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Running head: Sonoco Products Company

Case Study Analysis

Sonoco Products Company (A): Building a World-Class HR Organization

Joycelyn Jones
McDaniel College

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Abstract
This is an analysis of the Harvard Business School case study -- Sonoco Products Company (A):
Building a World-Class HR Organization. This analysis outlines the challenges of Sonoco
Products Company to revise its corporate strategy (i.e. products, structure, Human Resources,
etc.) to remain competitive and continue its growth in the volatile, ever-changing global
packaging industry.
In 1995, Cindy Hartley, Senior VP, Human Resources, came to Sonoco and found the Human
Resources (HR) function broken. She soon began working on a plan to rejuvenate HR and link
HR processes to Sonocos business objectives. As Ms. Hartley was well on her way, Harris
DeLoach became the newly appointed Chief Executive Officer (CEO) in 2000. Mr. DeLoach
soon recognized concerns with HR as well as overall business strategy in light of the changes to
the industry, Sonocos diminishing returns, etc. Consequently, he instructed Cindy Hartley,
Senior VP, Human Resources to among other things devise two alternative HR structures that
would reduce HRs cost by 20%, or $2.8 million. Other pressing reasons for the request include
the following:
1. Ensuring top-level accountability for talent management and upgrading.
2. Providing for a more even distribution of HR talent and support
3. Leadingthewayinsupportingthecompanysnewgrowthstrategy,whichoftenmeant
workingacrossdivisionlinestomarketandsellsolutionstoasinglelargecustomer
(Thomas,Groysberg,&Reavis,n.d.,p.1).
This case analysis utilizes the 7S Model of organizational alignment to perform the situational
analysis, explore the issues and/or opportunities related to the company and the CEOs request,
evaluate the alternatives and recommendations for course of action for the Senior VP, Human
Resources to meet its financial goals and HR meet goals.

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Introduction
Sonoco Products Company, a global packaging company, began in 1899 in Hartsville, South
Carolina. Founded by Major James Coker with $6,000 of initial capital, Sonocos original name
until 1923 was the Southern Novelty Company, and the new name of Sonoco uses the first two
letters from each word of its original name ("Mission statement - Sonoco," 2009). Its original
product was a paper cone used to hold yarn in the textile industry. Since most of the textile
cones of that time were wooden, paper cones were unique. Although Sonoco did not invent the
paper cone, its engineers invented new processes to automate the production of these cones. This
automated manufacturing gave Sonoco a competitive advantage, and it soon became the leading
producer of cones in the United States. During its history, Sonoco also adds to its credits the use
of the plastic T-shirt grocery sack common in supermarkets and retail stores and the creation of
Ultraseal, a closure system for Crisco shortening cans that eliminated the need for a can opener
(International Directory of Company Histories, Vol. 8 St. James Press, 1994). By 2000, Sonoco
was one of the largest packaging companies in the world. Its revenues reached $2.6 billion
through the manufacture and sales of consumer and industrial packaging, with 17,300 employees
across 285 operations in 32 countries, serving customers in 85 nations with a wide array of
industrial and consumer packaging solutions (Thomas, Groysberg, & Reavis, n.d., p. 2). In
addition to being a major packaging company, Sonoco produced nearly all of its own paperboard,
consuming almost two million tons of recovered paper annually.
Over the years, Sonoco Products Company continued to grow with new operations around the
world, diversify its product line (i.e. cardboard, aluminum cans, plastic, flexible packaging, etc.)
and become remarkably profitable. However, as Sonoco grew and changed, so did the world and
industry around it. While the United States was enjoying economic growth during the late

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1990s/early 2000s, so was the packaging industry. During this time, Sonocos position began to
change. The company was becoming increasingly more susceptible to changes in the world
economy. The packaging business began to focus on the following:

development and implementation of policies and action programs to meet the consumer
needs, including development of innovative packaging containers and techniques
production for diversified product types
improvement of productivity for cost reduction
introduction of higher speed computer technology for quality assurance, improvement
and labor saving
creation of websites for the entire industry
cooperativeeffortsoftheentirepackagingindustryforecommerceindividual
packaging/logistics
(Taylor,2005)

This called for Sonoco to reassess and reinvent itself in the face of the new global marketplace to
remain competitive.
In this case analysis, this writer will review the state of Sonoco in years approaching the new
millennium (situational analysis), utilize the 7-S Model of organizational alignment as
appropriate to examine Sonocos need for planned change (identification of issues), examine
proposed options (evaluation of alternatives), and propose plan of action (recommendation).
Situational Analysis
Upon approach of the new millennium, Sonoco began to recognize a change in its business.
After enduring many years of continuous growth and financial success, Sonoco was in a
precarious situation. Its stock price fell to an eight-year low. Sonocos debt was high because of
the acquisition and continued operations of several plants while many manufacturing plants were
moving overseas because of cheaper labor. North America accounted for approximately 80% of
the companys sales; however, competitors were operating on a more global basis. The internal
structure and composition of the company were facing challenges as well. Sonocos operations

