The Front-Office, Back-Office Interface

Chapter 7

Front-Office/Back-Office Interface
Main concern: aligning functional and
corporate service strategies
Organization:

Introduction to misaligned strategies

Academics
Practitioners/Consultants
Prescriptive model - aligning de-coupling and strategy
Analysis of the retail bank lending market

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Back-Office Interface

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Management, 2006, Thomson

Strategic Service Vision

Service Concept definition: results provided for
customers

General service concepts

Cost
Speed
Flexibility
Quality

Service Delivery System

Chapter 7 The Front-Office,
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Strategic Service Vision

Does a Service Delivery System support the
intended Service Concept?
Equipment, training, policies, procedures
Low Costs

Fee Reversal
Policy

Chapter 7 The Front-Office,

Back-Office Interface

High Service

Staffing
Levels

Successful Service Operations

Management, 2006, Thomson

Flexibility
Systems
Technology

Academic Literature
Productivity
Levitt (1972) Production-line Approach to
Service, HBR
Levitt (1976) The Industrialization of Service,
HBR

De-coupling of Front- and Back-office

Chase (1978, 1981) Customer Contact Model,
HBR, Ops. Research
Chapter 7 The Front-Office,
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Basic Principles of De-coupling

Customer contact model Richard Chase, USC
Services categorized by level of customer
contact
High Contact
Pure Services
(medical)

Low Contact
Mixed Services
(branch banks)

Quasi-Manufacturing
(distribution centers)

Efficiency: f(1 contact time/service creation time)

Potential for efficiency increases as customer contact
time/service creation time decreases
Chapter 7 The Front-Office,
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Decoupling
Method
Decouple high contact and low contact service
factory operations
Buffer low contact operations from customers

Employ contact reduction strategies in the lowcontact areas

customer contact for exceptions only

reservations/appointment systems
drop-off points (ATMs)
task standardization

Chapter 7 The Front-Office,

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Management, 2006, Thomson

Decoupling
Employ contact enhancement strategies in the
high-contact areas
customer-oriented layout
people-oriented contact workers
partition back office from public view

Chapter 7 The Front-Office,

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Managerial Differences
High Contact:
Support Center

Low Contact:
Branch

Facility Location

near the customer

near supply,
transportation, labor

Facility Layout

customer-oriented

production efficiency

Production

orders cannot be
stored

smooth production planning

with backorders

Worker Skills

public interaction

technical

Quality Control

variable standards

numerical
measurement

Capacity

set to peak
work loadwork load

set to average

Chapter 7 The Front-Office,

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Two Models of Human

Resource Practice
Coupled

De-coupled

Selection criteria

Trainability

College for platform

H.S. for tellers,
back-office

Training emphasis

Broad
customer focus

Immediate task
focus

Compensation

At or above market

Above market for some,

below for others
Individual incentives

Group incentives
Returns for longevity
Job Design

Cross-training
Enhanced discretion

Narrow, specialized
High control for most

Part-timers

For retention

For cost-control

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Practitioner Literature
De-coupling is good.
Banking

Burger (1988) Bank Systems and Equipment

Cronander (1990) Texas Banking
Gilmore (1997) Real Estate Finance Journal
Pirrie, et al. (1990) Banking World
Reed (1971) Sure Its a Bank but I think of it as a
Factory, Innovation

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Practitioner Literature
Other Services
Government:
Connors (1986) Office

Hospitals:
Greene (1990) Modern Healthcare

Newspapers:
Sharp (1996) Editor & Publisher, 129(29)

Chapter 7 The Front-Office,

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Service Blueprint for

Fast Food Restaurants
Counter

Line of Visibility

Make
Patties

Chapter 7 The Front-Office,

Back-Office Interface

Grill

Assemble

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De-coupling and cost

Does de-coupling always lower costs?
Why does de-coupling often lead to lower
costs?
De-coupling and task focus
Frederick Taylor and Henry Ford

Chapter 7 The Front-Office,

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De-coupling and Rounding of Small

Numbers
20 individual units Each needs 0.75 of
a person
Staffing level: 1 person each, 20 total
1 central unit:
1

15

1
1
1

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De-coupling and Variance Reduction

20 individual units: average day -1 person,
good day -2 people
Staffing level: 2 people each, 40 total
1 central unit

25

2
2
2
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Cost Problems
Back office:
(Queuing math) centralization is good.
Bigger means less idle time, higher utilization

Front office staffing:

Bigger is also better
Convenience strategy

Large minimum break-even points

Break-even based on labor reduction
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De-coupling and Flexibility

Bank employee moved from coupled to decoupled job:
The computer system is suppose to know all the
limitations, which is great because I no longer know
them.

