Thursday, November 16, 2017

Sacrificing the Long Term for the Short

In the last couple of years, I've started seeing more and more books and articles about the fallacy of shareholder value as the primary responsibility of a business exacerbating the drive to meet the monthly and quarterly numbers at the sacrifice of long-term goals and plans. Organizations are so concerned with hitting the short-term metrics that they are literally leveraging the businesses future to reap today's bonuses; even when it hurts the long-term health of the company and foreseeable impacts the ability to hit the future numbers. Unfortunately, this is an issue I've seen up close and personal several times.

I've worked across multiple ERP implementations, for Oracle and Microsoft Dynamics AX solutions. As is the case with most of my projects, I am typically not on the ground when the projects start but instead work to fix the projects after errors, missing change management, and difficulty with expectation management have driven the projects off the rails. In this particular case, as I conducted Lessons Learned, I realized the company made the exact same mistakes twice (once during a Finance implementation, and then again during a Sales Order implementation), and the cause of the mistakes was a focus on hitting the current monthly/quarterly numbers rather than planning the resources and strategy to ensure a smooth deployment of the new ERP system, which would impact the business for years to come.

The first mistake occurred when the business did not take the time to properly map out not only the current procedures but also the expected future procedures for the affected business areas. An ERP implementation is an ideal time to take a step back and identify not only how a company is doing business, but also if there are any strategic or tactical changes that would help the business become more efficient. This requires dedicated time from knowledgeable resources (Subject Matter Experts or SMEs) within the company, across multiple business units, to walk through the different process steps, mapping out the details, interactions, and connections within the process, not just within a particular area of the business (like Finance) but where those steps in the process touch other areas of the business (like Procurement or Manufacturing).

Once the processes are mapped, then they should be reviewed by the SMEs as well as management to determine what improvements could be made, such as removing redundant steps, improving cross-communication within the company, or re-ordering steps to ensure a smoother workflow. The initial mapping, as well as these steps, are typically done with input from the ERP Implementation team to ensure that the system can actually perform the identified procedures as well as manage the expectations of the end user to limit unexpected surprises or identify places that may be outside the typical approach of the software in question.

In this particular case, the business decided that they couldn't afford to lose the knowledge experts (SMEs) and managers from regular operations for the time necessary to perform the mapping and the process improvements. The concern was that the monthly and quarterly numbers would suffer and that the company was short-staffed already. As such a single person was identified as THE SME for each implementation (Finance and Sales), and he/she would work with the implementation team to provide the necessary knowledge and guidance. Then the team was basically told "Don't bug us until you are ready to Go-Live."

Unfortunately, this was their second mistake. No matter how knowledgeable a person is, nor how many different groups they've worked within the company, they cannot know all the processes, communication touch points, and system requirements necessary to successfully implement an ERP system. It requires a team of experts (SMEs) to provide the right knowledge as a foundation, and then management and the SMEs should be involved in the refinement process, as well as evaluation of proposed solutions to ensure that the system will meet not only the business demands but also the end user expectations.

Although there were a litany of other mistakes (I may approach these in future posts), the end result of these specific mistakes was an incomplete map of procedures and interactions, missed requirements, and an implementation of an incomplete system that generated a lot of pain for the users and slowed down the business until those gaps could be resolved in the LIVE SYSTEM. A couple of examples of the problems:

  • Within the Finance implementation, a bank integration was missed. As such, the company could not issue checks to vendors. For almost 6 weeks the business was filling out and signing checks by hand to their vendors. 
  • The sales order system wasn't properly mapped and tested with the legacy system for manufacturing (the focus being nearly solely on the sales side of the organization). As such, when the system went live, wrong parts were ordered in the legacy system and incorrect products were put together, not to mention issues with order forms released to the customer. This took months to resolve, as each mapping issue was identified and cleared. This meant months of incorrect products going out the door and bad order forms in front of customers.
These were only 2 of the repercussions related to the missteps from the very beginning (among others throughout the life-cycle).

Don't get me wrong. There is no such thing as an easy ERP implementation. ERP implementations are HARD. You are basically rebooting an entire business (or business segment) when you work through this type of project. There are best practices for a reason with steps that are tried and true; even with those best practices mistakes happen and difficulties will arise. When you undertake an ERP implementation, be aware that there will almost always be sacrifices to the short-term numbers in order to properly implement a system that will help the business become more effective, efficient, and profitable. Don't sacrifice the long-term for the short-term. Take the long view and understand that if the business is to succeed, the business leaders cannot be solely focused on the numbers for the next month, otherwise the poor decisions today could dramatically impact your ability to operate tomorrow.

No comments:

Post a Comment