Framing Back Office initiatives

November 22, 2017

Every time I hear the phrase “back office”, the image of the Office Space stapler guy comes to mind, which is not great brand association. Projects which seek to eliminate back office inefficiencies are low on the radar of executives because they don’t carry the cachet of competing projects. Hey, would you rather roll out this cool new iPhone app or reduce mortgage approval duration by two days? One certainly sounds like it’s more likely to get you a promotion.

Back office projects don’t get the time of day that customer-facing ones do even though there is customer-facing impact. The CBAs for back office projects are hard to sell because they seemingly don’t pay off enough returns. Three of the main reasons are:

  1. There are enough surrounding manual and laborious processes in place that automating one of them will not shorten the overall value stream, thus making the project look like local optimization.
  2. Revenue streams are rarely enhanced and the focus is on efficiency and cost-cutting, with projects showing high pay-back periods as value gets delivered towards the end (e.g., FTE reduction).
  3. There is a stability and predictability in back-offices that is seen as risky to change, especially when compared with the opportunity cost and risk profiles of other initiatives.

How do we position back office projects so that they are taken seriously? Easy answer is to picture yourself 20 years from now and ask what the level of automation and efficiency needs to be in large organizations as startups and other disruptors apply cost and customer service pressures on organizations with stable revenue streams.

Customer mobility across competitors is getting more and more fluid with barriers to exit being reduced through softening legislation, reduction in transition friction, and the ever-increasing importance of quality experiences. In this world, inefficiencies will be teased out whether we like it or not. The question then becomes whether we want to tease out the inefficiencies in our firm, or whether we are the inefficient firm that gets teased out?

There are some steps we can take to “sell” back office initiatives to the powers that be. I’ve compiled three and there are many more: 1) avoiding discrete initiatives, 2) emphasizing the value of data, and 3) employee retention.

Avoid discrete initiatives

Discrete projects which aim to solve a particular problem do not resonate with management as they attempt to resolve only one issue without at least addressing others, leaving you with a feeling that you’re attacking 2% of the problem while ignoring the rest. Contextualizing problems within the big picture helps frame the work so a series of projects can be identified which deliver value through iterations. Yes, part of the benefits will still be deferred till the end until the projects are completed, but there’s no shame in that.

I’ve always had a soft spot for Bain’s Digital Radar as a tool for framing initiatives, and that can easily be adopted to back office management and planning. The link above frames initiatives through the lens of digital transformations, which is perfectly applicable to back offices as much of the work there is around either process streamlining using digitization or automation.

Emphasize the value of data

CBAs tend to focus on cost efficiencies being gained with primary KPIs including number of FTEs, processing times, etc. These KPIs equate more easily to financial benefits as there is a direct mapping between resource and cost, i.e., optimize the resource and save on the cost. This is a good starting point, but falls well short of how CBAs should be framed when performing benefits accounting for such projects.

The real value is in the structured data that can be collected when digitizing back office processes. The quality and quantity of data that digitization produces in the back office can be mined to reveal insights that are simply not possible through manual processes and archaic tool-sets. What the data collected in the back office says about customer tendencies, internal processes, and revenue opportunities has to be examined. For example, what is the relationship between an HR system processing reference checks faster and potential employees signing on the dotted line? Boring, but useful.

The true value loss from not sanctioning back office projects is in the opportunity cost of not knowing what the data is telling you.

Employee retention

We are rightfully focused on customer experiences as they need to be delightful for many reasons. What about the employees, though? A mortgage broker working on an age-old platform painfully keying in customer details is an experience I’m sure he or she would like to avoid. Or how about the closing processes of a bank teller or cashier? The HR associate who has to filter through resumes using poor search functions? These are poor experiences which over time take toll on employees leading to dissatisfaction.

These experiences can be delightful and firms can view investment in such back office projects as investments in their employees with a view to retaining them because their life is made easier.

What level of impact this has on employee retention is unclear to me, but I do know that seamless experiences are attractive and make you want to come back for more.

Hopefully next time we’re doing fiscal year planning, maybe some of these considerations can creep into our minds as we weigh where to spend our dollars.