Many companies rightly identify the need to acquire new ERP systems. These commercial cloud software packages promise the seamless integration of all the information flowing through a company—financial and accounting information, human resource information, supply chain information, customer and vendor information. Usually there are many drivers for change, but common themes are always evident. For example, standardising cross departmental processes or increasing visibility into the organisation, often across multiple legal entities. For management who have possibly struggled, at great expense and with great frustration, with incompatible information systems and inconsistent operating practices, the promise of an off-the-shelf solution to the problem of business integration is compelling. Yet in my experience, even more distinguishably in SMEs, it is alarming how many have expectations for software to magically resolve process issues.
But are ERP systems living up to companies’ expectations?
Often no. I have seen this most with companies who are growing rapidly, are buyouts or carve-outs and have at the very least separate accounting and operational systems, which of these businesses have many more. In these situations, all information is arriving at ‘the gates of finance’ as I often term it. Many times, finance teams have total control in what information gets posted to the ledgers, from what source and in what form. However, they also become the bottle neck of invoicing, data analysis (BI) and business planning as the sheer amount of data responsibility lies with this department. This, with the addition of finance sometimes becoming apprehensive of other teams having control over processes with posting impact, becomes a true business risk.
Moreover, in addition to the challenges with defining responsibilities for different process streams, what is often seen (already during system selection) is increased focus on how a new system might be able to handle mistakes and associated corrections. Often when this unease is investigated, I typically see that the business has a requirement for process improvement first and foremost. Separate systems
mean the ramifications of mistakes can currently be lessened through corrections, before postings are made in the accounting platform. However, this implants a culture that ‘finance will sort it out’ and this attitude presents a large risk to the ROI of ERP software initiative.
With the emergence of more cloud-based ERP software suites, and the increased out-of-the-box functionality nowadays included in these commercial suites I believe the significance of the technical
challenges faced while rolling out these systems has decreased. Simultaneously, more sophisticated database technology has increased the stability of enterprise systems in general. Still, one should not
forget that these systems are profoundly complex pieces of software, and installing them still today, requires substantial investments of money, time, and particularly expertise.
But the technical challenges, however great or small, are not the main reason ERP system implementations fail or at least tend to struggle with. The biggest problems are business problems –
more-so process issues. Companies fail to reconcile the technological imperatives of the ERP systems with the business needs of the enterprise itself.
“An enterprise system imposes its own logic on a company’s strategy, culture, and organization.”
As this article is titled, software is not an effective bandage for process issues. I’ve worked with many businesses to help them understand the collective responsibility that a modern, deeply interconnected
ERP system needs. And if a company rushes to install a new ERP system without first having a clear understanding of the business implications, the dream of integration can quickly turn into a nightmare. The logic of the system may conflict with the logic of the business, and either the implementation will fail, wasting vast sums of money and causing a great deal of disruption, or the system will weaken important sources of competitive advantage, at worst hobbling the company. Selection and implementation of a new system relies on the mutual understanding of multiple departments, satisfying individual requirements, but remaining aware of the operational impacts on other areas. So how can businesses adapt to both improve efficiencies and increase the chance of a successful
- Drive timely execution and improve accuracy of transaction submissions.
- Undertake cross departmental process and responsibility mapping.
- Use Outcome-based software selection.
1) Drive timely execution and improve accuracy of transaction submissions.
It is important to drive a culture of timely but accurate execution in an organisation. Not only does this increase discipline and work ethic, but fiscal timelines need to be adhered to for obvious reasons. First, delays or mistakes in transactions can reduce company’s cashflow. Either invoices take longer to raise or have errors that call for correction and credit notes. Delays in submissions, or erroneous entries cause delays in monthly reporting, meaning management have slower access to data to make
decisions. At quarter and year ends, the pressure associated with statutory reporting requirements come to the fore. Equally important, the timely and accurate posting of records avoids wasted time and effort in the correction or further manipulation of data. This inefficiency has a hidden financial cost associated with it and can lead to compounding problems within an organization. Therefore, improvement of system processing, has benefits for an organization that can be realized in the
immediate and longer term.
2) Undertake cross departmental process and responsibility mapping.
Cross departmental process and responsibility mapping solves two key challenges in organizations. Firstly, it highlights ways to improve process efficiency, free from the bounds of departmental structures and without technological investment. Secondly and most importantly it improves an
organization’s readiness for change. This latter point, in my opinion, cannot be stressed enough. By considering processes across the breadth of the organization, mutual improvements or solutions can
be found to organizational processes. Interdisciplinary culture is fostered which is also vital for any subsequent ERP implementation and the associated change management. This has point has further
validity when undertaking ERP and software selections. Teams will be used to working together and considering processes based on primary outcomes with the collective benefit to the business in mind.
3) Use Outcome-based software selection.
Outcome based approaches to software selection focus on defined ‘outcomes’ of process not the method steps used. This approach allows a business to ensure new software is fit for purpose in meeting its stated goals but allows the business to be open minded about new processes. This is critical as most issues of legacy are often focused on, though not limited to, the method steps of a process. Every process can be mapped in terms of its outcomes. Different software has different ways
of achieving key process outcomes and focussing on an ‘outcome based’ selection, avoids discounting a software product for not matching current processes.
Personally, I am not a fan of MoSCoW (Must have, Should have, Could have, and Won’t have) based selection, as so often I can see that the ideas and thoughts around “must have” requirements merely reflect inefficiencies in a current process, rather than noting the business outcomes that are needed. This is reflected also with requirements denoted as “should have”. What remains documented as “could have” often reflects as an exhaustive wish list and blue sky thinking.
If process and responsibility mapping has been completed, as noted in (2) above, the business should already be thinking in terms of process outcomes, instead of individual departmental or process
The three major steps outlined above address main pain points in change management associated with software. Improving discipline and existing process ensures that unrealistic expectations are not placed on a new ERP software selection, for correcting what are user mistakes or process faults. Cross department process and responsibility mapping fosters a cohesive awareness within businesses and yields a process designed for its efficiency, where departmental responsibility can be subsequently applied. Finally, an outcome-based selection avoids selecting and implementing products to bend to current systems and processes followed. It allows other software to show what might be more modern or relevant processes, or indeed simply allow the business to operate in a more flexible manner.
Therefore, software is not a bandage for process issues, but with some careful analysis and change – business can magnify ROI and the benefits that new software can bring.