REV: SEPTEMBER 22, 2005
Sonoco Products Company (A): Building a WorldClass HR Organization
Your business is only going to be as good as the people you’ve got. You can have the best strategy in the world, but if you don’t have effective execution by people, it’s going to fail.
— Harris DeLoach, Sonoco CEO
In order to make progress, we had to somehow decide what things were going to be the same across the company and what things could be or needed to be different to support the businesses. There was a balance that we needed to figure out.
— Cindy Hartley, Senior VP, Human Resources
It was late August 2000. Cindy Hartley, senior vice president of human resources (HR) at Sonoco, a 100-year-old global provider of industrial and consumer packaging and related services, was meeting with five members of her reorganization task force comprising the heads of employee relations and organizational development, the company’s chief labor attorney, and two key divisional
HR directors. Looking to cut costs across the company, the company’s newly appointed CEO had asked Hartley to come up with at least two potential new HR structures that would reduce the function’s costs by 20%, or $2.8 million.
But there were other equally pressing reasons for the reorganization. Number one was to ensure top-level accountability for talent management and upgrading. The second reason was to provide for a more even distribution of HR talent and support, particularly to the company’s smaller growth divisions. Finally, HR needed to lead the way in supporting the company’s new growth strategy, which often meant working across division lines to market and sell “solutions” to a single large customer. Since her arrival in 1995, Hartley had helped transform Sonoco’s HR organization by introducing new, interwoven processes for performance management, compensation, development, and succession planning. Now Hartley and her team faced a new challenge, namely, being able to maintain and further develop HR fundamentals with fewer resources and a changing company strategy. Throughout the 1980s and 1990s, Sonoco enjoyed years of uninterrupted growth and financial success. This started to change by the late 1990s. As were most packaging companies, Sonoco was highly leveraged due to the number of plants it operated and their fixed costs. Any slight swing in
Professors David Thomas and Boris Groysberg and Senior Researcher Cate Reavis, Global Research Group, prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
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Sonoco Products Company (A): Building a World-Class HR Organization
volume, such as the drop in U.S. manufacturing exports that occurred during the 1997–1998 Asian financial crisis or a slowdown in the economy, had a major impact. By early summer 2000, the company’s stock price had fallen to an eight-year low. (See Exhibit 1 for financials.)
The company realized that it had to change its business model to enable new top-line growth and to reduce its overall cost structure to be competitive in the global marketplace. On the consumer packaging side, Sonoco had to rethink how it met the demands of a