Organization’s HR strategy is a system of HR management that has the ultimate goal of increasing the company’s overall performance through effective employees’’ performances (Guidelines, p.3). It should not be confused with the company’s recruitment system used when hiring personnel, but a system of internal HR management that encourages the personnel to do their best for the company by supporting them in terms of health, family, high salaries etc. or other methods of motivation (Guidelines 4).
For instance, IBM motivates its employees through providing performance based opportunities, leadership building, the surrounding environment of diverse and talented people, high values in the corporate social life etc. (Guidelines 3). Another example is Costco, which provides high salaries to its personnel. All of these benefits provided to people tend to result in high profitability for the company, because when each employee performs his work effectively, means that the overall performance of the company will be effective as well.
How is an organization’s HR strategy different from an organization’s business strategy?
Business strategy is a way the company reaches its goals, draws directions and commitments for the company’s future growth. For instance, IBM‘s CEO stated that the company’s business strategy is focused on the following areas such as the innovation, business value, global integration and on-demand infrastructure (Guidelines 3). These are kind of general principles applicable to all areas of the corporation’s work that should be maintained and born in mind by personnel in daily work in order to achieve the company’s goals.
Only the employees of the company can implement this strategy. Thus, for the good implementation of the business strategy, the company needs good people, who achieve the best results and in order to have these good people as personnel the company needs to have an effective HR strategy, which aims at encouraging the best performance of the personnel to achieve the goals of the company (Guidelines 3).
Describe the three types of HR strategies.
HR strategies can be different depending on the goals, financial and other capabilities of the company. Three types of HR strategies are High Performance Work System, Commitment v. Control Strategies and the Value matrix approach (Guidelines 4).
HPWS approach, for instance, focuses on training or staffing practices. This approach considers every single aspect of HR managements from the time when the recruitment begins, but choosing the best professionals by testing them. Then after recruitment, the whole corporate employee support programs and incentive managements comes into place, as the company provides means of support to build trust and motivation of the personnel.
In commitment strategy there are professional workers who are paid well, provided with high benefits, and thus have higher level of integration and influence on the company’s performance. This strategy may be good for companies with differentiation business strategy. In control strategy employees are paid less, they have low influence and low integration in company’s performance. The company is not interested in providing trainings and thus maintaining high professionalism upon its employees. This would more relevant to cost business strategy (Guidelines 4).
The value matrix strategy makes a division of different types of workers and, depending on their level, the strategy used is different (Guidelines 4-5).
What is the HPWS Approach? Give examples of HR practices that reflect the HPWS approach.
High Performance Work system Approach is known as a framework that is used to build up a generic HR strategy. Using the practices that from the core elements of the HPWS approach result in the improvement of the firm’s performance. HPWS HR practices involve building the effectiveness of the personnel through such means as more opportunities and benefits, skill building etc. This strategy builds up on such components as hiring skilled professionals through testing, providing training, good salary, career building opportunities. In addition, there may be levels of personnel, some of whom have higher benefits such as access to company incentive plans, profit sharing and gain sharing plans. There are procedures for performance appraisal and promotion. Hence, this strategy involves a comprehensive system when the professional life of employees are built upon a qualitative levels and lead to effective overall performances (Guidelines 6).
According to the guideline what is the talent problem?
It may be challenging for the leading executives of the company to identify the talents within the company and motivating them to stay and work for the company. There is a developing tendency that firms are trying to identify key employees and differentiate them from the rest of the firm’s personnel, thus providing them more benefits and incentives to work effectively and stay with them. These talents may be the future leaders of the firm, or important scientists and highly contributing specialists. Differentiation of these talents requires HR specialists to provide them with special trainings and insure full compensation. Another challenge will be that as long as these talents are treated specifically and provided with more material benefits, then the company may lack resources to provide benefits for the rest of the personnel, which is also quite important for the overall performance of the firm (Guidelines 20).
Prepare a summary (2-3 pages) according to the case analysis guideline posted on backboard.
