Global ERP Implementation: Tips for Organizational Change Management

Organizational change activities often have tangible results on the success of an ERP implementation. Some aspects of change are more important than others and have a more immediate impact. There are five specific steps that companies should take in order to develop, actualize, and sustain the long-term organizational changes needed to best realize measurable business improvements enabled by new technology:

1. Business process standardization. Companies with global offices, particularly if those locations were acquired from another company, often have very non-standardized business processes. A global enterprise software implementation provides an opportunity to standardize processes across locations, but it can be very challenging to make that change happen. Organizational change management is crucial to overcoming such challenges.
 
2. Balance of local needs vs. standardization. Optimization of ERP benefits requires standardization in order to achieve a positive return on investment. But it's is also important to understand the local situation to ensure that the standardized operational model of the new system will accommodate these local needs.
 
3. Localized delivery of employee communication and training. Global operations may officially speak English, but it is important to communicate and train in the language of each location. New ERP software takes enough time to learn without language barriers, so translation of key messages and training will typically pay dividends in the long run.
 
4. Rely on your change agents. Each major office should have a local representative that acts as the change agent for the project team. These change agents will represent the local interests of their offices, validate how standardized business processes will work with their location, and communicate key process and organizational changes to their respective stakeholders. This employee representation is key to a successful implementation.
 
5. Leverage performance measures. Performance measures should be used to quantify the results that are expected from the ERP software investment and how each local office is expected to contribute to these improvements. These benchmarks become important in identifying opportunities to improve results after go-live.

Adapted from: Panorama Consulting Groups 2010 ERP REPORT Organizational Change Management http://bit.ly/ba2isg

Change Management: The Key to Unlocking Procurement Savings

Companies are spending millions on procurement savings initiatives in order to drive improvement to the bottom line. Buyer and supplier enablement is one of the most critical links between sourcing initiative and measurable bottom-line savings.  This process includes connecting buyers and suppliers electronically and aligning business processes between vendors and buyers.  This alignment is critical to ensuring that both parties can do business efficiently and effectively.  The last critical step in achieving measurable cost savings is driving desired end-user behaviors.

Strong and sustained user compliance rates of 80% and higher will ensure maximized cost savings. The most successful programs have the following characteristics:

• Strong executive commitment
• Targeted communication strategies
• Company-wide user involvement
• Comprehensive user training
• Compliance programs that phase out incumbent suppliers

Hiring the Winning Way

In his book, Winning, Jack Welch talks about the four characteristics that employees need to have in order to be successful.  it's therefore imperative to look for these qualities when you are hiring.

People who have positive energy are generally extroverted and optimistic, they thrive on action and relish change.  They love to work, love to play; in short, they love life.

People who have the ability to energize others, get them revved up with enthusiasm, can inspire members of their team to take on the impossible.

People who have edge have the courage to make tough decisions.  They know when it's time to stop analyzing and start deciding.  Many very bright people have trouble with edge because they see too many possibilities, and this prevents them from making a decisive choice and taking action. This kind of indecisiveness can keep an organization in limbo.

People who can execute have the ability to get the job done,  They know how to turn decisions into actions and push them to completion through resistance, chaos, and unexpected obstacles.

If a job candidate has all four of these characteristics, then look for their passion.  This is an authentic, heartfelt excitement about the work they do, and about the people with whom they work.  They love to learn and grow their responsibilities, and they're enthusiastic when the people around them do the same.  People with passion tend to excited not just about their work, but about everything in life.

Adapted from Welch, Jack with Suzy Welch. Winning. New York: HarperBusiness, 2005.

Driving New Efficiencies in the Indirect Supply Chain

In difficult economic times, companies look for new ways to increase efficiency and cut costs. Most companies focus their efforts on direct materials and capital expenditures. In the 1980s, companies tried outsourcing purchasing, inventory and other functions as a cost cutting measure. However these bundled services did not provide the transparency needed to eliminate waster and inefficiencies. Now Supply Chain Managers can implement lean processes that provide better visibility and promote continuous improvement in every aspect of the supply chain. Best-in-class companies have reduced MRO costs by 19 percent, according to an Aberdeen Group Study, however there were significantly lower savings realized by average and laggard companies at 7% and 3% respectively.

Seven ERP software implementation success factors

1. Focus first on business processes and requirements, not on the choice of the software.
 
2. Focus on achieving a healthy ERP ROI (return on investment), including post-implementation performance measurement, by establishing key performance measures and setting baselines and targets for those measures.
 
3. Strong project management and resource commitment.
 
4. Secure the commitment from company executives including the CEO and the entire C-level staff.
 
5. Validate the software vendor's understanding of the business requirements/project plan and that these needs will be met.
 
6. Ensure adequate training and change management. People make or break ERP implementations. Job redesign and training of staff will be needed, both of which will take time and money.
 
7. Make sure you understand why you're implementing ERP. If process improvements or targeted technology will meet your business needs, you will be able to reach your objectives at a lower cost. The most appropriate choice for your situation may or may not involve implementing an ERP.

The decision structure needed to make the right choice when it comes to an ERP implementation is complex. Business needs must be understood, and business processes clearly defined. Rushing through this process will lessen the chance for the project's success.

Adapted from a White Paper by the Panorama Consulting Group, March 2009: http://bit.ly/bcs9NQ

The Downside of ERP Implementations

ERP vendors do not talk too much about the downside of ERP implementations, but they do exist.  Some issues that companies might experience include:

• The implementation effort will be bigger and more work than anyone imagined. These projects never come in ahead of schedule or under budget.
• The functionality possible with systems can temp users into wanting all the bells and whistles causing the scope to grow out of control.
• The swing from manual to automation for the many tasks covered by the ERP will improve efficiency, but decrease flexibility.
• Users will need to become more computer literate. Many see this as personally challenging - even beyond their ability - and will not cope, and possibly even leave the company.
• Computers are literal, and this means that data integrity is imperative. Don't ever forget: Garbage in leads to garbage out.
• The "E" in ERP stands for enterprise.  Never forget that what one person does can have a ripple effect across the entire company.
• ERP systems tend to replace old systems, and as such they are a quantum leap for all areas of the company. It is like replacing the trusty old Ford with a high performance Ferrari. This happens at a technical level as well as a business level. New ways of doing things and of thinking need to be learned in a very short space of time.
• Things have to be done consistently. No longer are we going to be able to do something one way in one branch and another way in another branch. The system is going to determine how we do things in all locations. Even within one location, special treatment may not be possible any more without changing the configuration of the system. If consistency can be implemented, there is good potential for cost savings as well as getting rid of special arrangements that reduce profit.

ERP systems have both upside potential for good outcomes and downside potential for bad outcomes.  Aim for the former and prepare to avoid the latter, and your organization will have a winning experience.

Adapted from: http://bit.ly/cW2osy

The Future of Procurement: 2020: The rise of Service Providers and the Evolution of In-house Procurement

What will be needed in 2020 are people who can take information and proactively develop strategies that advance an organization's priorities. The skills most needed will be those that directly drive profitability, such as:

• Financial assessment
  
• Relationship building
  
• Team management
  
• Ability to drive internal and external collaboration
  

Those who excel at sourcing processes, or at being power users of procurement systems, but who lack the above described skill set may find themselves working for a third party service provider in 2020, or not working at all.