Running head: Organizational change

Sonoco Company
McDaniel College
Lydia Radford
February 14, 2009









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ABSTRACT


Southern Novelty Company (Sonoco) was founded in 1899 by Major James Coker. Originally
known for manufacturing paper packaging products, Sonoco grew as the packaging industry
expanded. The packaging industry has gone through several phases of metamorphosis including
the use of metal, plastic and finally flexible packaging. Globalization also became a major factor
in how business was conducted in the industry. Competition is the industry was stiff and Sonoco
felt the need for a reorganization to remain competitive. Cindy Hartley the newly hired VP of
HR and a team of managers must present a proposal to the executive board. Hartley and her
team developed two proposals one that favors a centralized HR department and the other that
supports a hybrid approach.

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Southern Novelty Company, later changed to Sonoco, was founded in 1899 by Major
James Lide Coker. The company was first known for the manufacturing of paper shaped cones
used to hold yarn. Sonoco did not invent the paper cone, but engineers figured out a way to
automate the production of the paper cones. This automated manufacturing gave Sonoco a
competitive advantage and they soon became the leading producer of cones in the United States.
The Southern Novelty Company continued to add to its product line and rapidly establishing new
operational plants around the world. Through acquisitions and product expansion, Sonoco
became the eighth largest packaging company in the world. By 1998 Sonoco had nearly 17,500
employees in 33 countries serving customers in more than 85 nations with a wide array of
industrial and consumer packaging solutions.
The concept of packaging was derived from the notion of preserving or storing foods.
The oldest form of packaging included the use of paper. Treated mulberry bark was used by the
Chinese to wrap foods as early as the First or Second century B.C. Early paper was made from
flax fibers and later old linen rags. It wasn't until 1867 that paper originating from wood pulp
was developed. The development of flaked cereals advanced the use of paperboard cartons.
Made from base materials (limestone, soda, sand and silica), which were in plentiful supply, all
ingredients were simply melted together and molded while hot. Since that early discovery, the
mixing process and the ingredients have changed very little, but the molding techniques have
progressed dramatically. Feeding off of pottery, glass became a mainstay in packaging. The use
of metal and aluminum emerged in the 1970s created an opportunity for growth in the packaging
industry. Collapsible, soft metal tubes, today known as "flexible packaging," were first used for
artists paints in 1841. Toothpaste was invented in the 1890s and started to appear in collapsible
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metal tubes. But food products really did not make use of this packaging form until the 1960s.
Later, aluminum was changed to plastic for such food items as sandwich pastes, cake icings and
pudding toppings. As the world began focusing on the environmental issues and. plastic replaced
aluminum during the 1980s.
Advancing technology and labor cost prompted globalization in the packaging industry in
the 1990s. The Internet and e-commerce allows consumer to develop business relationships
throughout the world. This offered consumers the option to deal with any manufacturer that
could best meet their needs. The packaging industry produced sales around $400 billion annually
and Sonoco became globalized and launched an aggressive plan to maintain their market share of
the industry. The overseas markets did well but competition in the United States was
challenging. Consumers began demanding specific packaging and Sonoco expanded their
product line to maintain their share of the packaging industry.
Strategy
Sonoco has maintained their position as a leader and strong competitor in the pack ageing
industry. This is due in part to their commitment to quality customer service, safety, and their
attention to environmental concerns. Sonoco formed a committee that recommends and
establishes policies that are interwoven into the organizations long and short term strategy and
initiatives. The company has partnered with a local high school by helping fund an international
Bachelorette program for high school students. They also encourage their employees to
volunteer at the school. Sonoco offers several scholarships for students to attend Clemson
University. Environmentally Sonoco has made a commitment to use natural resources
efficiently. They also monitor the amount of pollutants emitted into the air. The company takes
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a strong position on the safety of their employees. They believe that every accident is
preventable and this philosophy is spread throughout every plant.
Structure
Sonoco has a divisional structure. Divisional general managers had a major voice
regarding compensation, hiring and training. Divisional managers had autonomy over merit
increases and HR had no control over the compensation and reward process. Employee
performance was not associated with compensation and because of the friendly family oriented
environment, low performance was exhibited by some employees. Implementing a pay for
performance system would curtail salaries and reward employees who are performing. To do
this right requires a significant effort to establish standards and objectives and then to measure
performance against them (Ding cited in Perry, 2008, pg. 36) A pay for performance system
will help managers determine what a persons job and how well they are doing it. Companies
could also reward employees at intervals other that merit pay increases. Employees sometimes
forget about the merit award increase because it takes so long (Perry, 2008).
A concept called broadbanding would also increase productivity and motivate
employee. Broadbanding is the grouping of multiple jobs into large salary bands (Byars, 2008).
As employees learn new skills they are given a reward or small pay increment. This method
encourages employees to acquire new skills but also improve productivity. It also promotes
lateral movement within the company and allows more control over salary progression.
Sonoco established a friendly family-oriented company. When employees came to work
they felt secure. While this environment is great from a social perspective, the company is a
profit center. This level of comfort did not serve as motivation for employees to excel and as a
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result they developed lackadaisical work ethics. Many of the employees at Sonoco had 20-30
years of experience with the company and were approaching retirement age. It is also important
