ISS & Nordea: Facility Management in the Nordic Region
(12 pages of text)
Nordea Bank had emerged as the largest financial group in the Nordic region. As part of its consolidated approach, Nordea’s top management had made the strategic decision to outsource a number of the company’s peripheral activities, such as catering, security, and cleaning, in order to focus on the core business of banking. In Denmark, Finland, and Sweden, some services had been outsourced to one of the leaders in the facility management (FM) market, the global service provider ISS. The relationship between Nordea and ISS on the delivery of facility services had a long history, but a new contract was successfully concluded by the end of 2010. Consequently, ISS was chosen as Nordea’s FM partner and would continually be providing Nordea with a scope of supportive services across 20 locations in the Nordic region. From 2010 and onwards, a significant switch was made to an output-based focus in the contract, where it was the quality of the delivered services that was specified rather than how to achieve this level of quality, i.e. the input. The change to an output-based contract was seen as a new beginning of a relationship that required significant changes on both sides in terms of mentality, organization, governance structures, and adjustments of expectations. Both the view of the customer (Nordea) and the supplier (ISS) are presented and contrasted in the case.
The case examines the financial, organizational, and managerial challenges met by an international company outsourcing peripheral activities to a global facility service provider. Many of the tensions related to the collaboration and the different aims of the two companies are illustrated in the case, as is the mutual learning and building of trust in the relationship.
The case covers the strategic issue of how a financial institution can collaborate successfully with a facility service provider through outsourcing — including the question of how to design and enforce a contract. Thus, various strategies related to partnering, outsourcing, and contracting can easily be drawn into perspective. The most relevant teaching objectives are related to outsourcing contracts and contract governance:
Outsourcing contracts: The case details the process of contracting and outsourcing. It presents the view of both the client (Nordea) and the vendor/provider (ISS) in this process. The case can form the backbone for a discussion of potential conflicts and tensions when outsourcing to an independent supplier, but also how these problems might be mitigated through the building of trust and proper governance.
Contract governance: The case can also be used to evaluate the various risks and advantages connected to different governance structures. Focus is best laid on strategic partnership or governance from a principal/agent perspective, as these can be exemplified by the case. Furthermore, governance in a corporate strategy perspective can be examined.
The case is suitable in both undergraduate and graduate courses in corporate strategy (including outsourcing), management, and international business studies.
Finance and Insurance
Nordic countries, Large, 2011
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