Despite progress in maximising operational efficiency, a new report released today by management consultancy Arthur D. Little found that financial services companies have much work left to do to optimise the support and back-office functions of their corporate headquarters.  According to Arthur D. Little's latest report, "
Rethinking the Corporate Center", treating support functions purely as cost centres can raise as many issues as it aims to solve, as cost-cutting models are demotivating and rarely live up to expectations.
Based on an analysis of the headquarter functions of several leading banks and insurance companies, Arthur D. Little found that the efficiency of financial services corporate headquarters varies greatly, highlighting that these companies have been met with mixed success in their past efforts to optimize support operations. The study also found a need within the sector for a new approach to evaluating support functions that takes into account the unique challenges facing the financial services back office due to its global reach and often complex product lines.
"Traditional cost-cutting models have a tendency to destroy those support activities that add value, and are ill-suited to the flexible and fluid nature of many financial services organizations," said Dr. Gerrit Seidel, Managing Director and Global Head Financial Services Practice at Arthur D. Little. "The sector needs a methodology in place to redesign their corporate headquarters in a way that simultaneously reduces costs and increases the value each support service brings to the business."
The report outlines a new approach for financial services to re-assess the value of each support service in relation to its cost. For example, can internal newsletters or office cafeterias be deemed non-essential if they prove to increase morale and thus productivity? By evaluating each service according to specific criteria, the traditional unqualified cost-cutting approach can be overcome. Arthur D. Little calls these criteria the Value-Driven Headquarter Redesign:

1. Define the underlying benefit of each service agreed between both parties, the service provider and the recipient
2. Identify and define objectively measurable efficiency indicators
3. Obtain subjective assessment of service provision from the service provider
4. Obtain subjective assessment of service provision from the recipient

The aim of Arthur D. Little's Value-Driven Headquarter Redesign solution is not to dictate to a financial services company what its new corporate headquarters should look like, but rather to redesign it in partnership with the client and its employees. The methodology simultaneously reduces cost whilst increasing value to the business.
"Rethinking the Corporate Center" is now available for download at
www.adlittle.com/headquarterrethink