Back office projects can deliver clear payback

Payback on back office productivity projects

Back office productivity projects should deliver clear payback. That may be reduced process time, less rework, fewer errors, faster throughput, less waste, fewer handoffs, fewer complaints, higher staff satisfaction, better profitability, more timely data, higher customer satisfaction, etc. These benefits can and should be defined and measured. They can be with value stream mapping, benefits realisation and other methods. Back office productivity can deliver clear payback but it needs to be proven.

Does investment in the back office pay off in practice? There is little reliable information to answer that. Most projects don’t set a baseline before they start, don’t set clear objectives, don’t measure results and benefits and don’t have a structured approach to reporting return on investment. Oft-quoted figures on the % of projects that fail are wrong as no one defined what success or failure looked like.

We have seen projects achieve successful outcomes and that payback can be proven. Unfortunately such projects are in the minority because most claims of success are subjective and difficult to substantiate. That doesn’t mean they failed but results should be clear.

What does success look like?

Projects are often measured by whether they came in on budget and on time. That is good to know but most project end dates are arbitrary and budgets are estimates. In most cases, an end date and a cost within a defined range is acceptable. Did the project provide a product or service, create a capability or enable a desired outcome? To what extent did it do that? You can do it with a cost benefit analysis (CBA). a structured return on investment (ROI) approach, a benefits realisation plan (good for a mix of tangible and intangible benefits). Success matters.

How do I measure success of back office projects?

There should be a comparison between the current state (pre-project). the desired future state (defined up front) and the actual future state at set points e.g Go Live, Go Live plus 6 months, Go Live plus 18 months). Value stream mapping, process mapping or other specific data capture methods suited to your business are necessary to establish baseline and project where you want to be. Without such a deliberate approach, you will not be able to measure success.. Once a project is over, no one is interested and if they are it all becomes too hard and another project will start without knowing if the last one was a success.

So is back office optimisation worth the effort?

Investment in back office optimisation can have huge payback and is definitely worth the effort. The reasons include:

• even small improvements mean big savings for thousands of transactions
• efficiency pays as customers return and refer when they get superior service
• people prefer to work for organisations that run well so staff turnover drops
• optimisation enables scaling of revenue at a higher rate than costs
• greater efficiency enables you to deliver more value to customers
• an efficient back office creates capability for innovation and growth
• fewer and more integrated systems can lower overheads substantially

The key to successful back office optimisation is to take the time to do some analysis up front to firmly establish your current state and desired future state and quantify both clearly. Every journey needs a good roadmap and the ability to know when you have arrived.

Phil Guerin, Consultant/Director, Hague Consulting Ltd. © Hague Consulting Ltd 2024. If you like this content, subscribe to our blog – it’s free!

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