Insight

Optimising your back office design for financial viability and better outcomes

By:
James McCluskey
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It's a challenging environment for independent schools in Australia. At the same time as rapidly upskilling to meet remote learning needs, school leaders are preparing for a recession that will likely see an increase in competition and a decline in revenue.
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For many, tuition deferrals or reductions have already hit the bottom line and pre-COVID expectations of enrolments are being revised considerably. The impact of the virus on Australia may see more parents enrol their children into government schools in response to high tuition fees and stagnant wage growth.

Commercial and future focused schools are undertaking broad based reviews of expenditure to identify opportunities to reduce costs. This includes identifying opportunities for smarter purchasing, reviewing unnecessary expenditure and consolidating purchases across campuses. They are also reviewing the way their 'back office' (e.g. student administration, finance, marketing, human resources and technology) are set up to improve education delivery and business management of school operations.

Fixed-cost bases and a commitment to quality will constrain options to balance post-COVID budgets

The challenge for schools seeking to right-size budgets in response to potential revenue decline is one of value and quality. Parents rightfully have the highest expectations of value for money for their investment in tuition at schools. The highest quality of learning environments will need to be maintained within schools, from grounds to buildings and the lessons taught within them. Schools risk losing students to competitors if they are seen to cut back on the educational experience of students that provide a real point of difference from government schools.

Transform back-office teams into enabling teams to improve service levels and the bottom-line

For many schools, a focus on education-delivery, from ensuring they recruit the best teachers to building the best classrooms, has meant that back office teams are left to their own devices and evolve to become inefficient and ineffective. For example, a team might become too small as a result of under-investment, or too large with people that don’t have clear responsibilities as a result of over-investment. In either case these teams will often fail to meet the expectations of their key customers, whether internal (school leaders and teachers) or external (parents and the broader school community).

Given the need to balance the post-COVID books, now is the right time for schools to improve the efficiency of back-office teams and to redesign them into 'enabling teams' that focus on the efficient delivery of quality education for students and alignment with a school’s broader strategy.

Four key activities which can improve performance

Independent schools can improve value for money in back-office teams, and transform them into enabling teams, by addressing on four key areas simultaneously:

1. Identify key costs

Undertake a wide-ranging review to identify opportunities to optimise costs. Identify where there are opportunities to consolidate, reduce or choose a more appropriate sourcing model particularly where external resources are used, such as contractors and casuals. This may involve using benchmarks as a targeting tool to prompt hard questions and detailed investigation into line items of budgets for teams across the school. Once opportunities have been identified and prioritised, individual business cases should be created to properly capture the full costs and benefits of the change and to hold people to account for savings. Without accountability, benefits may not be realised or people may be tempted to return to the way things were.

2. Redesign operating models

An operating model is how a team is structured (people, capability and processes) to deliver on the intended customer experience, products and services. For a school, improving teams’ operating models will enable it to use its workforce consistently with its strategy and provide a basis for understanding the total cost of the team. An effective operating model will break a team out of the back-office and encourage it to connect with the school.

3. Improve processes

Cutting costs and restructuring alone will not improve performance, and can have the opposite impact, if it isn't supported by effective process improvement activities. Too often, manual processes attract resource effort that is better spent elsewhere. A school should create a clear view of what processes are causing bottlenecks and poor outcomes. Start by understanding where staff are re-entering data, manually creating reports or spending time on activities that systems can do instead.

4. Invest in the right systems

After a school understands its costs, ideal operating models and key process improvement opportunities, it should step back and identify which systems will support achieving its strategic goals. Digital solutions need to support new operating models and enable teams to respond better to their customers without attracting costs or resource effort that undermines the value of services provided. New technology solutions provide effective reporting that support improved decision making and enable staff to focus on adding value.

The importance of an independent perspective

Changing the way teams work, and work together, is a challenging task for school leaders to take on in addition to their day-to-day activities, particularly in the midst of a pandemic. A clear-eyed, experienced and independent perspective is critical to ensuring school leaders buy-in to a program of work that is premised on improving the performance of teams (as opposed to cutting costs). Having an experienced set of hands on board will also enable leaders to navigate the politics of change and enable them to be challenged by new ideas. Without bringing on the right support, projects which aim to cut costs or improve efficiencies can have the opposite impact and place an undue burden on staff who are working hard to support schools navigating a period of unprecedented change. Any project which aims to improve efficiencies and reduce costs must consider the impact of the change from the outset to lay the foundation for success.

Impact

Improving the efficiency of back office teams can yield significant cost savings for organisations without impacting performance. For these efforts to be successful, however, the existing operating model must be carefully evaluated in the context of each school’s unique environment. Seeking short term cost savings without investment in processes and systems can undermine performance and cost more in the medium to long term.

Kristy Fotiadis and James McCluskey are part of Grant Thornton’s Management Consulting team and work closely with executive teams in schools to align their strategy and operating model structures to drive organisational growth and deliver change. To find out more contact them using the below links.