When ERP implementations fail, companies lose more than just money. They also damage their reputations, strain their partnerships, and diminish their customer loyalty.
While there are many causes of ERP failure, several of these fall under one category: project management.
Without the right project leadership in place, an ERP software implementation could be doomed from the beginning. Project management failure can set the stage for a high-risk project that ultimately fails to deliver.
Essential Project Management Functions
Before we dive into the various project management issues that could steer an implementation off-track, let’s be clear: there isn’t a one-size-fits-all approach to project management.
While there are many different organizational structures and strategies that can help organizations manage their projects, the approach you take will be unique to your needs.
Some companies prefer to decentralize their project management approach, establishing multiple business units to oversee different aspects of the initiative. Others choose a more centralized method, assigning the task to large groups of project management professionals.
Regardless of the plan you follow, there are a few universal project management needs applicable to every organization. When these needs are delegated to the appropriate groups, you can manage even the most complex ERP project.
These needs include:
- Acquiring and maintaining the right skill sets (technical and non-technical)
- Properly allocating scarce resources
- Ensuring effective communication
- Collecting project metrics to inform decision-making
- Selecting and using the right project management tools and technologies
In theory, these five tasks sound easy enough. Yet, all too often, companies fail to complete at least one of the above requirements. As a result, they never quite gain their footing, despite deep investments in cutting-edge ERP technology.
What Causes Project Management Failure?
There are several reasons why project management initiatives fail within software projects. In most cases, failures can be attributed to shortcomings in one of three areas:
- People
- Processes
- Communication
When these areas fall short, it isn’t the sole fault of the designated project manager. Rather, it’s a collective lack of attention to core performance factors by both the PM team and other team members and stakeholders.
These performance factors include:
- Focusing on business value
- Capturing data to analyze checkpoints
- Setting a requirements baseline
- Maintaining a consistent planning and execution strategy
- Managing and motivating people throughout the project
- Keeping end-users informed and engaged
- Providing project team members with the tools and technologies they need
When any of these areas suffer, the entire ERP implementation can fail.
Case in point:
A client asked our team to help them recover from a failed ERP implementation. The implementation had been led by an internal resource who didn’t have the right skill set.
In addition, the project involved multiple ERP vendors who had too much control over the implementation process and got the client mired in a technological mess.
Further, the client had no clear IT strategy or project governance and refused the help of outside ERP consultants. They went live with the solution despite not being ready for prime time.
As painful as it was to see, projects like these can provide some great lessons for the rest of us. Here are five mistakes that can lead to project management failure:
1. Lack of Focus on Business Value
The technical details of a project are critical, but they should be linked to greater strategic objectives.
When companies hyper-focus on software features and capabilities, they can end up investing in ERP solutions that aren’t a good fit for their needs.
We recommend developing a project plan before your initiative begins. This plan should cover your project goals, what’s going to be delivered, what changes need to occur, and how you will measure benefits realization.
A Failed Payroll System Implementation
Panorama’s Expert Witness team was retained to provide a forensic analysis and written report to the court regarding the failed implementation of a major software developer’s ERP/payroll system.
2. No Checkpoint Data to Set Parameters
It can be difficult to set clear parameters in terms of cost and timeline. This is especially true if your organization has never implemented an enterprise software solution before.
Thankfully, there are software programs that can help project managers benchmark their efforts against both current productivity data and historical data from similar projects.
With these insights – as well as industry benchmarks from comparable projects at similar organizations – managers can set more realistic expectations. This can help them avoid unnecessary overruns and keep the project on course.
3. No Requirement Baseline
It’s common for project managers to rush the early stages of a project as they eagerly try to reach the software selection phase.
However, moving forward without establishing a clear requirements baseline could leave teams floundering. If you don’t know what you need the ERP software to do, then it’s impossible to tell whether you’re headed in the right direction.
Before ERP selection, the project team should clearly define current processes, pain points, and business requirements.
4. Lack of Skilled and Available Internal Resources
Most ERP failures are attributed to people-based factors, not technical ones. To this end, it’s important to choose the right people for your project team. The people you select should not only be excellent at their jobs but should also have previous implementation experience.
If you can’t find skilled and experienced resources among your internal team, we recommend hiring external resources, such as ERP consultants.
If you do have such resources, but they are too busy to dedicate time to the project, you may want to consider providing backfill for these employees so they can fully focus on the project.
5. Lack of Employee Engagement
It’s ideal when end-users and project team members work side-by-side for the duration of the project. In other words, your project team should seek input from employees at every touchpoint.
Employee needs and opinions can help form your ERP strategy, from initial requirements gathering to software selection to implementation.
Employee engagement efforts should be part of a comprehensive change management plan. This ensures that your engagement approach is structured and strategic.
Avoid ERP Project Management Failure
A digital transformation can be a major undertaking for any company. Before you begin any type of enterprise software project, it’s important to ensure you have the right team, strategy, and plan in place.
Project management failure can lead to myriad issues within your implementation. By understanding the risks involved, you can equip your project manager and project team for ERP success.
Contact our ERP consulting firm below for a free consultation.
