Why do so many ERP system selection projects fail to achieve their objectives or fail altogether? Absence of executive buy-in? Implementation failure? Ineffective communication. All of these are legitimate, but maybe there’s a fundamental problem that isn’t addressed adequately. The process of selecting a new ERP system isn’t just about features and functions. Maybe firms just don’t create a strong enough foundation for success. Maybe ERP system planners forget that individual people drive a firm’s success. Maybe they forget that the new ERP system has to help these people do their jobs better and help them make better business decisions. Maybe they forget these people and their needs and therefore doom an ERP system selection project from the get-go.
Share the Responsibility
Never launch an ERP system selection project thinking that the vendor/reseller is 100% responsible for the outcome. That almost guarantees failure. Your primary objective in any ERP system selection project should be a successful outcome and that means you need to take whatever steps are necessary to do what needs to be done.
This philosophy also applies to the ERP system purchase decision making process. You and you alone are responsible for the decision to purchase an ERP system. Yes, consultants, resellers and vendors might recommend a specific ERP system, but that’s as far as it goes. Why? It’s really quit simple. You are going to have to use the system; not the consultant, ERP system reseller or ERP system vendor.
While there is no doubt that you need to appoint a project manager to make sure things get done, no one person should be totally responsible for an ERP system selection project. Every person in your organization must be responsible for the final outcome and therefore each person must make the “selection”. The only way this ERP system is going to stand a chance of succeeding is for each person to participate equally in the final decision. The key concept here is mutual responsibility.
Secure Buy In or Kill the Project
It’s really quite simple. If you do not have the active support of each significant stakeholder, go no further. You do not want people braying at you from the sidelines, but you cannot move forward without their support and their input.
Educate Yourself Regarding ERP Systems Selection
Selecting a new ERP system or accounting software isn’t something to be taken lightly. Any project of this magnitude and critical importance can fail simply because you get off on the wrong foot. Start this project by taking no direct action. Instead, spend some time educating yourself so that the decisions you make as you proceed will be based on realistic facts, not dreams or the marketing hype of ERP system vendors. One of the most important steps you can take is learning how an ERP system selection project should be organized. If you don’t understand what needs to be done and by whom, how can you possibly know whether you are on the right track?
Before you launch your project to select a new ERP system, you might want to spend some time on research or background knowledge accumulation. The more you spend educating yourself about ERP system selection, the industry and specific products, the better prepared you and others will be when you begin your analysis.
Develop an Understanding of What’s Possible
This is to some extent an educational step, but focused more on ERP system functionality you might need. The more you know about the potential that can be released through current ERP system functionality, the better prepared you will be to define exactly what you require to improve your own operations. Learn what other people are doing. Contact prospective vendors or resellers to learn more about what’s possible in terms of ERP system functionality. At this stage make it very clear that you are conducting research, not buying.
From the point of view of individual people within your organization, education is critical as well. How can people know what they need to be successful if they don’t know what’s possible? Rather than one or a very few number of people researching ERP systems and functionality options, extend this investigative process to as many people as practical. Rather than building your requirements document from the top down (only including project leaders and departmental manager), build it from the bottom up as well. This might actually give you a more accurate picture of what you need as a firm and therefore what you require of your ERP system.
Construct a Foundation for Greater Success
Rather than duplicating what you are doing today, take your business apart and create a stronger, more effective structure. While formal Process Improvement should not be undertaken lightly, maybe you don’t need such radical change. Maybe you do. The key concept here is creating an organization that is more efficient, more effective, more productive and therefore more profitable.
It makes no sense to spend thousands or hundreds of thousands of dollars on a new ERP system when the business process foundation upon which it sits is weak. Once you have completed the analysis of your organization, then you will be in a position to determine what you need in terms of ERP system functionality that will help you move to this future vision.
Assess Your Ability to Change
Even though you may have recognized the need to change, and have identified specific areas of the business or ERP system that need to be changed and to what degree, if you cannot manage effectively such a project, or your management and employees are not ready to change to the same degree you believe is required, the ERP system project’s basic foundation will be compromised.
Develop an Understanding of What’s Possible with ERP Systems
This is to some extent an educational step, but focused more on ERP software functionality you might need. The more you know about the potential that can be released through current ERP software, the better prepared you will be to define exactly what you require to improve your own operations. Learn what other people are doing. Contact prospective vendors or resellers to learn more about what’s possible in terms of ERP software functionality. At this stage make it very clear that you are conducting research, not buying.
Remember to Include your Customers
Since your customers are your most valuable business partners next to your employees, involve them in this process. Ask them how you can serve them more effectively.
Build from the Bottom Up
One of the mistakes firms make is driving ERP system selection from the top down. Executives, managers and project leaders will all contribute significantly to this project from defining requirements to making the purchase decision. What about everyone else? Is their input important? Are they ready to change? Will they accept a new ERP system? Any person who will be using the new ERP system is a vital contributor to the firm’s success and the success of this project. Their contribution may shed light on important software requirements or business improvements. Keep in mind the simple fact that these people use your current ERP system every day and will use your future ERP system every day. Who knows more about detailed business process functionality than the people in the trenches?
If you want to increase the likelihood of failure, leave these people out of the process.
