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© 2024 N. Dean Meyer and Associates Inc.
Excerpt from www.NDMA.COM, © 2024 N. Dean Meyer and Associates Inc.

Case Study: Building a High-performance IS Team at Sonoco Products Company

by Bernie Campbell, VP, Information Systems, Sonoco Products Company

My wife tells me that I have a bit of a death wish. She observes that I'm never quite so happy as when everything around me is falling apart. I seem to be drawn to hopeless causes.

In the mid 1980's, I was working for a company whose annual revenues dropped from $3 billion to $1 billion in about five years. During that same period, the corporate IS staff dropped from 130 people to 7 people. The company filed for protection under Chapter 11, and several corporate officers were under indictment for malfeasance. As you can imagine, I was in my element. There was a crisis every day. I didn't know from one week to the next whether I would be employed, or for that matter whether the company would continue to exist.

My Puritan upbringing warned me that it was possible to have too much of a good thing. Afraid that I was enjoying myself too much, in August, 1988, I moved to Sonoco Products -- a $1.7 billion packaging company headquartered in Hartsville, South Carolina. Sonoco has about 280 manufacturing facilities around the world, and during the 1980s ranked among the top 40 companies in overall return on shareholders' investments. Our mission is to be a leader in packaging solutions, recognized worldwide for superior quality, organizational effectiveness, and high-performance results. Integrity and commitment to excellence are hallmarks of our culture.

Welcome to Sonoco

Ethics, integrity, effectiveness, quality -- it sounds like a recipe for success. Given my background, these were strange and foreign concepts to me. But I was determined to make the best of the situation, in spite of the fact that things seemed to be going so well.

As it turned out, all was not as it seemed. Somewhere in the 1980's, Sonoco became somewhat complacent. We lost our edge in technology and innovation. This was nowhere more apparent than in the way we failed to utilize information technology.

Sonoco's attitude toward information technology in the 1980's was "less is better" and "far less is better still." In 1987, Sonoco had only one IBM 4341 midrange processor with about 30 terminals to serve a $1 billion corporation. Obviously, very little had been invested in information technology.

Sonoco's senior managers realized that the IS investment was not commensurate with the demands of that period in our history. So they sent three executive vice presidents to the halls of the sacred River Charles to meditate and consult with information technology gurus.

After listening to Sonoco's concerns, the gurus agreed that the company needed to exploit information technology, but warned that it would not be easy. Sonoco would have to spend a great deal of money and bring in high-priced talent. In fact, they told these executives that they could not spend money fast enough, and that the longer they waited, the more they would regret it. Then the gurus went back to the river to consult with other pilgrims seeking truth, leaving our executives to ponder their wisdom.

Well, the executives took this advice to heart. They recruited a vice president of Information Services, the first in Sonoco's history. He in turn brought in some excellent talent. (I can attest to that, because he brought me in.) In terms of following the gurus' advice, we were extremely successful. In a matter of just two years, we succeeded in increasing our IS spending by 30 percent. We also received many compliments from our users about how much better things were.

Things were going too well for my tastes, until the summer of 1989 when we began the 1990 budget cycle. Management was shocked that our clients' budgets were going up by 10 percent. When asked why, our loyal clients all pointed to their IS costs. Meanwhile, the VP of IS and several of his lieutenants were asking the finance committee (which is composed of our key clients) for yet another 16 percent increase.

I remember one of those executives (who not too long before had visited the gurus on the River Charles) saying something lake, "We have now spent so [expletives deleted] much money on information technology, and I'm not at all convinced that we are getting one [more expletives deleted] bit of benefit out of it."

Well, the silence was deafening. Finally, one of the IS people meekly suggested that this may be something that we just have to take on faith.

I remember thinking to myself: This guy doesn't have to take anything on faith -- he runs this place! (Have you ever had a moment when you realized that you were experiencing a significant time, a milestone in your life? This felt like one of those.)

Shortly thereafter, the vice president of IS resigned. The executives asked me what I thought the main problems were. I mentioned three:

1. Morale within the IS department was extremely low because we knew we were going to be scapegoats for everybody else's budget increase, and a lot of our people were questioning whether they were of any real value to the organization.

2. Our clients did not trust us to deliver what we said we were going to deliver when we said we would deliver it. In other words, we were typically over budget and late on our projects.

3. Senior management must think we were either corrupt or inept in the way in which we were managing our spending.

The executives said that I was right: IS had three problems. My reward was that I would get an opportunity to try to solve those problems. They made a point of naming me the director of IS (instead of vice president) to show their displeasure with the department.

After just over a year, I was back in my element; things were a mess.

