Gartner estimates that 55% to 75% of all ERP implementation projects fail to meet their goals and objectives. Considering these projects are at least several months long or, more typically, take years, the fiscal and cultural health of the entire company is at risk if they go wrong. To minimize disruption, you must have the right people, insights and pieces in place before starting an ERP implementation to best ensure success.
Time for an ERP Upgrade or New ERP System?
Something in your business has changed. Operations have grown and you must scale to meet the need. You need to enable more-seamless merger and acquisition efforts. You’re looking at divestiture, new lines of business or new capabilities. Maybe a change in leadership like a new CIO or COO has shaken up the business. There are any number of reasons that might prompt a closer look at the ERP system you thought you couldn’t live without.
2022 brings a fresh opportunity for business leaders to review their enterprise systems. Companies in the distribution, manufacturing and retail industries alike have realized their systems must have functionality previously unavailable.
No matter the trigger, before you dive into the complex and extensive process of an ERP implementation, consider these seven reasons ERP system implementations fail and how to avoid them.
Inadequate involvement of key business leadership
Appropriate, authoritative internal sponsorship must visibly drive the project from day one. Without endorsement and guidance from all levels of leadership, your ERP project can fail before it even starts.
Strong executive leadership and buy-in is critical in undertaking an initiative as impactful as an ERP implementation. They need to guide the core team that is stocked with pragmatic decision makers that have respect within the organization. Build a governing body that is small, can make decisions and has a focus on removing roadblocks.
Every ERP implementation needs an internal leader, or champion. This is a visible, vocal advocate who acts as a ‘snowplow’ – one who clears a path for the team so the team can keep progressing . The champion brings together executives, employees, the project team and future users of the system. This person is a true believer in the value and the implementation must be viewed as a high priority. In addition to c-suite champions, you need additional champions throughout your organization.
ERP implementation treated as an IT project
The entire IT department is invaluable throughout the lifecycle of an ERP implementation. But they cannot be the core drivers of the project and its only dedicated participants.
Remember, your ERP platform impacts business processes and people more than anything else in the business. Focus time, money and resources on the things that often get pared back to reduce implementation costs. For example, change management, performance measures, education, data management and system and performance testing often end up on the budgetary chopping block, but will come back to haunt a company later.
Lastly, it is not uncommon for a department to go rogue and make a software selection without getting buy-in from other departments.
Internal resources not sufficiently allocated to project
When resources like budget and people are insufficient, projects get stalled.
Budget: ERP implementations are expensive investments in your business. What is more costly is an ERP failure. Industry averages suggest adding 25% when developing a budget. Remember that software is just a portion of this. There will be payroll costs, hardware, network infrastructure upgrades, and other equipment investments. Ongoing support and maintenance should be considered too.
People: One of the most critical factors that makes or breaks an ERP implementation project is the decision making velocity. Because there are so many decisions that need to be made in the design of the applications, data, business processes and job roles, it is critical to make pragmatic decisions as quickly and early as possible and stick to them. This means sometimes making bold, potentially unpleasant decisions, but when made fast and early, flexibility still exists in both the project timeline and deliverables.
Inadequate ERP system testing
Don’t deploy until you are ready – test, trail, and communicate more than you might think is necessary and make sure you can support what you deploy. Getting it right early is critical. As a project progresses, the cost to change increases, the flexibility to change decreases and the overall risk of failure increases. Remember – you are testing the solution and new processes before go-live.
Ensure that appropriate technical redundancies are put in place for critical processes and applications that can’t afford disruption. Prepare business continuity procedures to ensure that standard processes can be executed while experiencing technical problems.
Focus too much on functionality and too little on people
Remember, as much as there will be new technologies for people to learn, there will also be a potentially enormous impact on people’s jobs. Have you assessed how much the new ERP system will impact your workforce’s day-to-day?
Implementing new technologies is complex and requires considerable, focused effort. However, it’s vital to keep in mind why it is you are implementing those technologies – to improve business processes, capabilities and decision making. None of that happens successfully unless the people in your organization can perform those processes, put those capabilities to use and use the information to make those decisions.
This requires significant focus and investment in communications, change management and education. These need to happen throughout the entire project lifecycle, not just as the finish line approaches, in order to prepare your people for the coming change. People need to understand what the impact to them will be and how to perform their duties – well in advance of the ERP go-live date.
You can design and build the best set of tools in the world during the implementation, but if your people aren’t properly empowered to use them, they won’t be used effectively and the full benefits of the implementation will not be realized.
While change is an inevitable part of life, it is also a psychological factor that must be considered through the long, potentially-disruptive course of an ERP implementation. Some employees will quickly see the future possibilities the new system and changes will bring to their work. Others though, will struggle to imagine different processes that will be better than those familiar ones they deem to be working.
Consider employing change management specialists as part of your implementation team. Those specialists will recognize different personalities and know how to work with all to help your staff accept and embrace the future.
Don’t spend enough time and money on training
As hinted at above, it’s vital to train your people before go-live. This seems like common sense, but in the rush to get up and running, this is one area regularly underemphasized. There are no shortcuts to success. Inadequate training inevitably leads to frustration organization-wide. Bake as much training into the scope of work as possible. Since nearly everyone in the company must be trained on both processes and applications based upon their existing or new job roles, be sure your ERP system partner has the skills to oversee this.
People need to learn more than just what new buttons to push. They need to understand why they are doing what they’re doing and how what they do affects other areas of the business.
Not enough organization-wide communication
Be sure to spend time upfront and throughout the project lifecycle communicating why this implementation is necessary and how it will change operations. Explain clearly what will happen if you don’t change. The “what’s in it for me?” factor is important. Leaders, especially in departments most likely to be affected, need to cascade this message down to their teams.
Always be transparent across the organization. While it never feels good, delivering bad news that is quickly identified and communicated can be more readily dealt with than springing surprises or withholding negative updates.
Keep spirits lifted. ERP implementations are a marathon, not a sprint; they require stamina from every level of the project team. Celebrate good news and significant accomplishments and milestones on a regular basis.
Despite the above pitfalls, it is entirely possible, with the right planning and the right team, to implement an ERP system that can take your business to the next level of success.
At Crestwood Associates, we are software agnostic. Our experienced consultants have been advising clients in a range of industries for more than 20 years. Through over 5,000 ERP implementations all over the globe, we’ve learned how to help companies like yours avoid pitfalls and achieve success.
- We have a strong and deep team to support the complexity of an ERP implementation.
- We have experts in various avenues who can help solve problems on complex projects.
- We do not outsource any aspect of the project, saving time and money.
Have you outgrown your current ERP system?
We advise key stakeholders on which technology solutions will have the greatest impact on your business goals by reviewing your system and processes. We then quantify the goals, and map out a plan for action to achieve them. Contact us today for an ERP Discover and Advise Consultation Request.