ERP failure doesn’t happen overnight. Much like “death by a thousand paper cuts,” they are instead a culmination of a large number of seemingly small decisions and actions.
During our experience with ERP expert witness projects, we see firsthand how some of the biggest failures unfold. When combined with our proficiency for helping clients select and implement ERP software, these experiences provide useful lessons that can help project teams avoid some of the same missteps that doom so many other organizations.
ERP failures can often be traced back to common root causes that fester over time. When identified and remediated quickly, project teams will avoid failure and ensure their initiatives stay on track.
Below are 10 warning signs to watch for during your ERP implementation:
1. Unrealistic implementation project timeline, budget, and resources. In our recent 2018 ERP Report, we found that a majority of projects spend more time, money and resources than expected. This is often because expectations were unrealistic to begin with, which leads to a number of poor decisions later on. It’s important to add a dose of reality to any sales proposal or implementation plan that you might receive from an ERP vendor or reseller.
2. Lack of involvement from your executive team. It’s important that your executive team be involved in key decisions surrounding your project. Most understand the need for executives to approve budgets and project resources, but executive involvement needs to go beyond these peripheral functions. They also need to be involved in ongoing decisions surrounding key business decisions, changes to business processes and other strategic considerations.
3. Unclear business processes and requirements. Clear business processes and requirements provide the direction that every project team needs to be successful. Without them, projects are more likely to go over budget, take longer than expected, over-customize the software and fail to meet the organization’s broader strategic intent. It’s important to take the time to complete this step before beginning the ERP implementation process.
4. Not enough time spent on business process reengineering. Most digital transformations and ERP implementations are intended to improve business processes. If you don’t spend enough time redefining your business processes, however, you will instead find yourself “paving the cowpaths,” or automating already inefficient processes rather than making fundamental improvements. Most ERP vendors and consultants gloss over this important point, so be sure to allocate enough time for this in your project plan.
5. Your organizational change management strategy consists solely of end user training. End user training is important, but it is just one component of an effective organizational change management arsenal that you’ll need to overcome resistance to your new system. Your strategy should also include change readiness, change impact assessments, communication plans, benefits realization plans, and a host of other items important to any successful ERP implementation.
6. Too little or too much dependency on outside ERP consultants. Some companies don’t recognize how difficult ERP implementations can be, so they underestimate their need for outside independent help. Others think they can outsource the entire function to ERP consultants. Either extreme is risky, so it’s important to find the right balance that leverages outside help, while at the same time ensuring your organization has dedicated ownership of the project.
7. Ill-defined project governance and controls. Projects fail without the right project governance and controls. There should be clearly defined approval processes for changes to project scope, customization requests, and other things that can undermine a project’s chances for success. Be sure to define (and assign) these and other critical governance processes as part of your project charter.
8. No business case or benefits realization plan. You can’t achieve what you don’t measure, so it’s important to have a business case and plan for how you intend to achieve the expected business benefits of the project. Your business case should be more than a tool to simply justify the investment in new ERP software; it should also be a tool to manage and optimize potential business benefits during and after implementation.
9. The project is managed like an IT project. Your project may be doomed from the start if it’s managed and treated like any other IT project. The more successful projects are those that are treated as important strategic business transformation initiatives, which permeate the decisions that are made and results that are achieved.
10. You don’t have a contingency budget. Most projects don’t go exactly as planned, so it’s important to not paint oneself into a corner. Be sure to allow for wiggle room when things don’t go as expected. Setting aside a contingency budget of at least 15% to 20%, is an important way to ensure that you have the budget and resources required to adapt to evolving project twists and turns.
While these 10 things can’t guarantee success, they can ensure that you avoid some of the common pitfalls that many organizations succumb to.