for the company to groom others to take over some of the leadership position in the company.
Succession planning is the process of linking organizational goals to HR. The process
involves identifying employees who will be targeted for training and mentoring them for key
positions in the company. Some factors to consider are: work history, job performance over a
period of time, education and training, and the willingness to take on new projects and offer new
ideas. The interest and goals of the employees would also be considered along with ability to
work with others and embrace the organizational mission and strategy (Werner, 2008). The HR
professional must link the personal assessment with the companys goals, track progress of the
goals with the help of managers. HR professionals should also monitor goals and trends of the
industry to make sure the companys future leaders are on the right track. Sonoco has a large
population of older workers and a succession plan should be put in place before these people
retire. Older workers can pass on their knowledge, work ethics and company loyalty to younger
workers. According to the US Bureau of Labor Statistics, more than 25 percent of the workforce
will reach retirement by 2010, resulting in a worker shortage of 10 million people. Some of these
workers may need to continue working because of the economy but Sonoco must put measure in
place to make sure that knowledge base does not walk out of the door.
Low performing employees must be motivated to produce. Maslows hierarchy of needs
states that if people first satisfy their psychological needs, they can then focus on safety, love,
and esteem and self-actualization fulfillment. A similar method called McClellands Theory of
Needs was introduced by David McClelland. McClelland identifies the need for achievement,
need for power and the need for affiliation as motivators that are directly linked to the workplace
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(Robbins, 2008). These programs not only lead to extrinsic rewards but also intrinsic satisfaction
for employees. Although changes were taking place at Sonoco, employees still need to feel as
like part of the company. The change team must ensure that all EEO regulations are being
upheld and feedback should come from the HR department. Programs should also be put in place
for people of different ethnicities, genders, age and educational levels.
Systems
As mentioned above when Cindy Hartley arrived at Sonoco there were no uniform
performance management systems in place. Hartley and her team developed a performance
management system that linked performance to compensation. The best way to get your
employees attention is to start affecting their pay. Using this program provided incentive for low
or subpar performing employees to increase their productivity. The comfort level perpetuated by
the established culture of Sonoco did not serve as motivation to excel and as a result some
employees developed terrible work habits.
Giving employees a cost of living (COLA) raise will not serve as motivation or lead to
increases productivity. Cost of living adjustments gave employees a feeling of entitlement.
Implementing a good pay for performance plan requires the establishment of standards and
measures. Managers and employees should sit down and discuss the plan making sure that the
goals are measureable and realistic (Cummings, 2008). It would even be beneficial to allow
employees a greater role in the establishment of their ratable objectives. A proven technique
would be to use the SMART template to ensure fairness. SMART is an acronym meaning Simple
Measurable Aligned (with the strategic goals of the company) Realistic and Timely. Objectives
based on this concept would ensure that the employee had a clear knowledge of company
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expectations. Its equally important to develop a monitoring tool so that employees and
managers can track the employees progress or lack thereof. Managers and employees would
then use the monitoring tool for performance evaluations.
Staffing
Cindy Hartley joined Sonoco in 1995 as the Vice President of HR for Sonoco however
many of the traditional HR functions were not executed from the HR department. The HR
department performed basic functions such as benefit planning and employee relations but
personnel decisions were being made at the divisional level. Each division handled training,
performance management and budgets. This system allowed disparity and competition between
the divisions. Hartleys recommendation included moving some of these tasks back to the HR
department creating a more centralized structure. The first step was to change the culture by
establishing respect for the HR department and this needed to start with the managers. Managers
were not accustomed to answering to anyone regarding performance evaluations and
compensation so this would be a major change for them. It is essential to gain support from
executives and top management before a change of this magnitude can be successfully
accomplished. More importantly, it may be difficult for managers to buy-in to the change
because they are not a part of the initial problem (Chernotskaya, 2009). Change takes time to
achieve. According to Hritz, it starts with individuals, then have to commit to the change in
order for the team to commit (Hritz, 2008, pg. 32).
Skills
One important component of Sonocos philosophy is care and regard for their employees.
Sonoco has established a strong family environment giving them a high level of employee
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attrition. They can now increase productivity by the implementation of a pay for performance
plan. It is also crucial to design employee development and succession programs. If these
programs are not instituted the knowledge of the aging workforce at Sonoco will be lost.
Another attribute is that members of the executive board have extensive experience in the
packaging industry and are now committed to employee development. Because of the skilled
professional employed at Sonoco they have been able to reach into the global markets and
capture a large share of the industries market through partnerships and acquisition.
Shared Values
Some of the core values at Sonoco are solution driven customer satisfaction,
environmental preservation and safety for employees. Customers can expect superior quality
products and integrity from Sonoco employees and management. Their commitment to
environmental awareness is communicated to all levels in the organization from top management
to employees. Finally, their loyalty to employees for a safe, fair and friendly work environment
are hallmarks of this organization.
Style
Sonoco exhibited a decentralized organizational structure. As previously mentioned,
many of the performance and compensation functions were managed from the divisional level.
At one point product diversity and the desire for profit took over the management of the
company.


