Sonoco Products Company
California Baptist University
Professor J. Avila
BUS 343-DE, Human Resources Management
August 23, 2013
This is an analysis of the Harvard Business School case study - Sonoco Products Company. This analysis outlines the challenges of Sonoco Products Company to revise its corporate strategy in order 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 lacking. She began working on a plan to restore and tie HR processes to Sonoco’s business objectives. In 2000, Harris DeLoach became the Chief Executive Officer (CEO) of Sonoco and also recognized concerns with their Human Resources. Additional concerns were raised regarding Sonoco’s general business strategy (in light of the changes to the industry), and the company’s weakening returns. CEO Harris DeLoach knew that one of the ways he could cut costs was by restructuring the human resources department. As a result, DeLoach instructed Cindy Hartley, senior vice president of human resources, to develop two new alternative HR structures that would not only cut costs but would also achieve three objectives. The new HR structure would have to reduce HR’s cost by 20%, or 2.8 million (Thomas, Groysberg, & Reavis, 2005, pg. 1). The three objectives were to (1) create a system of consistent HR policies and procedures, (2) increase general managers’ accountability for employee development and retention, and (3) provide customized support for each branch of the business. Additionally, it was clear that Sonoco had communication issues that could also be improved (Thomas et. al., 2005, p. 1).
In 2005, Sonoco Products Company, a manufacturer of packaging products for use in industrial and consumer goods, was a $3.2 billion firm with 150 locations around the United States, the source of nearly 80% of its revenues (Sonoco, 2012, p.12). In the 1990s Sonoco was affected by the consequences of the globalization. By mid 1990s, sales had dropped, shareholders pushed for a reduction in fixed costs, and management decided to reorganize the structure of certain functions, specifically Human Resources. Since 1995, the Human Resources transformation process had compromised strategic changes in performance management, development, compensation and succession planning. Since its beginning in 1899, Sonoco Products was a company that could be described as continually growing and thriving. The company originally manufactured paper cones used by the textile industry to wind yarn. As the company expanded and diversified, Sonoco began to manufacture additional products such as molded plastic cones and tubes, toner cartridges, caulking cartridges, composite containers (used for refrigerated dough, frozen juice concentrates and other foods), fiber and plastic drums used for chemicals and pharmaceuticals, tennis ball containers, paperboard, packaging forms, and cap seals, to name a few (Funding Universe, n.d., p.1). One year after its founding, the new company had sales of $17,000 and net earnings of $2,000. As the 20th century dawned, the textile industry in the South began to grow and prosper, and Sonoco's yarn carriers were in high demand. The advent of new uses for cotton and innovations in high-speed cotton spinning helped revolutionize the textile industry and fuel Sonoco's growth. By 1923, when the company changed its name to Sonoco Products Company, sales were approaching the one-million mark, and income was nearly $40,000 (Funding Universe, n.d., p.1) During most of the twentieth century, the company enjoyed continuous growth and financial success. Most of its success could be credited to the company’s ability to adapt to new packaging materials and technologies as they were developed. However, during the late 1990s, like many other manufacturing and...
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