Efficiency and Effectiveness
Efficiency and effectiveness are two key business success elements. From an operational point of view, you want to minimize the cost of doing business per dollar of revenue. However, efficiency isn’t the only answer. People will want to purchase from you because the perceived and actual benefits (other than cost) of doing business with you far outweigh the benefits of purchasing from your competition. In other words, customer service is just as important as price. The way to maximize your customer service is to maximize the effect of what you do. People must work effectively as well as efficiently. Maybe one of your fundamental areas for improvement has nothing to do with your ERP system. Maybe it has more to do with customer service and the way you interact with customers.
Identify Requirements, Constraints, Strengths and Weaknesses
Organizing the ERP system selection process is certainly a critical step. Having formed your selection committee, one of your first steps is giving people the ability to critique not just their current ERP system, but their own jobs and the organization as a whole. Give people the ability to describe their job objectives as they see them, critique the information that flows into them from other sources, critique their portion of the ERP system, and put into their own words what they believe the organization should do well and doesn’t do well. As you move forward please keep in mind one universal truth. An ERP system will have absolutely no effect on a business that isn’t organized for success.
While you want to launch this ERP system selection process by meeting with most of the people who will be participating in the process, it will not be possible to meet with them personally to discuss requirements. Instead, create what I refer to as a Preliminary Needs Definition document and then let everyone fill it out. The format is open-ended text responses to specific questions as listed below. I have used the term “we” because individuals don’t feel very comfortable talking it terms that refer to them directly.
- What do we do now?
- What works and doesn’t work?
- What can we do individually to improve business process efficiency?
- What can we do to improve customer service?
- What should we be doing that we are not doing right now?
- What changes should be made in the ERP system to help us work more effectively?
- What can other people do to help us do better?
- Are these goals or changes reasonable?
- Where is the organization today?
- Where should it be in the future?
If you consider the questions above, you will see that most have very little to do with specific ERP system functionality. The questions you pose here are designed to build a picture of the type of organization you want to be in the future. Improve the organization first. If you don’t look inward first, how can you possibly define how the ERP system should assist you from a functional or reporting point of view?
As you move this process forward, you are going to start to build a picture of where you need to be in the future. You may also identify opportunities for improvement (problems are no more than opportunities for improvement). Deal with these issues first as any flaws within the organization can negatively affect the effectiveness of the new ERP system.
As you move forward, please keep in mind the following suggestions.
- Build a sense of teamwork by giving each person, not just the right to participate, but the right to be heard and taken seriously.
- Begin to build a consensus of what needs to be done by holding open-ended meetings with all groups that will eventually participate.
- Start collecting improvement / requirements information from individuals and workgroups.
- Identify the most important factors affecting your success as a unique business, whether they have anything to do with the ERP system or not.
- Determine what your customers want.
- Critique your current ERP system (software and business processes).
- Determine if specific business processes will require substantial improvement.
- Build a picture of the most important ERP system functional requirements.
- Build a picture of the most important reporting requirements, keeping in mind the fact that the reports found in most ERP systems are static pictures of the firm at a single point in time. What you really need is an effective set of business metrics that help you determine where you are and where you are possibly going.
- Keep in mind the fact that your new ERP system can produce so much information that it may become difficult to identify where you need to spend you time. Consider supplementing your reporting/metrics system with some form of exception management or alerts.
- Consolidate ERP system requirements into a high-level needs definition document that can be used to review potential candidates.
Build an Effective Information Management System
Let’s admit that it’s now possible to track anything you want. That isn’t the issue. Modern ERP systems and accounting software can analyze data and spit out reports and graphs and dashboards that have the potential to either overwhelm people or give them information that they don’t need. Instead, you need to use this power to your advantage. As I have discussed in previous articles, what we need is a truly effective decision management system, not multi-page status reports or meaningless metrics and useless dashboards.
- Start by designing a targeted reporting system. Ask yourself why you need the information. If it doesn’t lead to a decision, then you don’t need it.
- Build a system of business metrics that gives people the ability to “see” where they need to concentrate their attention and to “see” if decisions they have made are leading to improved results.
- Finally, design truly effective Exception Management systems that give people the ability to identify and address issues that need to be addressed.
Commitment to the Process
Now you have reached the point where you must dedicate yourself, your employees and your company to the process of selecting a new ERP system. I’m not suggesting this is anything like a holy crusade, but the commitment is similar. This project will consume a great deal of time and ultimately money to bring to fruition. There will be a tendency on the part of some to lose interest. Their participation and input is critical. They and you must support the ERP system project until it has been completed. This is the only way to insure the ERP system you select meets your needs, and will be accepted completely by the people who will have to use it.
This first step toward selecting a new ERP system sets the stage for everything that will follow. If you don’t give people the ability to contribute toward the critique of your current ERP system and even the organization itself, you may not receive suggestions that could otherwise prove to be quite valuable, and you run the risk of being seen as imposing an ERP system on people who have not been included in this process. These people may support your final purchase decision, but they could also resist any changes you might make or resist the new ERP system. That you do not want. Create an inclusive ERP system selection process that will generate enthusiasm. If you ask people how you can help them, they will respond accordingly.