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Human Resources Management Term Paper

By Ahmed Nounou
12/16/2011 CBS-FTMBA-Class 2012 Presented to: Dana Minbaeva

HRM Term Paper Q1) considering the economics of the packaging business and the context of the current market environment what are the critical human resource tasks that Sonoco must accomplish in order to be successful? Sonoco is a large packaging firm that is facing big changes in the industry. These changes require the company to change its strategy and business model which will reflect on the whole companys procedures and cultures. One of the main drivers of this change inside the company is the Human Resources function. I would like to start my answer by defining what it means for Sonoco to be successful. From the HR perspective, being successful is to effectively and efficiently implement the companys strategy through applying HR practices and systems. In my answer to this question, I will follow the strategy cascade process presented by (Groysberg et.al., 2006) to structure the Strategic HR focus.

Figure 1: Strategy cascade process

Current business situation: Sonoco is a highly recognized player of the packaging industry. During the period from 1995 to 1999, the companys revenues were stagnating, stock price had fallen to an eight-year low and a consolidation in the industry gave rise to a higher market concentration (60% for the top-4 companies). In addition to that, in 2000 the packaging industry was facing a big change; packaging is more of a product differentiator (i.e. higher value to the clients), packaging companies are turning into One-stop shops for packaging solutions and the market is getting increasingly segmented (i.e. more differentiated products in the market and thus, more packages per product with different sizes, shapes and materials) (Case-A, 2005, pp. 4,5) Sonoco Strategy Initiated by the current business and market situation, Sonocos top management has identified three main strategic directions to be followed in the coming years Cost Cutting (Lowering down the fixed costs) Page 1 of 11 Ahmed Nounou

HRM Term Paper Shifting the business Model to accommodate the needs of the market. i.e. being more flexible and agile Offering solutions to large customers instead of selling products Workforce Requirements Achieving these strategic objectives require: Efficient workforce Less numbers of people to lower the costs but at the same time more efficient employees who are able to respond quickly and effectively to the customer demands Talented and flexible workforce: More general talents who are able to understand the clients needs and offer solution that matches the rising and diversified demands of their customers. Innovative workforce: The people who are able to respond to the complex needs of the highly segmented society have to be innovative and creative. HR Strategic focus: In lights of the strategic objectives and requirements, the HR role is to support the management in achieving the objectives through realizing the workforce requirements. Speaking of HR roles, Groysberg et al have discussed the importance of HR as a strategic partner in organizations (Groysberg et.al., 2006). Historically, the HR in Sinoco was more of an operational tool. It was used by managers to handle employees relations issues. The HR was reporting solid line to general managers instead of HR Manager (Case-A, 2005, p. 5). This resulted in siloed and inconsistent HR procedures across the organization. In order for Sonoco to be successful (i.e. achieve its strategy), the HR in Sonoco has to play a significant role as a strategic partner in realizing the companys strategy. Systems like talent management, succession planning, performance management and organization development have to be effectively put in place. HR will have to act as an internal advisor for the companys management and to share responsibility with line managers for the peoples performance. In addition to its role as a strategic partner, the HR Sonoco has to play another strategic role as a change agent in the organization (Groysberg et.al., 2006). A clearly articulated culture of accountability helps to enable successful strategy execution (Becker, Huselid, & Beatty, 2009). The culture in Sonoco is a collaborative, family friendly and team oriented. (Case-A, 2005, p. 3), but it clearly lacks accountability as there was a reluctance to hold lowperformance accountable (Case-A, 2005, p. 3). Ahmed Nounou Page 2 of 11

