ERP failures are all over social media these days – from the SAP failure at National Grid to MillerCoors’ recent ERP lawsuit. How do you avoid the same mistakes made by these high-profile organizations?
Most mistakes made during ERP implementation don’t become evident until later – usually when it’s too late. With an understanding of common implementation mistakes, you can develop a project plan that prevents ERP failure.
Our experience as ERP expert witnesses has shown us how some of the biggest ERP failures transpire. In most cases, the projects involved very little change management and business process reengineering. Instead, organizations focused on finding the top ERP systems based on what their competitors were using. These organizations implemented new ERP software but did not improve business processes. Ultimately, the project failed.
Here are nine mistakes that could mean your ERP project will fail to meet expectations:
Common ERP Implementation Mistakes
1. Not Involving Executives
Your executive team should be involved in key project decisions. We’re not just talking about budget approval. We’re talking about ongoing decisions about project goals and changes to business processes.
2. Treating the Project Like a Technology Initiative
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3. Not Developing a Business Case
You won’t achieve what you don’t measure. In addition to justifying the ERP investment, a business case can help you measure business benefits during and after implementation. It aligns stakeholders around project goals and sets realistic expectations. Do you want to improve your organization’s customer service? Include this in your business case by quantifying the improvements you expect.
4. Not Establishing Strong Project Governance
ERP project governance ensures the project team makes decisions aligned with the project goals. Use a project charter to assign certain team members the responsibility of approving requests, such as customization requests. Executives and other employees may make requests that increase project scope and cost. If you have strong project controls, you will only approve requests that align with the organizational vision. This will reduce the risk of budget and timeline overruns.
5. Setting Unrealistic Expectations
Most organizations spend more time, money and resources on ERP implementation than they expected. They expect implementation will cost as much as their ERP vendor or systems integrator claims. However, most vendors don’t account for costs, such as customized training and communication.
6. Adhering to Budget and Timeline Expectations
Even the most realistic expectations may need adjustment throughout the project. For example, change resistance could be a bigger issue than anticipated. While you want to stick to your original budget, you also want people to adopt optimized processes. In cases like this, where you can justify the long-term gains, you must be willing to adjust your budget.
7. Allowing ERP Software to Define Your Future Processes
While most backend processes can be defined by ERP system functionality, other processes should be redesigned before software selection. For example, if you want to improve your supply chain, you should identify pain points during your requirement gathering workshops. Clear business requirements ensure your chosen software solutions align with your organizational goals. These requirements give ERP vendors a framework for their software demonstrations.
8. Neglecting Change Management
Most organizations don’t understand the impact end-users can have on ERP success. As a result, they don’t invest in change management activities, such as regular communication. To avoid this mistake, focus on overcoming change resistance. Develop a change management plan that includes a sponsorship roadmap, coaching plan and training plan.
9. Misusing ERP Consultants
While ERP consultants are helpful for guiding you in ERP best practices, too much reliance on consultants can backfire. Find the right balance by frequently seeking advice while ensuring your organization has the final say on important decisions. Your ERP consultant should help you develop a center of excellence so you’re not dependent on consultants in the long term.
How to Assess ERP Risks
Avoiding these mistakes will help you avoid ERP implementation failure. However, detecting these mistakes isn’t always easy. Small mistakes often aren’t noticeable until they accumulate into bigger problems. If you’re immersed in the project details, you may not be able to objectively assess risk.
Here are three tips for assessing project risks:
1. Find Unbiased, Third-party Resources
It’s important to involve someone outside of your organization as their view will be objective. This person should have experience conducting risk assessments for projects similar to yours. Assessments should be conducted regularly to identify probability, severity and impact.
2. View Potential Risks From All Perspectives
There are all different types of risks, so it’s important to assess your project through many different lenses. Risks can relate to people, processes or technology. Whatever framework you use, it should provide a comprehensive analysis of your project.
3. Develop a Risk Mitigation Plan
Most risk assessments identify more risks than you can address with existing resources. Prioritize risks so you can focus on those posing the most threat to your project. For these high priority risks, create a risk mitigation plan and contingency plan.
Avoiding ERP Failure
Developing a project plan that doesn’t commit the common mistakes made by most organizations will help you achieve ERP success. However, even with an effective plan, you will experience issues along the way. That’s why it’s important to conduct risk assessments throughout your project. The sooner you detect risks, the sooner you can adapt your project plan to mitigate these risks. For a thorough risk assessment, consider hiring an ERP consultant to benefit from their lessons learned.