One great thing about Sonoco is that its culture encourages teamwork and helping one another. This became very clear to me as I assumed my new position. Hardly a day went by without a senior manager sending me an article to help me out. I got one titled, "C1O: Endangered Species." (I appreciated that because I know Sonoco has a commitment to the environment.) Another headline said, "IS in the Balance: Asset or Liability." I was very impressed that these gentlemen would take time out of their busy days to share their insights with me!

I made it a point to talk with key clients. They generally began by saying something like, "I don't know anything about IS and I can't begin to tell you what you should do..." Of course, I would immediately whip out my pencil because I knew that they were about to tell me exactly what I should do!

In the first few months, I found some good news. We were spending well under 1 percent of annual revenues on IS, which may not mean much as a measure of health, but it encouraged our executives to know that it was far less than most companies.

We found more good news when, as a measure of their faith in our abilities, the executives asked us to investigate outsourcing our operations. We invited three vendors to bid, and learned that we would have had to increase spending in the computer center by about $2 million to outsource it. This made the executives feel a little bit better about us, but it still begged the real issue.

Getting to the Root of our Troubles

The question was not how much we were spending, but how much value we were adding with what we spent. If there isn't perceived value coming out of the IS investment, anything is too much.

Delivering business value requires customer focus. A case study illustrates how poorly we were doing at this: Shortly after I arrived, our Tax department discovered a very good PC program which could save them a great deal of time in tax preparation, and could also improve the quality of planning. They projected a triple-digit return on investment.

The rub was that this software was only warranted to run on a "brand X" PC, which didn't happen to be the PC vendor that we were using at that time. The IS department forced the Tax department to stall for six months while they tried to get the vendor to rewrite the software to run on our accepted brand of PC! This, of course, generated a tremendous amount of distrust and ill will between the Tax department and IS. Clearly, we did not have our clients' best interests in mind. Thus, I decided to focus on customer satisfaction.

That was about the time when I met Dean Meyer, president of NDMA Inc., a management consulting firm in Ridgefield, CT. (That may have been another one of those "significant moments.)

I have a lot of respect for Dean, but I found that his theories were not terribly new or startling. By mid-1990, I felt I knew management theory as well as anyone. But like many, I hadn't the foggiest idea of how to translate that theory into measurable results. Dean offered two things:

First, he integrated into a coherent framework a combination of organizational theory, cybernetics, economics, sociology, politics, etc.

Second, along with theory, he offered nuts-and-bolts implementation guides and action plans.

The first thing that we did together was to conduct a (RoadMap) health audit. Dean helped me, my boss, and our vice president of Human Resources to gauge the effectiveness of IS on a wide range of issues.

Then I gave the health audit to my direct reports. They rated themselves even lower than I did! We felt we were doing the best that we could, but we were frustrated knowing that we were not a high- performance team.

I also gave the health audit to selected clients. While they recognized the same strengths and weaknesses as I did, l was surprised that they often rated us higher than I had. l attribute that mainly to the fact that we had trained them not to expect all that much from us!

In my original organizational structure, we had a computer operations group, and a number of systems development groups, each dedicated to a client business unit. Client executives liked the control this gave them, but they also perceived problems with the structure.

Because each client could only afford from two to five programmers and analysts, we could not support a high degree of specialization. One group of just three people was trying to support applications on an IBM mainframe, a DEC VAX, multiple PCs, and a RISC UNIX processor! This limited our quality and range of technologies.

Most programmers were really good with only a couple of tools -- and they applied those few tools to every problem they encountered. There was a great deal of knowledge spread across the groups, but no way to get at it. Thus, there was a natural bias for us to force-fit our clients' problems into our technical skills.

Split into so many small groups, there was little collaboration among our technical staff. We could not develop an overall architecture with each group working independently.

In addition to problems in our structure, the health audit revealed problems in what Dean calls our "internal economy." Nearly 30 percent of the total IS budget was allocated to our divisions on a basis other than direct usage. Our clients (rightfully) felt that they had little control over their IS spending. Meanwhile, since the marginal cost for them was nearly zero, almost any use of IS resources could be justified. Therefore, the backlog grew to disconcerting proportions.

The Decision to Restructure

As a result of the RoadMap workshop, we identified organizational restructuring as one of the first items to be addressed.

My biggest hurdle was the issue of decentralization. Client executives were afraid of losing control over "their" IS resources (staff reporting to me but dedicated to them); and they were initially reluctant to permit a change that was perceived as increasing our centralization. I spent a lot of time talking to them. l told them that we wanted to become more customer focused, and that they would have access to more and better resources than if they had a dedicated programmer working for them. Ultimately, they gave us a chance to prove that we were right.

The process of restructuring took months. It involved me, my managers, Dean, and our Human Resources vice president. Periodically we went off-site for a series of workshops, and between meetings worked on "homework" assignments which Dean gave us (in addition to maintaining our normal workload).

