How to Do ERP Right

You thought that just because your company paid several million dollars for anew company-wide computer system, everything would be magically wonderful. Thecompany would reap overnight success. Simple keystroke training would be all ittook to have the workforce off and running on day one of launch.

    This was the mind-set of the upper echelons in many corporations in the late1990s. It was motivated by Y2K gremlins looming at the turn of the millenniumcoupled with the promise of exponential productivity gains touted by vendors ofthe many enterprise resource planning systems.

    “People buy large software solutions because it sounds like the solution, like it will solve all their problems,” saysBrandon Hall, an e-learning expert and CEO of Brandon-hall.com.

    The typical ERP project went something like this: senior management signedthe purchase order for an expensive technology solution, and then IT stepped into run the project. A simple software installation, right? Actually, that’swhere companies went wrong and that’s where the myriad complaints about ERPcost overruns and performance disappointments arose.

Results depend on change management
    The reality is, ERP systems mean major, traumatizing cultural change, and thedismal results of so many installations derive from project-management teamsthat had no idea they would hit a brick wall while moving forward at breakneckspeed. That brick wall was built by the combination of a pure technology focusand a lack of employee buy-in.

    “Companies did not realize they were going through a cultural change aswell as a process change until they were well into the implementation. Thetechnology-based project teams didn’t realize they needed buy-in, and often,HR wasn’t brought in until it was too late,” notes Sarah Donaldson, aseasoned project team leader for two ERP initiatives for major corporateinstallations.

    Robert Fritz, president of GDR Global, Inc., comes at ERP from both insidethe corporation as a project manager and now as a consultant specializing inproviding learning services for organizations with a focus on ERPimplementations and upgrades. “ERP is usually the first, second, or thirdbiggest change a company will ever go through. Even Chapter 11 downsizing is notas far-reaching and shocking as an ERP implementation,” says Fritz. “Theseimplementations touch more corners of an organization than anything else everwill.”

    Those organizations that implement from a pure technology perspective facewhat Fritz says is “a huge people issue.” This is evidenced by predictableperformance dips of 25 to 50 percent for the first six to nine months aftersystem launch.

    “If you do nothing, eventually people will figure out how to work thesystem, but they won’t use it cross-functionally, and management says, ‘We’renot getting the benefits we expected out of ERP,’ ” says Fritz. He saw onecase in which a company lost $50 million in revenues because people didn’tknow how to use the system correctly.

    The alleged beauty of the ERP system is that it integrates data acrossfunctions, affording companies an opportunity to realize enormous efficiencies,if it is used wisely. But these systems are complex, and often require a majorchange in the way routine business processes are performed. With IT at the helmof the implementation, the focus is on technological changes, as opposed toaccompanying and necessary process changes.

    “All of the change was technologically feasible, but the organizationalissues were difficult to deal with,” says Fritz.

    These issues include mechanisms for deciding how business processes shouldchange. It may be clear that the new systems demand change, but IT should surelynot be the driver for deciding how business should be conducted in purchasing,distribution, or accounting. Then there’s training. In order for these systemsto achieve maximum efficiency, the people running them need in-depth,process-oriented training that shows how their functions fit into the mastersoftware scheme. They need to communicate with employees about the upcomingchange and what it would potentially mean for the organization.

A success story
    One company that achieved remarkable success with its ERP implementation wasDay & Zimmermann, a privately held Philadelphia-based managed servicescompany. In fact, Fritz says, it never experienced the classic post-launchperformance dip. Why?

    “ERP is really about understanding the processes downstream and upstream,”says Mark Frumento, manager of solutions integration for Day & Zimmermann.“People get it when they understand that if they’re not doing somethingright, then billing will not be right.”

    From the beginning, the focus at Day & Zimmermann was on people, nottechnology. “Technology should just run–be transparent,” notes Frumento.“If we had focused on software training, we would be in bad shape now. Wepurposely did not approach this as a technology project.” In fact, the projectmanager came from the company’s financial area.

    The installation team included power users from each key company function.They knew the intricacies of business in their respective areas and weresubsequently empowered to make process decisions encouraged by the software,help design and conduct user training, and work with other users post-launch asboth process and system experts.

    What Day & Zimmermann also found post-launch was that there was atremendous impact on the system’s integrity when people did not perform up topar. And it was not a one-to-one impact; it was a domino-effect,cross-functional impact.

    “It isn’t just about A, B, and C performers,” says Frumento. “Youhave to get rid of the Cs, but someone who would normally perform as an A mightbe a B because they are affected by upstream work. So much relies on people, onimproving their skills. People become paramount.”

    Although Frumento wouldn’t change much, he admits that if he had it to doover again, he would beef up early communication to employees. “I wouldimplore them to be ready for change. Tell them things will be forever changing,and that they’d better get used to it.”