In the recent blog Assembling an EPR Project Team: Three Things You Didn’t Anticipate I discussed how executive sponsorship can wharf, where employee participation goes wrong, and why status reporting for ERP projects can get off track. A logical extension to this subject are some of the “myths” that companies hold onto when attempting to deploy new technology. Take a read to see if you recognize any of these behaviors or biases within your company:
Money will be Saved by Using Primarily Internal Resources
This topic looks a little different for every company. Most company’s do not have a lot of extra resources available to devote “full time” to an ERP initiative that will take a considerable chunk of time (from months to years). Asking employees to “split” their time between day-to-day duties while taking on key ERP project team roles on a complex project doesn’t work.
In our experience rarely have we seen cost savings associated with internal employees shepherding the bulk of an ERP project. Employees can add the most value as subject matter experts, superusers, etc. Employee-heavy projects are also more subject to influence by management and the related tendency to avoid disagreement with coworkers which can impact the build. Any perceived savings can quickly be negated by over customization of the software or changes needed and only recognized post implementation.
Employees Need to Understand the New Software
Each ERP project should start with a well thought out strategy. Recognizing that a system is dated and needs replacement is just the beginning. ERP transformations need to go far further than just replacing existing functions, so it’s great to get employee opinions on what they would like to see a new system do.
Employees are most valuable in explaining what your company’s current technology does and doesn’t do. They should also be able to describe what differentiates the company’s services or products (the secret sauce of the organization). Don’t expect them to understand (or be constrained by) a constantly changing range of new software offerings. Any talk of selecting ERP software is often premature anyway. Both the employee and company will benefit from using employees as important subject matter experts and getting their honest feedback which will be part of the building block for new software requirements.
New Software Adoption Begins with the Employee
Employees are creatures of habit and many have learned to survive in less than perfect environments. As an ERP initiative unfolds the evolution of roles, responsibilities, and functions will begin to morph and change. While it’s important that your employees are in the loop about high level and conceptual goals, you want to avoid creating early fears, concerns or resistance. Communication is good – too many details are bad idea (because things will change as the project progresses). System requirements and configurations will dictate new routines – which will be validated and amended, sometimes multiple times.
While an organizational change management (OCM) plan is specifically designed to help employees, how and when it is unfolded will be in direct correlation to its success and adoption. There will be many actions and communication steps along the way, and the timing of employee involvement in these OCM initiatives is both an art and a science. A guiding principle should be that OCM adoption starts at the top.
Your IT Department Knows What’s Best for the Company (when it come to new technology)
Your IT department is probably the lifeblood of your existing operation. They understand your company’s existing tech architecture better than anyone else (including pain points and weaknesses). They are pros at keeping your current systems running and overcoming outages.
With that said, they have their own preconceived notions and preferences. They probably aren’t experts in the evolving technology landscape, nor should they be. In fact, most have biases (positive or negative) towards certain brands of software. If they’ve had a good experience with SAP vs. Oracle (or pick any well-developed software) they will advocate for it. You don’t want internal biases (whether it be from IT or upper management) influencing the important step of software fit and selection.
While valuable contributors to an ERP project, internal IT leads do not seize the freedom of choice or see alternatives in the same light as an independent ERP expert free of influencers.
The Budget You Have Set is Realistic
Typically, a company will have a budget for new technology. However, more times than not the budget does not match what the total cost of the initiative will be, and the company doesn’t have a good way of estimating or predicting this because of many variables they’re not aware of.
Typical total ERP implementation costs will cost around 3-5% of annual revenue. This incorporates a variety of internal and external costs as well as a contingency/overage budget. The budget is dependent on multiple factors, including the number of business units, number of locations, size of the organization, complexity of the implementation, and their own capabilities in complex enterprise projects. The larger the company, the more specific the needs and so the more reason to expect that some customization will be necessary which is always an additional driver of cost.
There can be several types of internal costs which may need to be incorporated into your budget – data cleansing, training, backfilling, steering committees, etc. Whether you choose to take these on internally or seek experienced independent ERP help, there’s a cost to the project and business. Estimating external costs are even trickier. What is the true cost of the software you want once a detailed process has taken place to select it? Software companies hope that you’ll be so enamored by their large discounts that you’ll sign and sign quickly during the ERP vendor negotiation process. As consultants we’ve seen “enticements” or so-called discounts range from 50%-90% off. The catch is what was the true price of the software to begin with, and what will it cost to implement it?
This is not all gloom and doom. ERP initiatives when implemented effectively should yield efficiencies, better managed inventory, scalability, etc. These are direct offsets to your project costs if the right software was chosen, and if implementation met or exceeded the defined deliverables your company set out to achieve.
Make sure the myths talked about in this blog don’t make their way into your projects plans. Your company will need help when embarking on a project as detailed as an ERP initiative. Whether it’s helping estimate cost savings, finding the right balance between internal and external resources, or negotiating a software contract you’d be smart to consider the expertise independent ERP consultants can add.
We assist some clients with limited budgets (and we all have budget considerations) to bite off and implement chunks of technology in logical pieces. This can be a more budget friendly approach to a large company-wide implementation. A recent example involved guiding a company through an implementation of a much-needed warehouse management tech update. Huge benefits were achieved by addressing this one piece of the organization that was operating inefficiently.
In a changing world it’s easy to succumb to a paralysis of sorts. There’s clear evidence that companies large and small are using this time to shape their own destinies by moving forward with technology and focusing on the long-term benefits.
How can we help you do the same? Please feel free to contact us for an informal discussion regarding your ERP project. We are happy to be an informal sounding board as you continue your transformation journey!