7 Golden Rules for ERP Implementations

Basic principles of good project management apply to any-size company, but there are intricacies unique to smaller companies that require considera...
Nicolas NicolaouJanuary 17, 2019

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.

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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.