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Five Big Ways Your ERP Can Go Wrong

Because ERP profoundly affects the business, and because you're responsible for the business, do you want to be engaged with or removed from ERP projects? For CFOs, there are two answers. Only one is right.
Martha Heller, CFO.com | US
June 12, 2012

Last year a midmarket medical-supply company asked my firm to recruit a new CIO.  The incumbent had done a wonderful job in her two years in the post, the CFO told me, but, sadly, she was retiring.  

Earlier in the year, this CIO had launched a single-instance, global enterprise-resource planning implementation that seemed to be going quite well. All the new CIO would have to do is guide this well-managed program to its graceful completion, with a go-live date set for September 2011.  

We recruited the new CIO, and guess what he discovered during his first few weeks on the job? 

The ERP project had run amok. 

When I asked him what the three greatest problems were, he said: "The systems integrator had dropped the ball on project planning, the development organization had done subpar work on configuration, and the business teams were not prepared for how a new ERP system would impact their work."

"So, just minor issues like project management, technology, and people," I thought. "What's the problem?"

Turns out, the company had to fire the systems integrator, go back to the well for nearly double the budget, and set the go-live date back a full year.   Essentially, the company had to start  over from scratch, and the CFO ended up in the unenviable position of having to report all of this to the board. The now-retired CIO had reported to him.  The CFO was accountable.

This story, unhappily, is far from unique.  It happens all the time.  Most likely, it has happened to you.  What could the CFO have done to prevent this disaster?  "Hire a better CIO" is not the answer.   I've  seen good CIOs preside over failed ERP implementations because their executive peers had not done their part in making the project a success.  ERP implementations have a profound impact on the way a business runs, and the degree and quality of business engagement is a critical part of their  success or failure.  If the business isn't involved, the ERP will fail, and the CFO — along with everyone else — will suffer.  Working  on the assumption that you do not like to suffer, here's my list of five common ERP mistakes to avoid.  

  1. Selecting the wrong product. Unbelievably,  companies often select ERP packages that are not commonly used in their industries.  In addition to looking for the right balance of reliability and flexibility, the ERP vendor you choose should have a long list of happy customers in the same industry as your own.
  2. Locating program leadership too low in the organization. ERP is a game-changing project that requires leadership in the upper echelons. I have had first-hand experience recruiting ERP program leaders for management teams who then want to shove those leaders three rungs below the executive committee.  At the midmanagement level, these directors do not have either the visibility or influence to lead. Consequently, the program suffers.
  3. Assuming that ERP is an IT project. I've said it before and I'll say it again: ERP is not an IT project; it is a business project, and it requires more than business sponsorship. It requires business leadership, not to mention resources, commitment, and engagement.  If your CIO is the only executive giving ERP project updates, you are headed for trouble.  And if your CIO agrees to launch an ERP project without a true and committed executive partner from the business, you have the wrong CIO.
  4. Ignoring the talent question. Sometimes I tell clients, "Finding SAP talent is easy. Just add a zero to their monthly pay." (I've  noticed that clients almost never laugh at this joke, so I'm thinking about retiring it.) Ask yourself, Can your company effectively recruit a pool of talent that has experience in your specific ERP package?  Can you pay them enough? Can you attract them to your company and your neck of the woods?  I have seen companies push back their ERP launch date because recruiting those rare birds with the right blend of industry, technology, and leadership experience is much harder than they anticipated.
  5. Underestimating how long an ERP will take. It is rare for a company to complete an ERP implementation (or upgrade) in the time they budget at the start.  This is one formula for estimating an implementation time line; there are others.  But whatever formula you use, you have to build in a cushion because, if history is a guide, you are bound to need more time.

A CIO recently told me that "ERP projects are won or lost at the beginning." If you don't set them up from the start with the right people, product, partners, and expectations, you may as well not start at all.  You are the CFO, and when an ERP goes south, you may be able to blame the CIO and even fire him, but the failure is your failure, too.  


I wouldn't have wanted to be that medical-supply company CFO standing in front of his board trying to explain why his previous reports on the progress of the ERP project were so far off the mark. Would you?

Martha Heller is president of Heller Search Associatesa CIO and senior IT executive recruiting firm, and a contributing editor to CIO magazine. Follow Martha on twitter: @marthaheller.

 




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