The back office came first
The change programme was initially called ‘Unifying the Back Office’ (UBO). The term ‘back office’ meant any activity not engaged in direct services to the end customer. It was perhaps a natural starting point in the drive to reduce costs. Customers of back-office services were largely internal with service quality perhaps less of an issue than for end-customer facing front-office services. Unifying the back office referred to teams adopting a standard set of service levels and minimising costs as far as possible without putting those service levels too much at risk. This could not be performed on the basis of anecdote or hearsay. Given that jobs could be at stake proposals to reduce cost needed to be backed up with evidence, confirming in particular calculations for the costs to be saved and for the potential impact upon services.
With data as evidence
Data provided the evidence. It identified the key activities within each team, the time they typically took, and the volume of demand for each. And it yielded the following insights: Each team (e.g. Finance, HR, IT) performed activities that fell broadly into four camps: Value development: Any service that helps the business to grow; Transactional: The essential services to the rest of the business (and possibly the end customer); Discretionary: Choices such as team meetings, reconciliations and checks; Failure driven: Essential distractions such as rework and chasing missing data. Figure 1 shows the typical staff cost proportions for most Back Office Teams.
For the ‘Transactional’ & ‘Discretionary’ services, each was tested under the following question: “What reduction in service level can the business sustain?” Most services could be reduced to some degree. Figure 2 shows the result for the HR Recruitment Service. For the ‘Value Development’ services, each was also tested, but for its potential to build value: “What should we do more of to lift value in the business?” Finally, for the ‘Failure Driven’ activities, the largest were singled out for investigation. Examples included some of the work of the IT helpdesk, HR efforts to keep staff records up-to-date, Finance’s efforts to account for and pay supplier invoices. The total cost of failure activities equated to perhaps 25% of back office budgets. For most, improvement depended upon investment (in better systems in particular).
One further insight was that, over time, several back office services had also become embedded within Front Office teams. Figure 3 provides some examples. This meant that more resource was needed for each service than would be the case if it was delivered from just one location within the business. For example, if all governance related activity was consolidated back into the Centre, £0.5M in pay costs could potentially be saved.
The front office soon followed
The approach yielded results, so it made sense to extend it to all parts of the business, and to widen the scope of the analysis involved. For example, when front-office activity analysis was combined with elements of transactional data, it became clear that 15% of properties placed a disproportionately high load upon the shoulders of a large number of people. Figure 4 lists some of the teams involved. This disproportionate level of effort for relatively few properties made it that little bit harder to maintain service levels for the remainder. A raft of proposals for change soon followed, for example: Accelerating the disposal (if appropriate) of those properties demanding the most time and driving the highest repairs costs; Changing processes to remove the need for Neighbourhood Teams to become embroiled in activities such as fielding repairs queries during neighbourhood surgeries. Capping the annual number of non-emergency repairs performed to those properties where the repairs effort was greatest; Taking a more aggressive approach to recovering payment from residents where the damage was the resident’s fault.
Evidence to drive change
Thanks to the evidence collected, all the proposals for both back and front-office areas stood up to scrutiny. Initially, however, they had limited impact. It was a reminder that, no matter the quality of analysis and research performed, a cost reduction initiative is unlikely to be effective unless it is driven from the top. It was only when the Board recommended that a major effort be made to bring costs down did things start to happen. As a result a report was written on each of 21 different areas of the business – front and back-office – with each report authored by either a member of the Executive Team or by a Head of Department. Each recommended service reductions where the business could bear it, the consolidation of activities back to the corporate centre, and enhancements to those activities that could help to grow the business. The outcome was a potential savings total worth £6M in the short to medium term, significantly more over the longer term. Results from the activity analysis were cited as evidence in 18 of the 21 reports.
If you would like to know more
We at Develin have performed similar exercises as part of cost management programmes across many different sectors. If we can help through direct support, or training, or a combination of the two, please don’t hesitate to give us a call.