As much as we’d all like to think, “It won’t happen to me,” disaster can and does strike when least expected. In fact, just looking at recent news coverage in the technology sector, anyone could conclude that ERP failures are distressingly common. Yet, despite the obvious need for business contingency planning, many organizations do not have contingency plans in place for responding to IT crises or ERP failures.
There are many reasons that organizations do not bother with business continuity management (BCM). This kind of planning can be costly and time-consuming – an obvious discouragement during an ERP implementation – and upper management may lack the bandwidth, knowledge or initiative necessary to assess or comprehend the risks associated with implementing a new ERP system. While BCM may seem like an unnecessary and pessimistic insurance policy, all organizations need to consider the variety of threats facing businesses (both IT-related and non-IT-related) and weigh the likelihood that a crisis will happen to them.
Today, the most common threats to businesses are power outages, extreme weather and IT failures – all of which happen with regular occurrence. Such crises account for millions of dollars of lost revenue among businesses globally, (due primarily to significant downtime and lost productivity), and can strike even the most venerable and stable corporations in the world. The risk profile of organizations that implement ERP systems without a sound selection strategy, third-party implementation expertise or independent verification and validation (IV&V) assessments is even higher.
To increase your organization’s chances of recovery from a crisis, it’s important to ensure that BCM accounts for a significant portion of the business process management efforts undertaken during ERP implementation.
Following are several characteristics of a solid business contingency plan:
- Comprehensive – Your contingency plan should address any and all possible disruptions to your business, no matter the scale or source. These include disruptions during and following ERP implementation as well as ongoing threats such as natural disasters, malware and hackers. Your contingency plan should also address every aspect of your business that could be affected by such disruptions.
- Organized – Possible disruptions should be prioritized by level of impact so your organization can put the majority of its energy into preparing for the most significant crises. Similarly, business processes should be prioritized by level of importance so your organization can determine measures to keep these most vital functions running with or without technology.
- Accessible – Hard copies of your contingency plan should be available to everyone in the organization who may need access. It should be written in a way that communicates exactly what role each employee will be expected to perform in the event of a crisis. All staff members should have at least a basic understanding of your organization’s vulnerabilities and dependencies as well as your organization’s recovery plan.
Once your organization begins to realize the pervasiveness of ERP failures and operational disruptions, it will not want to take the risk of leaving the integrity of its business processes up to chance. To learn more about how Panorama helps organizations assess risk, visit our ERP Project Recovery page.
Businesses that implement ERP systems have nothing but good intentions when deciding to reengineer business processes and alter IT infrastructure. Unfortunately, employees sometimes overlook this good intent and focus solely on the consequences: new business processes means they must learn new procedures which means they must fumble through unfamiliar territory to get their work done.
Employees will go to great lengths to defend and protect the privilege – or, as some may call it, the “right” – to convenience and familiarity. In response to unwelcome changes, employees may choose to sabotage an ERP implementation by stubbornly sticking to old, inefficient processes. As Panorama has seen time and again, internal sabotage is no laughing matter.
Refusing to adapt to the new system is not even the worst employees can do. Some employees – especially those that feel disconnected to their colleagues – aim to do much greater damage to an ERP implementation and the company as a whole.
The boisterous employees are the ones to watch out for.
These type of employees will openly voice their discontent to their peers but clam up around the people who actually have the power to help them. By sharing concerns with fellow end-users who are in similarly powerless predicaments – i.e., they are expected to adapt to the new system but have no real decision-making power for the project as a whole – they spread negativity like a virus. Change-resistant employees who also happen to be outspoken can be a great hindrance to ERP success.
But widespread resistance to change does not necessarily have to lead to ERP failure. Effective organization change management (OCM) can empower employees to direct their questions and concerns to the right people in the form of constructive criticism (as opposed to bitter comments spoken behind executives’ backs).
To prevent internal sabotage, OCM plans should focus on training managers to recognize signs of employee unease and emphasize the importance of making time to speak with particularly discontented employees one-on-one. Because traditional OCM activities such as vigorous communication and open-door policies are often not sufficient for engaging severely distressed end-users, managers must make the effort to directly approach the end-users and facilitate discussion.
Another technique for reducing occurrences of internal sabotage is to foster a team-oriented culture. Reminding employees that “we’re all in this together” can humanize the project team, which makes employees less likely to cause the team “harm” by undermining the ERP initiative. Humanizing the project team and executives makes them seem more approachable and employees will be more likely to voice their concerns to the people with the power to make a difference.
