Is your back office working as efficiently as it could?
This week I take a look at some of the common symptoms of back office inefficiency issues and offer a simple strategy to overcome it.
The topic of back office efficiency has been in my sights of late; it always seems to be an issue when we go into new consulting jobs. I’d be hard-pressed to think of one firm that has had their back office performing in a super-slick manner before we started working with them and sadly, most firms have no idea how many issues an inefficient back office creates.
Lack of back office efficiency usually shows up as one or more of the following symptoms:
Profit Margins Less Than 20%
By that I mean real profits, calculated after owners and salespeople are paid proper market remuneration.
High Head Count
Meaning, the number of bodies in the business can no longer be justified against the current level of turnover. Often this can be due to unplanned growth, where the business structure is thrown out of kilter as more people are added without restructuring to realign roles and responsibilities.
Poor Adviser Productivity
As a general rule, acceptable productivity sees each adviser in a firm managing about £200k pa in revenue. Good productivity is more like £300k – £400k and excellent productivity is in the £500k – £600k range. A well organised back office provides leverage for your advisers’ efforts and allows them to manage far higher levels of annual revenue. If your advisers are managing less than £200k pa in revenue, you need to consider how well your back office procedures are supporting them.
Lack Of Role Clarity
There is often confusion as to the types of roles which should exist to generate optimal performance. Another issue is the mismatch between the skillset of existing team members and what is required to move the business forward. Addressing that mismatch may require retraining or personal development for existing team members, or in some instances, a wholesale change of the personnel.
Everyone Is Really Busy
Everyone is really busy with almost no breathing space. An overworked team is a definite sign that your back office isn’t working as efficiently as it should.
There are two areas to consider and it’s important that they be considered in this order:
What are clients really expecting from you?
The answer to this question usually requires an external perspective. The reality is that you can be too close to the issue to look at it objectively. If you’ve been delivering a certain level of service via your ongoing review programme for a while, it’s unlikely you’ll be able to clearly see the ‘over-engineering’ contained in it. When you strip it all back to tin tacks, there’s not a great deal you need to do at annual review time in order to address the two key issues for clients:
Is everything going to be alright?
What have you done for me lately?
Strip out everything that doesn’t assist you in addressing these two key issues. I’ve seen firms preparing quarterly and sometimes even monthly reporting for clients. This is lunacy. By dealing with the issue of ‘what’ you need to do for clients, you can eliminate a decent percentage of work that may have evolved over time as your service developed. The main focus in this stage of reviewing your back office efficiency is to ensure you’re only doing the tasks that are absolutely necessary in order to satisfy your clients’ two key issues. Dispense with everything else and get it out of your process. If you’re unable to find at least a few ways to streamline your ongoing service, you’re not being objective enough. Every business has tasks which can be eliminated or modified to increase efficiency. As I said, if you can’t identify them yourself, bring in an external person to review them for you.
How can you do what remains most efficiently?
Once you’ve stripped out anything unnecessary from your practice, it’s time to work on ensuring that what remains to be done is done as efficiently as possible. Re-map your process and look at more productive uses of your technology, so you can reduce the timescale on service delivery even further. Ironically, in the majority of businesses, they’ve tried to do the opposite. That is, they’ve worked on efficiency issues first, not realising that performing a useless task efficiently is still a waste of time and a huge cost to the business.
Ensuring your back office works efficiently can drive spectacular gains in productivity and profitability for your business.
Consider the two areas I’ve outlined in relation to your business and if you still feel you’re unable to see the wood for the trees, employ the assistance of an outside eye to help streamline your back office.
By Brett Davidson