Lessons Learned - ERP Implementation
Already as early as the late 1990's, and Enterprise Resource Planning (ERP) system implementation was very popular amongst organisations. This trend sustained during the 2000's until today it is a popular migration strategy to enhance organisations' systems, mainly due to the advantages an ERP system brings to an organisation.
To ensure successful implementation, organisations must take cognisance of the critical success factors (CSFs) which was developed through extensive research. An ERP implementation is an expensive project. Even in smaller organisations it can easily amounts to R30 - 60 million (Bingi et al., 1999; Woo, 2007). By ensuring that the project follows the CSFs, an organisation can hope for a successful implementation.
We witnessed an implementation of an ERP. In general it can be noted as a successful implementation as the project did not exceed the original budget or time. A few change orders were implemented but was mostly because of poor planning rather than poor implementation.
However, one can not help but critically look at things which did not go well. Comparing such an implementation to the broadly accepted CSFs of research, one can find some answers to what went wrong.
What is an ERP
An ERP is an integrated business system which seeks to integrate internal business processes and business units. “ERP vanquishes the old standalone computer systems in finance, HR, manufacturing and the warehouse, and replaces them with a single unified software program divided into software modules that roughly approximate the old standalone systems” (Koch, 2007, p. 1).
Because an ERP is built on a relational database, all business units can benefit from the database information through a graphical users interface. Its built on a client-server architecture. The integration unites all the major business processes like finance, HR, sales, marketing, customer relations, supply chain and manufacturing. The benefits of this integration is better management of information exchange, improved information flow through business units, centralisation of administrative functions and consequently also a transformation to "best practices" business processes (Kumar et al., 2003, Woo, 2007).
Critical Success Factors (CSFs)
Different research has been done on the CSFs of an ERP implementation which generally confirms each others' findings.
The following CSFs were noted with a critical look-back:
- Top Management:
All the research list top management support as a critical factor to implementation success. "Lack of top leadership supported created challenges for the project team such as buy-in from users and adequate project resources." (Kumar et al., 2003:800). Top management is responsible for clear strategic direction and vision for the future use of the ERP. Chen (2001) also indicated that top management's commitment should be much more than providing the budget, or starting and appointing the project management team; it should be more than mere "blessing" (p.380) of the project. The implementation changes how the organisation will operate in future. Jobs will change, there will be resistance and uncertainty and in this atmosphere, strong leadership will be necessary to guide the process. Top management must calm the uncertainty by doing job evaluations and if necessary, implement organisational changes (Chen, 2001). An ERP implementation is not about processes or systems, but about people and therefore top management must provide strong leadership.
An ERP implementation is also not only a technological change, but its a business change, a new way of doing things (Woo, 2007). "Implementing an ERP system is not a matter of changing software systems, rather it is a matter of repositioning the company and transforming the business practices." (Bingi et al., 1999:7). ERP implement is not about process or systems, but about people.
Therefore, any organisation's management changes will have a detrimental effect on the continuation and involvement of top management on the project. Such a change will make it difficult for the new management team to understand the strategic intent and the passion of the project. The danger in a scenario where top management changes, is that management is often left to the consultants to steer the ship while the new management get to grips with the project. It goes without saying that top management involvement also means a unified top management in implementing. It should not be a case where one unit writes the business case and then handed to another for implementation. Unity amongst top management will ensure that all has the same vision where the organisation is heading and all staff members will be drawn in this unified approach. Disunity will intensify the unstable stages during an implementation.
- Project Management & Project Team:
The importance of proper Project Management principles and the appointment of a good project team goes without saying. No project can be successfully completed without the implementation and following of a proper project management framework. However, this CSF talks about ensuring that the project management team should not only be the consultants, as in many cases, but must include staff members. Even the consultants' involvement should be guided by a proper understanding of the organisation's strategic objectives and business (Woo, 2007). Proper and regular meetings should not only be to "tick the box" for compliance, but must me used to ensure everyone has its finger on the pulse with regards to the project. All decisions should be properly minuted and all documents must be readily available at all times.
- Training & Change Management:
Research has identified that there will be significant resistance to process and system changes when implementing an ERP (Ross, 1999; Kumar et al., 2003). In Kumar et al.'s (2003) research, one of the respondents stated: "Most of the training provided focused on how to carry out an operation with the new systems. Users were not told why to use the systems, which resulted in situations like an human resource clerk generating an employee number without understanding the significance of the project and sometimes getting the whole process wrong." (p.801). Their research also found that 50% of organisations reported that their end-users were not ready to use the system because the new processes were not communicated properly and a lack of training and documentation (Kumar et al., 2003). It is imperative that staff is not kept in the dark of the project. They must understand how their data affects other units and/or processes (Bingi et al., 1999). Change Management is probably one of the main issues in failures. Its fine for top management to decide to go the ERP route, but if the staff who eventually will implement the new system is not equally on board with the need and business case, it will critically effect the success of the implementation.
