How to Set Up a Center of Excellence
The term “Center of Excellence” is becoming increasingly popular among businesses and a number of organizations are setting up these departments. But what is the purpose of a Center of Excellence?
This guide will explain the 1) basics of a Center of Excellence and the 2) benefits of establishing one in your organization. We’ll also provide you a 3) detailed plan on how to set up a Center of Excellence in three steps to guarantee your organization will reap the benefits.
WHAT IS A CENTER OF EXCELLENCE (COE)?
The primary aim of any business is to become a successful enterprise that reaches goals efficiently. In order to do so, businesses often establish a set of pragmatic principles guiding the management team. However, striving for this type of excellence is often easier said than done.
To improve efficiency businesses have began setting up Centers of Excellence (CoE). These can also be referred to as “competency centers” or “capability centers”.
The definition of a CoE states that they are a group of people leading the organization and its different structures in a specific focus area towards pre-determined goals. Hence, the aim of a CoE is to improve expertise in a certain area and make the most of its resources to help the business to improve.
CoEs provide a focal point for knowledge management, with the overall goal being the ability to capture new knowledge and practices from inside and outside of the business.
Whilst in the corporate world, CoEs tend to be a single business unit, organizations working in the field of science and academia can set up CoEs as a cross-organizational project. For example, the Anna Freud Center of Excellence works in the field of youth mental health and involves a range of organizations, such as Yale and UCL.
It’s crucial to understand how a CoE differs from other business departments and centers, as the “excellence” term can be misleading.
CoEs aren’t supposed to be better than the other operational departments within the business. But instead of focusing on performing operational tasks, the aim of the CoE is to find the best practices and to disseminate them to the other departments.
Watch the below video the understand an example of setting up a CoE in the focus area of Business Process Management (BPM):
The core aspects of CoEs
There are three core aspects to CoEs: the team of the center, the particular focus area of the center, and the purpose of the center.
The team of the center
CoEs are built around a team or a group of people, who can be hired either from outside the company or be employees of the business. The team members can continue to hold other positions in the business and work in the role either full-time or part-time.
Therefore, CoEs can be either an on-going part of the business or a temporary setup. For instance, a business might choose to set up a CoE in the event of a new technology adaptation.
The particular focus area of the center
CoEs tend to be built around a specific focus area. This could be any area relevant for the company and of particular importance for the business.
The typical focus areas include:
- Technology – the adaptation of a new technology system or simply the study of a new technology as a means to improve the business.
- A business concept – the introduction of a business concept such as BPM.
- Skill – improvement and utilization of a new skill such as certain management practices.
- Other broad area of study – for example workplace equality.
The purpose of the center
Depending on the focus area of the CoE, it can have a wide range of purposes. The main goals and responsibilities of CoEs include the following:
- providing research,
- supporting the organization,
- offering guidance,
- providing training and oversight of the employees,
- governing the organization through appropriate resource allocation.
In which cases do companies set up a CoE?
Let’s look at the events that might lead to a company implementing a CoE. The center can operate in a number of focus areas. Since the aim of CoEs is to lead the organization towards a better understanding of the particular area, the establishment often involves either:
- the implementation, management and use of a new technology or
- the adaptation, management and use of a new or particular skill or concept.
For example, a company might set up a CoE for business intelligence and use it as a means to gain insight into different areas, such as products, customers and market initiatives. The goal would be to conduct research on the best business practices, help the company implement them and ensure the organization takes full advantage of the new strategies.
On the other hand, a company might want to set up a CoE during the adaptation of new accounting software. The goal could be to find the best software, support the organization during the implementation process and provide training to employees.
Dig deeper into some use cases for which a center of excellence is set up.
Project Management CoE
Big Data CoE
Business Process Maturity CoE
The benefits of CoEs
Before venturing into the steps an organization must take in order to set up a CoE, it’s essential to understand the benefits of creating one. In short, CoEs can improve business practices and guarantee success.
Furthermore, the proper creation of a CoE can guarantee a company:
- uses its resources in a more efficient way,
- provides quality services and products to customers,
- reduces the costs of running the business by eliminating inefficient practices and by cutting the time required for implementation of new technologies and skills.
Therefore, CoEs can be essential in the development and measurement of business success. It can help a company achieve consistency, as well as reduce complexity.
3 STEPS TO ESTABLISHING A CENTER OF EXCELLENCE
Business shouldn’t take the implementation of a CoE lightly, as mistakes during the setting up can lead to inefficient practices.
In order to gain the benefits of a CoE, organizations must take the time and follow these three steps.
Step 1: Define strategy and vision
The crucial part of creating success is to define the strategy and vision of the CoE. Without a clear strategy and a vision, it’s unlikely the CoE will improve the business.
In order to guarantee success, you should create a charter for your center. This would be the mission statement of your CoE. Therefore, you should:
- Think about the purpose of the center. What is the reason for establishing the center? Are you building the center to focus on a technology, a business concept, a skill, or something entirely different?
Establish the purpose of the center before you move forward. This will help clarify the governance of the center, as well as the strategy.
- Think about the goals of the center. What exactly is the center trying to achieve? Are you looking to ease the implementation of a new process, research a new method or perhaps improve the business practices of an area?
You should have a clear set of goals the center is moving towards. By having a set of tangible goals, you can better measure the effectiveness and success of the center and ensure it doesn’t slide off course.
- Think about the scope of the center. What are the issues the center will deal with? How far-reaching is the research or study going to be? What budget will be required and how many employees need to be part of the team?
By defining the scope of the center, you place restrictions on projects to guarantee you focus on the key areas of importance.
Furthermore, keep in mind the vision of the CoE should always align with your overall business strategy. You want the vision for the center to match the vision you have for the business.
