return on its investment leading into the late 1990s.

In 2000, the case history reports, Sonoco would experience an historical 8-year low in stock value. Accordingly, "the company realized that it had to change its business model to enable new top-line growth and to reduce its overall cost structure to be competitive in the global marketplace. On the consumer packaging side, Sonoco had to rethink how it met the demands of a growing, convenience-obsessed society and how it would differentiate itself from its competitors. In the meantime, controlling costs to support the shift in the business model was one of the main objectives." (p. 2) This would precipitate a focus on HR as an area in which costs could be measurably cut without diminishing any of the more tangible resources that the firm had acquired across several years of expansion.

What did they change…