It is therefore critical that staff members are not only properly trained, but should also be committed in the intent and reason for changing the system. The training must not only show staff members how to do things but specifically also why! Without knowing why the organisation change, staff members will keep on longing back to the old system or wanting to process data according to the legacy systems. An ERP is not a improved legacy system; it is a complete new integrated system which will necessitate new ways of doing things. It might even happen that the current staff is not skilled in the new ways which emphasizes the importance of training and full commitment of the staff. I would go further to say that a union representative should form part of the process from the very start of implementing an ERP.
- Business Process Re-engineering (BPR):
Many researchers have shed light on this CSF. An implementation of an ERP system requires a substantial investment in time and money and is a difficult implementation project. The reason for this being the change an ERP implementation will bring about in the way staff will do their normal day-to-day tasks. The decision to implement an ERP often goes hand in hand with business process re-engineering which on its own, is an involved process and challenges staff members with process changes. It is a general fact that an ERP do not necessarily fit biz operations perfectly. Business processes must be modified to fit the system, mainly because legacy systems fragment info while ERP integrates.
Two things happen in organisations. If the staff members keep on working as they did on the previous system, and this system is not compatible with the new one, it will keep on posing huge problems in user acceptance. But conversely, if you want to change your new system and keep your current processes, you will either trying to recreate your old system on the new(which is impossible), or you will build up huge costs to modify the ERP (using international standards and best practices) to accommodate your business processes.
Some organisations have opted to modify the ERP system according to their processes. Modifications of the system proved to be complex, impractical and extremely costly (Chen, 2001). One can therefore safely say that business process re-engineering is a prerequisite for success (Yusuf et al., 2004).
I have seen the intention of of organisations to not change their processes. This obviously brings a mismatch between the ERP and the current processes with great frustration to the staff and eventually not maximising the benefits of the ERP implementation. The more customisation is requested, the greater the cost. And, as long as you still allow things to happen as they did in the old system, there will be no need by all staff to start doing the new thing.
- Clear Strategic intent:
Part of the importance of top management support is for the organisation to have a clear business intent; the reason for change, the objective must be clear to all. Coupled with this, the organisation should have a clear comprehension of the changes that will happen and the consequences these changes will have on the way the organisation went about dong things. Clear intent is necessary in order for everybody to understand that paper-based process of units working in silos is not the objective of the ERP implementation. Automating the organisation means that everything is done on a whole new scale - leave, salaries, payslips, claims, supply chain orders etc. Many organisations fail to realize the full potential of their ERP implementation because as business they are not ready and organised to fully benefit from the new system (Chen, 2001).
Its all very well for a portion of top management to decide to implement an ERP system and thereby demonstrate its willingness to be in the forefront of technological advancements, but if the technology doesn't fit the business intent, the business strategic objectives, it can become a costly demonstration of its market position. Top management's role is not only to provide money, or to kick start the project, it should be involved throughout the project and ensure that staff is with them all along the way. An ERP implementation is a new way of doing things; the old has passed; the new has come!
- Bingi, P., Sharma, M.K., and Godla, J.K., (1999). Critical issues affecting and ERP implementation. In Information Systems Management, 16(3), pp. 7-14.
- Chen, I.J., (2001). Planning for ERP systems: analysis and future trend. In Business Process Management Journal, vol 7(5) pp. 374-396.
- Hitt, L.M., Wu, D.J., and Zhou, X. (2002). Investment in Enterprise Resource Planning: Business Impact and Productivity measures. In Journal of Management Information Systems, 19(1) pp. 71-98.
- Kumar, V., Maheshwari, B., and Kumar, U., (2003). An investigation of critical management issues in ERP implementation: empirical evidence from Canadian organisations. In Technovation, 23(2003) pp. 793-807.
- Mandal, P.M. & Gunasekaran, A., (2003). Issues in implementing ERP: A case study. In European Journal of Operational Research, 146(2003) pp. 274-283.
- Ross, J.W. (1999). Surprising facts about implementing ERP. In IT Pro.
- Woo, H.S., (2007). Critical success factors for implementing ERP: the case of a Chinese electronics manufacturer. In Journal of Manufacturing Technology Management, vol 18(4), pp. 431-442.
- Yusuf, Y., Gunasekaran, A. and Abthorpe, M.K., (2004). Enterprise information systems project implementation: a case study of ERP in Rolls-Royce. In International Journal Production Economics, 87(3), pp. 251-66.