Executive Misalignment: The #1 Threat to your ERP Implementation

We see it more often than not. Any reasonable business advisor or strategy book will tell you that you need it and you can find endless blogs and articles on the topic, yet executive misalignment is ever more prevalent in today’s business environment.

While a company could potentially survive for years with some degree of misalignment at the top, the risk increases significantly with a strategic initiative such as a digital transformation or ERP implementation. These initiatives put strain on every nerve of an organization, making executive alignment a critical part of any successful digital ERP strategy for 2020 and beyond.

What is executive misalignment and what does it mean to an ERP implementation?

So, what is executive misalignment and why is it so dangerous? Misalignment can occur on a number of levels, between divisions, between regions, between departments and across the hierarchical layers of an organization. If the leadership of an organization are marching in step, then it is possible to fix any of these various formations of misalignment.

If leadership is not aligned, however, the company will remain misaligned as there is no clear direction to follow. When put under stress, this weakness will show and put the organization at risk. Executive misalignment can take many forms, either between executives, between executives and business direction or in various forms of bias. Addressing this is an important part of an effective digital transformation change management strategy.

Here are a few telltale signs of executive misalignment and how this can impact your ERP initiative:

There is no stated governance process that everyone understands during the ERP implementation

You may be in an environment where the executive team all has “open doors” and employees are unsure where to funnel a question or concern. What happens here is employees figure out very quickly who they want to turn to with certain concerns.

For example, if during implementation a department identifies a critical need for new functionality and wants to purchase a disparate system to handle their needs in the interim, this type of decision needs to follow a prescribed process. If users are instructed to go ask “the executive team” in general, the COO may immediately state “yes, we cannot hinder operations,” while the CFO may state “absolutely not, we have a fixed budget that this does not fit within.” Where do you think the process owner will go?

Leaders’ financial interests are imbalanced during the digital transformation

Take the previous example. Let’s say in this case, however, that the COO is placed as the executive sponsor responsible for approving customizations and disparate products and is also guaranteed a $10,000 bonus if the implementation is delivered on-budget. In this case, the COO will be incented to deny any modifications to budget, regardless of the potential benefit to the organization. Even though this may come from good intentions, it is a recipe for ERP failure.

Executive technology bias in the ERP implementation and digital transformation

Executives are placed in leadership roles because they have “been there” and “done that”. This includes ERP implementation in most cases. If an executive leader has had a bad experience in any way, they will carry bias against technology products or firms, or will bring a heavy load of negative energy. If they have had a good experience, they will assume it will all go without a hitch, without realizing they may have been one of the lucky ones. The worst cases we have seen is where a leader makes a sole decision to purchase a technology platform simply because it worked in their previous organization.

As the whiteboard video below illustrates, executive bias (along with misalignment) are the primary root causes of digital transformation and ERP failures:

Corporate strategy is undefined

Ultimately, businesses are in business for a reason. Whether they are out to maximize shareholder profit or make the world a better place, that reason is hopefully clear and has been well-stated since the founding of the organization. Following this vision is the strategy to accomplish that goal. If this stated strategy is missing or not clearly stated, then executives will fill in the blanks on their own.

If a digital transformation initiative comes to the plate, it too will follow the various perspectives of a misaligned executive team. One leader may be targeting simply to replace outdated technology with little disruption, another may be looking to reduce waste, expenses and headcount, another may be looking to enable growth, another to enable use of data and emerging technologies, etc. (Hint: Stating you want everything is not the answer).

Acceptance is the first step

We find it interesting that executive teams rarely believe they are misaligned. It is often the mid-management level that identifies issues and concerns at the top of the organization. The problem with this is that middle-management are usually not given an opportunity to share their perspectives, they are not taken seriously or in some cases, they are given a pink slip when they share their views on issues at the top.

Handling executive misalignment internally is rarely a good idea, as ultimately someone reports to someone else and egos and executive bias are very difficult to navigate. Our recommendation: ask for help from independent ERP strategy consultants on this one as a first step to a successful digital transformation.

Contact us to learn more about how our team can help guide you through a structured alignment process. We are happy to help!

Brian Potts

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