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How to Set Up a Center of Excellence

by Anastasia Belyh

July 7, 2016

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HomeMagazineHow 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?

How to Set Up a Center of Excellence

© Shutterstock.com | garagestock

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

[slideshare id=12893693&doc=creatingaprojectmanagementcenterofexcellence-120511072425-
phpapp02&w=640&h=330]

Big Data CoE

[slideshare id=26696974&doc=buildingbigdataanalyticscenterofexcellencev3-130930093241-
phpapp01&w=640&h=330]
Business Process Maturity CoE

[slideshare id=17723371&doc=bpmcoe-awdadvance-130326132442-phpapp02&w=640&h=330]

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.

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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.

Staffing

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.

Governance

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.

Marketing

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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9:44 amFebruary 3, 2018

Raymond Thurston

Thanks for interesting insights on an initiative that has only recently found its way into our Capex Project
procurement space

I have been with company for 33 years & was assigned role of center of expertise. Would appreciate
comments around definition of center of excellence & that of expertise.

Currently enjoy the role of expertise whereby coaching, mentoring, knowledge sharing, guidance &
advice is provided within procurement of goods portfolio

My experience & exposure has covered procurement of goods, limited exposure to procurement of
services, expediting, logistics, supplier assessments & performance.

A key component of my role also includes ensuring Procurement health within portfolio which
contributes to successful SOX audits

12:44 amJuly 8, 2018

tall tiger

Great article and helping as I am tasked with setting up an internal user research CoE. Where would I
house the CoE, is there a good software programme that I could buy off the shelf? Thanks for any
guidance
3

3:17 amMarch 2, 2017

Tlindsey

Excellent guidance. You've given us a lot to consider.

11:01 amMay 4, 2017

Nafisatu D. Muhammad

Found these guidelines very useful in setting up the newly established Centre for critical thinking,
teaching and learning at my university. Thank you

7:31 amFebruary 21, 2019

sharjelahmed 92

Interesting Article,

Can you please suggest me, what type of excellence can be associate with the testing unit.

8:17 amFebruary 21, 2019

Martin Luenendonk
Depends on what you mean with testing unit. But often times quality control (testing product quality) is
organized as a center of excellence.

8:32 amFebruary 21, 2019

sharjelahmed 92

Thank you Martin.

I have one more question, if a tester has to organise a excellence type keeping the goal to the
organisational level apart from testing / quality then which type can be used?

1:23 pmNovember 21, 2019

Najam Khan

Would that be feasible if add a CoE on top of the Service Desk, System/Application Management,
Network Management, and PMO organizations or would that be one of them on the same layer?

5:34 pmNovember 21, 2019

Martin Luenendonk

Hi Najam, I think a PMO might work as an umbrella function for a business driven by CoEs.

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