Basic Tenets About Setting Up A Center Of Excellence!

For decades many MNCs, Global Retailers, International Banks, and Insurance Companies have been offshoring their business support and corporate functions to India, primarily for talent and cost arbitrage. Buzzwords like COE and GIC have been making rounds as the offshoring industry in India gained traction.

While speaking at colleges and industry forums, I often got asked – What is COE (or GIC) and what is its value proposition?

Let me explain the concept of a COE, in a way that I have experience and exercised it over the last couple of decades.

So, Where To Begin?

COE (Center of Excellence) and GIC (Global Innovation Center) loosely follow the same concepts. Some companies like to call their specialized offshore teams as COE – like the ones I have worked for – while others call them GIC. In this article, I’ll stick with one term, the COE, to explain how it works.

I have had the opportunity to build COEs across industry sectors and global geographies. I have experienced everything from crushing failures to moderate success, and to rave reviews. Based on my experience, I have devised a Success Plan for setting a COE. I call it the PACT with the sponsor organization.

1.      “P” for Purpose – Undoubtedly, the purpose is the foundation stone for any successful COE. Here, one should ask the employer and yourself a lot of questions on the famous 4Ws and 1H – What, When, Where, Why and How. The questions include but are not limited to:

a. Why are we building the COE? b. Why is a Specialized team required? c. Isn’t there an existing SME or Team? d. What is the Concept in mind of the Key Sponsor? e. Why now and why you? f. What do they plan to achieve, both tangible and non-tangible aspects? g. When do the employers want to Go-Live? h. Where are the funds coming from? i. How does the employer envision future and what are their success factors? j. How will you execute the strategy and how will you scale and sustain the core team?

The more questions you ask, clearer the purpose becomes. Diligent and honest efforts should be put in defining the core purpose to ensure a successful start. And, as they say, “Well begun is half done.” Be mindful that this very step can take anywhere between a fortnight to a month.

I can share an example for my professional journey. I had just started working for an American Retailer and was tasked to build the Industrial Engineering COE. The role was exciting and it rolled into the Finance Head. No one really knew what to do. The mandate was clear and I was given 6-months and a decent budget to work with.

Here is how I started. I called my old HoD to gain insights and pulled Retail and Supply Chain books and magazines to understand what exactly does COE do? What end goals should we shoot for? And then, I asked all the 4Ws & 1H questions to myself and the Sponsor. As I started getting the answers, I became more confident that I would be able to pull it off. Some of the answers were not easy to find. I exercised patience and tried to follow my ex-HoDs advice, “Take your time but get it right the first time itself. This will give you the right confidence and a strong buy-in from the organization.” This exercise gave the Core team a good understanding of the structure, purpose and targets for the COE.

2.      “A” for Alignment – By this time, one is clear whether the purpose is strong enough to succeed. This is the first Go-No Go step. If doubt lingers, it’s better to drop the project rather than continue with it and fail later. The alignment with the employer, the key sponsor and/or the core management team is critical. It is pertinent to find concrete answers to the following queries:

a. Why are they supporting this initiative? b. How long will they support the initiative? c.  Do they believe in you and your capabilities? d. What is their budget and/or financial constraints? e.  What KPIs do they want you to sign for? f. What is their Plan B?

Here, it is crucial to ensure that the sponsors and decision-makers are well aligned with the core purpose outlined in Step 1 of setting up COE. This step enables total commitment of the employer or the key sponsor to the project. Considering its criticality, the step shouldn’t be rushed as it may take about a month in case of geographical difference among all the stakeholders.

In one of my moderately successful attempts at forming a COE, I under-valued this step. I was given a short window which I shouldn’t have signed up for in the first place. I was constantly running against time. I short changed this step and over the next few quarters spend many late evenings catching up with my Sponsors and aligning them with the Plan & Targets. The message that I want to pass to COE proponents is that you can short change the alignment with your Sponsors or Key Stakeholders at your own peril.   

3.       “C” for Core – The core of COE is divided into two elements – “Team” and “Design”. Once the alignment with the Key Sponsor is established, the speed of execution can be doubled as the foundation is well laid. It’s time now to build the skyscraper.

At this juncture, one should start building a team. You should handpick your team and not allow anyone to push candidates on you. It’s your vision and your responsibility; the buck stops at you. Look for passion, commitment, and persistence to recruit your team members. One can always be trained for knowledge later.

Do remember to get the Org Design approved by the Employer before you actually start hiring the talent. Share the long-term vision with the prospective team members and encourage them to openly share their feedback and their perspectives. In my experience, typical COEs take about 2-3 years to get established and show positive results.   

COE’s design is the next step. Here, you list down all the tasks that are to be performed by the COE team. This is the detailing/deep-dive step. The following KPIs are detailed in this step:

a. The Performance Parameters, b. Business Metrics, Systems, c. Processes, d. Best Practices, e. Deliverables, f. Quantified Expectations, g. Tangible and Non-Tangible Results, h. Delivery Matrix, i. Capacity Plan and Capability Building, j. Throughput, k. ROI, l. Knowledge Management & Retention, m. Productivity Measures, n. Risk & Compliance; Escalation Plan, o. Team Structure, p. Task Assignments, q. PMO, r. Plan B / BCP-DR, s. IT Equipment & Resources, t. Facility Plan, u. Procurement, v. Hiring Plans, w. L&D, x. P&L.

This is an extensive and time-consuming step towards ensuring a successful COE setup. One wrong move and the whole skyscraper can come crashing down. It’s okay to do multiple iterations before the Actual Plan is ready to be implemented. To yield better results, be ready to spend a quarter or two to complete the “Core” step.       

4.      “T” for Training – This step also includes Sustainability. Here, a crisp training plan to ensure that the team stays knowledgeable and current is drafted. Training includes L&D, Current Trends & Technologies, Analytics, Research, Performance Management, Talent Grooming & Retention, Offsite Management Development Programs, College Relations, Social Skills, Succession Planning, and ROI. With all the investment of time and energies in developing the COE, it is important to ensure that it sustains for long and achieves the desired productivity and profitability. Profitable P&L and positive ROI are the natural outputs of this step. One should spend about 2-3 months in getting this step right.

Let me talk about my recent experience of forming a COE with a Telecom company. Now, I have become wiser with age and experience. I set aside my personal time in training and developing my Next-Gen leaders. I personally spent days on introducing them to the concepts of performance management, business ethics, leadership development and succession planning. As they say, the proof lies in the pudding. That COE continues to thrive and grow even after I left the company and as a COE proponent it is very heartening to know that.

Experienced proponents of COE may include a few more steps to ensure the successful implementation of COE. But in my experience, if one gets these 4 steps right, there is a very high prospect of success.

COEs of global MNCs have just started penetrating the Tier 2 and Tier 3 cities and I strongly believe there is a bright future for specialty professionals in India. I would be happy to exchange views on this topic and learn more about the success factors that you might have implemented at your organizations.