Financial Systems

Notes from the Field: Avoiding Surprises in ERP Stabilization Projects

This blog is based on my recent experience with a client that had implemented Microsoft Dynamics AX/Dynamics 365 for Finance and Operations. That enterprise resource planning (ERP) software offers benefits such as end-to-end system connectivity, resulting in profitability, transparency, and efficiency. It’s robust, but agile at the same time, and has a very familiar Microsoft Office interface. While these lessons stem from that experience, they will apply to any ERP stabilization project.

ERP implementation involves sales, production, logistics, fulfillment and accounting. Launching an ERP not only requires a system change, but also “change management” – from process, culture, and even personnel. Integrating such a system can sometimes lead to issues and other unplanned scenarios.

Change Management is even more daunting when the system is already live after a failed launch. More stringent user acceptance testing protocols must be followed with live data. Naturally, users become consumed with their day-to-day activities, and sometimes increased turnover follows. Failed implementations are often caused by: lack of user buy-in, poor requirements gathering (both vendor partner or users), over-customization, poor integration between cross-functional departments, lack of training and poor vendor partner selection.

Project Plan & Timeline

Critical items should be identified and tackled first. However, proactive communication to the user base on project plans helps curb frustration and aligns the organization. A post-implementation project plan should include estimated completion time and proper resource allocation with the flexibility to stretch, similar to a fresh agile implementation method. It should be noted that all timelines and resource needs usually expand and rarely contract.

It is advised that stakeholders have frequent informal meetings rather than the formal in order to facilitate resource allocation, establish realistic timelines, and reduce politics during the post implementation resolution phase.

Change Management & “Saying No to Customization” in the Post-Implementation Environment

A common issue during an implementation are requests to build processes and reports to match that which existed in the legacy system that do not come standard in the new ERP – also known as customization.

Beware of customization. Customization should be used sparingly and particularly when change management is most needed. Naturally, users will be comfortable with the old ways of doing things and may be resistant to change. Ideally, users change their process to match the new system. Customizations in code and reports lead to increased technical support costs with potentially unknown changes rippling through to different departments.

So how should an organization proceed if it has already customized processes and reporting? A hard reset. Resetting code back to the “out of box” version and having the users adapt to the ERP’s method for that particular process is a way of simplifying customized code.

Dealing with Turnover

Another challenging aspect of a failed implementation is ever-changing resources. A full ERP implementation is long lasting, and the company is likely to experience turnover on all levels, including external vendors.

Consider formalizing the onboarding process. Embracing an accelerated staff change upfront after a failed implementation will facilitate a more robust process map and training process.

Consider the following scenario: A code-fix in taxes within the customer service module leads to changes in the order fulfillment – which impacts AR and the GL – then ultimately management reports. In most instances, customer service won’t understand the impact between debits and credits or see the ultimate impact of the management reports. A map that bridges the gap between departments is crucial to understanding the ripple effect changes will have. The issue with documentation floating on shared drives is version control and access, particularly in a high turnover environment. Like a map of the world, the process map should be the single source of truth and understandable between all departments.

It is vital that process maps be displayed for everyone and constantly updated as processes are, for example in the “war room.” As staff changes, there should be no assumption that one functional area like Customer Service will understand the impact their changes will have in Fulfillment and Accounting.

While most organizations include this process, it is crucial to make this visible, dynamic, and part of the onboarding process. Process maps also decrease the need for report customizations, and as users understand the full capabilities of the new ERP they will embrace the system. Process maps will also help vendor partners who won’t entirely know the nuances of the business or industry.

Investment in training videos are more helpful than live training in high turnover environments so that sessions can be taken “on demand.” Having internal users take training courses by function as a part of the onboarding process will greatly minimize the friction between partners, leading to less customization and facilitating user adoption.

User Buy-In

No system can ever be successful without user buy-in. The users in place must be ready for radical – not just incremental – change and be completely aligned with the adoption of new processes.

Two solutions to increase user buy-in and adoption:

  1. The selection of user “champions” from each functional area as needed. Not only are champions part of the day-to-day operations, but also accountable for the success of their functional area. (Note that some relief from day-to-day activities should be provided in the form of responsibilities and project-based resources). To further align the champions, a long-term compensation plan and empowerment to make changes is recommended. Typically, champions should self-volunteer. User buy-in cannot be forced.
  2. Prevent occurrences where users implement “Band-Aid solutions” extending any long-term resolution. User acceptance testing should be a strict process, which includes accountability from all champions. Each functional area should sign off on new features, fixes, and even reports.

Partnership

Vendor selection and coordination between partners might be one of the most crucial factors in implementation. As vendor partner resources are limited, identifying the strengths and weaknesses upfront is key to building a full team.

Additionally, different functional areas may require a different vendor partner. For example, the fulfillment center may have a different system which feeds the ERP system, and ultimately feeds actuals to the planning tool. What typically arises is finger pointing between the different vendor partners. Even technical project managers typically find it difficult to identify the issues across a variety of different systems; having project managers with knowledge of all systems in play is as rare as a unicorn. One solution can be a phased approach, where one area is finished before rolling out the next. Additionally, team-building activities to build trust among all the cross-functional departments are useful facilitators of progress.

Challenges

Implementing ERP systems requires a symphony of teams, modules, and partners. A general guideline for system stabilization is three to nine months after go-live, which includes a dip in performance. Navigating through these rough waters is challenging, but for my client, the long-term benefits of Dynamics AX/Dynamics 365 for Finance and Operations meant robust data, an easy-to-use system, and ultimately a higher performing organization.

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If you’re looking to make the most of your financial systems selection, implementation, or usage, we invite you to visit our service page to learn more about how we can help. You can also contact 8020 Consulting directly for more information.

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About the Author

Jackson brings 15 years of finance and systems experience in apparel, entertainment, and technology. Prior to working at 8020, he served in various leadership roles in the apparel industry: VP of Finance at PPLA Clothing, VP of Finance at Little Giraffe, and the head of FP&A at Junk Food Clothing. At Fox Entertainment, Jackson led the implementation of business intelligence tools and reporting, and at Fox Sports, he conducted analysis on multi-billion dollar sports deals. Jackson’s experience also includes financial modeling for technology startups as well as large public-sized tech companies. Jackson holds a Bachelor’s from USC’s Marshall School of Business with a concentration in finance.

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