5 min read

Eight Key Factors that Lead to ERP Implementation Failure

Nancy Phillippi Mar 13, 2023 1:47:52 PM

How to Avoid an ERP Implementation Failure

Migration to a new ERP system is an expensive investment of time and money. It should not be taken lightly. Many organizations do not give this undertaking the same diligence as other important projects. We have seen companies also give the evaluation of ERP to someone new at the company that has no idea of the culture or company requirements. That’s like getting your grandmother to pick your next vacation or car. I can say that because I am a grandmother! The people in charge of evaluating your business ERP should know your company’s culture and at least a high-level understanding of what you do. Bringing in key department heads to help is also critical. One more thing…don’t be that business owner that says we will do things my way, with no flexibility. Part of getting a new ERP is to CHANGE what you have been doing and do it better!

We believe implementation failures are not due to the ERP software solution. It is often due to the following project failures. These are eight key points to consider before and during your new ERP implementation.

Not Having a Realistic Project Budget

Taking the time to complete a risk assessment, cash flow impact, benefit, and performance objectives are crucial steps often omitted when evaluating an ERP system. Another mistake is focusing on reducing the implementation costs. If you are working with a partner that wants to close the deal, then they will cut the budget to meet the client's demands. This leads to the assumption that the software will increase productivity and efficiency by requiring minimal configuration. The result is often disappointing and blamed on the software solution. The reason is that there is not enough budget. At this point, no one is happy. Instead, focus on how using a consulting firm can help improve productivity and streamline processes and how your team can reduce implementation costs in other ways, such as using the free eLearning that nearly every software vendor offers now. This is a win-win!

Some companies have a management team that blames the consulting team and finds a different partner to give them sometimes the same answers! Of course, sometimes there are just better ERP consulting partners. This is often called a "rescue". However, it is never a good idea to pay twice.

Be realistic with your budget and communicate this clearly with your partners. Ask the question, “If we reduce the services quote, what are we giving up”?

Inadequate Resources

Many business leaders fail in their responsibility to provide the resources, staff, and time necessary to make an ERP implementation successful. Resource requirements must be identified in advance and appropriately allocated.

Management must also be able to account for the loss of productivity caused by staff members being taken from their jobs to receive training and address important project issues. These will include all aspects of your business. To keep critical processes running smoothly and to avoid bottlenecks, temporary resources can be accessed.

Also, it is important to ask about the duration of the project as well as the skills required to implement the system successfully. This will help you determine what resources the consulting firm will supply and which resources you will need to source internally or externally.

Inexperienced TEAM

A complex, in-depth implementation project is not something that a novice should lead. An ERP solution's life expectancy is approximately 10 years. This project can have a significant impact on the performance and efficiency of your company. You'll want to select the best talent available for the project team.

It's a good idea to have some members of your team who have been through an ERP implementation. You can be sure that the outside consultant guiding you in your implementation has successfully implemented your ERP solution for similar companies.

The Project Manager must have the domain knowledge to manage the project details while still keeping the business goals in mind. A positive outcome is possible when project managers are involved in the selection and implementation process.

Your project manager should be in touch with your users. The project's success should be in his or her best interest with executive leadership support.

Unnecessary customizations and data conversion

Data conversion, interfaces and customizations are the three most difficult phases of an ERP implementation. These are the costliest and cause for delays. Do you really need 5 to 10 years of transactional history? Ask yourself and your team how and when they would use this data. Is it worth the 10K to 75K costs? If your partner says yes, we can convert your data, then ask them how much? It is hard to estimate data conversion. I have been attempting to do this for 25 years to no avail. Converting this much data is risky, expensive, and takes time. Imagine you are in charge of testing all that data…Only convert what you have to have. There are other options of keeping your old data handy for look-ups such as a Legacy Database. Choose the cleanest conversion and import master files and GL balances or even GL detail is not that expensive.

ERP buyers are often not discouraged from asking for small changes and additional features in the implementation phase, even though the cost of customizations can be inexpensive or expensive, they may save you a ton of labor time in the long run. The rule of thumb is if you can go-live without the change, then wait and see if you really need it, then do it after go-live. Every feature request must be justified and offer quantifiable benefits to the company.

Bad Executive Leadership

Executive support and leadership is key to a project's success. Because it is a huge under-taking, it requires strong executive leadership to succeed. I have seen many projects falter due to poor executive leadership. Your team must have direction, support and understanding during an ERP implementation. Don’t just hand this off, join project calls, ask questions, make sure the people in the trenches are not burning out and making wrong decisions for your business.

Poor implementation strategy

To see success, a methodical approach with a well-planned strategy is essential. It should be aligned with the company's objectives and culture for the project, which were set in the initial phase of planning. The project will not move forward if it isn't clear what problems ERP will solve and what outcomes you want to achieve.

You will, for example, need to pay attention to core business processes, and measurable financial benefits and establish reasonable deadlines for project milestones. However, if your consulting firm requests you change go-live, ask for specific reasons. This isn't a finger-pointing exercise since in most cases it's everyone’s fault things are delayed. Typically an ERP partner won’t ask to delay a go-live unless they feel the project may fail at go-live. The best thing to do is listen and change plans. You have to be nimble during an ERP project because invariably the best-laid plans will have a hick-up. Its not a matter of IF, its when.

Not enough system testing

One of the biggest problems ERP implementations have besides lack of executive leadership, is customers that do not TEST the system. Testing your system is imperative to go-live success. Everyone that will use the ERP needs to go through testing so that they can do their job. Project Managers should make a schedule of testing and make sure that everyone has done their job in the new ERP at least once, two to three times or more is ideal. NO EXCEPTIONS. One of the main areas to test is reporting. Can you do your job and get the most important reports that you need at go-live? If not, report your issues in an email to your Project Manager and Manager.

Managers should make every effort to sit in on their staff testing. This time can be used to evaluate end-user training efforts as well as how the system will work for each staff member. Some of the best projects use this time for end user training.

Post Go Live Expectations

Depending on your implementation, you may have several outstanding items at go-live. This is normal. Ensure your project quote has enough budget for post-go-live support. Review this with your project team mid-way through your implementation and before go-live. Discuss changes with your ERP partner so they can schedule accordingly. Keep in mind that ERP consulting companies schedule other projects and may not have planned for additional resources for an extended go-live. User adoption is super important at this point. You don’t want staff to go back to old bad habits and spreadsheets.

Plan for Success!

ERP implementation success is not a matter of chance. It's a matter of design. Properly implemented ERP will result in increased productivity, improved resource utilization, improved inventory management and a better customer experience.

Do you need a hand in implementing your ERP? Get in touch with the Clients First Business Solutions team today to discuss your ERP project.