5 Rules for ERP Success
Understand the benefits. “You should not define an ERP’s success by whether it’s delivered on time or on budget,” says one CIO from a global manufacturing company. “You need to focus on the benefits of the implementation and whether those benefits are realized after go-live. All too often, companies spend huge amounts of money and then forget about the payback.”
Don’t clip the tail of the project. Many companies fail to include "leave behind" resources — both in IT and in the business — when they plan their ERP implementations. “With ERP, processes change, things are different, and the senior who knew his way around the campus [in the old system] is now a freshman who needs a lot of support and guidance,” says a CIO. “You must allocate resources to focus on process and system improvements as the implementation team moves on to another site. Businesspeople on the implementation team are always in a rush to return to their ‘old’ jobs, but when that happens, there’s no one left to make the new system better.” Or as another CIO put it, “Go-live is the start, not the end, of a true implementation if you want to achieve the positive outcomes you’re after.”
Don’t underestimate the importance of master data governance. Data, data, everywhere, but not a drop that’s clean. “It sounds so mundane,” says a CIO friend, “but master data governance is critical to driving ongoing value from a global ERP.” Some companies spend a lot of time and money aligning processes, but not enough on cleansing and managing the data. “It is all about the data,” says another CIO. “Bad data equal bad ERP results.”
Prepare for the dip. The best-laid schemes of mice and men, as Robert Burns knew, “gang aft agley,” which, if you’re not familiar with Scottish dialect, means your business is bound to suffer a bit during the afterglow of a go-live, bringing, as he wrote, “grief and pain for promised joy.” Rather than be taken by surprise, why not plan for it? “Despite best efforts, there will typically be a business-performance dip in the first month or two post-go-live as the business learns to operate within the new model,” says a CIO. “Having well-thought-out contingencies and a ‘hypercare’ support model in place will minimize the dip and ensure that the organization exits from that dip as rapidly as possible.”
Don’t overload the ERP. “Perhaps the most critical thing for a CFO to understand is that ERP programs are like replacing the wiring in your house,” says Mamasource CEO Marc West, who has spent time in CIO, COO, and CEO positions. “You already have the house [your business and its operations] but you are threading in a new core element. Make sure you don’t overload the job with a bunch of wonderful, amazing, bright shiny new things. Be sure that your business today can run against current performance metrics before you add in process reengineering, new features, and deep analytics.”
5 ERP Errors CFO’s can avoid
Selecting the wrong product. Unbelievably, companies often select ERP packages that are not commonly used in their industries. In addition to looking for the right balance of reliability and flexibility, the ERP vendor you choose should have a long list of happy customers in the same industry as your own.
Locating program leadership too low in the organization. ERP is a game-changing project that requires leadership in the upper echelons. I have had first-hand experience recruiting ERP program leaders for management teams who then want to shove those leaders three rungs below the executive committee. At the midmanagement level, these directors do not have either the visibility or influence to lead. Consequently, the program suffers.
Assuming that ERP is an IT project. I’ve said it before and I’ll say it again: ERP is not an IT project; it is a business project, and it requires more than business sponsorship. It requires business leadership, not to mention resources, commitment, and engagement. If your CIO is the only executive giving ERP project updates, you are headed for trouble. And if your CIO agrees to launch an ERP project without a true and committed executive partner from the business, you have the wrong CIO.
Ignoring the talent question. Sometimes I tell clients, “Finding SAP talent is easy. Just add a zero to their monthly pay.” (I’ve noticed that clients almost never laugh at this joke, so I’m thinking about retiring it.) Ask yourself, Can your company effectively recruit a pool of talent that has experience in your specific ERP package? Can you pay them enough? Can you attract them to your company and your neck of the woods? I have seen companies push back their ERP launch date because recruiting those rare birds with the right blend of industry, technology, and leadership experience is much harder than they anticipated.
Underestimating how long an ERP will take. It is rare for a company to complete an ERP implementation (or upgrade) in the time they budget at the start. This is one formula for estimating an implementation time line; there are others. But whatever formula you use, you have to build in a cushion because, if history is a guide, you are bound to need more time.