HRM Term Paper In summary the HR in Sonoco has to play a more significant strategic role in the organization. This should result in variety of initiatives, activities and tasks that HR should achieve. The most obvious for me would be recruiting, retaining and developing the companys talent while implementing a mind-set and culture change program to strengthen accountability within the company. Q 2) What are Sonocos current strengths in terms of its culture and people? What are the companys major weaknesses? An organizations culture develops over many years and is rooted in deeply held values to which employees are strongly committed (Robbins & Judge, 2010). Considering Sonocos case, in a company of over 100 years old and employees who probably spend their whole career in the company (Case-A, 2005), the culture plays a big role in shaping the way business is being run in the company and hence the companys overall performance. In this part I will discuss the companys strengths and weaknesses in relation to the current market and business situation for Sonoco. Strengths It is stated that Sonocos culture is a tightly knit culture, collaborative, family friendly and team oriented (Case-A, 2005, p. 3). Being such a close culture could have a lot of advantages, especially at hard and crisis times when people need to come together to overcome the challenges. It is proven in the text that employees are willing to do extra efforts for the companys benefits. For example, employees where taking an active role in the performance management process throughout the year. Together, supervisors and employees initially agreed on what was to be measured and how it was to be measured (Case-A, 2005, p. 8). The employees in Sonoco describe the culture in the company as ethical. Being ethical is highly important to ensure long-term business sustainability. This is proven by the fact that the company has sustained for more than 100 years. Weaknesses Having such a family culture also has some downsides too; the managers are reluctant in punishing underperformers You could ride with a little bit of extra cost of a C player not pulling their weight (Case-A, 2005, p. 3). This means that managers were not willing to sacrifice the personal relationship for the companys performance. This definitely had badly Ahmed Nounou Page 3 of 11

HRM Term Paper affected the efficiency of the company and led to increasing the companys cost. For many years, the company didnt have a proper Performance Management or Compensation Systems. Most of the employees were getting the same rating (Case-A, 2005, p. 6). This resulted in employees who assume that pay is not based on performance and achievement; this decreased the differentiation inside the company and established a culture that is based on the strength of relationships managers rather than performance competencies. As a consequence, managers used to manipulate performance rating in order to get larger salary increase for their employees (Case-A, 2005, p. 6). They even found it problematic if they were to assign a salary increase for their employees different than that in other departments (Case-A, 2005, p. 6). This suggests a culture that lacks integrity and openness between the different departments. Becker et al have discussed the culture and discussed in contrast its effect on companys performance (Becker, Huselid, & Beatty, 2009). Applying there concepts on our case, we find that Sonoco has an Employer of choice culture which focuses on making the firm a good place to be in rather than a company that drives their employees to perform at their best in order to serve the companys strategy. In addition, a strong culture might act as a barrier for diversity (Robbins & Judge, 2010). It is stated that there were issues related to gender, race, ethnicity and age (Case-A, 2005, p. 7), which might have also affected the level of openness in the culture. Reflecting on that, I believe that having such a culture could be one of the reasons that caused the companys lousy performance in the past few years. If the employees are not motivated to do their very best, they wont perform as needed and they will tend to free ride on the companys whole performance. On the times of tough competitions, the companys efficiency is tested and the effect of free-riders becomes more apparent. 3) How successful were the HR changes at Sonoco? (Take the snapshot of 1995 and contrast that to what Hartley had implemented by 2000). Will changes be sustained? In this question, I will discuss the effect of the HRM practices on Sonocos performance. Paauwe & Farndale suggest a classification of the variety of ways to measure HRM (Puaawe & Farndale, 2006). It can be measured through financial outcomes (e.g., profits; sales; market share; etc.), organizational outcomes (e.g., output measures such as productivity; quality; efficiencies) and HR-related outcomes (e.g., attitudinal and behavioral impacts among employees, such as satisfaction, commitment, and intention to quit) Ahmed Nounou Page 4 of 11

