Back Office Streamlining for Financial Services: Why Start Now?
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Back Office Streamlining for Financial Services: Why Start Now?

Mid-market financial service businesses are hampered by unnecessary complexity. One of our Principals refers to it as the ‘spaghetti underneath the website’; multiple systems that can’t talk to each other, often requiring tedious and demoralising labour from staff.

Guest blog by Graeme Freeman, Co-founder and Director at Freeman Clarke

Just as often the complexity is driven by external factors. Brokers, for instance, may deal with a wide range of providers, each with their own systems, complexities and idiosyncrasies.

We won’t pretend that sorting it all out is easy. But it is more than achievable if you take a systematic approach. And, frankly, you can’t afford not to. While we are bullish about financial services in the near future and beyond, the sector will see undeniable pressures in terms of regulation, competition and disruption.

But these pressures offer opportunities for the best to forge ahead. When you streamline your systems and processes – that is, improve integration with customers, suppliers, and service providers – you create a clear advantage over competitors.

The basic goals of streamlining are:

  • Greater efficiency
  • Lower cost
  • Automated decisioning
  • Clear, accurate, and timely reports
  • Excellent customer service
  • A platform for expansion

Of course, then there is the question of how to go about it. In our experience, the key is to focus on three areas: reinforcing leadership, knowing what you’ve got, and creating a timeline.

First: Reinforce leadership

Priority number one is to appoint someone with Board-level authority to have ownership of the streamlining project. Most members of the Board are unlikely to have the time (or the inclination!) to run this particular show, but the project will never get off the ground without a real leader in charge.

And expect this leader to be deeply involved. Important decisions about processes, staff, systems and vendors will be needed, including renegotiating contracts and hiring. These decisions will cut across departmental boundaries; the leader will need the time, authority, confidence, and competence to pull people together and to make changes happen.

It may be unrealistic to expect a CFO to do this, as they are too busy. Your IT head may have the knowledge but not the authority and people skills. The HR Director may not have the detailed systems knowledge. Even if there is no one perfect person at your company, there must be a clear leader regardless.

And set deadlines for delivery of specific improvements. You may decide on a stream of smaller improvements, or a large, transformational project, or both. Either way, unless you have clear deadlines, you can expect the project to be overtaken by other priorities.

Second: Know what you want and what you’ve got

This step involves first understanding what you want to achieve. Then you figure out what you actually have, and how well or badly things are working.

Your goals may include:

  • Lower costs. You want to save money by avoiding unnecessary labour and cutting waste. But if the aim is to reduce costs, then by how much?
  • Tighter security. When you eliminate the gaps and redundancies in your back end, you are also eliminating security weaknesses. Can you match this objective to an external standard?
  • More efficient compliance. When your systems communicate better, compliance becomes much less complicated. Can you identify the current gaps and cost of compliance and be clear about your target?
  • New opportunities. With cleaner data and better reporting, you will uncover opportunities to upsell or cross-sell. Can you substantiate the value of the opportunity? Can you set targets?
  • More flexibility. With more efficient systems, your company can more easily expand and contract as the market demands. Are there growth targets that will be enabled by streamlining?
  • Improved morale. Inefficient systems create demoralising extra work for staff, tension between departments, and drain your people’s energy. Streamlining frees up workers and whole departments to focus on what really matters – customers. Can you identify key people who you would like to see spending more time on more value-adding tasks?

After you are clear on your goals, you next establish what you have. List every software product your people are using – and we mean every product – so you have a clear picture of how your business operates.

This is usually an enlightening exercise for our clients. It’s when they learn what they are actually using, and where they are spending money for no reason. They will usually also see immediate, no-brainer steps toward greater efficiency and security.

Freeman Clarke have created a simple way of visualising the technology that a business typically uses. We call it the Four-Layer System Model. Think of your tech as having four layers, one atop another:

  1. Customer applications
  2. Business applications
  3. Basic services
  4. Communication and connectivity

There will undoubtedly be ‘systems’ within your business that are informal; for example vital information could be in a spreadsheet or an Access database.

And some systems will not be delivered via technology. For instance, it is possible that your company still uses paper for stock control or manages and stores contracts in filing cabinets! These systems need to be identified as well -because part of streamlining will be making them more efficient with technology.

And look into what staff are using beyond what the company owns – for instance, if they use personal email accounts for business or vice-versa. (They made need a bit of reassurance that this is not a punitive expedition; it’s information-gathering to look for gaps in connectivity and security.)

Finally, how can you build on what is working. Perhaps you have third-party systems already helping your company, and their role can be expanded. Or a department whose processes are working smoothly, and it could serve as an example for other departments.

Third: Make a timeline to streamline

At this point, your streamlining leader has a clear picture of what the company is currently using and where many of the snags originate. Now the CEO must empower the leader and team: give them the resources and the confidence to create a simple framework of twelve days, twelve weeks, and twelve months.

12 Days

There may be simple problems that staff know all about (maybe for years), but no-one got round to fixing. Perhaps some persistent people issues need to be addressed by training or redeployment? Perhaps some old laptops need to be replaced, or you need a shared calendar, so it is clear who is on holiday? Perhaps there is an ongoing ‘cold war’ between two departments that can be sorted out by a daily stand-up meeting?

Now is the time to identify the quick-fix problems and, well, fix them.

12 Weeks

Many important problems can be fixed in this middle stage. Focus your efforts on making them happen. This may involve bringing together suppliers, or some simple custom software, or use of a low-code integration tool.

Whatever the issues, you may need managers and staff to put aside their normal priorities. And the focus must remain on the problems; no blaming should be tolerated. A ‘management lock-in’ may be necessary, when no-one leaves the room until they sort it out!

Within reason, be prepared to spend money to deliver these projects. But don’t overdo the scrutiny process – perhaps set aside a budget and then allow the team to spend as they see fit.

12 Months

What can’t be fixed in twelve weeks will likely require a more substantial project. Perhaps you need a number of system improvements, perhaps a big-bang replacement. Either way, your streamlining leader must define specific outcomes and cost-justify each and every project.

Similarly, if external vendors are involved, then a tendering process will be necessary for significant spends. External projects are especially inclined to go pear-shaped, so these too need to be planned, owned, and managed, with specific timetables and deliverables.

Each of these deadlines will help to keep everyone focused and energised. Whichever project is at hand, ensure that everyone remembers that your customers decide what matters – and if you don’t get it right, a competitor will!

One last thing: Create a culture of efficiency

Having a senior person with authority over the streamlining project ensures that it remains a priority. It also helps to shift the culture of a company.

More efficient systems will lower costs and increase customer satisfaction. At the same time you are reducing stress and frustration for your people. And if you want to retain these benefits moving forward, you’ve got to set an example for staff. If they see the Board allowing poor practice, they too will be lax. If they see you working toward efficiency, they will be conscious of it as well.

Much of the cultural challenge may be for managers to listen to people internally, and for these people to feel safe to express their frustrations, especially when they involve their own jobs. You will know it is working when staff feel empowered to ask questions and make suggestions, so that down the line you don’t have another mess of spaghetti to clean up!

Read Freeman Clarke’s full series on digital transformation for the financial services industry on their website.