For some reason, we seem to have a morbid fascination with poorly conceived, poorly executed or otherwise disastrous ERP projects. High-visibility projects that involve market-leading ERP vendors and Fortune 500 companies make for the most tantalizing reading, particularly if they involve career carnage in the executive suite or public defections by outraged customers.
One negative effect of these public failures is fear and reluctance on the part of executives and company management in general to become involved with anything associated with ERP. That is unfortunate because ERP, carefully selected and properly implemented, delivers great benefit to almost any enterprise.
The clear majority of critical issues associated with difficult ERP implementations is rooted in the very early stages of the project. ERP is somewhat like a space mission. If you don’t get the launch right, the rest is meaningless.
To get past the fear and misunderstanding of ERP selection and implementation, I’ve put together this brief discussion of five common and often disastrous blunders that are common to many ERP failures. We will also look at strategies to avoid or mitigate these common missteps.
No. 1 – Buying and Selecting an ERP System Based on Name or Price
In the old days of mainframe computing, there was an adage often quoted: “No one was ever fired for selecting IBM.” At the time, IBM was so big, so successful and so dominant in the market that there was a feeling of assurance, security and safety in choosing that vendor over any one of their few competitors. As long as you did things “their way,” everything would work out fine.
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That will not work in the world of ERP. There are so many systems available from so many vendors offering so much variety in terms of feature and functionality that restricting the selection to vendors with recognized names is irresponsible in the extreme. The challenges customers hope to address via ERP are equally diverse, and the selection process should be driven by the specifics associated with mitigating those issues.
Chris Doig, in his May 2015 article, identifies “selecting the wrong software” in his list of 18 enterprise software selection risks. Shortcuts are the primary cause for these poor choices. The only acceptable method for avoiding this is implementing a “comprehensive evaluation and selection analysis” to identify specific needs to be addressed and the features needed to meet those needs.
If you are looking for innovative solutions provided by companies with cutting-edge ideas, you are more likely going to find your match among smaller, newer companies. The big, old-name vendors are more concerned with preserving their market positions and stock prices than in innovating new solutions.
As for price, understand from the beginning that ERP is not inexpensive. How could it be? You use ERP to run your entire enterprise. The pricing discussion must be had in terms of value delivered and not so much around which vendor offers the lowest per-seat price.
No. 2 – Failure to Build Executive-Level Commitment, Participation and Follow-Through Into Your Implementation Plan
Lack of commitment by top management is cited more frequently than any other single factor as the primary reason for failed ERP implementations.
ERP systems touch every level of the organization and every vertical within the organization as well. Virtually every implementation plan will incur resistance, pushback and active undermining of the implementation process at some point along the way. Turf wars, political rivalries and perceived threats to individual careers will inevitably surface during the project. Without commitment by top management, these factors are nearly impossible to overcome.
These cannot be resolved by a committee of department managers or third-party project teams. Executive involvement, from the start through implementation and beyond, must be overt, active and constant. The presence of the “big stick” underwrites the credibility of the system and vendor selected as well as the implementation plan itself.
Involvement by the executive suite should not just be cosmetic. Specific project milestones should be agreed upon in advance with progress reports and completion sign-offs performed by the management team.
This is not to say that mid-course corrections will not be needed; to the contrary, they are nearly inevitable. Executing those corrections effectively and quickly will likely require executive backing.
No. 3 – Not Taking Ownership of the Implementation
This one is easy. There is one rule that should be inviolate in the implementation process:
It is your implementation; take ownership of it.
If you want to drop a few pounds, quit smoking, cut back on drinking and adopt a healthy lifestyle, you may be tempted to look for a doctor or service to help you out with the plan and working it into your daily life. But, there is no one, no service or no guru out there that can do it for you. Ultimately, it is you who must weather the hunger pangs, endure the nicotine cravings, stop at one cocktail and take the daily walk to accomplish your goal.
