The Road to Failure

As per industry estimate, more than 29% of ERP implementations fail to achieve even half the planned business benefits. The implementation problems these ERP systems face are driven by the complexity, risk, and integrated nature of the business processes they automate.

Successful ERPs not only automate the businesses but also take care of the complex requirements with ease giving you time and energy to focus on your core strengths and strategic areas. This is more so because ERP software is finally being made for small businesses and smaller products launched targeting smaller and medium businesses pockets and ease-of-use. Software such as HRP for HR & Payroll has been making their powerful product suitable for a start up company’s needs and budget. ERP systems today touch almost every aspect of a company, so whether it is a completely new system, or just a major upgrade, these common seven pitfalls companies can avoid:

  1. Doing it right in the first place.

Even before implementation the company is dilemma whether they really require it or not. Often large ERP implementation projects fail before they even start. Companies unhappy with their current system become convinced their reporting, integration, or efficiency problems lie in the software they are using. Convinced the grass is greener on the other side of the fence, they embark on a large, risky, and expensive ERP replacement project, when a simple tune-up of their current system, or a small add-on application, such as a better reporting system or employee portal, would address the problem at a fraction of the cost. Even a reimplementation of the same software is usually less costly than switching to another software vendor.

Once an organization makes the decision to implement a new ERP system, the first step is to have a clear definition of success. Often, lack of consensus on the problems being solved, the outcome desired, or the specific financial justification of the project, leads to challenges later controlling the scope and maintaining executive sponsorship. Having a clear destination means defining the important business processes, financial benefits, and deadlines up front and making certain stakeholders agree how to address them. Without a strong definition of success, the end point becomes a moving target.

  1. Mindset

Many companies, big and old enough have a dearth of quality ERP project managers and they put software project managers in-charge of ERP implementations. ERP implementation is a different ballgame from software development. The approach, the team composition and the skill set required are different. Many of them do not even differentiate between Business Analysts and Functional Consultants. Identifying candidates to switch to best practices, Process mapping/design/redesign and change management get a miss and create huge troubles in the end resulting in delays, chaos and failures.

A person experienced in project management makes lot of difference. ERP projects need their own dedicated, experienced project managers. Asking the executive sponsor or the business owner to also manage the project as a part-time adjunct to their main role means neither job will be done well. Not just a scorekeeper, the project manager needs to be an active leader pushing for accountability, transparency, and decisiveness.

  1. Not sticking to the plan

When implementing an ERP solution a series of activities are a must, starting with business process analysis, identifying process changes for better and best practices, identifying and engaging process champions to analyze and design the desired system. This all gets reflected in the plan along with roles and time-lines.

Some businesses don’t want to conduct a business process analysis. This leaves the vendor to guess what features would be most compatible with the company’s unique functions. Without a proper business analysis, it is impossible for the software vendor to know how your business operates. If the vendor doesn’t know how your business operates, it’s impossible for them to give advice or suggest recommended changes best for your business needs and how to appropriately tailor the software. Now is not the time to try to save money by skipping this step.

No matter what vendor you use, the cost of implementing a new business software is too great for your company not to use it to its fullest advantage. It’s a great time to seek guidance on what the best practices are for your business operations and what role your software will play in it. More importantly, this will cause mistakes to be made that will result in delays in the project as the implementer will have to backtrack and ultimately cost the company more money.

A detailed plan is very necessary for successful implementation. All projects start with some kind of plan. However, more times than not, the plan are not realistic, detailed, or specific enough. Companies build a high-level plan with broad assumptions or underestimate the amount of business change involved. Despite how obvious this sounds, it remains the most common mistake companies make. To be a good plan, it needs to identify all the requirements and the people who are going to work on them. It needs to be at a level of detail where a knowledgeable person can visualize the work, usually in work blocks of a few days. It needs to have a logical sequence of tasks, like leaving time in the schedule to fix bugs found in test cycles. Until you have a good plan, you really do not know when the project will end or how much it will cost.

  1. Wrong team composition

Most common blunder to happen is with resources projected. Having a solid understanding of the internal and external resources needed to complete the project is critical. For internal resources, understanding the time commitment needed from business users, typically in the Finance, Accounting, or Human Resources departments, is one of the most commonly underestimated areas. During critical phases of the project, it is often necessary to backfill the majority of transactional employees by bringing in temporary resources. This frees up the users of the new system so they have time for implementation and training. For external resources, having an agreement up-front with your consultants and contractors about the specific duration, skills, and quantity of resources needed is critical.

Too much dependability on consultant can make the team more redundant. Most ERP implementation projects involve consultants, for the expertise, best-practices, and additional resources they bring. While their outside experience is definitely helpful for a project, there is a risk that the company can become over-reliant on the consultants. The company needs to maintain control over the key business decisions, hold the consultants accountable, and have an explicit plan to transfer the knowledge from the consultants to the internal employees when the project is winding down.

Bringing in an outside consultant to help bridge the gap between the executives and the software vendors may sounds like a great idea until you realize the consultant knows nothing about your business, making them useless when it comes to giving the software vendor some background information to better the implementation solution. Again, if you want to get what you’re paying for in the implementation you’re going to want both team members and executives to contribute as much information as needed for a smooth and efficient implementation.

  1. Change Management

The management shouldn’t hurry to start using the tool without adequate training and hand-holding to users. Today’s modern ERP systems are being used by more and more personnel within a company. Beyond the Finance and Accounting departments, modern systems also cover procurement, supply chain functions, compliance, customer relationships, sales, and much more. If the system includes human resources or expense reporting, then essentially all employees use the system. Training hundreds or thousands of users, to the right depth, at just the right time, is no easy task. Leaving training to a small phase at the end of the project makes it very difficult for users to get the training they need to understand the system and have a positive first impression at the rollout.

If ERP systems are the nervous system of a company, then doing an ERP implementation is like brain surgery: only to be attempted if there is a really good reason and not to soon be repeated. Unfortunately, ERP implementation projects often fall victim to some of the same problems of any large, complex project. However, there are some repeatable problems that good planning early in a project can work to avoid.

  1. Document, document, document

Most of the ‘developers’ avoid documenting and get down to coding directly. Even their managers many-a-times push their teams to produce results without proper documentations or signoffs. QA is not for cosmetics only; it brings the two sides on the same pitch, same understanding, gets new innovations. Lack of understanding hits you when/where it hurts most, delaying whole process by bounds vitiating the environment. Every step should be systematic, participative, and measurable backed by prescribed set of templates, checklists and guidelines.

  1. Can’t get it together

Everybody is entitled to their opinion, and when it comes to what software to implement and how it should be implemented everybody in the organization has one. The financing department wants the software that is known for having stronger accounting features but the Sales department wants something with better CRM capabilities. Because of this, it is ideal to make sure everybody, all the stakeholders in the company are on the same page and understands the overall company goals. That way they can cohesively decide which software is best for the big picture and the bottom line.

It’s also best to have a Project Manager (PM) to make sure everyone stays informed about the project and keeps the team up-to-date on the status which will include internal tasks, vendor tasks and the timeline.

Would you like to learn more about ERP implementations for small or medium businesses? Write to me at atul@nexcen.in or consulting@nexcenglobal.com

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