Building A World Class Hr Organization Management Essay

The situation facing Sonoco is that the company has grown rapidly over a period of several years, largely through acquisitions in a growing packaging industry. This has led to the development of a large number of silo based HR systems for each of the company’s divisions, which are largely influenced by the specific demands of the divisions and by the acquired businesses, and hence are divergent in nature without a strong level of strategic direction. This is causing issues for the company, as HR is now an expensive function that is not providing significant strategic value. As a result of this, the company has appointed a new senior vice president of Human Resources, Cindy Hartley, with a mandate to develop new organisational structures for HR in order to save costs; improve talent management; develop more effective performance management systems; and provide customised strategic support to the overall business. Hartley has already implemented a number of new systems and process changes, and has seen some benefits, but still needs to overcome issues related to ineffective talent management and a lack of alignment between performance management and company strategies (Sonoco Products Company, 2012, p. 5). This essay will critically reflect on your own personal learning by drawing upon various academic themes and concepts around managing human resources in order to offer and propose interventions on the case study, as well as to assess the actions already taken and their effectiveness.

Diagnosis

As noted above, the core issue in the case study appears to be the fact that the company has grown by acquisition with a relatively rapid pace of growth, including making over 60 acquisitions in just a single decade (Sonoco Products Company, 2012, p. 1). When a company grows through such an acquisition focused approach, it is almost inevitable that the HR resourcing and development functions will not be perfectly aligned, and this will hence create silos of HR functionality, with each individual silo only considering their own specific role and function rather than the strategic goals of the organisation (Alberg, 2007, p. 9). This form of silo based approach to HR can be very damaging for a company, as it will create an HR function which is aligned to the requirements of each individual division or department, rather than to the requirements of the business as a whole. The negative impacts of this can be seen in the case of Sonoco, where HR is focused primarily on day to day employee relations issues rather than strategic concerns, and where there are high levels of non cooperative competition between the individual divisions (Sonoco Products Company, 2012, p. 3).

The other major crucial HR problem that exists in the company is that there has been a lack of effort to develop a strategic and proactive HR culture in Sonoco. This has resulted in the emergence of an HR culture which is highly reactionary, with the HR function viewed primarily as a watchdog to head off legal and employee relations problem, as well as to assist managers with specific employee issues such as helping managers tell employees they are being terminated even when they have excellent performance evaluations (Sonoco Products Company, 2012, p. 3). The reactionary nature of the HR culture also sees the company being broadly unable to hold underperformers accountable. This has resulted partly in poorly performing employees being able to free ride through the company, and partly in compensation being viewed as an entitlement rather than a reward, and hence failing to improve performance levels. This has led to employees generally being paid at or near the midpoint for all individuals and jobs, which has prevented the creation of any form of meritocracy on the company. According to Weinberger (2003, p. 29), this creates the ‘peanut butter’ issue where wages are simply spread evenly to avoid any discontent that can come from rewarded highly performing employees and penalising others. This is again evidence of the reactionary culture that avoids conflict and thus fails to boost performance.

These two main issues can be seen to be responsible for the majority of HR problems encountered by Sonoco. Specifically, the company is failing to achieve good talent management due to a lack of a coherent HR approach across the company and a lack of desire to identify the best individuals out of all employees. The silo based approach to HR also prevents effective performance management leading to the peanut butter issue identified above. These silos and the reactionary culture also mean that HR is not able to provide strategic support to the business as a whole. Finally, the lack of a mechanism for identifying and disciplining or terminating poorly performing employees has prevented the company from eliminating poor performance, thus hindering cost control as the company cannot effectively save costs by removing the poorest employees.

Analysis

This section of the work will focus on appraising the environmental and organisational context of the case to identify the main issues these contexts create for the company and the strengths and weaknesses of the HR policies, practices, and systems in light of these issues. The analysis will also consider Cindy Hartley’s objectives for changes at Sonoco and the drivers of these objectives.

