Sonoco Products Company (a): Building a World Class Hr Organization Case Analysis

Sonoco Products Company (A): Building a World Class HR Organization The major challenge faced by the Human Resources (HR) function of Sonoco was the negative consequences of decentralization tendencies and the shift to a more divisional structure throughout the 1980s, resulting in HR being just seen as an administrative tool ignoring also its importance as cost and productivity driver. Due to the existence of multiple HR functions in each department, each with its own systems, budgets and performance management, the non-cooperative competition surged among divisions and a loss of morale and motivation between many employees. In addition the complex staff structures in many departments resulted in an upward manipulation of many performance measurements in order to achieve increases in salaries or eliminate certain employees for individual departments. The decentralized HR function showed itself incapable of adding value to Sonoco in a new environment marked by uncertainty and with new challenges regarding competitors and customers demanding an each time higher degree of flexibility in production. Also there was relative lack of alignment of people and Sonoco’s values. By the end of 2000, Sonoco had to take a decision on whether to implement a centralized HR function or a hybrid structure in which the divisions would have more direct involvement with staffing, succession planning, personnel programs, compensation, and benefits. Sonoco is a diversified organization that has business units competing in different markets (divided into consumer and industrial) and tries to exploit the synergies among them. For these types of business organizations, Shared Services is a new way to organize HR resources. Therefore it will be beneficial on establishing a hybrid structure as it can combine some major strength of a centralized and of a decentralized structure and enable Sonoco to face the new challenges of a more demanding end consumer and industry in general.