ERP failure: the human factor

There is a mountain of advice available on how to successfully implement ERP, much of it free, and yet we continue to read of high profile failures. That many organizations do implement successfully is incontrovertible and clearly proves that it can be done, so the question is why even throwing large sums of money at ERP projects doesn't come close to guaranteeing success.

To try to answer that question, this article comes at the problem from a slightly different angle and, rather than highlighting what needs to be done to ensure success, looks at things that most frequently contribute to failure in the hope that forewarned is forearmed. It looks at how people can be an obstacle to success and investigates the human element because this is the most important factor in an ERP project. Although new technologies, such as Business Intelligence, the Internet of Things, Blockchain, etc, are emerging, it remains true that ERP is not about technology it's about people. So what can go wrong?

Star players omitted from the team

In the early stages of an ERP project, it is not unusual for managers to want to be closely involved so that they can articulate their department's requirements and ensure that the new system meets their needs. In all but the smallest projects, they soon find that doing their regular jobs whilst freeing up enough time to do this effectively is just not possible, so they frequently decide to delegate much of the task to subordinates. Unfortunately, what can happen then is that they delegate responsibility but not authority and then attempt to micro-manage those staff. They demand that all decisions are routed through them, and they demand a right of veto over any decisions made in their absence. The results are never good.

In anything other than a small project in a small company, the answer is to devolve the task to people who can apply themselves full time to the task. Even in large projects, when outside consultants and system integrators are performing much of the work, a full-time in-house core team is required to liaise with them and to understand, and if necessary, challenge their decisions and recommendations, but that raises the question of who to choose as departmental representatives. It often seems axiomatic that the best accountant should be accounting, the best buyer buying, and the best planner planning, but that can lead to second rate people being put in positions where they will be deciding, or at least influencing, how their departments will be running for many years into the future. So brief them properly and talk to them regularly but don't try to supervise them.

Internal resistance

Other articles on this website look in detail at the critical importance of change management and its role in encouraging and enabling change, but this article looks at a problem more insidious than a reluctance to change, and that is deliberate and active resistance to it. To the senior management who initiated the project, and signed off the significant investment it entails, it may seem obvious that a new system will benefit everybody because, in making the company more efficient, it will make it more effective and, in consequence, not only secure the jobs of all employees but also open up opportunities for promotion as it grows.

Most of their staff will agree. But not all. A very natural and understandable human response to change is, “What does this mean to me?”, and, though change management can mitigate the fear of the unknown, other things need to be considered. One is that, however bad a company's existing system, some people benefit from it. Many of these will be 'old-timers' (though not necessarily old!) who have become expert in gaining the most from it, at knowing how to work around its weaknesses, how to fix things when they go wrong, and what data within it can be trusted and what can not.

That makes them 'go to' people whenever there is a problem and that gives them a status which they will immediately lose when a new system is introduced and everyone is suddenly at the same level. Properly managed; these people can be an appreciable asset because they are trusted by their colleagues and, if given sufficient training to make them departmental 'super users', they can be vociferous and influential supporters of the new system.

A secondary problem to be overcome arises from the fact that departmental representatives have to be 'the best of the best'. Unfortunately, badly handled, that can say to the people not chosen for the role that they are considered not to be the best and some will not react well to that. They may then feel that derailing the project is a good way to prove that they should have been chosen. One possible solution is that, during the implementation phase, the core team can be faced with more tasks than they can handle, so the ability to be able to delegate specific tasks to specialist groups can be invaluable.

The challenge is to make these people understand that their involvement will be tactical and not strategic, that their responsibility will be to work out how things should be done and not what should be done. The worst thing that a company can do is try to placate staff by telling them that their views 'will be taken into consideration' because the people who use that phrase and the people who hear that phrase usually have different interpretations of what it actually means.

The team is not a team

A team is not a group of people who work together. A team is a group of people who trust each other and support each other. So, when a company pulls a group of people together to manage their ERP implementation, then, regardless of the previous comments made here about choosing the best of the best, those companies also need to make sure that the team is a team.

The reason is that an ERP system affects many departments, so the effects of a decision can ripple a long way. For example; a purchase order receipt affects Purchasing, Inventory Control, and Finance, so any decisions taken about how to handle it will have to be taken by the team and not just one department. Inevitably there will have to be compromises and that can be difficult when people don't trust each other. It is natural, when selecting and implementing a system, that departmental representatives will want the best for their individual departments but the best system for Purchasing may not be the best system for Inventory Control, and the best system for Inventory Control may not be the best system for Finance. So the team needs to be mature enough to be able to select the system and build the procedures that are best for the company and not for individual departments.

A secondary reason for needing trust is that, when difficulties arise during the project (and difficulties will arise during the project), the team needs to display a united front. If it is ever leaked that a particular department is being unreasonable, or dragging its feet, or being obstructive, then confidence within the company of a successful project will quickly leak away.

Inappropriate cost cutting

ERP systems are expensive. They are expensive to buy and expensive to implement. Before committing themselves to that expenditure companies will have been through a cost justification exercise. Nevertheless, when the bills start to roll in, more than a few will try to find ways of cutting costs especially when budgets appear threatened. They can’t at this stage cut costs on software (apart from bespoke) so the only places where cuts can have any real effect are in consultancy and training. Both are expensive (although you will have heard the expression, “If you think training is expensive, try ignorance”) but reducing either can cause real damage.

With insufficient consultancy, the chances of getting the best possible system are severely lessened.  If the consultants have insufficient time to understand what you want to achieve, their chances of delivering what you want are not good. When training time is reduced, someone has to decide on what gets skimped and on what doesn’t get taught. Who is best placed to make that decision; a system supplier who doesn’t know your business or your people who don't know what the system can do? The results vary from disappointing to disastrous.

When implementing ERP, it is important to realize that it is not a computer system. It is actually a people system that just happens to run on computers.