ERP: An Executive Reputation Killer
Thursday, April 11, 2013
Enterprise Resource Planning (ERP) is a widely adopted technology that is seen as the must have for business to integrate the different aspects of the business for fast effective decision making and for manufacturing, construction, mining, distribution companies a tool to simulate different business scenarios for likely impact of decisions made.
Sounds great but there is a catch. Somewhere between 55-70% of organisations attempting to implement the technology end up with some form of disaster on their hands! Cost overruns averaging 25% as a minimum, some much more, of original budget, software to support the technology doesn’t fit or doesn’t work when the system is turned on, scope creep during the project, delays in the go live date, internal disruption and confusion and losses impacting the financial results when the system is turned on and potential bankruptcy are the traps along the way.
Senior executives who delegated the ERP project to the computer people or another executive to oversee the project are now under enormous pressure to explain to their boards and shareholders what went wrong and how did this happen on their watch.
With many survey statistics showing the level of poor outcomes from ERP projects it is reasonable to make the assumption that most of you reading this blog will have, have had or are having ERP problems. Whilst ERP systems failures attract the usual blame game internally in the end the CEO or most senior executive will end up carrying the responsibility.
There have been many reputations and careers ruined off the back of a disastrous ERP project, all of which could have been foreseen and avoided. For 35 years one of the major reasons given for ERP failures is the lack of involvement of senior executives in ERP projects.
ERP is not a computer technology project. ERP is a business change process that must be driven by top management and not simply delegated to others in the organisation who do not have the authority to cross departmental boundaries. When issues blocking progress are raised that impact the outcome of ERP that are beyond the authority of the project manager or team to resolve then management must be involved to push through these barriers.
Unfortunately, too often, the issues are put in the too hard basket and remain unresolved and shortcuts are taken to go around the problem resulting in potential downstream problems and disasters when the system is turned on to live running. ERP is a change process that requires senior executives to engage in the detail from the very outset of the project. Failure to provide management leadership and detailed oversight of the ERP project leaves the project team short on authority and prone to too many compromises during the project implementation process.
A prime example is setting a budget based on some figure without actually determining the quantum of work to be done. Data clean-up activities not researched before setting the budget can over-run in both time and money end up being incomplete in the interest of keeping the schedule on target only to find when the system is turned on the data coming out of the system is incorrect resulting in chaos.
We are frequently asked to analyse ERP projects to determine the cause of failure. Whilst the blame game points the finger in many different areas the involvement or lack of involvement of senior executives is an issue that impacts project outcomes.
When projects go badly wrong it is too late to talk about what should have been done. The time to act is before and during the ERP project and that is the best way to keep reputations and careers intact.
Assess your project against the 26 points for successful ERP outcomes. Contact us for
details. It could save you a disastrous ERP outcome and your career!