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Recommendations
Centralization
The centralized structure could cost lese because most of the support from corporate
would be via telephone and or the internet. The majority of the work should be mandated at the
corporate level including compensation structure, benefits, etc. There would be little or no
variance in compensation because the values would be set at the corporate level. Often
corporations are not aware of the needs of the divisions and people at the subordinate levels. The
compensation cost values would be predictable based on the staffing levels for each division.
Compensation would be granted at the administrative level rather than at the divisional level
where employees perform. This does not allow for true succession planning because in this
model the planning is performed at the senior management level.
Hybrid
This method is more costly initially but can have long term benefits. The rewards for
productivity tied to valued performance could lead to a decrease in realized profits; however the
resultant gains in the encouragement for thinking outside the box would ensure that the company
would keep pace with market demands for versatility. Divisional managers would have more
input into the business needs i.e.: staffing, performance management, etc. Succession planning
could be better accomplished at the divisional level because managers can see the day to day
function of the employee. This plan would better serve the needs for a pay for performance
program. The family oriented culture could be maintained and employee development can be
established. Employees may be motivated to work better for Sonoco knowing that the
organization is looking out for their best interest.
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REFERENCES

Byars, L. (2008) Human resources management. New York, NY.: McGraw-Hill Irwin.

Cummings, T. & Worley, C. (2009) Organizational development & change. Mason. Ohio: South
Western Cengage.

Chernivitskaya, D. (Jan 2009) Big plans, Training & Development, 63,1,66-69.

Perry, P. (July 2008) Pay for performance. Industrial Distribution, 97,7,35-37
Robbins, S. & Judge, T. (2008) Essential of organizational behavior. Upper Saddle River, NJ:
Pearson Prentice Hall.

Werner, J. (2006) Human resources development. Mason, Ohio: Thomson-South-Western