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Your Guide to Successful ERP Implementations
By Sujeet Karna Your company is planning to implement a large scale Enterprise Resource Planning (ERP) system, such as SAP. The implementation budget is probably too low, and the time frame too short. Combine these constraints with a lack of personnel, training, and other necessary resources, and you are now in the position of every other mid-market company who has attempted the same daunting task. Under these circumstances, many companies, both large and small, have suffered from blown budgets, unprosperous systems, and alarming attrition rates, leaving the company in a compromised state. And the system that originally promised to reduce the cost of operations is now, in fact, the primary contributor to fixed overhead. The only way out is to spend more money. If you plan carefully, however, you can not only 'survive' an ERP implementation, but also effectively retain your staff and make the company more profitable. An often overlooked, but critical aspect of a successful ERP implementation is the ability to properly utilize internal and/or external resources, and strategically plan and position your staff. This requires the ability to plan well, locate and retain expert assistance where needed, utilize resources effectively, and construct a team for the future. Proper Planning There are many reasons for implementing ERP systems: Obtaining year 2000 compliancy, gaining a competitive edge in the market, or adjusting to keep up with large-scale company growth. But all too often, companies try to do too much at once because of budget and time constraints, and consequently end up hurting routine business processes rather than helping them. The end result can be botched operations, lost customers, and a huge liability rather than a competitive edge. Thus, it is important to plan carefully and establish achievable milestones. Successful implementations are broken into distinct phases, with measurable targets and reasonable time frames defined for each phase. The first phase of the implementation should focus on achieving current functionality and maintaining basic, but consistent business operations. The remaining phases of the project differ from the first in that they are more of an "evolution" of your ERP system as opposed to an "implementation." These phases are where more of the advanced business solutions are implemented. However, implementing advanced processes will only add to the challenge your staff faces in learning a new system. This phrase requires careful planning and testing, so that if a problem is identified, it can easily be determined if the problem source is the new system or an existing business process. A methodical approach can prevent frustration on the part of both users and customers. Once the system is stabilized and things are running smoothly, it is appropriate to take advantage of the advanced features within your ERP system. At this point the employees should be comfortable with using the new system to do their job. Once comfortable with the system, it will be an easy transition for the users to adapt to and support new business processes, where rewards of most ERP systems, such as reduced order lead-time, are realized. When trying to meet your goals for each phase, try to avoid "scope creep." Keep the tasks for each phase in check, and add tasks only if necessary. Otherwise, keep track of additional requests when defining the next phases of the project. Rolling the system out in a phased manner is also beneficial. Going "live" one business unit at a time will prevent unexpected disruptions in company wide business operations if the system should shut down. With a phased rollout approach, if one business unit is forced to stop operating, the other business units may accommodate the workload, minimizing and potential disruptions. Sample Project Schedule
Expert Assistance With a tight budget and time constraints, the possibility that the system can be implemented by in- house staff is unlikely. Given that, who do you hire- contractors or consultants? The answer to this question varies according to a company's individual needs, and there are pros and cons of each type of specialist. When obtaining outside resources to help a project team, there are several major factors to consider. Among the most critical is whether you are looking for technical expertise, business expertise, or both. Equally important are the level of expertise you currently have available in-house, and the size of your budget. Consulting firms provide both systems and business expertise. Beyond providing the technical expertise to get your system up and running, they will help you manage the project and coordinate resources to help staff the project. Consulting firms are also better at working with companies to transfer knowledge to help users learn the intricacies of the system, an important consideration if you have limited in-house expertise. Consultants are also better skilled at navigating around political and organizational barriers that can hinder a project's success, and can bring to the table an understanding of the business functionality that needs to be enhanced by the ERP technology. Consulting firms view all of these additional responsibilities as part of their job, whereas contractors are usually focused on the technical implementation only. Contractors, however, are usually less costly than consulting firms. While their systems expertise is often as good as that of a consulting firm, they typically lack the deep business knowledge consulting firms possess. Contractors are best used to fill gaps on the project team. For example, if additional programmers are needed to help the sales team implement a complex pricing design, contractors may be a good option. Project management is best left in the hands of internal staff or consulting firms. If your company is considering retaining a consulting firm, spend some time getting to know the capabilities and experience of the given consultancy. Many "consulting" firms are actually nothing more than body shops that collect contractors to form a "consulting team." These firms are simply a more expensive means of working with contractors directly. Also beware of consulting firms and contractors who want to 'bring out the troops in hoards', which can quickly consume your budget. It is important for your company to keep external resources in check. When possible, internal staff should fill the positions they are requesting. Utilizing Resources Efficiently The key to maximizing the benefit of outside resources is to work hand in hand with them. When things get busy it is easy to rely on external resources to do all of the work. If company people are not involved, they will not learn much, even if the firm assisting with the implementation presents fancy deliverables to facilitate the knowledge transfer. People rarely look at the documentation when presented with it at the end of a project phase, and often toss it on some forgotten bookshelf. The usual approach to organizing a project team for an ERP implementation is to put people in smaller teams based on functional areas, along with a team of developers and a technical team. In a typical SAP implementation, there is usually several people assigned to each of the major modules: Finance and Controlling, Sales and Distribution, Materials Management, and Production Planning. For example, the Sales and Distribution team may have a resource for sales, another for distribution, and possibly another for pricing. A good staffing approach is to put at least one internal resource, if not more, on each team. As the project progresses, staff members should approve all design and development deliverables before they are implemented. An excellent way to make sure your staff sees everything and is receiving adequate knowledge transfer is to set up a separate test system environment for the consultants or contractors, and constrain their system activity to that environment. This system environment is frequently termed the "sandbox" because it refers to a playground for figuring things out. When something needs to be implemented the consultant or contractor can figure out what needs to be done in the "sandbox", and guide company project members to do the same thing in the development system. This way the staff will get a hands-on opportunity to learn the necessary skills for maintaining the system. Sample SAP Project Team Staffing Case 1: $150 Million Manufacturer and Retailer of Commemorative Products This company retained the services of a large-scale consulting firm. They had knowledgeable business analysts and programmers, but lacked the necessary SAP configuration and technical skills. Note that the position of Business Analyst is equivalent to someone who would do SAP configuration.
