Strategies to Improve Back-Office Efficiency

Companies often struggle with back-office productivity challenges. Figuring out the right way to group tasks and enhance customer value can be complicated. Some managers opt to have employees perform several transactions while others choose a specialization strategy. Understanding which strategy yields the best results can help boost back-office efficiency and the company’s bottom line.

Back-Office Inefficiencies

Back office staff faces a variety of struggles when improving operational efficiency. Customers need change, new products are developed and other situations occur which interferes with production cycles. Companies involved in finance, health care, insurance and other service organizations appear to be at highest risk for back-office efficiency challenges.

Seeking to solve this problem, some companies are investing heavily in training all back office employees to handle numerous types of transactions. This training is expensive, but many companies feel it’s worthwhile, providing more flexibility among employees. For example, when times get really busy, employees were cross-trained to handle back office functions that needed the most help. This approach however isn’t always successful. Despite the large investment, efficiency often continues to decline.

Challenges with Production

When executives studied why efficiency was declining, they found several problems. Employees with dozens of tasks to complete, rather then just a few, experienced difficultly meeting customer’s service expectations. It also made it difficult for management to accurately track and measure employee performance.

There were also other problems when front-line employees were generalist instead of specialists in specific tasks. Employees weren’t encountering specific tasks enough to handle them efficiency and correctly.

Executives also found that some employees were manipulating the system. These employees would only choose the easiest tasks, which delayed the more difficult transactions and damaged customer service. Other employees became upset about this practice which negatively affected teamwork. When customers weren’t getting the more complicated problems handled, this created even greater inefficiencies. Employees had more angry customers to deal with which further affected the back-log of work. When this happens, companies spend more money on overtime to catch up which severely affected the bottom line.

Boosting Efficiency

When faced with this problem, executives knew they needed to make changes quickly to boost efficiency. Executives studied all transactions that employees were currently handling. They allocated these transactions into groups, based on level of difficulty. These groups of transactions were distributed to employee “teams” that handled the same types of assignments each day. This made employees more efficient and created specialists in each transaction type. Employee performance was also easier to track and manage with this strategy.

When developing the “groupings” of transactions, executives made sure the tasks were variable enough that employees wouldn’t become bored with their daily tasks. Executives also created a team of “floaters” who assisted teams experiencing higher than normal transaction volume. These employees helped the existing team work though their back-log which prevented burnout and customer service challenges.

According to the McKinsey Quarterly, these solutions helped companies meet service deadlines and reduce frontline staff and management by 25 percent. They also decreased overtime costs by 90 percent.

The Results

According to the McKinsey Quarterly, this strategy to manage back-office efficiency is similar to power companies using “peaker” plants to handle increases in the demand for energy. Managers creating teams of floaters to handle overflow can work the same way. It will make teams more flexible without all of the productivity “waste.” To make these plans work, the company must spend adequate time understanding how their customer demand works. This will help the company design a more efficient plan for assigning and handling overflow work.

A company must select the right tasks for each specific team. For example, executives might discover if a team takes on assignments A, B and C, they’ll be more productive then handling A and D. To accomplish this, senior managers must look at the context of the assignments. Assignments can be assigned based on the customer segment, level of difficulty, regulation issues or other important factors within your company.

There should also be measures in place that encourage career paths for front-line employees to boost job satisfaction. Those who perform well should have opportunities for more complex team assignments and opportunities for advancement. Having an employee assigned to a very specific task also decreases the learning curve for new employees. An employee can train much quicker on five transactions then thirty transactions.

Evaluating front-line activities and creating ways to streamline these tasks can boost your company’s productivity. It also improves employee moral and gives managers better ways to measure front-line performance. Creating these strategies in your own company can boost your bottom line and increase employee satisfaction.

Resources

Dan Devroye and Andy Eichfeld. “Taming Demand Variability in Back-Office Services.” The McKinsey Quarterly, September 2009.


--------------------------------------------------------------------------------

Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy”, “Selling Your Business the Hard Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition” and “Selling Your Business The Practical Guide to Getting It Done Right”. For more information, contact him at 770.399.9512 or by email.