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.
BREAKING DOWN '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.
Some companies use this as an incentive to attract top talent. If, using a similar example, a financial services firm requires high-level accounting, it could offer a housing subsidy to experienced CPAs who want to work from home. If it costs $1,000 to give an employee an office space, a housing subsidy of $500 a month can be given to any employee electing to work from home, saving the company $500 a month.
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.