RESEARCH REPORT

In brief

In brief

  • An intelligent back office completely breaks the mold and works less like a bureaucracy and more like an enabler of new value.
  • The intelligent back office has three fundamental characteristics—people-centered experiences, digital on the inside and a data-driven backbone.
  • Transformation to the intelligent back office is not a project with a start and end date. It is a mindset of continuous improvement.


Conventional wisdom is that administrative resources focus about 80 percent on mandatory routine tasks, which leaves only 20 percent to spend on other value-added activities. What if agencies could redeploy resources through a combination of intelligent and transformational strategies?

The new back office transformation

The back office traditionally involves repetitive, high-volume and rule-based activities. But digital is disrupting the traditional approach, reinventing how people work and interact. Business hours are not just nine-to-five. Data is pervasive. The pace of change is fierce. The definition of success is changing too. Now more than ever, governments need long-term structural fiscal balance to avoid the specter of huge generational debt.

Digital and the user-centricity it enables creates both an obligation and an opportunity for a new government back office. Both fourth generation ERP systems and digitized applications can handle a lot of transaction processing and compliance activities, which means that back-office resources, capacity and investment can be redirected to advance the core business of government—citizen service.

Generally speaking, about 10 percent of a government’s spending is on administrative functions, which means 90 percent of the resources are in the programs. So the key questions is this: How can resources tied up in administration become a value engine to support the mission-driving programs? What’s needed is an evolution to an intelligent back office, which has three fundamental characteristics.

People-centered experiences

When people think of the back office, they often think about technology and process. But there is a critical human element too. The workforce produces services that people across government consume. The better people are at this, the better positioned public service organizations are to meet citizens’ and users’ needs. Yet the focus on human needs is getting lost. Back-office staff spend a good portion of time on repetitive tasks that may make their jobs tedious, unchallenging and ultimately unsatisfying.

Introducing intelligence into the back office eliminates this dynamic—one that rarely delivers user-centric processes in an efficient and productive way. The intelligent back office is designed to reflect user journeys, factoring in current and aspirational ways of working. How does this work in practice? It is finance staff using predictive analytics to forecast budgets based on volatility in demand. Or human resources helping program managers recruit top hires to win the war for talent. Or procurement’s spend strategy going beyond savings goals to power program objectives.

Tracing back a century, the design of the current back office centers around rules in a hierarchy to accomplish control. The new back office must balance control and performance. This is where intelligence fits in, automating basic and repetitive tasks so people can do more complex, interesting, and therefore, more fulfilling work. Back-office personnel become more programmatically focused.

To enable this shift and prepare people for this focus, organizations must train back-office staff to support the programs differently, define new roles and hire top talent. Traditional competencies, such as memorizing and applying complex rules, must be replaced with new competencies, such as customer service and problem solving. The new value focus will alter the profile of the future workforce.

Seventy-three percent of public service finance leaders think the traditional finance talent profile needs to change quickly and dramatically.

Digital on the inside

The value engine depends on fuel from digital. This is why investing in digital solutions is a key strategy to create an intelligent back office. However, deploying intelligent back office solutions is not about magically making change happen with the latest hot trend in digital. The magic comes from how the solution interacts with the broader context of people, process and policy to drive transformation.

Many governments have already begun exploring automation and analytics for the back office. They are developing prototypes and proofs of concept, and working toward scaling the most promising ones. Take data analytics, for example. It is now possible to consume data from multiple sources (beyond transaction processing applications) and render the results in user-friendly ways. Dashboards automate descriptive answers to regular questions and provide predictive insights that prompt relevant human interventions.

These investments are just the first wave of digital transformation for the new back office. The second wave includes more cutting-edge digital solutions, such as artificial intelligence and machine learning. These and other emerging technologies will impact how the back office operates at a foundational level. While today’s public service organizations are at the very early stages of this exploration, emerging technologies are always advancing fast and cannot be ignored.

Just 21% of US state chief administrators expect to deploy automation over the next three years, that’s four times less than the private sector.

Data-driven backbone

The traditional government back office has a love-hate relationship with data. Finance, human resources and procurement all have a wealth of data. In fact, finance is “mission control” for data in many public service organizations. Even so, the back office often struggles to turn data into insights because of issues with data access and quality or because advanced analytics skills are not widely available.

In contrast, the intelligent back office is built on a data-driven backbone. Analysis of structured and unstructured data from both internal and external sources brings breakthrough insights. These insights can benefit specific functional areas, departments, and ultimately, citizens. Digital platforms make it possible to integrate and share this diverse data in a secure environment designed for collaboration. This enables evidence-based program evaluation and budgeting. Instead of programs and budgets on “auto-pilot” getting annual budgets increases, they are evaluated and funded based on the evidence of outputs and outcomes.

Another distinction is how the intelligent back office engages with data. Digital tools and analytics extract relevant patterns more efficiently. And back-office staff—who are now attuned to program needs, not transaction processing—use their judgement and experience to make sense of it. They offer analysis and advice to the organization enabling strategic decision-making and wiser investment decisions.



Change comes in different forms

Transformation to the intelligent back office is not a project with a start and end date. It is a mindset of continuous improvement. Think of it as a journey composed of initiatives, each of which has a business case. Every journey is unique and depends on organizations’ readiness, resources and appetite for change. For example, some organizations prioritize an individual functional area. They begin with very specific pilot projects and scale them across other functions achieving multiple successes across the organization.

Other organizations take a much more comprehensive approach from the start. This broader transformation often begins with clean sheet design, which is revolutionary for government. It is building the new back office from scratch. Collecting data on requirements, skill sets, outcomes and more reveals the desired future state. This “should-be” view guides the transformation from the ground up.

Regardless of the approach, every back-office function in government should direct the transformation with a value-oriented mindset. After all, it is impossible to create a value engine without knowing the desired outcomes and return on investment from the outset. Leaders must know what they want out of the transformation, how they will get it, and how they will measure success.

Bill Kilmartin

North America Lead – Finance and Administration


Joseph Fiorentino

Managing Director – Health and Human Services, North America

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