Four Ways to materially cut your back office costs
For years now, manufacturing has enjoyed tremendous attention to detail in improving the manufacturing process. Whether it be Six Sigma, Kaizen or other popular techniques, the focus has been on squeezing the fat out of the process, removing all non-value added activities.
It is time now to apply the same thinking to back office systems, and in a radical way. Incremental improvements in document management and storage to eliminate a file cabinet here, and a copying expense there will not achieve today’s goals.
Four Ways to improve back office performance
· Increase speed of processes and retrieval
· Decrease personnel cost and increase quality
· Improve customer service
· Increase market responsiveness
Your goals should not be for 1% improvement, or even 5% improvement, but 20,30 even 80% improvement in these areas.
Your first step in achieving these goals is Process Re-engineering. Start with a blank sheet of paper. Discard your preconceptions. Define your work objectives. Draw your current processes out, and then eliminate any process that does not add value. You MUST fix your processes before automating them. If you start with a mess and automate it, you end up with an automated mess!
Next, imagine that the ideal technology exists to support these processes. What would it do? How would it allow you to improve the speed and personnel cost? A good starting place is to look at the length each task takes to perform. The longer a task takes to perform, the more likely it could respond well to the use of technology. Also look at those steps in the process where workflow is waiting on action. Is there a way to eliminate that wait, reroute the process if the wait exceeds a limit, or improve the likelihood that the action will occur?
Now, let’s focus on Quality. Where are errors occurring in the process? Are your employees hijacking a standard policy or procedure, implementing their own approach, which leads to errors down the line? Are your processes documented so that your entire quality control process is not walking out the door every night? Are your processes enforced via rule based technology? Are your processes subject to routine audits to ensure constant improvement? Current technology should enable a rules-driven process where 80% of your transactions are handled instantaneously without a human touch. Connect everything you do with the Customer. Examine every business process and ask “How does this help our Customers? How does this help increase revenue or reduce costs?” Improvement must increase revenue, decrease cost, reduce risk or improve customer satisfaction.
Improving internal customer satisfaction is key as well. Most organizational departments are interdependent, and a change in one department may actually shift costs to another department. LEAN goes to back office means all of the back office functions (and the front office ones as well) that interconnect. For example, imagine an A/R process. It is not a standalone within accounting, it must also interact with Sales (from order origination to customer interaction), Shipping and Receiving, Logistics, Manufacturing, Human Resources, IT, ERP systems and potentially other parts of the organization. For this reason, any LEAN activity must examine the implications for all of the interconnected parts of the organization.
Look at the resulting vision. Does it allow the organization to respond quickly and cost effectively to its customers? Does it allow the organization to rapidly adapt to changing circumstances, rolling out new products, new sales campaigns and new organizational structure quickly?
When reaching the implementation phase, most organizations immediately become wrapped up in the detail features and functions of the technology systems they think they need. This is a mistake. Keep in mind that 80% of the effectiveness of your LEAN initiatives will result from the effectiveness of the new processes in achieving the goals. Of the remaining 20% that could be attributed to the effectiveness of the technology, 80% of the effectiveness of technology is associated with the successful implementation of that technology, with only 20% being associated with the specific details of features and functions.
· Process first
· Implementation second
· Technical features last
Start your work in-house first, thinking about ways you can strip away all work processes until you get to the essence of each task, and then brainstorm on how this will optimize its business performance. Consider all possible organizational interactions, but start small with some easy quick-hit solutions to prove your case. Then, if necessary, engage a trusted advisor to help you organize and document the process and implement the technologies across the organization. Often, this advisor will know the technology better than you and will see even more opportunities for improvement.
Once the entire organization sees what can be accomplished with a few pilot projects implementing LEAN in the back office, the rest will stampede to follow.


