What is Back Office
The back office is the portion of a company made up of administration and support personnel who are not client-facing. Back-office functions include settlements, clearances, record maintenance, regulatory compliance, accounting, and IT services. For example, a financial services firm is segmented into three parts: the front office (e.g. sales, marketing, and customer support), the middle office (risk management), and the back office (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. The term "back office" originated when early companies designed their offices so that the front portion contained the associates who interact with customers, and the back portion of the office contained associates who have no interaction with customers, such as accounting clerks. Despite their seemingly invisible presence, back-office personnel provide functions essential for operations. Their roles enable and equip front-office personnel to perform their client-facing duties. The back office is sometimes used to describe all jobs that do not directly generate revenue.
An Example of Back-Office
Today, most back-office positions are located away from company headquarters. Many are located in cities where commercial leases are inexpensive, labor costs are low, and an adequate labor pool is available. Alternatively, many companies have chosen to outsource and/or offshore back-office roles to further reduce costs. Technology has afforded many companies the opportunity to allow remote-work arrangements, in which associates work from home. Benefits include rent savings and increased productivity. Additionally, remotely employing back-office staff allows companies to access talent in various areas and attract a diverse pool of applicants.
Some firms offer incentives to employees and applicants who accept remote positions. For example, a financial services firm that requires high-level accounting could offer a $500/mo housing subsidy to experienced CPAs to work from home. If it costs $1,000/mo to secure office space per individual, a housing subsidy of $500 a month would result in an overall savings of $6,000/year. The cost savings can be significant when employing many remote professionals.
The Flow From Back Office to Front Office
Although back-office staff do not interact with customers, they tend to actively interact with front-office staff. For example, a manufacturing equipment salesperson may enlist the help of back-office staff to provide accurate information on inventory and pricing structures. Real estate marketing professionals frequently interact with sales agents to create attractive and relevant marketing materials, and IT professionals regularly interact with all divisions within the company to ensure proper functioning systems.