The primary environmental issues at the time of the case came from the changes in the packaging industry. In particular, the industry was going through a period of stagnation and change, with volume now less likely to increase and revenues under threat from low cost foreign competition whilst the industry as a whole began to consolidate (Sonoco Products Company, 2012, p. 2). These trends highlighted the major weakness in Sonoco’s silo based approach to HR and the resulting disparate systems they created. Specifically, Sonoco’s HR practices tended to make it difficult for the company to control costs, and hence made it difficult for the company to respond to market changes in a manner as aggressively as its rivals. This can be seen in the fact that the company’s stock price significantly trailed the S&P 50 between 1995 and 2000, despite the company increasing net income at this time (Sonoco Products Company, 2012, p. 1). This indicates that investors felt the company was underperforming relative to the market, implying that costs could be cut in a more effective manner.

The other main change in the packaging industry was that customers were becoming more demanding, with more variations in packaging and higher levels of segmentation of many markets. As a result of this, clients expected the packaging companies they purchased from to be able to supply them with competitively priced packaging that was highly responsive to industry trends, and to be able to apply new technologies and innovative tools to provide higher levels of customised service (Sonoco Products Company, 2012, p. 2). This is another area in which Sonoco’s reactionary policies and practices made it difficult for the company to compete, and hence acted as a strong weakness. Specifically, the company lacked a strategic and proactive approach to HR, which reduced its overall ability to respond to trends in the marketplace. This meant Sonoco was restricted to developing new approaches as they were required, thus slowing the packaging concept to market delivery cycle. The company hence had failed to align its HR function with the demands of the market, which is a key weakness in any HR system (Aswathappa, 2005).

In light of these two issues, it can be seen that Cindy Hartley’s objectives for changes at Sonoco are not simply those addressed in the case. The case states that the objectives were to increase accountability for talent management; to distribute HR talent and make systems and processes more consistent; and to provide strategic support to the individual business units. However, in light of the environmental issues identified, her objectives can also be seen as being to improve talent management and performance management in order to increase overall performance; to improve performance management in order to facilitate cost control by allowing the company to terminate underperforming employees; and to provide strategic support to enable the company to be more proactive when responding to the demands of the market.

Evaluation

This section will consider the success of the HR changes at Sonoco, as well as the extent to which they are in line with state of the art HR policies, practices, and systems, and how they could be improved through the implementation of best HR practices relevant to the case.

The fundamental change at Sonoco has been the introduction of a top down approach to performance management, with goal setting and targets being implemented at corporate level and trickled down to individual performance goals through negotiation. This practice has the benefit of attending to employee development needs and career development, as well as linking to the financial rewards system. The system as it stands appears to delegate significant authority to the divisions to set their own goals, and lacks the crucial control and assessment techniques such as business intelligent and analytics to ensure that the performance management system provides strong support to the goals of the business (Elbashir et al, 2011, p. 155). On the other hand, the system has the benefit of being relatively simple and easy to implement, which Muras et al (2008, p. 65) argue is more important that using complex processes which often confuse employees and managers. The system also implements 360 degree feedback for managers, which is vital in ensuring strong managerial development (Carson, 2006).

One of the main issues that can be identified with the new performance management system is that it is focused on the value added by the individual. Whilst individual performance important, and will help overcome the problem of employees free riding, it is not in line with best practice performance measurement techniques. These techniques generally focus on the combination of individual and team performance, in order to ensure a balance between the individual and team levels of performance (Addison and Haig, 2012, p. 37). In particular, a failure to incorporate team performance into the performance measurement approach risks harming team identification levels as employees see themselves as individuals rather than members of a team. As Solansky (2011, p. 247) notes, team identification is a vital driver of performance, and hence by failing to attend to this there is the risk the new performance measurement system will hamper levels of team work. This is thus something that needs to be addressed through the implementation of best practice in the future.

Design

This section will focus on identifying ways of improving the existing HR policies, practices, and systems and how they can become state of the art or best practices. It will hence focus on making recommendations for improving the HR practices and addressing the problems identified in the case, as well as determining the right HR structure for Sonoco: either centralisation or hybrid.

