By Mario B. Demarillas, AICD, Agile PM Foundation, CPISI, CFE, COBIT (F), CRISC, CISM, CISA, CIA, CPA
Partner, Advisory Services of Reyes Tacandong & Co.
As organizations strive to be more competitive, agile, remain relevant to the ever-changing business needs, and comply with regulatory and legal requirements, having a robust Enterprise Resource Planning (ERP) system is a must. An ERP system promises to (a) integrate financial information, (b) increase efficiency, (c) strengthen internal controls, (d) improve profitability, and the list may go on. Without adequate planning, however, the expected benefits of implementing an ERP system may never be realized and organizations may end up in a worse situation than before. Here are some of the common pitfalls:
• Limited stakeholder involvement
The organization already lost the battle even before it even began. All stakeholders, to include the Board, senior management, business unit or department heads and the Information Technology group, should be involved actively in the project. An ERP solution is not a ‘plug and play’ tool that one can expect to run seamlessly. Before an ERP system is selected, (a) business needs should be established; (b) project risks should be identified and analyzed; (c) needed resources are determined and optimized to include time and budget; (d) governance framework is set, implemented, and monitored; and (e) communication channels are always kept open among the project proponents.
• Adopting the ‘Best in Class’ rather than the ‘Best Functional Fit’ solution
Sometimes due to time constraint and inadequate planning, an ERP system is selected from among the supposed ‘Best in Class’ category. It should be noted though that an ERP system that works for an industry or a similar company may not work for another. The ultimate objective should be to implement a system that best functionally fits the organization’s business needs.
• Inadequate definition of business requirements and adhoc project management practices
Benjamin Franklin once said, “If you fail to plan, you are planning to fail.” Winston Churchill’s “Those who fail to learn from history are doomed to repeat it” is also a constant reminder.
Organizations must keep in mind that the implementation of an ERP system is their project and not of the system vendor’s, and that they should not rely too much on the vendor’s project management practices. Ownership and accountability should reside within the organization if they want the project to succeed. Once management has set the direction and expectations, business rules and specifications should come from the business unit leads and the process owners, as they are the ones with the best understanding of the peculiarities of the business that must be considered. Also, if the skillset to manage the project is not available from within the organization, they should consider employing an experienced Project Manager for such a critical initiative.
• Lack of Organizational Change Management
An organization needs to manage not only the transition to an ERP system but also the whole organization itself as it implements the change. My mentor once said, “ERP is not an Early Retirement Program.” It is this kind of mindset that creates resistance from the users and makes implementation more difficult. The Human Resource Department should be at the forefront in managing this organizational change by facilitating group discussions, retraining and re-tooling concerned personnel, and assigning project champions.
Steps for a Successful ERP Implementation
When I was in my last semester of my Information Management course, we were divided into four groups tasked to submit a working system in 14 weeks, otherwise we would fail the subject. We realized that we had different capabilities and skillset, and even contrasting personalities but we needed to collaborate so that we would achieve our objective. We were reminded by the professor that we could afford to make mistakes in school but not in the business world when such mistakes may significantly affect the bottom line and the continuity and sustainability of the business. After sleepless nights of bickering, ranting and complaining, we passed the subject and graduated with flying colors since we focused on our objective and worked out our differences.
The following is a practical but not necessarily an easy list of steps in implementing an ERP system:
• Ensure clear understanding of the project needs and expectations as well as the level of comfort desired.
• Define the project scope based on the business requirements leveraging a risk-based approach.
• Set the ‘tone at the top’ and be sure to obtain approval and active involvement of the key stakeholders.
• Ensure proper allocation of needed resources to include a project implementation team with the required technical and management skills.
• Execute the project on time and on budget as best possible.
• Maintain agility, the ability to make changes as may be required e.g., timeline re-baselining but never accept scope creep.
• Closely monitor the progress of the project between checkpoints and resolve issues on a timely basis.
• Provide clear and timely reports to the Project Sponsors, Steering and Audit Committees, and elevate matters for their decision making, as may be applicable.
• Remember to always keep the communication lines open with all stakeholders.