Harvard Case - Transforming a Human Resource Function through Shared Services and Joint-Venture Outsourcing: The BAE Systems-Xchanging Enterprise Partnership 2001-2012
"Transforming a Human Resource Function through Shared Services and Joint-Venture Outsourcing: The BAE Systems-Xchanging Enterprise Partnership 2001-2012" Harvard business case study is written by Leslie Willcocks, David F. Feeny, Mary Lacity. It deals with the challenges in the field of Information Technology. The case study is 14 page(s) long and it was first published on : Nov 20, 2012
At Fern Fort University, we recommend that BAE Systems continue to leverage the shared services model and joint-venture outsourcing with Xchanging, while actively seeking opportunities for further digital transformation and innovation within the HR function. This strategy should prioritize the use of technology and analytics to streamline processes, enhance employee experience, and achieve cost optimization.
2. Background
BAE Systems, a global defense, aerospace, and security company, faced challenges in managing its HR function across diverse locations and business units. The company sought to improve efficiency, reduce costs, and enhance employee service. In 2001, BAE Systems partnered with Xchanging, a business process outsourcing (BPO) provider, to establish a joint venture called Shared Services Group (SSG). SSG centralized HR processes, including payroll, benefits administration, and recruitment, for BAE Systems' UK operations. This partnership proved successful, leading to further expansion of the shared services model and the adoption of joint-venture outsourcing for other HR functions.
The case study focuses on the evolution of this partnership from 2001 to 2012, highlighting the challenges and successes of implementing a shared services model and leveraging joint-venture outsourcing for HR functions. The main protagonists are BAE Systems, Xchanging, and the SSG team responsible for managing the shared services operations.
3. Analysis of the Case Study
This case study can be analyzed through the lens of operations strategy, organizational change, and digital transformation.
Operations Strategy: BAE Systems effectively implemented a shared services model to centralize HR processes and achieve economies of scale. This strategy enabled the company to:
- Reduce costs: By standardizing processes and leveraging Xchanging's expertise, BAE Systems achieved significant cost savings in HR operations.
- Improve efficiency: Centralization and automation of processes led to faster processing times and reduced errors.
- Enhance service quality: By focusing on core competencies and outsourcing non-core activities, BAE Systems was able to improve the quality of HR services for employees.
Organizational Change: The implementation of shared services and joint-venture outsourcing required significant organizational change within BAE Systems. This involved:
- Change management: The company needed to effectively communicate the benefits of the new model and address employee concerns regarding job security and potential disruptions.
- Organizational structure and design: The shift to a shared services model required adjustments to reporting structures and responsibilities.
- Leadership: Strong leadership was crucial to guide the change process and ensure successful implementation.
Digital Transformation: The case study highlights the importance of embracing digital transformation to further enhance the HR function. BAE Systems can leverage technology and analytics to:
- IT management: Modernize IT infrastructure, including cloud computing and enterprise resource planning (ERP) systems, to support HR processes.
- Data analytics: Utilize data analytics to gain insights into employee demographics, performance, and engagement, enabling data-driven decision making.
- Cybersecurity: Implement robust cybersecurity measures to protect sensitive employee data.
- Artificial intelligence in business: Explore AI and machine learning applications to automate tasks, personalize employee experiences, and improve recruitment processes.
- Mobile technology adoption: Develop mobile applications to provide employees with convenient access to HR services and information.
4. Recommendations
- Continue to leverage the shared services model and joint-venture outsourcing with Xchanging. This partnership has proven successful in achieving cost savings, improving efficiency, and enhancing service quality.
- Invest in digital transformation initiatives. BAE Systems should prioritize investments in technology and analytics to further enhance the HR function. This includes:
- Modernizing IT infrastructure: Migrating to cloud-based solutions and implementing an integrated ERP system can streamline processes and improve data management.
- Implementing data analytics: Leverage data analytics to gain insights into employee performance, engagement, and retention, enabling data-driven decision making.
- Exploring AI and machine learning applications: Automate tasks, personalize employee experiences, and improve recruitment processes through AI and machine learning.