HRM Term Paper Although the company had a financial dip in revenues, profits and values during the period from 1995 to 2000, yet it wouldnt be fair to draw a direct relationship between HRM and the financial outcomes especially that the world has witnessed the East-Asian financial crisis during those years. On the organizational outcomes side, there is no much data in the case text on the organizational performance before and after the HRM practices where introduced. In my attempt to this question I will discuss the HR related outcomes in Sonoco. I shall start with a brief description to the HR situation in 1995 and then summarize the main HRM achievements before I evaluate the effectiveness and sustainability of those practices. In 1995, the structure of the HR department was decentralized, fragmented and siloed. There was no consistency in processes or services among the various businesses. HR managers were reporting directly to GMs while indirectly to HR Corp. The different HR departments were highly aligned with the divisions but had no strategic focus; divisions had their own HR Departments with own systems, budgets, performance management processes. Benefits and compensation were not seen as tools to motivate people. Performance management systems were mainly based on objective and measurable indicators, which created a room for manipulation and agency costs (Zimmerman, 2010), e.g. performance reviews most of the time ended with a score of four. A complex organizational structure inside HR avoided strategic planning, e.g. benefits administration was separated from benefits planning. Finally, the termination process was complicated due to misuse of the performance review (Case-A, 2005) From 1995 to 2000 Hartley had performed many HRM reforms that can be summarized in the following points: Systems: She established the Performance Management system that is linked to the corporate and divisional strategy; she made changes to the compensation system to link it with the PMS. In addition, Hartley introduced a new 360 degrees evaluation process and a leadership development program that is also connected to the PMS and started a succession planning process that aims to place the new potential leaders in their best fit positions. (Case-A, 2005, pp. 8-10) Culture: Hartley worked on tackling the diversity issues inside the organization by creating a vision for diversity and implementing a corporate wide task force to focus on diversity issues (Case-A, 2005, p. 7) In my evaluation I will use the best fit model developed by (Puaawe & Farndale, 2006). It Ahmed Nounou Page 5 of 11

HRM Term Paper suggests four dimensions for evaluation the HRM system: Strategic fit: Vertical fit between the HRM practices and the corporate strategy. The designed system was in high alignment with the companys strategic objectives, e.g. The new system was designed as a cycle that began with overall company goal setting and earning targets and worked its way down (Case-A, 2005) . Systems like performance management, leadership development and succession planning are intended to support in cutting costs, developing talents and increasing efficiency of the company. On the other side, there is no information in the case on the recruitment processes which I see a critical process in developing the companys talent and increasing efficiency. In addition an effective talent program was still mission in Sonoco. Horizontal fit: Internal coherence between the different HRM practices. The designed HRM processes were highly synchronized together, e.g. Hartley was highly focused on the consistency of the HRM processes and making sure they are interlinked Organizational fit: Fit between the HRM and other systems in the organization. There is no sufficient data in the case on how the designed HRM were aligned with the other operational or administrative processes. In addition, it would be interesting to know the effect of implementing those systems on the employees performance and on the administrative cost per employee. Environmental fit: Fit between the HRM practices and the social and cultural environment. As discussed by (Nishii, 2011), there is a clear distinction between the intended HR practices and the actual perceived ones. It is stated that the HR managers have bought in the new changes after some resistance, yet there is information on how the workforce perceived such changes. Besides there is no evidence that the efforts done to improve the diversity have actually succeeded in achieving the desired cultural changes. It is also stated that the HRM changes didnt succeed in changing the attitude of managers towards low-performers. In summary, Hartley has succeeded in laying down the hard foundations of HR (i.e. systems, processes, follow-up procedures), yet more efforts have to be done to improve the soft side of the organization (i.e. culture, attitudes, etc.). In my opinion, without effectively addressing the cultural issues, all the system changes are not expected to sustain on the long run.

