Mark McDonald

A member of the Gartner Blog Network

Mark P. McDonald
GVP EXP
8 years at Gartner
24 years IT industry

Mark McDonald, Ph.D., is a former group vice president and head of research in Gartner Executive Programs. He is the co-author of The Social Organization with Anthony Bradley. Read Full Bio

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It’s time to start talking about the ‘middle office’

by Mark P. McDonald  |  March 30, 2011  |  8 Comments

Many people think of a business as consisting of a front office, which markets, sells and serves customers and a back office that fulfills demand and handles operations.  The dichotomy of front vs. back is the basis how we think of everything from compensation structures and rewards (front office) to information systems (back office) and the way we look at reducing organizational costs (primarily back office).

Front office processes are seen as highly competitive, information intensive and customer critical. They are often the sacred processes as changing them opens the company’s revenue stream to risk.  They are managed and viewed in terms of their effectiveness, do they get the job done, rather than their efficiency.

Back office processes are highly structured, automated process intensive and need to be delivered with high reliability, low cost and little variance.  These are the processes that guard the company’s EBITDA margin and since they do not generate revenue, they are relied upon and measured against their efficiencies.

However not every activity fits neatly into either front or back office processes.  There are in just about every organization as set of middle office activities that go un-noticed but may be prove to be more important and either of end of the organization.

Mid-office processes are decision centric, semi-structured and require bringing experience and tacit information together to assess the situation make decisions and mobilize the organization.  These processes are not formally recognized or even overtly managed, but they are critical because the decisions they produce and the actions that determine the company’s direction and cost structure.

The figure below highlights the distinctions between and examples of processes found in the front – middle and back office

Its time to pay attention to the middle office as the efficacy of its decisions and actions do more to determine a company’s potential more than we realize.

Mid office processes make decisions that set front office goals and bind back office processes.  A poorly functioning mid office requires both the front and back to work harder than necessary to achieve their goals.

Too often we have thought of activities in the mid-office as either being the domain of management or knowledge work that cannot be readily monitored, measured or supported as past attempts have produced behaviors that were counter productive to the goal.  Think of the call center person who hangs up to keep their average call time down.

The nature of the mid office is changing as new technologies like social media, mobility and dynamic intelligence make it possible to transform these processes in the same way that we have transformed the company from front to back.  This is good news as most organization have squeezed significant cost and inefficiencies out of these activities and they need a new answer as doing the same old stuff – 10% is a sign of weak — almost brain dead -management.

So rather than saying how we can up the sales goals or cut the operations cost, Its time to talk a look at what goes on in the middle, the processes and activities that have to date escaped scrutiny largely because they do not fit into or need model of what happens at the front and back of the organization.

More to come,

Start improving performance by naming your mid office processes

8 Comments »

Category: 2011 Applications Management Strategy     Tags: , , , ,

8 responses so far ↓

  • 1 Douglas   March 31, 2011 at 9:14 am

    I think “Its time” should be “It’s time”?

    Not carping, just point out a typo …

  • 2 Doug   March 31, 2011 at 9:33 am

    Excellent points here!

  • 3 Pamela   March 31, 2011 at 11:24 am

    I agree, middle office can make the diference in any organization! Looking forward to read more about this issue.

  • 4 Albertto Manuel   March 31, 2011 at 11:34 am

    Hello Mark:

    Why unstructured processes cant be executed in front office or back office? The example you provide at the front office, information intensive processes are the land of unstructured processes. If we are talking about technical customer support, a typical front office process, most of the times there is high volume of information exchange among peers, partners, analyzing data, sharing knowledge, asking for advice, where unpredictable events occur (customer changes it’s mind, changes the request, pushes for a solution or it will quit service).

    Regards.

    Alberto Manuel

  • 5 Roger Bottum   March 31, 2011 at 1:29 pm

    Mark

    An interesting way to think about business processes. At least based on the examples you cite, what you view as mid-office often get treated – well or poorly – as projects, not as transactions.

    One question is that the examples chosen for mid-office could be construed as mostly internally focused. Is that just the list you happened to choose or is that implicitly in your taxonomy that these are not customer or vendor-facing.

    Roger

  • 6 Analysis: Gartner on the Future of Enterprise Architecture | Ted Simpson   April 1, 2011 at 3:05 pm

    [...] to the middle of things, I read a smart post by Gartner’s Mark McDonald about the “middle office” and he is correct. Not only is the middle office wedged in between the front and back office, it is [...]

  • 7 Mark Montgomery   April 23, 2011 at 10:12 am

    Nice focus — of course the middle office could be viewed as the virtual office that includes all offices in the organization, which is how we look at the world.

    Mark Montgomery
    Founder & CEO
    Kyield

  • 8 Mark P. McDonald   April 28, 2011 at 8:53 am

    Mark

    Thanks for your comments and contribution. I would suggest that while many of the activities in the mid-office seem virtual in nature, they are not the only application of virtual technology or work practices. The mid-office has been hidden from management concentration because it exists across traditional organizational units.

    Thanks for reading the blog and it would be great to hear more about how your virtual office works.