To encourage an openness to change, we decided that no one would lose his or her job, and no one would take a cut in pay, as a result of the restructuring. After the restructuring, we agreed to give people six months to demonstrate that they could perform in the new organization.

The Process of Restructuring

In the first workshop, Dean taught us the theory of Structural Cybernetics. The group then analyzed the old organization in terms of the model. We talked about its problems: conflicts of interest, lack of requisite variety, inability to specialize, poor teamwork, etc. By the second day of this retreat, we had a commitment to change.

At the end of that second day of the workshop, we announced that everybody in the room was out of a job. This was a (somewhat dramatic) way of telling people that they no longer had turf to protect.

When we left the conference center that day, we went back to our old jobs and kept the shop running; but as we discussed our future structure, everyone was asked to think about what would be best for the company rather than best for them and their people. This may sound idealistic, but for the most part it worked.

In the next workshop, we brainstormed alternative structures, and shared our ideas about the ideal organization for Sonoco. Dean applied the theory to help us see the pros and cons of the various alternatives. With some prodding and nudging from me, the group arrived at a consensus on our new organizational structure -- a set of "empty boxes" representing jobs without associated names.

I ended up with 13 direct reports: a computing and a telecommunications service bureau, a people-based service provider (customer support), a base engineering group (infrastructure engineering), four applications engineering groups, an architect, and four strategic consultants (account representatives). This may sound like a big span of control. Frankly, I didn't want to increase my costs by putting in director levels under me.

The strategic consultancy is a new function for us. Each consultant is assigned to specific business units, so there is continuity in their working with the same client executives from one month to the next. They are not associated with any technology solution, but specialize in their clients' business and the methods of consulting.

The architect is also new to us. His job is to facilitate consensus on standards and guidelines, something we did before on a somewhat haphazard basis.

We made changes in the familiar functions as well. The engineers are now clearly focused on their specialties, rather than structured by client and expected to serve as consultants as well as technical experts.

The service providers were also better focused, concentrating on efficient operations rather than a mix of operations and technical innovation.

In the next few weeks, I met individually with each of the managers to do career counseling and help them decide which positions they were most interested in.

The next few steps were probably the most important part of the process. Once people had been assigned to positions, each developed a "catalog" for his or her group. Then, in a three-day workshop, we went over every product in every catalog. We examined all of the customer-supplier relationships within the IS function. No group could sell a product unless its customer agreed to buy it. This resulted in a book of about 30 pages where we cover all possible products and relationships.

This was the most grueling part of the process. At times we all felt, "Darn it; it's so obvious that we don't need to clarify the term." But Dean forced us to be very clear and precise in our definitions, and it has paid off. Writing and refining catalogs encouraged our people to think more like entrepreneurs, to take responsibility for their pieces of the business, and to understand their interdependencies and the need for teamwork.

Then, we did what Dean calls "walk-throughs" to test our understanding of the way the new organization would work.

It was only at this point that we had a clear enough understanding of the new structure to actually reassign the remaining 60 people in the organization. Of those 60 people, roughly 45 continued to work for the same manager that they had in the past, and most continued to work on the same projects.

After that, we planned the announcement of the new organization to the rest of the IS group and the company.

Throughout this process, we maintained some degree of confidentiality. We wanted to be as open as possible. I told people where we were in the process. But we didn't discuss the actual structure until we could fully explain it, because we felt we would just confuse and scare people.

We announced the new structure in January, 1991, in a half-day educational session with my entire staff. In parallel, we notified people throughout the company, and met individually with key clients.

Right after the announcement, the managers then spent a lot of time with their staffs explaining the catalogs and the structure.

We've been very careful in the migration process not to disrupt ongoing projects. Everyone continued to work on projects until they were transferred to the right place in the new structure. Some of the groups were able to make the migration immediately. In a few cases, the migration continued for several months after the announcement.

Participation by the managers in this process took a lot of effort over a long period of time. I know I could have restructured the organization without participation from anybody. But at Sonoco, especially with our difficult history, I felt that the managers should have a say. It gave me an opportunity to sell the concept, and helped them understand why we were changing.

I want to note that I got a lot of support from Human Resources throughout this process. The VP of HR not only helped to facilitate our meetings, but helped us adjust compensation systems to avoid empire building and reward both specialists and generalists. I'm grateful for his support.

The Transition Process

I knew the first year would not be easy. Our problems primarily came from ourselves.

I overestimated how comfortable my direct reports felt with the new structure. While we "understood" it as a group, when each of us began functioning in our new positions, the level of shared understanding broke down. Some managers were not able to explain the new structure to their groups. As a result, many of the programmers and analysts in the applications engineering groups were confused by the structure, or thought that it was irrelevant to their "real" jobs.