What is the underlying problem or problems?
There were several underlying problems like highly leveraged capital structure, which was significantly impacted by any economic failures such as the Asian financial crisis. The company had to work on increasing the shareholders’ value in the company. Hence, the company had to work on minimizing costs and maximizing value for shareholders. Another problem was the necessity to restructure the operations, including HR management strategies, to become globally competitive and cope with the needs of clients and consumers.
In addition, because of the globalization and growth of competition in the late 1990s, the producers were now interested in reducing their costs on packaging and limiting the number of suppliers. Sonoco was interested in maintaining its key clients and providing them with highly competitive packaging services in correspondence with the technological developments and consumers’ demands.
What factors are causing the problem?
There were both external and internal factors that caused the problems to evolve. The external factors were that economies were not stable, and as long as the company’s capital structure was highly leveraged means that it had many fixed payment obligations it was not able to cope with. The internal causes were that HR management was not organized in most efficient manner, for example, the fact that there was no connection and accountability between workers of different divisions. The existing practice implied that each general manager managed employees within his division, which meant that the employee was not a human resource of the corporation as a whole, but of the division only. The whole HR structure was somewhat inefficient in a sense that each division of a company had its own HR manager, which absence of the solid and single aim oriented structure.
Hence, as far as the personnel was not organized in a proper manner, it is hard to talk about resolving problems caused by external forces.
Who is the decision maker?
The CEO and the board of directors of the company are the decision makers. CEO identifies the key development pathways and board of directors decide on how to tackle with the capital leverage problem and increase shareholders’ value. When CEO makes decision on the company’s future development strategies, it gives tasks to each divisional managers to implement the decision.
Hence, HR manager in his part is responsible for effective implementation of the tasks given by the CEO. In this case, Cindy Hartley, the vice president of HR department at Sonoco was asked by the CEO to propose an alternative restructuring of the HR, which would allow the company to reduce its costs by 20% and increase overall efficiency of company’s performance.
Is there any missing information that might be needed to make a decision?
There is no information as to how both of the proposed solutions will be implemented. Because. For instance, the report shows that system was highly collaborative, team-oriented, managers were reluctant to approach underperforming personnel to make them work better or even dismiss if necessary. It is reasonable to suggest that it would be hard for the executive managers to decide which solution to make if there is no description on how these processes and changes are going to be enforced. There is no information whether there will be implementation costs, because in order to change the whole structure of HR management, the company will have to bear costs, some people will have to be dismissed, some hired, some changed in their positions.
Also, there are no estimated results on how these solutions are going to be effective in struggling against the external causes of problems, for example, how the shareholder value would be increased by this changes etc.
What is the recommended solution? Advantages and disadvantages of the solution?
The aim of Hartley was to build a more professional, business oriented HR team. HR had to work on the developments such as supporting the company’s growth strategies, reducing costs, productivity increase, improvement of working-capital management and cash flow(Thomas, Groysberg 4).
Hartley identified the priorities that had to be changed and which were subsequently introduced. These changes were:
making the performance management and compensation more consistent and reflective of employees actual contributions to performance;
creating an employee-development process, which would help to identify talents and develop deficient skills, and;
creating a good succession planning scheme as well, in order to prepare future generation of leaders of the company (Thomas, Groysberg 4-5).
This kind of restricting of HR was able to reduce costs as initially undertaken as a goal, but also provided an opportunity to extend companywide accountability for talent and general increase in performance of the company and its readiness to changes (Thomas, Groysberg 6). Even if these changes were introduced, however, several aspects remained an issue such as that the employee management was still divisional and depended largely of general managers and HR managers, and some of them were still reluctant to deal with underperformers. In addition, even though the compensation system was changed, the remaining core issue of connections between business strategy and HR incentive plans was still unresolved (Thomas, Groysberg 6). Hence, further changes were necessary.
