The Upgrade Challenge- A Case Study

Making the right decisions is critical to any business’ success. Information comes from experienced staff and data gathered from operations. Management’s ability to interpret data is important to make the “right” decisions that guide the company. Often, the way the data is collected, sorted and stored is deferred to technologists that don’t understand how the company operates, and are therefore unable to integrate the capabilities of the software with the operational needs of the business. 

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The challenges are even greater when a company totally changes the way it is operating. Upgrading simple accounting software to an ERP (Enterprise Resources Planning) system that is going to manage every aspect of the company from operations to accounting and finance, and sometimes even sales and customer relations is no small task. There is a significant amount of planning that needs to take place. If the planning is incomplete, this huge expenditure of money and staff time is doomed. Global consultancy McKinsey estimates that more than 70% of ERP implementations fail, and Gartner says that failure rates can exceed 75%. With those failure rates, what are the steps that will assure success? 

• Business – Industrial seating manufacturer
• Location – St. Louis, Missouri                              
• Sales – $15 million
• Ownership – Single owner

Initial Contact –

The company had been working on their ERP implementation for over a year. Everyone was in place for the kick-off at the start of a new month. But in less than a week, management realized that the results weren’t meeting their expectations. Not only were the customizations not working properly, but staff was not fully trained in the new software. The financial reports were no better than with the old software. And, on top of that, even though the balance sheet totals matched the totals in their old system, the numbers didn’t match the subsidiary reports that supported it. They needed to start over, and needed a new approach to achieve the success they expected from their investment of time, money and manpower.

Significant Findings and Recommendations

Any dramatic change in the way a company operates starts with the leader. It needs to be more than a commitment of dollars. It needs to be in time and energy, with the expectation that the monumental effort will yield significant changes and improvements for the employees and the company. That commitment shows in not just memos, but participation as well. The CEO knew that company operations needed to change, but in spite of the effort and cost, he was skeptical that the final product would meet expectations. As a result, that lack of confidence pervaded the organization, leaving the employees with a half-hearted effort to complete the task. 

Recommendations

• Staff commitment – Establish new teams with someone from Operations and Finance involved with a member of the outside implementation staff. Hierarchical meetings were established, starting with senior management for overall guidance and scheduling, middle management for operational planning and milestones, line employees with specific training and testing. 
• No customizations – Software is designed to work a particular way. Customizing the software creates challenges. Any programming changes may affect different sections of the software, with some effects not seen till it’s operational. Plus, upgrades must be tested and confirmed with the customizations, to assure that they would still work. Best practices are to use the software as delivered.
• Operational workflow – The new ERP system must either work within the bounds of the way that the company functions, or the company operations must change to meet the flow of the new system. Workarounds are counterproductive. Build an operational plan based on the new paradigm created by the ERP. Think about what is the best way of accomplishing the operational task, and how does the ERP contribute to tracking, efficiency and reporting?
• General Ledger Dimensions – ERP systems allow true slicing and dicing of information gathered. Take advantage of the new capabilities of GL Dimensions by redesigning the Chart of Accounts for added flexibility. If it isn’t designed into the GL now, you won’t be able to take advantage of its power to analyze information later. 
• Verify data conversion – Make sure that the detail brought from the old system matches exactly with what arrives in the new database. Verification of Inventory, Accounts Receivable, Accounts Payable, Bills of Materials must all be exact. Any conversion program must be run and re-run to verify the accuracy of the data brought. Otherwise, the true nemesis of any computer system – Garbage In/Garbage out – will become reality. 
• Ad Hoc reporting – No ERP system can provide stock reporting with every variation management desires. Implementation should have a report writer for quick design and capture of information. 
• Test Company – To assure that things are setting up correctly, build a test company with enough data to do sample runs of various operations. Billing, cash collections, inventory adjustments, manufacturing, calculating standard costs. Every operation should be tested different people assure it works as planned.
• Training of staff – Every employee – every employee – should be trained in the test company so that they know how to do their daily activities in the new ERP system. Every software works differently, and the first week will be slow going. But spending time in advance will save a lot of frustration when the system goes live. 
• Trial Run – Take a long weekend. Convert the data, verify the critical numbers and then have the lead person in each department do one test transaction in each functional area to assure that everything is working correctly. 
• Running Parallel – Even though this is considered the gold standard, it takes a huge amount of work.  If all the other steps are taken, going live should be a cut-over activity, with everyone moving to the new system. No looking back.

RESULT –

It was painful to “start over” again. But the effort paid off. After an intense three months of work, the company was ready for a new cut-over. During the first 48 hours there was a lot of nervous energy in the office. But by the end of the first week, the staff was humming along, pleased with the efficiency and capabilities of the new system. By the time month end rolled around, the speed of the close, and the ease of gathering data made even upper management smile. 

Conclusion

Data is the backbone of any decision-making process in a company. Installing a new ERP system in any company, whether large or small, is a daunting task. It’s not just the expenditure of money and time that is at risk, it’s the confidence of the line staff that all of this work is going to be worth it. Making sure that the plan is complete and well executed is the key to success. Assuring that everyone has a part in the process makes the change a team effort. 

Change is difficult. Leaving old processes behind, and embracing new ones adds stress to everyone. But if it’s done right, the benefits outweigh the time and energy spent. Planning is the key that assures success. Then everyone can take credit for the part that they played. 

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