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were decentralized to the point that it was unable to support some of the more far reaching
strategic initiatives of the company. Specifically, its human resources function was ineffective
and viewed as just an administrative support function. Additionally, Sonoco had to face the
growing challenges of fast changing technology, and diversity matters. For example, it now had
to contend with flexible packaging that was the new technique of this time and the mounting use
of ecommerce as a source of trade. Lastly, globalization as well as the wants and desire of its
consumers were challenging. Products had to serve all segments, which made the strategy for
the packaging and distribution of them more demanding.
These variables as well as others propelled Sonoco to revisit its business strategy. Sonoco
realized the need for transformational change to ensure its sustainability in a continuously
evolving environment. Specifically, Sonoco needed to conduct a SWOT analysis to assess and
build on its strengths, improve its weaknesses, identify the available opportunities, and
strategically plan to eliminate pending threats. Particularly, Sonocos focus was to evaluate
external forces (i.e. climate change, environmental destruction, energy crisis, etc.), global
marketplace, packaging industry, demands of its customers and especially its competitors to
ensure alignment, if necessary, with its business strategy. Furthermore, Sonoco needed to
analyze itself internally -- mission, culture, structure, human resources, technology and processes
prior to considering any change. To this end, this analysis utilizes the 7-S Model to analyze
Sonocos situation. This tool provides a structure with which to consider the company as a
whole, so that the organizations problems may be diagnosed and a strategy may be developed
and implemented.

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Identification of Issues
In order for a company to be effective, it must have a high degree of fit or alignment among all
the seven Ss. Thus, this writer identifies the following issues/challenges as possible reasons to
initiate or continue transformational change initiatives at Sonoco:

Stagnantbusinessstrategy
Growingpackagingindustry
Saturationofmarket,increased
competition
Environmentalconcerns
Stateofeconomy
Globalization
Ecommerce
Expandingproductlines

Diverse,sophisticatedanddemanding
consumers
Newand/orimprovedtechnology
Ageofdifferentiation,brandvalue,
changingimage
Companyculture
EvolvingroleofHumanResources
Ineffectiveorganizationalstructure
Managementdeficiencies
Changingpoliciesand/orpractices

The 7-S Model propels companies to pay attention to systems thinking, which involves looking
at all seven elements at the same time since they are all interconnected (Kotelnikov, 2001).
Therefore, this analysis examines several of the issues above as they relate to the seven Ss.
Strategy
Strategy is an organizations means to help management achieve its objectives. Key strategies
can include the introduction of new products or services, cost containment, or a combination of
these and others. During most of its existence, Sonocos strategy was product driven; however,
due to changes in the environment, the industry, the economy, the workforce, and societal trends,
it was adopting a more solutions oriented approach. Consequently, Sonoco needed to review the
business it was in, the products it supplied, its differentiation relative to its competitors, its ability
to sustain in a changing industry, and the applicability of product solutions to multiple situations.

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To this end, Sonoco was pursing top-line growth on two fronts: organically, which includes
market growth, new products and services, and geographic expansion and through acquisitions
and joint ventures that complement existing businesses and meet the changing needs of the
markets it serves ("Strategy for Growth," n.d.). Additionally, Sonoco recognized the need to
embrace the growing global marketplace and its people. They incorporated diversity into all
aspects of business including products, suppliers, consumers, and workforce.
Sonoco understood that to be the leader or one of them one had to be continuously flexible in the
new marketplace. Thus, the corporate mission statement which -- Sonoco intends to be the lowcost global leader in providing customer-preferred packaging solutions to selected value-added
segments, where it expects to be either number one or two in market share supports this point
("Mission statement - Sonoco," 2009).
This writer believes that Sonoco was a company that did its homework, which continuously
diagnosing itself to stay competitive. As a result, they were able to react to and minimize any
potential damage. The relatively quick move to rethink and revise its strategy at a critical time in
the companys history attests to this point.
Structure
Closely related to strategy is structure. Structure is the framework in which the activities of the
organizations members are coordinated. Structure affects how successfully a company can
implement its strategy. The organizations size, technology, environmental uncertainty and even
products/business significantly affect its structure.
Sonoco experienced a few iterations of corporate structure centralized, divisional, functional,
etc. in the past. However, key to any strategic business plan is the reassessment of an
organizations structure to ensure its alignment with the current business environment. Thus,