Some groups understood the new catalogs, but misused them to shift unpleasant tasks to other groups. Before the restructuring, some people had used the excuse, "That's not my job." Now they said, "That's not in my catalog."

In retrospect, I should have spent more time working with each group and its manager. I continue to spend a lot of time coaching people in our new way of doing business.

Over the past year, I have identified a subset of the managers who can lead others within the spirit of the new structure and who have learned to use catalogs and contracts for products and services effectively. I have reduced the number of my direct reports from 13 to nine.

Our next challenge is to upgrade the skills of our engineers. One of the reasons we do not collaborate as much as we should is a lack of trust in others' abilities to deliver quality products on time. Everyone wants to be effective, but people may lack critical tools and training. Organizational structure cannot substitute for technical expertise; but it brought out the needs and clarified specific training requirements by function.

The Results So Far

In spite of the challenges, we have made tremendous progress toward becoming a high-performance IS team. Our catalogs have proven especially important. We live by them. They encourage us to collaborate and work better in teams.

Catalogs also provided us with a foundation for future growth. They identify our current products, and provided a framework that tells us where future products will fit. Even now, from time to time we find something that we left out, and we add another product or service to the catalogs. In other cases, we delete products that for some reason are no longer applicable. Catalogs will always grow and change.

Conveniently, all of this fits nicely with our Corporate Total Quality initiative. Working with Dean gave us a head start in recognizing the importance of customer satisfaction. More, it provided us with tools to move our organization toward improving our products and services.

It took the better part of 1991 to phase out some of the old practices. Even now, it might be too soon to call the process a success. But I think there are encouraging signs. Let me give you a few examples.

One of our strategic consultants had worked with our vice president of Human Resources before the restructuring to install a combined payroll/HR package. The payroll module was recognized as a success by all concerned. But the VP of HR felt that he had never been asked how he would use the new HR system or even if it was particularly strategic.

After the restructuring, the strategic consultant learned some of the business-driven techniques for needs assessment that Dean's organization teaches. That client now has a totally different perception of IS. Recently, he said, "Gee, I can't believe how much so-and-so has changed in the last year! He is much more effective in talking with me. In fact, I want to talk to him more regularly."

I have another strategic consultant who does a lot of international work, and spends about half of his time in France. Until six months ago, Sonoco's international businesses had no interest in paying for services from corporate IS. If I sent somebody to Europe, I picked up the tab. He changed that, and his costs to date are well over $100,000. But our French subsidiary realizes his value and now say that if he can spare more time, they would gladly pay for it.

I have a systems administrator -- an excellent person -- who shied away from Unix in the past because he saw it as competition. Now he is working with Engineering on a CAD installation on a Unix workstation. Under the new structure, he perceives that the engineers are his customers and his job is to satisfy them. As a result, the engineers are vying for his time, and he is open to other lines of business that are within his domain.

One final bit of evidence: The new structure separated computer operations from systems software, associating the systems software specialists with other engineers. Both groups were initially concerned about this separation. But the catalogs clearly show that computer operations is a customer, and systems engineers are their supplier.

Shortly after the restructuring, this was put to the test. We have had two electronic mail systems at Sonoco -- one on IBM, the other on Digital, and never the two shall speak! In fact, in the past, our IBM and Digital engineering teams barely spoke to each other! Our strategic consultants uncovered an opportunity to deliver business value by integrating those two mail systems. In the old structure, computing services would have resisted integration because it would have added to their overhead costs. In spite of this, the techies would have gone off and researched it for a year, and probably come up with some solution that would be too expensive to implement.

But the strategic consultants explained the opportunity in terms of the revenues that integration would generate for the computer services group. This market research gave the computer services manager an incentive to "buy" an integration of his systems from the engineers in order to better serve his customers.

Putting things in terms of customers and suppliers has been very valuable for us. We have always tried to be focused on our internal clients; we want to do a good job for them. The catalogs have reinforced this, and gotten around a lot of politics. No paying customer is unimportant.

But the IT organization had been its own worst enemy. In the past, we had not perceived other internal IS groups as customers and suppliers... We perceived ourselves as pains in the neck. The catalogs gave us the right language for real teamwork. That's one of greatest values that we have gotten out of the restructuring.

While restructuring did not solve all of our problems, it has provided us with a foundation from which to deal with other business issues. Now, we are well-positioned to participate in, and perhaps lead, Sonoco's commitment to total quality management.

(The editors would add one more piece of evidence of Mr. Campbell's success. A few months after the new structure was announced, he was promoted to vice president. Sonoco's executives had recognized the transformation of IS from a problematic technical utility to a responsive, strategic business partner.)


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