Four steps To create an effective COE

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Four steps To create an effective COE 3

A centre of excellence (COE) is an effective way to obtain lasting value from your enterprise resource planning (ERP) system deployment. Deloitte follows a highly developed process for creating a COE that involves a focus on collecting the best talent, setting guidelines for the COE structure, integrating the COE into your business partnerships and setting metrics to help ensure lasting success.

Many companies already rely on an internal group of experts to support their ERP projects. Whether they call it a COE or not, every company needs to set up an organisation to maintain, care for and improve its ERP project after it goes live.

Companies look at the tremendous size of the investment they’ve just made in an ERP implementation and recognise that there is a need to keep going to get the required value and return from it. A COE should focus on improving business efficiency, continuously enhancing new tools and capabilities to meet evolving business requirements and maintaining the solution on an ongoing basis.

However, a COE should not be confused with a basic IT maintenance organisation. In addition to routine care, the COE should focus on change management and advancing the organisation. ERP projects are very different from traditional IT projects. They bring together a very diverse, multi-disciplined team and usually have very high stakes in improving the business and gaining good, solid ROI.

While most ERP implementations are fairly standardised today, COEs vary greatly from company to company. This can be attributed to the vast procedural and operational differences from company to company. One reason for COEs having the greatest variability is that they tend to reflect every organisation’s unique culture and bias towards how an ERP solution may impact them. That wide variety in terms of cultures and biases creates a large variation in how COEs are implemented.

To avoid a loosely organised COE implementation, Deloitte recommends focusing on the four steps below. Achieving success in these aspects of COE formation can translate into further success throughout the lifecycle of your ERP project. 1. Appoint powerful leadershipA highly effective COE starts with carefully chosen and talented leadership. When deciding who will fill the leadership role in your COE, be sure to pick someone who knows how the business is run and who has the respect and credibility of the other business functions. A high level of business knowledge will support the COE leader’s ability to know what’s right for the company, while having great respect within the organisation can garner faith in the project and its success. Choose someone at executive level and from the business side of the organisation to meet these criteria. After the leadership role is filled by the best qualified candidate, that leader will be responsible for three key tasks:

Developing a charterThe COE leader should create a charter that outlines specific strategies, cost requirements and the overall business case of the COE. When spending is tight, this charter will help stakeholders to view the COE not merely as a cost centre, but instead as a necessary function that brings savings and value to the business.

A centre of excellence (COE) is an effective way to obtain lasting value from your ERP deployment.

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Prioritisation and investmentAn effective COE must do more than just break-fix and standard maintenance tasks. The true value of the COE will be around participation and the broader strategic efforts within the company. To accomplish this, the COE should be business led, not IT led, so it knows what’s going on in the business and how its goals can be achieved. Additionally, the COE must be sure to focus spending on the future of the organisation, not just on the “squeakiest wheel”.

Attracting and retaining talentPossibly the most important factor in generating value from a COE is seeking out the best, available talent. This allows the COE to influence positive change for the business. Talented people want to work for someone who inspires them and makes them want to be a part of something special. In addition to drawing in the best people for the COE, leadership must lay out clear career development models for their employees that show a future after their involvement in the COE. Without that comprehensive career path, it will be more difficult to convince highly talented people to sign on to the COE. Because COEs are usually new organisations, they may not understand how this is going to help them five years down the road after they’ve been successful within the COE.

2. Define the organisationAfter you choose the best qualified leadership for your COE, detail a clear reporting and staff structure. This clarity will allow you to organise the long-term plan for your COE, avoiding issues involving the organisation. Deloitte recommends focusing on two facets of configuration, namely the reporting structure and the staff structure.

The reporting structureThe COE has to be organised in a fashion that optimises the integration of different departments so there are no silos, and so it optimises the teamwork within the organisation. Communicating common goals and work processes with other departments or groups beforehand can greatly reduce the chances of issues arising in the future.

The reporting structure within the COE organisation is just as important as reporting to other areas of the business. A COE is better served by a hard-lined, or direct, reporting structure, rather than a matrix style. A matrix organisational structure can lead to employees who are unsure of their priorities for different groups or projects, whereas a hard-lined structure creates the most effective top-down accountability. It enables the COE to maximise the amount of value it offers the organisation because it achieves focus and very common goals.

To get the highest value for their investment, many companies create a COE to oversee ERP projects and ensure their lasting success. Deloitte focuses on how to build a COE that can continue to support your ERP project long after go-live.

Staff structureWhen structuring your COE, don’t overlook how important your staff members are. The people and skills you bring into the project need to be superior and diverse to accomplish the desired objectives. When choosing technical staff members, choose those with cross-functional knowledge of IT. You need the traditional IT skills, as well as business analysts, developers and configuration experts.