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Sonoco reviewed its structure to ensure that it too would aid the organization in meeting its
overall goals. With a centralized structure, Sonocos support departments, especially Human
Resources were not able to be strategic in focus and therefore provided little support in the way
of long-term plans for the divisions (Robbins & Judge, 2008, p. 235). However, this structure
provided economies of scale when centralizing core administrative functions. As for the
decentralized structure, the company experienced problems with departments/divisions
becoming their own entities and not tied to the bigger picture. Additionally, this structure
probably represented increased cost due to duplication of efforts.
Based on many aspects of Sonocos business environment, this writer believes that Sonoco is in
need of a combination structure that will allow it to create more synergies between business units
to leverage resources for greater cost effectiveness and customer service. Additionally once the
overall business structure is in place, reviewing structure on a micro level would be a benefit.
Consequently, reviewing structure from a divisional, departmental, and even individual job
perspective is important. Interventions such as continuous quality improvement, teambuilding,
and job enrichment are relevant options to improve processes, productivity, and morale during
structure transition.
Systems
Society is indeed becoming increasing more technological and systems driven. Thus, company
systems, the activities involved in the daily operation of business, also need attention. These
systems include business, management, performance management, financial, compensation, and
even customer satisfaction. For that reason, Sonoco attempted to restructure its
processes/systems in order to more efficiently maintain its market share, increase productivity,
and maintain safety goals.

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Prior to Cindy Hartleys arrival, Sonocos fragmented HR system was unable to operate
strategically. From a Human Resources perspective, Cindy Hartley had three main priorities:
1. Changing compensation and performance management systems to eliminate arbitrary
nature and more accurately reflect the employees contribution to the companys
performance.
2. Creating an employee development process to refine employees skills and
identify/develop lacking skills.
3. Building a succession-planning process to identify the next generation of leaders.
(Thomas,Groysberg,&Reavis,n.d.,p.7)
Ms. Hartley understood that Sonocos performance management, compensation, and succession
planning systems must complement its business strategy. Therefore, she began to implement
change.
A performance management system is effective if it:

Reflects the organizations culture and values

Has senior management actively involved
Focuses on the most important performance/business measures
Links to an organizational compensation and rewards system
Includes employee coaching, feedback and development
(Werner,2006,p.391)

Cindy Hartleys performance management did include these aspects. According to Hartley,
Until you systematize something to ensure that it is done and done correctly, you will never get
compliance (Levitt, n.d., p. 9).
This interwoven system connected business goals and individual objectives instead of
subjective measures of the past, which managers manipulated to get higher pay raises for their
employees.
As for the new compensation system broadbanding system, it complemented the new
performance management system. Broadbanding reduces salary categories to manage career
growth and deliver pay.

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According to Byars and Rue (2008), broadbanding works especially well in companies that are
fast moving and undergoing persistent change because it provides less formal structure and
allows the company to react quicker. This system supports the business strategy focused on
developing and maintaining the most skilled workforce to meet the companys goals. However,
this system places more emphasis on the person not the job, which may be contrary to Sonocos
culture of team-orientation. In addition, there is no mention of any incentive awards to
encourage teamwork. Although individual accomplishments are good, Sonocos environment is
one such that teamwork will be necessary to meet the challenging demands that it faces.
Furthermore, this competency is part of the new performance management process.
Subsequently, team or group incentives (i.e. profit sharing, gain sharing, etc.) could prove useful
and balance out the compensation portfolio. These incentives involve employees in a common
effort to improve organization performance (Byars & Rue, 2008, p. 283).
Staffing
With a companys strategy, structure, and systems defined, the companys human resources are
what hold it all together. It includes details on how a company trains, socializes, integrates,
motivates, and manages the careers of its human resources.
Sonoco needs to get a tighter control over this component. Over the years, it failed to hold its
people accountable and develop them, especially the leadership. Sonoco realized this
fragmentation led to ineffective succession planning and leadership development that only
harmed the company. Hence, the implementation of the new performance management and
compensation systems, the increased focus on leadership development, and most importantly the
succession planning process. It is not only important to have the right people with the right skills
now, but to sustain the companys position into the future; Sonoco has to develop its talent pool