Ahmed Nounou

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HRM Term Paper 4) Hartley had two options: a centralized HR function or a hybrid organization. As you learnt from the Case B the hybrid option won. What is your evaluation of this decision? In order to be able to answer this question, I will share my understanding to the selected solution, which is different than the hybrid structure suggested earlier then I will draw an evaluation of it in contrast with the alternative option. Under the hybrid model, HR is split into two main functions, the first is the HR strategic design (center of expertise), which consists of 5 sub-functions; strategic LE Relations, benefits, compensation, HR information Services and finally OD & staffing. The second function is HR management on the divisional level; it consists of compensation, organizational development and employee relation management. In my evaluation to the decision taken by the management, I will structure it using the normative decision making model (Bazerman & Moore, 2009). The model starts with defining the problem; in our case, the problem was to choose a structure for the HR department which would maximize the benefits vs. costs difference. The criteria for assessing this decision, as discussed by the management, are identified as: Depth and effectiveness of the services provided Alignment of the services with the corporate and divisional strategy Consistency creation in HR procedures across the organization Cost Cutting Readiness to implement the new structure

For simplicity reasons, I will assume equal weights to those criteria and I will discuss the available alternatives along the defined criteria without giving quantitative ranking. In regards to depth of the services offered, the hybrid model shows a relative strength because the divisions would have direct involvement with staffing, succession planning, personnel programs, compensation and benefits (Case-A, 2005, p. 10). This would also retain the personalized and customized services on which the divisions relied (Case-B, 2005, p. 1). In regards to the strategy alignment, the hybrid model keeps showing relative advantage; under it, the field HR reps would be able to provide more proactive, business-related support. In addition, the divisional HR directors would be closer to the general managers of the different businesses (Case-A, 2005, p. 11), which means they would be closer to the business requirements and thus are able to provide flexible and meaningful support. Ahmed Nounou Page 7 of 11

HRM Term Paper Regarding consistency creation along the HR procedures, it is stated in case B that Senior managers believed that the new structure would create greater collaboration among the business and a new opened around sharing information and talent (Case-B, 2005, p. 1). I would rather disagree with this statement. Under the new hybrid structure most of the HR activities will be managed by the two divisional directors (VP level). This could create variance in the way HR procedures are implemented in each division, which would probably create two big silos in the organization. On the other hand, the centralized option doesnt have this problem as most of the HR functions are designed and implemented on a corporate level. In order to overcome this problem for the hybrid structure, Corporate VP HR has to be aware of ensuring procedures consistency in the two big divisions. Regarding cost cutting, both models show a significant cost saving, the centralized model saves a little more money, yet the difference between them is negligible in comparison to the companys total administrative expenses (around 0.12%). In my opinion, we could assume equal rating for both models along the cost cutting criteria. The fifth criterion is the readiness to implement the suggested structure. The hybrid structure requires personnel who can provide strategic services related to talent management, performance management and coaching. It is stated in case B that finding those people is a hard task (Case-B, 2005, p. 1). The centralized model would require less talent because the HR representatives are expected to perform basic-level tasks like managing employee relations and communicating HR program changes. I have no clue how big the gap is between the current state of the HR department and the required talent. Knowing the size of the gap could be a deterministic factor in my judgment to this particular point In summary, my analysis shows that the hybrid model displays a relative strength in terms of the depth, customizability and effectiveness of the services provided to the business units. It also shows relative advantage in terms of alignment with the corporate and business strategy. On the other hand, the selected model shows a relative weakness in terms of creating consistency in the applied HR procedures across the organization. Apparently it would be more challenging for Hartley to implement the structure due to the gap between the current and required HR department capacity.