Every CoE requires a set of operational standards. Since the focus of the center is to improve the management and operations of other aspects of the business, it would be unwise to set up the CoE without having a clear framework. By defining how the center is supposed to operate and what is expected of each individual, you guarantee a clearer, leaner and more efficient functionality.
Finally, you should outline the role of the center within the greater organization. This means the way it approaches other CoEs, either within the organization or in other companies. You should also consider its place in the wider community of SMEs and other such organizations.
Step 2: Secure funding
The second step involves the other important aspect of launching a CoE: the funding. Badly designed CoEs can end up costing the business more money than they bring benefits, so it’s important to pay attention to the funding structure of the center.
You should understand that while CoEs can help to reduce operational costs of a business, running a successful CoE isn’t for free. In the long-term, the funding issues might become easier, but at the start, you’ll need quite a bit of capital to get going.
In many instances, the senior management of the business will need to support the process, not only in terms of time but also in terms of money. The main question is whether the business can self-sufficiently run the CoE or if outside funding is needed.
In most instances, businesses are required to look for outside funding. A good starting point is to find partners for the project. You can look for suitable options in areas such as technology, education or other such related sectors that fit to your CoE’s focus. Ensure these partners have aligned interests and goals in mind before you start dealing with them. You don’t want to form a partnership with a business or an organization expecting different results from the project.
There’s no reason for CoEs not to operate with other companies. For example, the CoE could be set up as a Joint Venture of two or more companies.
Furthermore, depending on the purpose of your CoE, you might be able to find public funding. For example, if you are setting up a CoE for environmental protection, the government or other environmental agencies might be able to provide extra funding. This is also available for certain academic and scientific purposes.
Before you start dealing with the operational issues, you therefore want to create a budget plan. Include estimations regarding the salaries of the staff and the operational expenses. Don’t add any benefits of CoE (such as cutting the cost of new technology implementation) to these calculations.
Step 3: Make the center operational
Once you have defined the strategy and vision of the center and managed to organize the funding, you can start focusing on the operational side of running a CoE.
Five key areas of focus must be sorted out in order to establish a CoE. These include: staffing, governance, marketing, measurement of the performance, and the position of the center within the community.
The first aspect of operations naturally involves finding the right personnel for your CoE. As mentioned in the first section, CoEs can either be staffed full-time or part-time. In addition, you can either hire completely new personnel for the center or reassign existing employees from other business units. The right approach depends largely on the purpose of your center, as well as its scope.
You need to hire people who are highly qualified and skilled for the required positions. If possible, previous expertise in CoEs can always be beneficial. But the most important thing is to identify the key skills required in order to achieve the objectives you laid out during the first step.
The best CoEs are agile, innovative and well governed. Therefore, you need to place governance structures at the heart of the operations. CoEs should have as little red tape and bureaucracy as possible. The purpose of these centers is to find the best practices and this often requires a much more relaxed governance approach compared to operational units.
On the other hand, the center’s inner governance structure must be clearly laid out. There should be clear accountability and role structures in the center. This ensures employees are aware of the expectations and requirements they need to fulfill.
Ensure the center has plenty of support. Every member of the team must feel able to operate in an efficient and effective manner, without having to deal with operational problems and bureaucratic obstacles. It makes sense if a member of the board of directors is overseeing the center, in order to guarantee high level support within the organization.
Businesses shouldn’t hide their CoEs from the public. In fact, you should be marketing the center at every opportunity, as this can help to achieve goals quicker and help to find additional funding.
Most key areas of CoEs can directly benefit other similar organizations. Just as you would ideally form partnerships with other companies, you should also market the center to these organizations while in operation.
The knowledge gained by the CoE can provide an organization an additional revenue source. As the following section on the importance of community will show, CoEs shouldn’t be viewed solely as an internal department, but an opportunity to increase external reach of the organization.
Measurement of the performance
It is crucial to measure the performance of the center at all stages. When you are defining the goals, you also want to figure out how to measure them.
Every process within the business should be identified and categorized. This allows the team to find the inefficient processes and make changes to them.
Define the metrics that matter the most to your business success and find the tools to measure them. Having a business intelligence dashboard in place will make it easier to measure success. In case you don’t achieve your pre-defined goals, don’t hesitate to wind up your CoE before it consumes more resources.
Furthermore, since CoEs often aim at helping the business to implement a new skill or technology, it’s important to measure the success of the skill or technology as well. This can provide essential information for future adaptations and help the business improve its operations as a whole.
Focus on the community
Finally, you also want to focus on the community. Businesses operate in a wider culture and as well as adapting to the changes within the organization, they need to focus on the changes taking place outside of the business. CoEs need to be aware of the cultural and operational environment of the community to ensure it can react to external changes.
For example, you want to pay attention to how people interact with the business and whether changes within the business result in changes in consumer behavior.
Since the focus of CoEs tends to be knowledge management, businesses can be wary of sharing this information with the community or other businesses.
Yet, Tableau pointed out in an example of a CoE at UBS that community can help to “deal with problems quickly and encourage people doing innovative work”. Therefore, a community shouldn’t be seen as a hindrance to a CoE, but rather an opportunity to learn more and benefit the wider business culture.
THE BOTTOM LINE
Whilst the term CoE can be overused in the corporate world, businesses shouldn’t think they are just another business fad. There are real tangible benefits of setting up a CoE and it can streamline your business processes in a variety of ways.
However, you shouldn’t take the process of establishing the center lightly. In order to guarantee the success of your center, you must properly define its vision and strategies.
Furthermore, ensure the center has appropriate financing by negotiating partnerships and through continuous marketing.
Finally, focus on creating a lean management structure that provides knowledge throughout the whole of your organization.
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