Definition
A back office in most corporations is where tasks building layout of early companies where the front office would contain the sales and other customer-facing staff and the back office would be those manufacturing or developing the products or those involved in administration without being seen by customers. Although the operations of a back office are seldom prominent, they are a major contributor to a business. Broadly speaking, back office includes roles that affect the left side of business’ trading statement.
Back Office
What is the ‘Back Office’
The back office is the portion of a company made up of administration and support personnel who are not client-facing. People who hold jobs in back office positions carry out functions such as settlements, clearances, record maintenance, regulatory compliance, accounting and IT services. A financial services company, for example, is logically broken up into three parts: the front office makes up sales, marketing and customer support personnel; the middle office manages risk; and the back office provides administrative and support services.
Explaining ‘Back Office’
The back office can be thought of as the part of a company responsible for providing all business functions related to its operations. Back office jobs are necessary for a company to run smoothly, and are especially important in financial services firms that are required to maintain strict compliance with SEC regulations. An internal auditor is an example of a back office person. This type of job is integral for the success of the company, but it is a completely internal role and does not interface with outside clients. The back office is sometimes meant to describe all jobs that do not directly generate revenue for a company.
An Example of Back Office
Since back office jobs are not required to be present for client relations and other externally facing tasks, many companies have chosen to either outsource back office needs or keep back office personnel remote. This is due to the desire to reduce costs. If, for example, an office space, on average, costs $1,000 per employee per month, it does not make sense to have an office for personnel who are not considered “front-line employees.” Instead, back office people are often allowed to work from home or work in a satellite office in a cheaper area.
The Flow From Back Office to Front Office
Even though it sounds like back office personnel do not interface with front office people, this usually is not the case. For example, even sales people in a front office role rely on back office personnel to help provide support for their job. If a salesperson is selling manufacturing equipment, he needs the help of back office people to give him accurate information on inventory and pricing structures, thus remaining in close contact with them.
Further Reading
- Back-office intricacy: the description of financial objects in an investment bank – academic.oup.com [PDF]
- The governance of back-office integration: organizing co-operation between information domains – www.tandfonline.com [PDF]
- When the back office moved to the front burner: Settlement fails in the Treasury market after September 11 – papers.ssrn.com [PDF]
- Financial engine or glorified back office? Dublin's International Financial Services Centre going global – rgs-ibg.onlinelibrary.wiley.com [PDF]
- Global outsourcing of back office services: lessons, trends, and enduring challenges – www.emerald.com [PDF]
- Robotic Automation Process-The next major revolution in terms of back office operations improvement – content.sciendo.com [PDF]
- The economic effects of technological progress: Evidence from the banking industry – www.jstor.org [PDF]
- Integrating Europe's Back Office: 10 years of turning in circles – papers.ssrn.com [PDF]
- Using kaizen events for back office processes: the recruitment of frontline supervisor co-ops – www.tandfonline.com [PDF]
- Customer relationship management (CRM) in financial services – www.sciencedirect.com [PDF]