Under the centralized model, most HR services would be handled by four centers of expertise and divisions would have a pared-down field staff. Field HR representatives will be on constant serve for the needs of businesses. Each representative would cover 10 to 15 plants and provide individual consultancy services for line managers about plant level HR issues. Hence, as long as business unit managers do not perform HR tasks themselves, but the service of Centers of excellence would be provided. Thus, as long as support is not provided directly to general managers, this centralized structure costs less (Thomas, Groysberg 6).
What other approaches might the organization use to solve the problem?
The second approach is the hybrid model, where HR is broken into two sectors, which are consumer and industrial. This structure would mirror the organization of the company as a whole. Each sector of organization would have its own VP of HR, who will be supported by director of employee relations and director of compensation and organizational development. They will directly interact with general managers and partake in sectoral planning regarding HR matters. The participation of general managers in HR process is of crucial importance, because they know best the needs of their divisions. There is also a link between General managers and Centers of Excellence, and each sector would have its own representative, who will provide more proactive business related support (Thomas, Groysberg 6-7). This model saves up to $2.7 million of costs.
Identify 5 managerial lessons to be learned from the case
It is important to minimize costs as much as possible, but maintain good organization. It might be better to have key clients and work for key customers and do it more qualitatively and with less costs rather than trying to work for the whole market;
Also, it is important to have a transparent and reporting compensation system within the company. The personnel has to be rewarded upon real results and performances;
The company accounting, payroll and all other structures should follow the established models like payments should be made at the beginning of the financial year and etc;
What is the Sonoco’s current strengths in terms of its culture and people? What are the company’s major weaknesses? (answer 135 words)
Sonoco’s current strength in terms of its culture and people was that it was family friendly, paternalistic, collaborative, ethical and team oriented. Which means that emphasis was not on key persons or individual performances, but team oriented, making every person contributing to the group work. The environment at the company was family like, employees worked on a long-term basis and everyone was doing something important
However, these features were also the weaknesses of the company. Underperformers had to be held accountable for their inefficiency, but because of the family like and tight-knit relationships, there was no accountancy and control. (Thomas, Groysberg 4).
The other problem was that the individual performance of the personnel were not linked to the business strategies, thus leading to inability to adapt to changes in market and globalization (Thomas, Groysberg 2-5).
How was HR aligned with business objectives? (135 words)
The problem before changes had to be introduced were that business goals and strategies were not connected with the individual objectives of personnel. Performance reviews were conducted on employees; anniversary dates instead of making it in the beginning of the company’s fiscal year, when the annual budgets and strategies were developed. The promotion scheme was not a result of overall performance of an employee, but a mechanical process, meaning that person was not incentivized to work more effectively to get a promotion. The salary ratings were based not on performance, but a midpoint for all individuals at certain job level. There were no accurate performance evaluations, thus as long as the evaluation were mechanical it was hard for general managers to terminate inefficient employees, because on there were not valid reasons for it. In addition, employees were asked about their career visions and plans, but no body ever developed a career plan on implementation of these plans. Thus, the whole HR system seemed to be ineffective and subordinated from the business strategy (Thomas, Groysberg 2-5).
I agree with Zuckerberg that good business strategy and effective personnel implementing this business strategy are the essential elements for the success of the company. The majority of the leading corporations now keep stating that the core value of them are human resources who are able to perform their duties professionally and in the best interests of the firm.
Сcompanies invest huge amounts of money and resources in the development of staff and their support. Moreover, looking at the root of this issue, it becomes clear that even a business strategy is created and implemented by talented professionals who are capable of taking risky and interesting decisions, thus, leading the company to great success. Hence, it is always about people who are the best in the area of a certain specialization and the role of them should not be underestimated.
Works cited
Patrick M. Wright. “Human Resource Strategy. Adapting to the age of globalization” The SHRM Foundation’s Guidelines Series. Print.
Thomas, David A. and Groysberg. Boris. Sonoco Products Company (A): Building a World-Class HR Organization (Abridged). March 11, 2010, Harvard Business School.