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and leaders going forward. Additionally, Sonoco took advantage of the concept of incorporating
diversity into its business. It appreciated the diversity of its workforce, its suppliers as well as its
customers.
Skills
Skills refer to what a company and its personnel do best. Over the years, Sonocos strengths
were its strong market position, brand value, product diversification, flexibility, culture and
visionary leaders. The new performance management and compensation systems further
reinforce Sonocos commitment to enhancing employees skills to serve the organization.
Sonoco based expectations for all employees on satisfying customers through six core
competencies:excellence,communication,teamwork,technical/professionalskillsand
knowledge,strategicintegration,andcoaching/mentoring(Thomas, Groysberg, & Reavis, n.d.,
p.97).
Shared Values
The anchor of all the 7s is shared values. These values are evident in all actions taken by the
company. Sonocos value revolves around people, culture and values. Sonocos culture has
always played a role in its success. Safety, integrity and respect for the individual are hallmarks
of its culture ("Strategy for Growth," n.d.). Unfortunately, over the years, there wasadiminished
senseofpersonalresponsibilityandaccountabilitythatlinkedintothecompany.Thus,some
financialgoalsfellshort,butsomeofMr.DeLoachsandMs.Hartleysnewstrategiesturned
thisaround.

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Evaluation of Alternatives
Sonoco experienced growth and prosperity as well as a decline in a few key results during the
late 1990s/early 2000. As described previously, there were a myriad of challenges to include
globalization, the industry, economy, and environment to name a few. However, Sonocos
business strategy was solid. Built on people, capital effectiveness, productivity and quality
improvement, top-line growth and establishing stretch targets, Sonocos strategy would endure
turbulent times ("Sonoco Products Company (SON)," n.d.). Its basic strategy was to reduce cost,
develop a more efficient operating structure and put the right people into the right jobs to carry
out its strategy.
With this in mind, Senior VP Human Resources, Cindy Hartley along with an HR Council,
comprised of HR management, formulated two options in response to Mr. DeLoachs original
charge that was to devise two alternative HR structures that would reduce HRs cost by 20%, or
$2.8 million.
The first option was a centralized HR function in which one of four centers of expertise would
handle the majority of services, and a trimmed down field staff would serve the divisions. The
advantages to this structure would be the decreasing costs associated with driving administrative
and other types of process improvements. These economies of scale would free up money and
resources for other purpose. Thus, this structure would be less expensive.
On the contrary, it would be difficult to achieve some of the other objectives with this structure,
since there would be less opportunity align with individual business needs and interests.
Typically, the view of this structure is that it is inflexible and coordination from throughout the
organization is difficult especially in large companies. This could result in greater customer
service issues and employee dissatisfaction. Additionally, HR may not readily have its finger on

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the pulse of the organization to be proactive about needed changes, actions. However, more
importantly, this option only results in a $3.1 million cost savings, which is above the cost
savings of $2.8 requested by the CEO.
The second option was more of a hybrid organization in which the divisions would have some
direct involvement with staffing, succession planning, personnel programs, compensation, and
benefits. The strategy development, HR planning, and its implementation responsibilities would
are the responsibility of Corporate (the specialists - thinkers and designers) while the field staff
(the doers) would handle divisional level issues, assist in rolling out initiatives, perform
consulting services. The main advantage to this structure was that it left a form of divisional HR
management intact on which general managers could still call for help. These new group HR
managers would be able to provide the strategic link between corporate HR functions and the
businesses (Cummings & Worley, 2008, p. 321). It would be flexible enough to respond quickly
to environmental changes, and be able to participate in divisional level strategies. Lastly, the
projected cost savings would be $2.7 million for the hybrid structure, which is in line with the
CEOs directive of a $2.8 million dollars cut in costs.
The main disadvantage to this option stemmed from a concern over whether changes could be
easily driven across the company with this new structure. This structure may result in some
duplication of resources if delineation of duties is not specifically outlined and understood.
Logistically, it does not readily support the sharing of knowledge between HR practitioners
because some of them are working in one division and the others are working in other divisions.
Recommendation
Based on the specifics of the case and the research conducted, this writer would choose option 2
the hybrid structure. Research suggests that large, complex organizations with advanced

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technology and dynamic environments (i.e. dynamic competitors, continually changing products
preferences by customers, changing government regulations affecting its business, etc.) typically
fair better with a hybrid structure. This option aligns perfectly with Sonocos flexible strategy to
meet the changing demands of its industry and consumers. Besides, this structure allows for the
right people with the right skills to be where they are most beneficial to the company. This way
they get the development and attention that they need to produce the results that Sonoco wants.
As far as meeting its financial targets, this option would over time fair better. 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.
With this structure in place, more attention could be given where needed. For example, while the
corporate function worked on high level initiatives, the field HR staff could provide insight or
suggestions on how to make this best work for the division (with corporates guidance, if
necessary). This would result in HR being proactive to the business needs. The HR field
manager could also observe and communicate what compensation plans may work best since
he/she would have firsthand knowledge of operation and the staff. Lastly, this structure would
place the critical HR processes into the meat of the organizations where they should work best.
Ultimately, these actions will result in improved operations and cost reductions for Sonoco.

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Appendix 1