Internal sabotage can be intentional or unintentional. Not all discontented employees intend to cause serious harm to the company, but unfortunately, this a common side effect of selfish, retaliatory behavior. When employees refuse to adapt to change or decide to spread negativity throughout the organization, they put the company at risk for slow implementation, decreased business benefits and ultimately, ERP failure.
Learn more about Panorama’s independent ERP consultants’ experience managing employee resistance by watching Panorama’s on-demand webinar, Organizational Change Management: A Critical (and Often Overlooked) ERP Implementation Success Factor.
When an ERP implementation fails, it’s easy to blame the software, the project manager or the ERP consultants but there are less obvious causes.
Think organizational change management. This ERP implementation success factor is all too often overlooked or underutilized, but smart companies know that it is instrumental in changing, rebuilding and sustaining a strong, collaborative corporate culture.
Is your staff motivated? Do employees feel respected? How open are employees to change? Having answers to these questions (and many more) is key to understanding your current organizational culture and what you would like it to look like in the future.
ERP software thrives in companies where leadership is strong and where corporate values are demonstrated in all of the organization’s endeavors. Organizational change management can help leaders communicate these values with employees and deliver messaging that keeps them focused on the future – not stuck in the past.
Following are four characteristics of organizational cultures that can help affect the alignment necessary for ERP success:
- Collaborative – ERP systems break down silos between departments so it’s important to promote collaboration before the new system arrives to ensure users are prepared for the new business processes. Collaboration between departments is essential because ERP systems are designed to ensure continuity of data by making all data available across the organization.
- Enthusiastic – Employees with a positive attitude will be the first to embrace change, and your organization should recognize and reward these change agents to draw attention to the type of culture it is aiming to achieve. When hiring new employees, look for signs of a positive attitude to ensure that they will fit within your ideal organizational culture.
- Visionary – Companies should hold regular meetings to discuss the larger purpose of the organization and maintain focus on what’s next. During these meetings, leaders should also discuss training needs and define the gaps between current business processes and ideal business processes.
- Unrelenting – Structuring a strong organizational culture should be a continuous process, which means it should be happening before, during and after the ERP implementation. Your organization should always be moving forward. The best way to decide the next step is to establish benchmarks and best practices from competitors and clients within your industry.
It’s been proven time and again that for a successful enterprise solution implementation, an organization should always place emphasis on organizational change management. This essential budget item helps establish a positive and proactive organizational foundation for the new ERP system. To learn more about successful ERP implementations, view our on-demand webinar, Five Key Organizational Change Management Challenges With ERP Implementations.
ERP implementations more often than not run counter-intuitive to lean concepts. While lean and Six Sigma cultures focus on reducing waste and non-value-add activities, most ERP implementations are bloated with inefficiencies and cost overruns. For example, the average lean six sigma initiatives strive for zero waste and defects, while the average ERP implementation costs $10.5 million, takes months longer than expected, and fails to deliver tangible business improvements – or reductions in waste, to speak in lean terms. Further, the complexity of SAP, Oracle, Microsoft Dynamics and other leading ERP systems contribute to the watered-down lean results experienced by most organizations.
The irony is that a good number of organizations replacing ERP systems are manufacturing companies that have mastered lean concepts, embrace a Six Sigma culture and have Six Sigma black belts on staff. Many of them have successfully squeezed inefficiencies and costs out of their operations, but even these types of organizations have difficulties implementing ERP software with the types of results one would expect. Our experience and research shows that misguided decisions and poorly managed ERP implementations can easily derail a culture of continuous improvement and lean behaviors.
So how can CIOs and COOs incorporate lean concepts into their ERP initiatives? We have found in our ERP implementation and expert witness experience that most lean organizations do the right things when it comes to lean, but they unknowingly make mistakes in their software implementations that undermine those initiatives. Here are a few pitfalls to watch for:
Beware of the “best practices” trap. While most modern ERP systems will make spreadsheet-driven or antiquated IT operations more efficient, they hardly enable lean results. The “best practices” urban myth is one of the disruptors of lean cultures in that a) there is no such thing as “best” practices, even though it’s a great selling point for ERP vendors, and b) software vendors define best practices as what’s best for their software — not necessarily what’s best for your lean operations. Come to think of it, I don’t recall the last time I met a software developer or technical consultant with a lean or Six Sigma background but they are the ones who define these alleged best practices. Regardless, best practices become less relevant as you move up the value chain to focus on core competencies and differentiators that give your organization competitive advantages.