The same is true with ERP. Regardless of promotions offering “turnkey” implementations, there is no such thing. It is your system, your company, your pain and your problems that must be addressed. It must be your implementation process.
The more you involve your own employees the better. People understand systems they participate in building. They know how things work because they were there when the system was designed and built. When the “go-live” day comes, your employees will know exactly what is going to happen and how things will work.
Third-party implementation teams can be extremely helpful. But, without your input, when confronted with choices, they will pick the choice most expedient to their own needs.
Set it and Forget it
A popular consumer product — a countertop oven — advertised that you could “set it and forget it,” meaning that once the time and temperature were set and the food was properly arranged within, you could go about your day without another thought. At dinner time, your meal would be miraculously ready. ERP doesn’t work that way.
ERP is a never-ending project. ERP systems are replaced because they are no longer aligned with the host company, its activities, goals or processes.
New ERP systems will ultimately be cast out for the same reason. It is interesting to note that there are huge amounts of data available to influence your decision to buy or select a new ERP system. There is comparatively little information available about extending the lifespan of your existing system.
But, the simple fact is, the useful lifespan of the system can be extended for many years by maintaining an ERP team who evaluates, reports on and tweaks the system on a permanent basis. Michael Burns alludes to this in the paper ERP Systems for Life. As he suggests in the “how to do it” section, the business process improvement project should resemble the same analytical process used during implementation.
The composition of the team should reflect the same interests as those on the implementation and selection teams. The system cannot operate in a vacuum. The natural tug of war for resources between assorted entities within the organization should be reflected in the decision-making processes regarding the ERP system.
For example, if the company decides to emphasize business-to-business product sales and not grow consumer product sales, that decision should be reflected in the attentions of the ERP team. Time and resources needed for the B2B product lines should have priority over the consumer business processes served by the ERP system.
Some specific processes or steps would include ongoing training and auditing usage, particularly by senior management. Formalized regular system reviews with performance reporting allows for long-term comparisons of data tracked in a variety of relevant categories. IT must be aggressive in maintaining the currency of the system in terms of recommended updates from the vendor.
That is how the ERP system is kept in alignment with the business at large.
No. 4 – Staffing the ERP Team With the Wrong People
I doubt that there are many folks out there who are likely to jump up and shout, “Lunch is on me! I’ve been chosen for the ERP selection team!” The fact is, mentioning the three letters ERP is likely to cause most folks to run and hide.
This is where the second blunder, no executive commitment, is manifestly evident. Someone decides the company needs a new ERP system and starts looking for help. It you don’t have buy-in from the C-Suite, you will not get commitment from anyone. Time is precious, and time is what most folks have the least of to donate to your project. This is particularly true of those individuals who are needed most in the ERP selection and implementation process.
First, let’s address the team responsibilities. The team should assemble and evaluate several candidate systems and vendors. A recommendation should be provided to the executive committee. After the selection is made, the team should transition into an implementation oversight team. Finally, once the implementation is complete, the team should transition into the standing ERP team. Personnel may change during each of these transitions. However, constancy at the senior-management level is highly desirable.
The team should have an executive sponsor; someone with sufficient clout to go to battle and win on issues that relate to the success of the project. Following that, the team should have permanent representation from Finance, IT, Marketing, Sales, Engineering, Operations and Manufacturing.
Rick Carlton provides guidance on what the team structure should look like. He sees a steering committee to manage the high-level goals and strategies with upper-management representation across the entire organization. Following that, a project management team directs the actual installation and primary portion of the implementation. This team is heavy on IT, Production and Finance representation. Finally the implementation processes are assigned to individual teams for each line of business.
There should be representation from all levels including clerks, workers, supervisors, managers and directors. These folks are going to need to be happy with the decisions made. They all need to be heard to ensure that the project is successful.
This list is not meant to be all inclusive. But, these five blunders are frequent enough that mitigating them will go a long way toward achieving a more successful ERP implementation.
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