As noted above, one of the key methods that can be used to improve existing HR practices is to improve the performance management system to measure team work and individual contributions to team performance. According to Levasseur (2011, p. 204), contemporary organisation development theories hold that this needs to be achieved through consideration of various issues such as team development, conflict management and change management in the team context in order to create high performing teams. Hartley should thus look to include these factors in the new performance measurement framework to ensure high quality outcomes.

The other primary issues to be resolved are how to ensure effective talent management, how to be responsive to industry and market requirements, and how to save costs. All of these issues are linked to the fundamental question of which HR model to implement: the centralised model or the hybrid structure. Of these, each option has its own specific focus on different aspects of the organisation. The centralised model will offer greater cost savings as well as improved talent management across the entire organisation, as HR will be able to identify talented employees on an organisation wide basis and move or promote them as necessary. In contrast, the hybrid model will allow for greater responsiveness to industry and market requirements due to the support provided to the general managers. The hybrid model also offers improved talent management at the divisional level as managers are encouraged to invest in their own people and staff them accordingly, although there are concerns over the level of companywide coordination and change management under a hybrid model (Sonoco Products Company, 2012, p. 6).

In general, the hybrid model appears to be more desirable as it improves market responsiveness and proactive behaviour due to the support offers to the general managers. Whilst it saves $400,000 less in costs, it still comes close to meeting the $2,800,000 cost saving target, and the improved revenue is likely to be much more important for a business with revenues of around $2.5 billion (Sonoco Products Company, 2012, p. 1). In general, current HR best practice is that the HR function and HR metrics should be focused on strategic alignment ahead off cost saving, as this will allow for higher levels of performance and a more positive HR strategy (Gates and Langevin, 2010, p. 111).

The main question is hence which approach to talent management and change management is more appropriate. In this regard, it is important to note that, according to Martín-Alcázar et al (2008, p. 103), best practice HR is moving away from universalistic and centralised approaches, and towards the acceptance of more contingent approaches. This provides further support to the hybrid model, as a model which is more contingent on divisional requirements and hence better able to adapt to specific organisational requirements, including providing the general managers with the specific intelligence, support and responsiveness they need in order to deal with the more competitive industry environment. At the same time, it is important to note that organisational strategy itself has an impact on the most effective HR practices, and hence the company should consider a more universal and centralised approach if its strategy will better lend itself to such an approach. Determining the most effective approach to support the organisational strategy should thus be what Cindy Hartley should attend to next.

5. Implementation

This aspect of the essay will consider how the changes should be sustained and the schedule and resources required in order to effectively bring about the suggested changes, as well as how the company will you know that the changes are effective. The first aspect of the implementation should be to implement the hybrid model, once this has been formally selected and adapted as necessary to fit the organisational strategy. This will require the concerted effort of all the HR resources, with the specific implementation strategy depending on the availability of these resources and the ability of the company to organise them to obtain the necessary capabilities (Wright et al, 2001, p. 701). The relative success of these implementation efforts should be measured by considering the levels of support provided to the managers, as reported by the managers, as well as the achievement of the cost savings projected from the implementation of the new model (Becker and Gerhart, 1996) A similar approach can then be used to adapt the performance management approach in the company to the new organisational realities in order to improve team work, with levels of team performance used as a way to know these changes are effective (Armstrong and Baron, 2011).

Reflection

The learning activities undertaken in this module and during the analysis and completion of this case study have provided significant abilities with regards to my ability to provide solutions to the case. In particular, whilst studying this module I have learnt how to apply theoretical techniques and models from organisation development and human resources to specific cases and examples. This can be seen in my ability to apply theoretical concepts such as universalistic and contingent HR practices, as well as team work and performance management to the case of Sonoco. This will also assist me in my future managerial career, as I will be able to apply these concepts to the companies I work for.

The other primary way in which the learning activities on this module have contributed to my ability to provide solutions to the case is that they have helped me to analyse a practical situation and determine the root causes of the situation from the symptoms. For example, in this case I was able to use the literature to link the acquisition based nature of the company’s growth to the development of its HR silos, and use this to make recommendations to address this issue. I was also able to identify and analyse the implications of the hybrid and centralised models using theory, and hence make appropriate recommendations in this area, something which will be useful if I face a similar situation later in my career.