Ahmed Nounou

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HRM Term Paper 5) What should Cindy Hartley attend to next? In my approach to this question, I firstly discuss the main activities that need to be done in the HR department and the reasons for implementing them. Secondly I discuss the priorities of these activities and suggest an action plan for implementation. Based on the analysis carried out through the paper, Hartley needs to take care of three main areas: HR department capacity, talent management and organizational culture. HR Department Capacity: Under the chosen hybrid model, the HR department in Sonoco is expected to perform wide variety of tasks. Those tasks are not only carried out by the high caliber corporate staff, but also by the HR representative who deal with the managers and employees on a daily basis. This is expected to create a challenge for Hartley because she doesnt have the right number of people with the needed skill set to make it work (Case-B, 2005, p. 1). Therefore, Hartley has to work on raising the internal capacity of the HR department whether through recruitment or through talent development. I would suggest that she introduces an HR face-lifting initiative that would include the following tasks: Assessing HR staff current capabilities. Analyzing the gap between the current and required capabilities. Developing a plan to close the gap. It is expected to include hiring, firing and development. Implementing the plan and measuring its effectiveness Talent Management: It is one of the key differentiation factors for Sonoco to be able to compete in the future. In an industry that is heavily changing towards flexibility, talent would play a big role in paving the way to success. I suggest that she starts what I call Sonoco Academy for talent development. The academy would target current employees as well as interns and prospect candidates. The main objective of the academy is to provide the company with the experienced and fresh calibers by holding the whole company not only HRaccountable for developing talent. The academy is to be sponsored and supported by the top management and strategically steered by the managers of the company. The academy should assign highest priority to customer-interfacing and business-related positions. This is critical to align with the new changes to the companys business model of solution based selling. The academy should be strongly linked to the leadership development process early developed. In addition to the academy, Hartley should establish a top-notch recruitment arm in Sonoco to make sure that the company hires the best employees in the required positions. Ahmed Nounou Page 9 of 11

HRM Term Paper The companys culture: As discussed thoroughly in question 2, the culture in Sonoco could act as hinder to the companys development. A culture change program needs to be established in Sonoco. Accountability, flexibility and outcome orientation are values that have to be implanted in the companys new culture. Robbins and Judge suggest a three-step model to implement culture change (Robbins & Judge, 2010). The model starts with unfreezing the status quo by establishing a sense of urgency and creating a compelling reason for why change is needed. The second step is implementing the change. In this phase Hartley should form an empowered coalition to lead the change, create a new vision to drive the change and communicate it to the people. Hartley should also work on removing the barriers for change and rewarding short-term wins that move the organization towards the new vision. Finally, Hartley should reinforce the change by consolidating improvements and reassessing the cultural change. Priorities As discussed in Q3, Hartley had succeeded in building the HR systems and foundations, but in order to witness a visible result, more work on the people and culture has to take place. I would suggest that Hartley starts firstly with implementing the cultural change program. This would act as a quick-win which utilizes the HR infrastructure that was built during the past years. Establishing a sense of urgency and creating a vision would have a significant impact on the peoples morals and unfreeze some of the old assumptions. Meanwhile, Hartley has to work on building her own team of HR specialists. This is a critical step and has to be carried out as soon as possible taking into consideration the cost-cutting requirements associated with the hybrid model. The HR face-lifting initiative should be have an objective to fill in the major gaps within 6 months. The successful implementation of both initiatives should enable Hartley to work on the talent management initiative, which is by far the most strategic one. Despite being the most important step, talent management would consume a decent portion of the HR resources and thus has to be deferred until the HR department is well equipped. The figure below shows the priorities of the main tasks required.

Figure 2: HR Action Plan

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HRM Term Paper

1 Sources
HBR - Sonoco Products Company (A): Building a World-class HR Organization (2005). HBR - Sonoco Products Company (B): Building a World-class HR Organization (2005). Bazerman, & Moore. (2009). Judgment in Managerial Decision Making. Willey. Becker, B. E., Huselid, M. A., & Beatty, R. W. (2009). Design an HR Architecture for the Differentiated Workforce. Groysberg et.al., B. (2006). Delivering Strategic Human Resource Management. Judge, R. &. (2010). Nishii, L. H. (2011). Understanding Micro-Foundations for Successful Strategic Human Resource Management. Copenhagen. Puaawe, & Farndale. (2006). International Human Resources Management and Firm Performance. Robbins, S. P., & Judge, T. A. (2010). Essentials of Organizational Behavior (Vol. 11). Zimmerman. (2010). Accounting for decision making and control.

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