Existing Environment and Changes in Sonoco - Case Study Example

?Existing environment Sonoco was at the verge of its downfall. It had lost its prime time of increasing sales growth in the early 1990’s and was now experiencing decreasing sales. The firm was being affected by the global economic downturn. It increased its net income by 14% by reducing its expenses but had to lose its top-line sales, which meant a fall in the stock market and an overall downfall period. With globalization taking place, there was now a need to look for new markets like China and India. However, to grow multi-dimensionally the firm needed to operate more effectively especially by having an HR department that was aligned to their strategic growth plan. The local market has reached saturation and 80% of the firm’s sales are in North America. The firm needs new markets for sales and production options to be able to produce in a globally competitive market. This may be achieved by impeccable execution by the HR department. This would mean changing the whole organizational culture of the firm and drawing out more efficient ways of operations especially where employees are concerned. The problem was that the firm was losing shareholder value, which it needed to regain at any cost or risk the firm’s downfall as a permanent feature. The firm was growing with takeovers and eating competition shares which was not enough for real growth, as it needed to increase its top-line sales (Hofstede, 2005). Analysis With the changing global economic environment, Sonoco began suffering as its sales went down. The firm was incurring many additional expenses which could have been easily avoided had the HR structure been in line with the long-term strategies of the firm. The firm was in need for surging new markets but it could not do so with the current HR design nor could it afford to spend unnecessarily especially on employees. Assessing the internal environment it seemed that the employees had settled in and were content with the fact that they had secure jobs. The majority had been working for a long time with the firm which made them at ease with one another and there was hardly any competition with one another which worked negatively for the firm (Decenzo, 2001). This is because the employees did not mind that some of them were under-producing and were ok with the fact that they were not being compensated for their extra work if any. The firm was not giving the right appreciation to the right employee, which indicates that the growth was not on merit. Perhaps there was a lack of leadership where the grievances of employees were not addressed and they stayed because the firm was lenient. The employees did not have stringent objectives to work towards and apparently the overall work of each employee was not too demanding. However, the work environment was healthy as there is teamwork and employees are willing to protect each other. But there is a stark absence of a leader and key knowledge workers who could help in implementing the long-term goals and objectives of global growth. The HR department lacked structure and strategic alignment. Hartley focused on talent management and to place the right person at the right place, to assess individual worker’s input so that the compensation plan, promotion and talent may be assessed and utilised accordingly. She also focused on aligning the HR with that of GM’s businesses. She also focused on the fact that the firm needed to develop employees in terms of training and on the job learning. Lastly she understood that there was a need for leadership and to identify those with leadership qualities for the future. However, in her approach the most apparent mistake was that there was a top down approach. The industry trends were changing where the packaging demanded became extremely segmented and catering to these different niches was challenging. It was essential to understand the consumers. Likewise, according to Deresky (2007) it was essential to understand the wants and needs of the employees as suggested by Maslow in his needs theory. Once these needs were understood the firm could motivate the employees to work towards their respective goals in the most efficient manner. Talent management, compensation plan and performance management were things she was able to introduce and sustain however, incentive plans were still not in place. This meant that even though the company was able to identify the talent, the achievements of employees were still not appreciated as per the desires of the firm primarily because the firm did not make an attempt to understand the needs and wants of the employees. Moreover, Darren (2000) adds that with some HR strategies being implemented , it can be said that she was not able to bring about the so-called change that she was initially hired for. HR changes in Sonoco The strategic objective was change yet there was hardly any change in the overall working of the organization (Garavan & Donhell, 2004) . The strategies implemented were in bits and pieces and though she managed to align performance management, development of employees, diversity of employees, their compensation plan but the talent management remained unfixed which meant that the right people were not in their right place (Latham & Ernst, 2008, pp.181-198). This also inferred that there was job dissatisfaction, de-motivation and thus inefficiency. Moreover, since the compensation plan was not fully integrated, there was widespread de-motivation, as diversity was not being handled well. Lack of talent recognition plans also