- Developing mobile applications: Provide employees with convenient access to HR services and information through mobile applications.
- Focus on talent management and employee engagement. The company should prioritize initiatives that foster employee engagement, development, and retention. This includes:
- Developing a robust talent management strategy: Implement performance management systems, career development programs, and succession planning initiatives.
- Investing in employee training and development: Provide employees with opportunities for professional growth and skill enhancement.
- Promoting a positive work environment: Foster a culture of collaboration, innovation, and employee well-being.
- Continuously evaluate and improve the shared services model. BAE Systems should regularly assess the performance of the shared services model and identify areas for improvement. This includes:
- Measuring key performance indicators (KPIs): Track metrics such as cost savings, efficiency gains, and employee satisfaction.
- Conducting regular reviews: Evaluate the effectiveness of processes and identify opportunities for optimization.
- Seeking feedback from employees and stakeholders: Gather input from employees and stakeholders to identify areas for improvement.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: BAE Systems' core competency lies in defense, aerospace, and security. By outsourcing non-core HR functions, the company can focus on its core business and achieve strategic alignment.
- External customers and internal clients: The recommendations prioritize improving the employee experience and providing efficient HR services to internal clients.
- Competitors: BAE Systems needs to remain competitive in attracting and retaining top talent. Investing in digital transformation and talent management initiatives can help the company stay ahead of the curve.
- Attractiveness ' quantitative measures: The recommendations are expected to yield significant cost savings, efficiency gains, and improved employee satisfaction.
- Assumptions: These recommendations assume that BAE Systems has the resources and commitment to invest in digital transformation and talent management initiatives.
6. Conclusion
BAE Systems' partnership with Xchanging has been a success story in leveraging shared services and joint-venture outsourcing to transform the HR function. By embracing digital transformation and focusing on talent management, BAE Systems can further enhance the effectiveness and efficiency of its HR operations, improve employee experience, and gain a competitive advantage in the global talent market.
7. Discussion
Other alternatives not selected include:
- Complete outsourcing of HR functions: While this option could offer significant cost savings, it could also lead to loss of control over HR processes and potentially impact employee morale.
- Maintaining the status quo: This option would not address the challenges faced by BAE Systems in managing its HR function across diverse locations and business units.
Key assumptions of the recommendations include:
- BAE Systems has the resources and commitment to invest in digital transformation and talent management initiatives.
- Xchanging remains a reliable and capable partner for joint-venture outsourcing.
- The shared services model continues to be effective in achieving cost savings and improving efficiency.
8. Next Steps
- Develop a detailed digital transformation roadmap: Identify specific technology investments, implementation timelines, and resource allocation.
- Establish a dedicated team to oversee the implementation of digital transformation initiatives.
- Conduct pilot projects to test new technologies and processes.
- Communicate the benefits of digital transformation to employees and stakeholders.
- Continuously monitor and evaluate the effectiveness of digital transformation initiatives.
By taking these steps, BAE Systems can ensure that its HR function remains aligned with its strategic goals and continues to support the company's growth and success.
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Case Description
The call for new types of collaboration in outsourcing saw the development of the enterprise partnership model by Xchanging in 2001. The case looks at the history of one such partnership with BAE Systems. History shows why the model was attractive to BAE Systems against several other models. In Part 1 of the case, we look at and ask students to assess the in-house, fee-for-service outsourcing and management consultancy options for transforming HR through shared services. In Part 2, the case details the distinctive features of a joint-venture model that was eventually adopted and of the supplier competencies needed. We follow the relationship through the phases of preparation, realignment, streamlining, and continuous improvement, initially up to 2003. Students are asked to assess the model, progress, and what the future holds. In the third part of the case, we follow subsequent developments, including the change in the nature of outsourcing with BAE Systems from March 2007, the launch of Xchanging on the stock market in April 2007, its continued expansion, and its troubled history from 2010 to 2012. The case gives insight into the conduct of a distinctly different form of outsourcing, into how the client and the supplier deal with outsourcing over a number of years, and how a supplier navigates through a highly dynamic 21st century global environment while trying to expand its market services and revenue growth.
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