In addition to technical knowledge, ensure that your staff members have an ample supply of business experts. You need process experts who know the existing way in which the business works and the requirements of the business but who also see how it can be better so that they’re not stuck in the status quo. They need to understand how they can transform themselves to improve. Having staff members who know processes like Lean and Six Sigma will help in the improvement of existing processes as well.

Possibly the most important factor in generating value from a COE is seeking out the best, available talent.

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Lastly, because the COE should be working to greatly improve the organisation, your team should include change management experts. With organisational improvements come process improvements, for which employees need to be trained. Having staff members who understand change management related to large corporate cultures means your new processes, reinforced by training and education, will have the chance to become permanent.

Success starts with a strong relationship with the business so that the COE leadership truly understands in detail what the priorities, issues and challenges of the business are.

COEs should seek to secure the most qualified talent available to make up their staff to produce the greatest value. Many times, we have witnessed situations in which the COE will require top talent at the same time that many other projects require the same thing.

A COE defines new business processes. If you put average people on a COE, you’re going to get average, sub-optimised processes that have to be executed by hundreds of thousands of people. It is essential to use the best resources available for a COE, so that talent can trickle down to the people and processes that make up the rest of the company.

3. Build tight partnershipsThough a COE’s ability to achieve its objectives lies in its own strength, partnerships can make or break the organisation. Both internal and external partnerships are key to bringing others on board.

InternalInternal partnerships should be forged with the business side to help the COE to determine exactly where pain points are, what processes can be executed more efficiently and how additional value can be added to the business. A tighter relationship with the business increases the COE’s likelihood of improving business results and decreases the probability that setbacks will be caused by miscommunications or the lack of knowledge.

A close partnership with the business can position your COE to identify effective process improvements and savings. Success starts with a strong relationship with the business so that the COE leadership truly understands in detail what the priorities, issues and challenges of the business are. As mentioned earlier, having a highly respected COE leader and a strong charter will have a great impact here by maintaining the day-to-day internal partnership.

ExternalThe connections between the COE and outside partners are just as important as the connection between the COE and the business. The breakdown of COEs historically happens when the end of the ERP project turns into the end of the major relationship with the company’s application management services (AMS). After go-live, many companies only used the AMS for technical problems that arose rather than as a lasting collaborator in the COE’s strategy for improving business processes.

Now, however, companies are realising the benefit of a stronger post-go-live relationship facilitated by a COE. Leading COEs are putting a heavier focus on business value generation and process improvement. This change is seen most clearly in the creation of a service level agreement (SLA). Rather than the established method of writing up an SLA to focus on trouble ticket resolution, development hours involved and other IT-related tasks, they’re moving more towards process improvements and changes that bring specific value to the business. This increasingly popular method leads to improved business processes over time, not just until the ERP project is complete.

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4. Create strict metricsAfter you’ve built the strongest COE you can, have staffed it with the most talented people possible and have established strong partnerships to support it, you need to create metrics for its continuing effectiveness. Metrics help to defi ne the value of the COE to the business to prove its worth and impact.

Without established metrics, the COE tends to devolve over time into just a system maintenance type shop. To help prevent this from happening within your organisation, establish metrics early to lead the progress of your COE in the future.

Deloitte recommends following two guidelines to create the most effective metrics:

They should be business-focused.Metrics should be business-focused, not IT-focused, in order for the COE to reach its goals. COEs are created to measure and improve business performance. Your metrics shouldn’t be focused on system performance or other IT-related benchmarks that take up time and resources that should be spent on determining the COE’s value to the business.

They should be created with input from both the COE and the business. At the beginning of the fi scal year and when the COE takes on a new project, metrics must be jointly agreed upon by the COE and the business. This process can be long and arduous in the beginning. The business and the COE are still trying to fi gure out each other’s role, how much they want to commit to each other and how much infl uence each of them has over the ultimate solution. This area takes time to improve and streamline as the COE’s role is implemented within the organisation.

COE metrics should mesh well with the pre-existing business metrics, as it is easier to achieve metrics that are aligned with the business’s goals. Metrics that exist outside the scope of the business’s metrics can create issues when the COE and the business are trying to accomplish different things. Some of the common metrics that COEs concentrate on are order-to-cash cycle time, support-to-touch labour, inventory turnover and on-time delivery.

Metrics should be business-focused, not IT-focused in order for the COE to reach its goals.

Glen KrynauwAssociate Director, Deloitte Consulting (Pty) Ltdgkrynauw@deloitte.co.za

Nivendra RoyAssociate Director, Deloitte Consulting (Pty) Ltdnroy@deloitte.co.za

Sharryn van TonderSenior Manager, Deloitte Consulting (Pty) Ltdsvantonder@deloitte.co.za

Leonie MulhollandSenior Manager, Deloitte Consulting (Pty) Ltdlmulholland@deloitte.co.za

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