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8 reasons to consider a COE (Part 2)

February 11, 2010

[A quick editorial note: Thanks to Rick Tucker, who just pointed me to John Mancini’s
“8 Things” page
—a great resource that, thankfully, doesn’t appear to have an entry yet for
8 reasons why you should consider a COE, although it has just about everything else covered…I highly recommend it.]

This is part two in a three-part series of posts looking at compelling reasons to consider a COE. In the last post, we examined how COEs can help reduce knowledge management risk and improve the quality of service delivery. In this post, we’ll see some ways that COEs can help organizations develop core competencies, retain employees, and create organizational linkages.

#3. To Develop a core competency around a strategic capability for the enterprise

For all sorts of reasons, organizations find it necessary to develop or improve core competencies. The advent of new technologies, the arrival of fresh competition, mergers and acquisitions, the opening, closing, or shifting of markets—all of these (and more) require organizations to identify the gaps in their enterprise capabilities and do what it takes to close them.

As an example, consider the seismic shifts in the corporate marketing function due to technology and market changes over the last ten years. These changes initially drove organizations to develop their internet marketing capabilities and more lately have pushed them to develop (or at least begin to develop) Web 2.0/3.0 marketing capabilities. The cross-functional nature of the capabilities required to keep pace with these shifts poses a serious organizational challenge: how to get marketing, sales, creative services, IT, customer service, product development, and so on, aligned and working together around a moving target like collaboration or social computing for the enterprise in order to deliver business value?

COEs can help organizations facing such challenges develop strategic capabilities in a number of ways. They foster the intake of new knowledge and the sharing of that knowledge across the organization; they bring together a diverse collection of subject matter experts from different functional areas to work together; and they can transform a capability from a collection of local, siloed, ad hoc efforts to a coordinated, enterprise-level, and strategic one.

#4. To foster professional growth and development among employees

Pursuing HR as a strategic capability has shifted from the far left of the adoption curve to somewhere near the middle. It’s no longer a bleeding edge differentiator (as it was for firms like GE in the 80s and 90s), but is quickly becoming a commodity, particularly for organizations that rely heavily on knowledge workers. Given this, organizations face the challenge of hiring and retaining top talent, and providing opportunities for growth is part and parcel of a successful employee retention strategy.

COEs can contribute signally to the success of an employee retention strategy. They bring together employees from around the organization across functional, reporting, and geographic lines; they provide the opportunity for employees from different levels to work together closely on a range of initiatives, from writing policies and procedures, to service delivery, to monitoring and governance activities; and finally, they provide the organization a way to discover and nurture talented employees outside of  the usual channel of performance reviews.

#5. To overcome an overly vertical or siloed organizational structure

As organizations become increasingly complex, both in terms of sheer size and global reach, the ability to create linkages between and across functions, geographical areas, and reporting hierarchies is critical to success. Doing so shortens product development cycles, improving time to market; facilitates a 360 degree view of customers, partners, and vendors, improving customer satisfaction and maximizing procurement dollars; and allows an organization made up of a loose collection of international properties to transform into a truly global enterprise.

For example, consider a company that began as a large national manufacturing firm, but, through acquisition, has grown into a “global” organization, i.e., it now owns properties around the world that not only augment its manufacturing operations, but extend them backward and forward in the supply chain, to raw materials suppliers and logistics support. Differences in language, national and organizational cultures, technologies and processes, not to mention simply geographic distance, all make it difficult for this “global” organization to realize the full benefits promised by its acquisitions…or even to offset the acquisition and transition costs in order to break even.

Of course COEs aren’t the only way to create the kind of organizational linkages that help organizations overcome the challenges of going global, but they have some advantages over other methods (such as adding a layer of global CXOs over the top of regional CXOs or creating an executive leadership layer organized around cross-functional processes):

  • They’re flexible—because COEs don’t typically require changes to reporting relationships, they can be deployed and decommissioned with agility.
  • They’re adaptable—COEs can be created with wide variances in scope, from purely advisory centers of best practices, to full-fledged governance bodies with the authority to enforce policies and standards (and everything in between).
  • They have lots of beneficial side-effects—over and above the organizational linkages they enable, COEs positively impact knowledge management risk, service delivery, employee retention, strategic capabilities, and IT performance (see next post).

In my practice, the organizations that have succeeded in truly going global are those that use COEs in conjunction with the other techniques for creating organizational linkages. In this way, they pair the flexibility and adaptability COEs provide with the benefits that more traditional approaches (like appointing global CXOs) bring to the table.

In the next (and final) post, we’ll take a look at some of the ways COEs can help organizations improve their IT capabilities, both in terms of service delivery and the relationship with the business.

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