Don’t let the software drive your business. Letting your chosen enterprise solution dictate to you how you’re going to run your business is another selling point that sounds great in theory but simply doesn’t work well in reality. If you truly are a lean organization and have spent years perfecting and fine-tuning efficiencies and quality, it is very likely that your operations are more efficient than most off-the-shelf ERP systems. If pre-configured ERP solutions (another urban myth, by the way) really enabled lean processes, then wouldn’t most companies with ERP systems be enjoying world-class operational utopia? The fact that most experience the opposite after their go-live is a testament to the fact that software should not be driving your business. Instead, your business processes and requirements should be clearly defined so that you can find the software that best fits your operations, and in many cases, so that you can customize the software the way you need to in order to preserve the efficiencies you’ve worked so hard to develop.
Right-sizing your ERP implementation budget may lead to higher long-term costs. Lean practitioners typically focus on reducing waste and cost wherever appropriate, including when it comes to their ERP implementation. While ERP projects are often fraught with waste and inefficiencies, those challenges typically have more to do with focusing on the wrong activities and dedicating too little time to the more important critical success factors. Cutting activities such as organizational change management or business process management – both proven prerequisites for ERP success – may look like a good financial decision on paper but, in reality, omissions in these areas will actually increase total time and costs and decrease business benefit realization.
When it comes to incorporating lean concepts into your enterprise software projects, what you don’t do on your ERP implementation is just as important as what you do. These three tips will help ensure that the decisions you make and the way you manage the ERP project don’t undermine the results of years of effort to make your organization as lean as possible.
Learn more about ERP success — and failure — at next week’s webinar, Lessons Learned From Failed ERP Implementations (September 6 at 10 a.m. MT).
One of my favorite books is The Shock Doctrine: The Rise of Disaster Capitalism by Naomi Klein. The book details the psychological and cultural aspects of societies in relation to systematic change. According to the author, it is extremely difficult to impose systematic cultural and economic changes within a society without profound “shock and awe” or some sort of significant event following the implementation of sweeping changes. Running the risk of oversimplifying the tactical roadmap Ms. Klein lays out in the book, the idea of “shock and awe” is that there has to be a profound event in which members of a society set aside current beliefs or traditions, whatever they may be, and accept the implementation of a radically different economic system with “eyes wide open” in order to achieve the desired benefit realization of the given theory. While Ms. Klein references many instances of historical global economic events, a thought-provoking parallel certainly can be applied to successful ERP implementations.
ERP implementations in large domestic or international organizations are arguably one of the hardest technical and organizational change initiatives that a corporation can embark on. If an ERP system on this scale has a chance of being implemented correctly (i.e., realizing the largest possible amounts of desired benefits), there has to be a significant shift in how employees look at and process the act of “doing business.”
At Panorama, we’ve created our own “shock and awe” in the form of an exercise called Executive ERP Boot Camp. Our consultants provide this service for an organization prior to an ERP implementation to lay to rest the status quo. Leveraging the sobering notion that it’s a flip of a coin if an ERP implementation will be successful (as detailed in our 2012 ERP Report), we draw a direct parallel from Ms. Klein in explaining that if the perceived benefits of a new ERP system are to be achieved there has to be acceptance from the highest level that significant changes are going to have to transpire prior to implementation. This is a cornerstone of any organizational change management program and thus we take great measures to ensure that the executive team understands that business process management is a sweeping change that has to happen before the software is rolled out on any scale.
So what is business process management and how does it relate to ERP software? Simply put, business process management entails business process mapping, business process improvement and business process optimization. At Panorama, the output of business process management is what we call an ERP business blueprint or roadmap for how an ERP system will most effectively enable the organization to realize the maximum possible benefits. During the process of creating and adopting this blueprint, business processes, roles and responsibilities from top to bottom of the organization, and the strategy behind resource allocation are all evaluated and refined.
While business process management is a monumental and stressful undertaking for any organization, an ERP implementation should be attempted once and only once the business is prepared to effectively and efficiently receive the software.
Panorama provides personalized on-site ERP Boot Camps for our clients as well as three-day Boot Camp training sessions in Denver for all interested parties. Find out more about our next ERP Boot Camp, which will be held September 12, 13 and 14.
Written by Jason Henritze-Hoye, Senior ERP Consultant at Panorama Consulting Solutions.