Putting the back-office at the forefront of value creation

Back-office operations are often regarded as expenses to manage, processes to automate, or functions to outsource. But they hold one of the keys to driving innovation, value creation and growth. If the back-office isn't sufficiently capable or professionalised, they will erode value. So how can you get your back-office up to speed?

When we asked executives from various sectors to identify areas with significant scope to drive value, the robustness and scalability of the back-office came out alongside customer engagement and finance as the critical areas of priority.

The demands on back-office teams are increasing as businesses face a pressing imperative to transform. A high-performing, agile, and data-powered back-office is critical for digital transformation, the transition to net zero, and the development of future-ready capabilities.

Cost-efficiency also remains critical in the current market conditions, but the central question isn’t how to reduce cost across the board. Instead, it’s how to differentiate between “good” and “bad” costs and directing resources towards areas that promise to deliver the greatest value. This is likely to require a rethink of what areas of your business are primed for growth, which ones are no longer core, and the back-office capabilities needed to support and align with these key decisions.

“A high-performing back-office is critical for digital transformation, the transition to net zero, and the development of future-ready capabilities.”

Bridging skills gaps

The pressure placed on HR teams exemplifies why back-office operations are now critical in realising strategic objectives and driving value creation. Talent is in short supply and the skills needed and markets targeted for growth are changing. Your HR team needs to ensure that you have the right people in the right place at the right time, with the skills required to meet current and future demand.

The current gap in tech skills highlights the stakes. In an interview for PwC’s 26th CEO Survey, Sheridan Ash MBE, Founder and Co-CEO of Tech She Can, points out that “over 80% of jobs advertised in the UK require some digital skills and the lack of available talent is the biggest factor holding back growth and productivity.” In response, “you’ve got to look at short-term and long-term measures,” she says. “Right now organisations should be targeting women with boot camps and apprenticeships, offering to reskill them. Appealing to returners and women coming back from time out of the workforce.”

The new face of finance

Finance teams are also rethinking where and how they can create value. The annual rounds of budgeting and scorekeeping are giving way to more forward-looking and actionable modelling and analysis that would enable your business to plan and pivot at speed. Finance also needs to consolidate and share the data coming in from around the business to support decision-making and the value creation story communicated to investors. This isn’t just costs, revenues and other financial metrics, but also the environmental, social and governance (ESG) performance upon which consumer goodwill and investment increasingly depend.

Tech investment can both free up finance professionals and sharpen their strategic analysis. “Automating the monthly close can cut hours of people’s time that can be redeployed on thinking about the future of the business or delighting customers,” said Steve Hare, CEO of Sage, in an interview for our CEO Survey. Steve also stresses the multidimensional nature of value creation in today’s business environment. “As CEO of a publicly listed company I’m managing four stakeholder groups: customers; colleagues; society and shareholders. They’re all equal and if you don’t treat them equally you won’t sustain long-term value. People talk about trade-offs but I like to say, ‘why can’t this work for all four?’”

Losing out

Are back-office teams equipped to deliver the guidance and support businesses need? In many cases the answer is no, as across-the-board cost-cutting continues and they lose out to front-office operations when competing for investment in talent and technology.

According to our CEO Survey, 40% of UK business leaders believe their company’s tech capabilities lag behind the demands of their strategic objectives. But HR and finance are some way behind sales, marketing and operations in the list of priority areas for investment in tech and talent. Risk, legal and tax are at the back of the queue.

The disparity in investment allocation fails to meet business needs. According to Jerome Auvinet, Chief Information Officer at beauty and home group, Coty, there is a temptation to focus more investment on innovative tech for front-end commercial work (exacerbated by the tendency for front-end teams to have a well-prepared business case for investment), but the reality is that a modest percentage allocation to new technology is enough. “If you allocate 20% or 30% of your tech budget to new, advanced commercial work, that’s a lot of money. Back-end tech is important – it’s like the foundations of your house – and it’s expensive to maintain,” he says.

Even when back-office teams do secure investment the value can be undermined by failure to integrate back-office systems development with front-office modernisation or a preference for solutions that address pain points without assessing what capabilities are needed as businesses change.

Make your investment count

So how can you secure investment in back-office modernisation and make the most of the benefits?

Don’t be afraid to pull the plug

There is a tendency to keep adding systems, processes and capabilities without a clear sense of what is creating value. Some of your existing architecture may be redundant in a digital-first operating model and can therefore be retired without replacing. Similarly, it may actually be better to take a process out and harness the resources elsewhere. A ‘clean sheet’ zero-based budgeting approach will help you to identify what is necessary going forward, what can be switched off and what added or augmented.

Cultivate the right culture

Recognising and enabling the back-office’s key role in value creation will require a cultural leap for many organisations. The starting point is encouraging functional teams to think of themselves as service providers. You can then map the time and money they spend against business priorities and value delivered. If this falls short, you can refocus time and resources. For example, why is a particular report produced – because it always has been or because it adds real value? Could this particular process be better delivered by another function such as procurement rather than finance – invoice approval and monitoring of spending limits, for example?

Lay the systems foundations

As with front-office modernisation, the systems foundation is transition to SaaS/cloud-based capabilities. This would pave the way for swift and flexible upgrades in capabilities without the heavy lifting of major design and build. It would also help to make sure that new front- and back-office systems are interoperable and mutually supporting. If sales systems are being upgraded, for example, tax and finance should be inputting into specifications from the outset so that data feeds and analytics are compatible. Similarly, slow invoicing and refund processes within finance can undo the improvements in experience gained from fast and intuitive order and delivery.

Make the case for investment

When making the investment case, get on the front foot by identifying the critical strategic goals that require a step-up in back-office capabilities to deliver and then support this with quantified projections of the return on investment.

Be pragmatic. As Mark Trevorrow, Chief Information and Digital Officer of Highbourne Group, City Plumbing, highlights, you don’t have to jettison all your legacy tech in one go. As long as you can access, analyse and respond to your data at the speed that will make a difference to customers, you can get by in the short-term. A modular cloud-enabled approach to modernisation, which breaks the systems switchover down into a series of component steps, allows you to identify and prioritise the areas of legacy that need the most urgent upgrade and work from there.

Bring people with you

When making the case to your employees, it’s important to highlight the benefits. Some won’t like the disruption. Others might be worried that their jobs will be significantly changed or impacted. So it’s important to stress both the elimination of tedious manual tasks and the chance to raise their status and influence within the business. Looking to the future, the chance to work with the latest tech and be more closely involved in driving progress on ESG could be a big differentiator in recruitment and retention.