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De-coupling and Flexibility

Bank manager
As we have more and more processing in the black
box, few people know what a bank is really like.
Some guys are walking encyclopedias of banking
information, but they are a dying breed. Do we
need people who really know all the processes? Is
there a risk?

Chapter 7 The Front-Office,

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De-coupling and Service Quality

Service Gaps de-centralized service
Management
Policy
Customer

Chapter 7 The Front-Office,

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Service
Provider

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De-coupling and Service Quality

Service Gaps centralized service
Management
Policy

Management
Policy
Customer

Chapter 7 The Front-Office,

Back-Office Interface

High contact
worker

Successful Service Operations

Management, 2006, Thomson

Low contact
worker

21

De-coupling and
Service Quality
Quality of conformance decision consistency
improved
Task quality and the Renaissance man

Speed
Speed of Task versus speed of Process
Task speed improved due to focus
Process speed can be worse due to hand-offs
Chapter 7 The Front-Office,
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De-coupling
Benefits
Cost (task focus, variance reduction, technology)
Service quality conformance quality
Speed of Delivery task speed

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De-coupling
Disadvantages
Cost (increased idle time in front-office, duty
overlap)
Service quality personal service, empathy
Speed of delivery process speed
Flexibility

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Back-Office Decoupling Strategies

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Consistent Functional Choices for

Decoupling Strategies
Management Practice

Cost Leader

Cheap Convenience

Focused
Professionals

High Service

High

Low

High

Low

Level of
De-coupling
Competitive Advantage

Low costs

Locational
convenience/low cost

Personalized service at
moderate cost

Premium level of
personalized
service

Reason to
De-couple

Scale economies

Maintain cost
competitiveness

Quality control;
disaggregation of highand low-contact

Centralize only
when it is cost
prohibitive not to

Activities to
De-couple

All back-office work

Centralize back-office
work in excess of
front-office idle time

Back-office activities
regionalized, not
centralized

Activities requiring
expensive capital
goods

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Consistent Functional Choices for

Decoupling Strategies
Management Practice
Operational Strategic
Focus

High-Contact Product
Line
Training

Cost Leader
Cost minimization;
Conformance
quality

Narrow
Narrow, focused on
task within process,
low cross-training

Chapter 7 The Front-Office,

Back-Office Interface

Cheap Convenience
Cost minimization;
conformance
quality

Focused
Professionals

High Service

Maintain sufficient
flexibility,
response time, or
service quality at
lower cost than
High Service

Maximize flexibility,
response time, or
service quality

Broad

Very broad

Very narrow
Broad. All employees
should be able to
perform each function.

Narrow, but focused

on an entire process

Successful Service Operations

Management, 2006, Thomson

Broad, but with

specialization across
functions

27

Consistent Functional Choices for

Decoupling Strategies
Management Practice

Cost Leader

Cheap Convenience

Focused
Professionals

High-contact Worker
Responsibility

Service customer
requests; Low
off-site
responsibilitie
s

Service customer
requests; Low offsite responsibilities

Increasing number of
customers largely
through off-site
activity

Increasing customer
relationship
depth; High offsite
responsibilities

High-contact Worker
Compensation

Salary/hourly

Salary/hourly

Commission on sales

Salary with
commission on
unit performance

Purpose of Automation

Standardize
activity; Labor
replacement

Reduce job complexity

Enhance marketing

Enhance service

Chapter 7 The Front-Office,

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High Service

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Activities in Processing a Retail Loan

Solicit
Application

Document
Signing

Line of Customer Visibility

Application Processing
Credit Decision

Chapter 7 The Front-Office,

Back-Office Interface

Payment Processing
Bad Debt Collection

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Modeling Services De-coupling

Service

Strategic
Operational
Focus
Cost

High
Service
Bank of Green Hills

Focused
Professionals
Union Planters

Cheap
Convenience
Nashville Bank of Comm.

Low

Cost
Leader
First Union

High

Level of De-coupling
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Industry Analysis:
Retail Lending in Nashville, TN
Cost Leader:

High Service

AmSouth
First American
First Union (changing to
focused professional)
NationsBank

Cheap Convenience
Nashville Bank of
Commerce

Chapter 7 The Front-Office,

Back-Office Interface

Sun Trust
South Trust Bank of
Green Hills

Focused Professional
Union Planters

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Chapter Summary
Practitioner/Academic view of De-coupling
De-coupling as part of a coherent strategy
De-coupling
High de-coupling

Low de-coupling

Strategic Focus
Service

Classification
Focused
Professional

Cost

Cost Leader

Service
Cost

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High Service
Cheap Convenience
32