made her strategies unsuccessful. Perhaps her approach was not right. She failed to understand her employees. As per Adam’s Equity Theory, employees assess their input and output and compare their bonuses, compensation and rewards with their co-workers and the degree of comparative satisfaction that they get (Deresky, 2007). Understanding of this is lacking at Sonoco and precisely why the compensation plans have not been given so much of importance. Not giving the right compensation to the worthy individual is not a best practise, which spreads the plague of dissatisfaction and de-motivation. According to Latham (2005, pp. 485-516), like Maslow’s theory, Vroom’s theory also states that an employee has expectations from his inputs and desires to be compensated for his knowledge skills and experience. If he is not compensated as much as he expects then he is de-motivated. This again is seen in Sonoco’s plan where the talent management is not being fully recognised with the result that the employees are not being rightfully compensated leading to inefficiency. Moreover, Sonoco fails to realise that according to the two-factor theory, satisfaction level is not inversely proportionate to the dissatisfaction level. This means that taking care of diversity issues, compensation, employee management etc may not compensate for the compensation plan and lack of leadership. Also, in the two-factor theory, there are two aspects one is a set of motivators and the other is the hygiene factors. The former include the challenges in the job, recognition and responsibility etc and the latter is the security, salary and associated compensation. The firm is giving a few motivators and a few hygiene factors, which means that the employees may not be satisfied in their jobs. Hence the sequence of changes was certainly not the right one (Peiperi, 1999). This is because the firm should have understood first what their employees’ needs and wants were and then charted out a compensation, reward and bonuses plan, which apparently the firm did not do. Thus, according to Fenwick (2005), without understanding their needs, without managing their talent and without establishing leadership in their employees, the firm is out to make changes, which seems rather impossible. Where the best practises are concerned, the management is only looking out for the interest of the firm. The employees are not being compensated with their due rights because since there is a lack of talent hunt and leadership, the likelihood is that the employee with the right skill set is not placed at the right job posting. This also infers that the recruitment also needs to be improved which again trudges on the ethical values. Perhaps there is hiring going on without proper personnel assessment, which is why the talent hunt is executed after the employees are placed in a particular job. With today’s technology, the right employees should have been in the right place. Moreover, ethics and best practise requires that employee performance appraisal be carried out more frequently than the suggested 24 months. This means that the employee would have to wait for two years before the 360 degree assessment decides that he deserves a better position in the firm or someone is less deserving (Welnberger,1998). With such a slow performance assessment program there will be widespread de-motivation and the employees would lose their interest in their work and would thus not be able to give their best leading to under performance. However, aligning HR systems with the business objectives were the strengths of the program and this is what could bring the changes that the firm is looking for. This is because the alignment meant that the system had a trickle down effect of aligning the HR system with the business objectives with every individual knowing precisely what he is working towards and being well aware of what is happening in the firm. Once the system is implemented completely the firm would know which employee is most suitable for which job especially if MBO (management by objectives) was incorporated into the mechanism and hence talent management would be easier and the turnaround rate would also decrease (Bing et. al., 2003). Design Since the economic conditions of the external environment are such that the local market is not lucrative for the firm in the near future, the firm has to have expansion plans, look for new markets and hire new sets of people for growth and for surging new markets. In such a situation, the HR department plays a pivotal role for the firm. Thus the HR department has to have a substantial role in the overall management for such a strategic plan for the firm. However, Moreover, according to Lloyd (2005, pp.929 – 943) with the centralized system of HR, although the cost will be lower, the effects would be far less impacting. The centralised HR system has reps that are consistently on the call and cater to the different business needs. Business unit leaders get in touch with the Centre of excellence themselves and not much of the support id given to the GM, which brings the costs down (Welch, 1999). But such a design is not feasible for the firm. There are few opportunities through which the system could be aligned to the individual business needs and requirements. There are also chances that since the system would be centralized with a larger chain of command, the firm may get confused about what the customers actually require losing the whole focus of the firm. With the hybrid structure of the HR, the division will have substantial control over the