This company experienced a successful implementation. Though the implementation was completed in an aggressive nine months, management was good at recognizing the performance of team members. Through the course of the project, both internal management and staff gained a strong level of SAP knowledge and skills. The management is now leading new implementations and initiatives within the organization. With the new implementation that is currently in progress, they hired the services of a contracting firm. The company's business analysts, now resident 'experts' in SAP, are serving as the team leaders for the project. In addition to the new implementation, further enhancements have been implemented at the previous site. A new warehouse management system was implemented along with a new Internet Order Entry system. Additional internal resources have been hired to help with daily operations. Consulting services are periodically retained to assist with large-scale enhancements such as those mentioned above. Building a Team for the Future Ultimately, regardless of what external resources a company uses, a successful ERP implementation also requires knowledgeable internal resources. Internal staff are vital to the ongoing success of the new system, because without them, the system cannot be adequately maintained. The inability to be self-sufficient in maintaining a new system can force dependency on external resources longer than budgeted, a costly scenario. If your company cannot staff at least one member on each sub-project team, or the task may be overwhelming for current staff members, hiring additional staff may be the answer. Unfortunately, experienced people with ERP skills are scarce and expensive. If you cannot incur the expenses of locating and hiring additional ERP resources, your company is not necessarily at a loss. Many companies have had success in developing smart, motivated people who are eager to learn into successful ERP specialists. The advantage here is that inexperienced resources are usually less expensive and do not come in with a "free agent" attitude- meaning they will likely stay with the company longer as opposed leaving the company for more money just because they have ERP skills. In a very short time, these people turn themselves into huge assets for the company. But beware, headhunters will try to tempt anyone with any sort of ERP skills, so plan the staffing budget to rapidly increase compensation as skills improve. Attrition is one of the largest issues facing companies that implement ERP systems. It happens for a variety of reasons, but burn out and compensation are the two biggest. The key to retaining these people is to not ignore the issues and plan ahead for them. The best way to deal with burn out is to make the work plan and milestones achievable. Schedule things liberally and plan for no more than more than 40 hours per week. If this is not possible due to budget and time constraints, warn your staff well in advance before the start of the project so they can plan ahead for the anticipated disruption that may occur. It also important to recognize and reward their efforts. For example, some companies have allowed staff to accrue extra vacation to make up for lost time with family and provided extra bonuses at the completion of project milestones. Another critical factor in preventing attrition is increasing salary and overall compensation in an adequate and timely manner. Over the course of an implementation, staff members gain valuable ERP skills. In a cut throat environment, headhunters will do anything to get your project phone list and start cold calling to entice your employees with large sums of money. If you do not compensate your employees for their newly acquired "hot skills," you risk losing them and face a costly battle of trying to maintain a complex system without the necessary qualified staff. Do not expect a $35,000 staff member to stay loyal if his market value has doubled or tripled. For example, the same $250 million process manufacturer mentioned below lost three of five business analysts on the project because of burn out and lack of compensation. Both analysts acquired valuable skills in SAP configuration while on the project. Neither was actively in search of a new job, but nonetheless obtained new jobs through headhunters who sought them out. The manufacturing company adjusted by not implementing scheduled enhancements and acquiring the services of contractors just for maintenance purposes. Sample SAP Project Team Schema 2 Case 1: $250 Million Manufacturer and Retailer of Commemorative Products This company retained the services of a large-scale consulting firm. They had knowledgeable business analysts and programmers, but lacked the necessary SAP configuration and technical skills. Shortly after implementation, the project team experienced a large amount of attrition halting many scheduled enhancements and forcing them to acquire additional external services for system maintenance. The implementation had an aggressive time frame and was completed in about seven months.
This company demonstrates the importance of building for the future. After the implementation was completed they suffered mass attrition because of burn out and lack of compensation, and were left in a compromised state and had to halt planned enhancements. The areas that do remain strong have continued to grow, but in an integrated environment, difficulties in one area will adversely affect another. Conclusion Throughout the life cycle of an ERP implementation there are many obstacles, but careful planning and staffing decisions will help a company successfully hurdle any obstacles. Planning should include building an achievable work plan and acquiring the right type expert assistance. Having the right level of resources, whether they are internal or external is imperative to the success of an ERP implementation, and depends on the individual needs of the company. During the course of the project, external resources should be used effectively to help build the ERP skills of internal resources. At the completion of the project a competent team of internal resources should be retained to maintain the new system. Combine these factors, and you have the key for a successful ERP implementation. |
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