Creating a “Middle Office”

My colleague Joe Fenner and I were discussing a trend we’ve seen at a number of our clients: the emergence of the “middle office”—a team that bridges the roles fulfilled by front- and back-office personnel.

Essentially, we see organizations forming middle offices in order to offload clerical and low-value activities from the front-office, or client-facing, roles. Basically, the middle office is responsible for functions that get materials “in good order” for the back office—for example, functions such as credit approval, insurance underwriting, or account-opening. Completion of such tasks allows employees in front-office roles (e.g. sales people and branch staff) to focus on tasks associated with acquiring new clients or servicing existing clients.

Another advantage of the middle office is that this structure allows an organization to pool its resources, thereby creating scale. In many instances, the various front-office functions have some level of administrative support within their teams. For example, if a company has 50 sales teams across the nation, each with a single admin, those admins will most certainly have busy days and light days. By pooling the admin resources into a middle office function, the team is better prepared to deal with fluctuations, and typically excess capacity can be trimmed.

The formation of a middle office also creates opportunities for automation. For many organizations, having distributed administrative staff embedded in front-office functions can make it difficult to identify those automation opportunities. Seldom is there either sufficient time or skills to think through the “world of the possible” to complete administrative tasks more efficiently. Admins spend their days copying and pasting data from emails into systems, from one system to another system, or populating Excel spreadsheets and doing various reporting. Typically, one or two of each of these tasks are done daily. When the resources are pooled, it becomes evident that 50 or 100 instances of the same manual task are being performed daily—so why not automate? Simple integrations, data transfer scripts, saved queries, etc., can be created to speed these types of remedial tasks.

For those firms considering establishing a middle office structure, the challenge is organizational. Front-line folks like having control, and they like having those dedicated resources. Of course, if done right, a middle office will be able to give them as good or better support; remember, a team can scale up much better than an individual can. But still, this tends to be a big objection at some of our clients.

Overall, the concept of the middle office is an intriguing one, and may well fill a crucial gap for many organizations, particularly those that are highly distributed. To reiterate, the opportunity to pool administrative resources creates scale and enables task automation—and, as a result, it winds up being far more cost-effective for the organization as a whole. It's a concept that deserves some serious consideration.

Rich Medina
James Watson
I’m President and co-founder of Doculabs, serving as executive sponsor on consulting engagements for financial services clients.