recruiting, retaining, compensation plans, succession plans and benefits of the employees. This would result in a more aligned program as it would be designed and implemented as per the strategic goals of the firm. Moreover, in the hybrid, the HR is in two sectors which are consumer and industrial which makes it much more organized and well managed (Cho & McLean, 2004). Moreover, in this way talent management can also be carried out effectively (Chadwick, 2009). The needs for HR support are better known by the different heads of the compensation, organizational development, VP of HR and employee relations directors and they can give better HR services to the GM as they are interact with the GM on a regular basis and thus know what the current and future requirements of HR would be. This would also make the whole system more aligned with the business unit strategic objectives and the HR objectives. To make a change in the organization, it is wise that the GM knows about the recruiting, compensation, retaining and so that the HR department gains the strategic importance that it should have. This may be a costlier HR structure but it will save the firm more in the long run if the right people are selected for the job, the right compensation, bonuses and rewards are given to the deserving employees, motivation will go up and efficiency will increase. Moreover, turnaround rate will decrease and loyalty to the firm will flourish (Chermack & Ruona, 2003). There are field reps also into the hybrid plan, which give the everyday information and thus enable a better HR system. However, there are still loopholes in the hybrid structure also as there should be more integration between the three sections- Administrative, Centres of Expertise and Divisions. They should be interlinked and interconnected so that hey are aligned with each other and there is better coordination between the different departments. Moreover, the GM will be able to make better decisions when he becomes more aware of the situation within the three departments and what problems are created when these three departments work in conjunction. Without this interconnectivity the chain of commands would be longer and everything would take more time. Lastly technology should be an essential part of this structure so that the whole decision making process is fast and efficient (Festing & Engle, 2008). Implementing and sustaining To begin with, Hartley has to align the whole management so that the HR changes can be made. To do that, the management has to be strategically located in a way that it has control over everything and is aware of all that is happening. As per Clark (2004), adapting the hybrid structure will of course be better as it allows the GMs to do exactly that. There has to be technological integration into the system which means every move of the change incorporated has to be recorded on a daily basis with the help of software designed especially for HRM. Moreover, as per Hirshman & Bjork (1988, pp. 484-494) the management has to be open for consistent improvements and changes as these changes are not permanent and the whole system has to be altered as per the requirements of the firm and the changing external environments. Next, the firm has to know its employees especially understand their needs and requirements so that their benefits, rewards and compensation may be designed in the appropriate manner to keep them consistently motivated. She should also ensure that the management, with the help of the new hybrid structure would be able to deploy their employees in an efficient manner. Moreover, when the HR is aware of the requirements at every level the employees can receive training and development at the right time, innovative ways of increasing productivity may be devised, the information may travel quickly to the management and employees via technological incorporation reducing costs. Lastly, Steyn (2002, pp. 82-101) confirms that with the new structure the GM will directly look into the hiring in the firm and the best will be selected. She should also concentrate on developing the relations between employees and the management, ensure better talent management and lastly but not the least, introduce the balanced scorecard system. Once the balanced score card is in place, the progress and input of every individual employee from the tactical to the highest management can be known and thus his compensation and rewards would depend upon this assessment. Moreover, even his training and development can depend on this and also promotions and hiring. In this manner the firm will be able to curtail its costs by not spending in the wrong direction, as it would be saving time and thus resources. However, the whole system has to be revisited over and over again and consistent changes have to be made so that the HR structure and the associated changes are in line with the business objectives. Since with the new structure the higher management is now more involved with the HR department, strategic alliance will be easier. But assessing the implementation by a balanced score card and conducting researches on the existing employees to know about the problems they are facing with the new system is the key to having a system that is devoid of any loopholes and thus such actions would guarantee sustainability. References Decenzo DA. (2001). Fundamentals of Management: Essentials Concepts and Application. Prentice Hall, New Jersey. Deresky, H (2007). International Management: Managing Across Borders and Cultures (6th Edition). 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