Front-Back Interface

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
Chapter 7 The Front-Office,

Back-Office Interface
Successful Service Operations

Management, 2006, Thomson
Strategic Service Vision

Service Concept definition: results provided for
customers
General service concepts

Cost
Speed
Flexibility
Quality
Service Delivery System


Strategic Service Vision

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

High Service
Staffing
Levels

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

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

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


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


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


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


10
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


11
Practitioner Literature
Other Services
Government:
Connors (1986) Office
Hospitals:
Greene (1990) Modern Healthcare
Newspapers:
Sharp (1996) Editor & Publisher, 129(29)


12
Service Blueprint for

Fast Food Restaurants
Counter
Line of Visibility
Make
Patties

Grill
Assemble

13
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


14
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


15
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

16
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

17
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.


18
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?


19
De-coupling and Service Quality

Service Gaps de-centralized service
Management
Policy
Customer

Service
Provider

20
De-coupling and Service Quality

Service Gaps centralized service
Management
Policy
Management
Policy
Customer

High contact
worker

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

22
De-coupling
Benefits
Cost (task focus, variance reduction, technology)
Service quality conformance quality
Speed of Delivery task speed


23
De-coupling
Disadvantages
Cost (increased idle time in front-office, duty
overlap)
Service quality personal service, empathy
Speed of delivery process speed
Flexibility


24
Back-Office Decoupling Strategies


25
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


26

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

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

Broad, but with

specialization across
functions
27

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


High Service
28
Activities in Processing a Retail Loan

Solicit
Application
Document
Signing
Line of Customer Visibility
Application Processing
Credit Decision

Payment Processing
Bad Debt Collection

29
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

30
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

Sun Trust
South Trust Bank of
Green Hills
Focused Professional
Union Planters

31
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


High Service
Cheap Convenience
32

Front-Back Interface

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The Front-Office, Back-Office Interface

Introduction to misaligned strategies

Chapter 7 The Front-Office,

Successful Service Operations

Strategic Service Vision

General service concepts

Service Delivery System

Successful Service Operations

Strategic Service Vision

Chapter 7 The Front-Office,

Successful Service Operations

De-coupling of Front- and Back-office

Successful Service Operations

Basic Principles of De-coupling

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

Successful Service Operations

Employ contact reduction strategies in the lowcontact areas

customer contact for exceptions only

Chapter 7 The Front-Office,

Successful Service Operations

Chapter 7 The Front-Office,

Successful Service Operations

near the customer

smooth production planning

Chapter 7 The Front-Office,

Successful Service Operations

Two Models of Human

College for platform

Above market for some,

Chapter 7 The Front-Office,

Successful Service Operations

Burger (1988) Bank Systems and Equipment

Chapter 7 The Front-Office,

Successful Service Operations

Chapter 7 The Front-Office,

Successful Service Operations

Service Blueprint for

Chapter 7 The Front-Office,

Successful Service Operations

De-coupling and cost

Chapter 7 The Front-Office,

Successful Service Operations

De-coupling and Rounding of Small

Chapter 7 The Front-Office,

Successful Service Operations

De-coupling and Variance Reduction

Successful Service Operations

Front office staffing:

Large minimum break-even points

Successful Service Operations

De-coupling and Flexibility

Chapter 7 The Front-Office,

Successful Service Operations

De-coupling and Flexibility

Chapter 7 The Front-Office,

Successful Service Operations

De-coupling and Service Quality

Chapter 7 The Front-Office,

Successful Service Operations

De-coupling and Service Quality

Chapter 7 The Front-Office,

Successful Service Operations

Successful Service Operations