A few years ago, I made the decision to leave a big multinational company and join a privately held mid-sized company. I joined as the CFO with expanded responsibilities that included overseeing HR and IT.

One of the first initiatives I undertook was to understand the company’s IT infrastructure. I knew that if we wanted to grow rapidly and support the owner’s vision of tripling the size of the business in five years, we had to have the right IT infrastructure to support the growth.

My review quickly indicated that the company had many stand-alone, old, and home-grown IT systems supporting different parts of the business. The systems were highly customized, did not communicate with each other, and required a lot of manual intervention.

For example, it would take a month to close the books, and management reports were non-existent. I proposed to implement a new ERP system so that our systems could support the owner’s vision.

Implementing an ERP system can be very challenging but very rewarding at the same time. Throughout my finance career  I’ve had the opportunity be part of many systems implementations for big companies. However, as CFO of a smaller company and overseeing IT, I was responsible for the entire implementation. It was an end-to-end implementation, excluding the HR module.

I knew that even though the basic principles of good project management applied to any-size company, there were intricacies unique to smaller, owner-run companies that I had to consider.

Nicolas Nicolaou

Looking back, it’s clear that a number of golden rules are imperative for successful ERP implementations. Some relate to software and business-partner selection, some to implementation, and some to post-implementation. These apply to all ERP implementations but may require different perspective for smaller projects.

Get senior leadership sponsorship: Senior management must buy into the overall plan, the timing, the investment of both financial and human capital, and the deliverables and benefits. If you don’t have this alignment with senior management, do not start the project.

Challenge: In many cases, senior management of a smaller company may not understand the importance of technology or may not understand the scope of the project. Managing their expectations is crucial.

Choose the right technology: It’s very important to select the right technology platform for the needs of a particular business.

Challenge: Vendors will try to oversell on their solutions. You don’t want to overpay for technology that has functionality you may not need or that’s too complicated for a small business.

Choose the right consultants: It’s inevitable that you will have to partner with a consulting firm to assist with the implementation. But even the right firm may send the wrong team. Much of what will drive success will come down to the quality of the consultants on the project. Before starting the project, review consultants’ résumés and interview them before selecting one (or more) for the project.

Challenge: Throughout the project, make sure to have the attention of the senior management of the consulting firm. Sometimes additional consulting resources will be needed, as a smaller project likely will be competing for resources with bigger ones.

Staff the project team with the best and brightest: It’s very important to resource the project with the organization’s best employees from each functional area — and they need to work on the project on a full-time basis. Find ways to backfill their positions until the project is completed.

Challenge: This is a much more difficult task for smaller companies, where good and versatile resources are more scarce than is the case at bigger companies.

Apply strong project management: A successful project needs a leader who is dynamic, diligent, inspiring, and not afraid to hold people accountable and stick to deadlines. Hold daily meetings, clearly articulate deliverables, and continually track progress.

Challenge: Project-management skills may be lacking in smaller organizations.

Manage “scope creep”: It’s almost certain that throughout the project, various stakeholders will ask to broaden its scope. Manage this “scope creep,” as it could derail project delivery. It’s preferable to de-scope items than to jeopardize the overall project. After a successful implementation, the de-scoped items can be revisited.

Challenge: Stakeholders may be very aggressive in their pursuit to broaden the scope. Don’t be afraid to push back in the interest of successfully executing the project.

Don’t underestimate training and post-go-live support: About 30% of the project resources should be for training and go-live and post-go-live support. You can’t ignore the fact that things will go wrong.

Challenge: Smaller companies tend to have a “tribal” culture where little is documented and training may be non-existent. Things get done because the same person has been doing it for many years. In an ERP implementations, everything is changing. Training will be a culture shock to most employees.

All of the above golden rules are extremely important, but in my experience the fourth one — dedicating your best employees to the project — made the most difference. The project I led could not have been successful without the team’s dedication and hard work.

The project lasted 18 months. The first three months after go-live required us to do a few things to stabilize the system, but nothing out of the ordinary for ERP implementations.

After stabilizing the system and making some process changes, we started realizing many of the benefits, including closing the books in five days, having management reports at our fingertips, and accessing information on a timely basis, among others.

Implementing an ERP system is a major undertaking for sure, but adhering to the golden rules is a big help in successfully executing the task.

In his 25-year finance career Nicolas Nicolaou has been CFO of cosmetics manufacturer Mana Products and of the Pepsi-Lipton Partnership, a joint venture. He previously worked at Unilever for 17 years. He is also president of the Cyprus-U.S. Chamber of Commerce.

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10 responses to “7 Golden Rules for ERP Implementations”

  1. Nicolas, great post! I have been on both the buy and sell side of software for the better part of 25 years. One thing that I have come to realize from being on the sell side is that most CFOs are not the best at buying technology. To your point, they can be convinced to buy the bright shining object. This has a lot to do that to be good at something you really have to do it quite a bit. As you said, some vendors (not the good ones) will oversell. Knowing how to lead a good selection process so you get exactly what is needed to deliver expected outcome is a learned skill. To your point, if a CFO does not have the experience aligning with a trusted partner or peer to provide a framework to work from is so key.

  2. Yes, Nicolaus, great article. And I agree with your observations, David. I am contemplating the use of a 3rd party project manager because there is a knowledge gap in our organization that can understand how the technology can be applied across business units. This is an added cost to everything – the 3rd party is going to have to spend considerable time understanding us at a rather deep level. However, past experience showed me the costs of having to make a 2nd sweep at fixing things we totally screwed up the first go-round.

  3. Nicolaus good article and essential elements to a successful ERP system and it is possible. Also, a high number end up not changing because they do not have in place a good business process and / or change solution in the organizations: if they do one kind of project in the company bad they will also get the ERP system wrong too. Half if not more will be the professional services to get the organization to go live and using a manageable solution and so along with not forgetting to check references (don’t for get to check at lease three no matter who they are e.g. SAP, Microsoft, Aptean, etc.); and as bad as scope creep is having no deliverables defined at all is worse than scope creep. Oh you wanted that kind of PO and you wanted to track containers (pallets), that’s extra. Lastly if reporting is 3rd party they cost to implement will be higher. Yes reporting is an expectation and a deliverable.

  4. Nicolaus, Thank you for sharing this. I am an accounting manager in a mid-sized company and can attest to your insights and have felt first-hand the challenges you mentioned. I will keep this article for future reference and share it with my team.

  5. Nicholas – Enjoyed reading this article. In particular your mention of managing scope creep can by itself be a significant factor of being successful right out of the gate.

  6. My mother has been looking into getting an ERP platform for her business and the way you explain finding the right technology platform for the needs of a particular business, is such great advice. I look forward to having a conversation with her on hiring an ERP consulting service to find the right platform for her small business. Thank you so much for contributing such great information on ERP platforms.

  7. Thanks for the suggestion to staff the project team with the best employees from each department and allow them full-time devotion to the project. My husband has been thinking of implementing an ERP system at his company but is worried it won’t be as effective as it could be. I can definitely see how assigning the best employees from each department would help the system be successful. Hopefully they can find a great ERP consultant to work with and help them transition!

  8. It was interesting to learn about how product delivery can be derailed by scope creep and should be managed so that the overall product isn’t jeopardized. I can see how it could be really useful for a business to make sure that they can get the right systems in place so that they work better. Getting ERP implemented by a professional could be really useful for them.

  9. My husband and I have been thinking of implementing an ERP system in our in-process company. I like that you mentioned the importance of assigning the best employees from each department to be able to improve their performance. Thank you for the contribution about ERP platforms, I will start looking for a company that offers the service so that we better our processes.

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