KPIs Hold the Key to ERP Success

Enterprise Resource Planning (ERP) systems are business management software platforms that enable organisations large and small to collect, store, manage, and most importantly use mission critical information to produce strategic insights and improve operational performance.

Although a departmental necessity, when organisations are carved up into HR, finance, manufacturing and sales & marketing functions, information-sharing barriers are created, which significantly harms the prospect of achieving high-level business objectives and goals.

Without continuous, conscious, and clear feedback being facilitated between business units:

• staff lack visibility over the periodic and routine actions of their colleagues;
• thereby decreasing the likelihood of organisational synergies forming;
• and restricting organisations from capitalising upon opportunities for change.

The great thing about ERP systems is that they are designed to overcome this challenge, by integrating and connecting a wide range of business processes and functions, across multiple sites and locations with an expressed connection to the financial bottom-line. They facilitate the assembly of a wide range of transaction data, giving decision makers a holistic view of their organisation – allowing them to take action quickly on the basis of facts.

Without doubt the implementation of an ERP system has the potential to revolutionise the way that your organisation operates, yielding significant payback in terms of efficiency and process improvements in the short, medium and long-term.

However, to realise improvements, organisations need to be aware that this is an inherently information led process, requiring business insights to be actioned and actualised day in day out. This is because, although an ERP system enables the collection of business information, real world success is entirely dependent upon how you use it. And with a wealth of information at your fingertips with ERP support, organisations have to determine what counts as business critical information and what doesn’t. As such, ERP data needs to be streamlined and organisations need to link it to their overarching strategy.

And this is where Key Performance Indicators (KPIs) come in.

KPIs are targets that help enterprises define and measure their progress towards achieving certain organisational goals. They are the administrative framework that allow for the achievement of an all-encompassing organisational strategy, ensuring that day-to-day, month-by-month, each and every part of the business is working in harmony towards the same end.

Without clearly defined KPIs organisations tend to fail.

And, ERP systems tend to be less effective if KPIs are not assigned to them because the data produced is not linked to a clearly defined business objective. Hence, just as KPIs form the cornerstone of the enterprise, KPIs are equally as vital to ERP success.

One of the great things about ERP systems though is that they enhance our ability to determine KPIs through digitising every action undertaken in the business, thereby enhancing overall visibility.

Take for example, revenue per fee earner as a KPI. Whereas prior to ERP implementation organisations that assign billable hours to consultants or technicians would’ve administered their time centrally, by connecting these frontline workers to HR and finance planning specialists for example, they can be put to best according to business need.

And herein lies the key advantages of an ERP system: they enable organisations to share crucial KPIs cross-departmentally so that they can keep an eye on the bigger picture when managing resources.

Another KPI related to the one above and a mainstay of ERP systems is FTE utilisation. More than ever before organisations are engaged in what management consultants McKinsey & Company describe as the ‘global war for talent’.

Ask any business leader and they will tell you that hiring is costly and time consuming and often fraught with complication. That is why organisations need to develop their talent from within in order to maximise ROI. An ERP system will allow you to do this by giving visibility of both upcoming projects and project resources, thereby allowing for short-term workforce optimisation while aiding long-term talent management.

The fundamental value of an ERP system is that all of this information links back to finance, hence providing the crucial link between revenue generating activities and your company’s bottom-line. Net profit, gross profit, aged debtors, aged creditors, cash in the bank are all available in real time and can be stacked against the wider activities of the business to generate insight.

As a further matter, you no longer have to wait until your accountant has calculated these figures, or until the data has been passed into a third party product for manipulation and presentation. You can keep an eye on your business from wherever you are, on your device of choice.

Just as important that the financial information you work with is up to date, it is vital that KPIs are timely and accurate, yet flexible enough to meet the changing demands of your business.

Undoubtedly, KPIs will change over time and a particular advantage of cloud-based solutions is that their inbuilt flexibility allows for these to be configured at the click of a button.

Using smart dashboards decision makers can get a snapshot of their business at a particular moment in time, on the go, according to their needs.

Overall, when an ERP system is aligned with attainable KPIs the ability to adopt evidence-based management delivering tangible results is greatly enhanced. They allow you to not only reflect the KPIs you currently have in your business by collating information and sharing it, but also they allow for discovery of new ones through making critical connections in your business.

Learn more here.