3 Reasons Why ERP Projects Need the President’s Involvement
By Wayne Strider
In a previous post, “A Unique Role for the President in ERP Projects”, I suggested that an organization’s president has a unique role in ERP projects and gave examples of what the president can do that no one else can.
In this post I want to tell you why it is so important that the president be actively involved in an ERP project. Here are three reasons:
1. ERP Projects Are Risky
ERP projects are not like most other IT projects. They tend to be highly visible. Internally they can affect how employees do their work in almost every part of the organization or institution. Externally they can be media magnets. They typically have very large price tags. They have a track record of troubled implementations. They deeply touch the operations that you depend on to run your business. If an ERP project goes badly there are significant risks:
• The ability to achieve your mission and strategy can be jeopardized if you are counting on your ERP system to increase your competitiveness and it doesn’t work as expected.
• The ability to run your day-to-day business can be compromised if your ERP produces errors in payroll, accounting, purchasing, accounts receivable and so on. What would it cost your organization per hour or day to have any of these functions inoperable or producing errors? Hershey Foods several years ago suffered order processing and shipping problems during the Halloween and pre-Christmas sales periods due to a glitch in their new $112 million ERP. Third quarter sales were down 12.4% or $151 million. Share price fell 27% from the year high. (Source: CIO.com)
• There could be an uprising among staff who don’t want to change how they do their work.
• Your organization could get a black eye in the press.
• A ton of money could be spent with little or no value realized.
• Your president’s career could suffer a setback.
2. You Can’t Just Leave It To The IT Department
The IT department can handle getting the technology up and running. That’s what they do best. But, most IT departments typically do not possess the skills or experience to handle the political, organizational, and human change management issues that are inevitable with ERP projects. When ERP projects go badly it is almost never because of technical issues or lack of technical skills.
3. You Can’t Just Leave It To The Project Governance Structure
Many ERP projects have a governance structure that includes executive sponsors (i.e., direct reports to the president) to handle decisions that cross organizational boundaries or that are outside the authority of the project manager. The president may not be included in the governance structure. The idea is that executive sponsors will handle the most difficult enterprise decisions; and therefore, not bother the president. Even under the best of circumstances this governance structure can fail to keep the project on track. Here are three reasons why:
• It is human nature not to want to be the bearer of bad news. The project staff, team leads, project manager, project office, and possibly even the CIO do not always reveal the most serious problems to the governance structure. They have so much hope and belief in themselves that they keep thinking they can fix the problems. However, this belief can become a trap. They can lose their objectivity. They can lose their ability to notice they need help.
• Executive sponsors often don’t know which questions to ask of the project leaders or how to interpret their answers. Just because they are executives does not mean they know how to oversee an enterprise IT project. What they don’t know about the project can become a trap. They can lose their ability to understand the significance of the information they’re given and of the information that they’re not given.
• Presidents are too busy to get involved in all the details of an ERP. Many do not want to be seen as micro managing the executive sponsors nor give the appearance of not trusting their IT staffs. This belief can become a trap. They can become isolated. They can lose their ability to know what is really going on with the project. Yet boards still hold presidents responsible and accountable for the significant dollars these projects consume.
Notice how these three traps can conspire to keep anyone from noticing the project is in trouble, and therefore asking for help. ERP projects get into trouble gradually over time, not all of a sudden overnight–although when the top finally blows off, it might seem like it happened overnight.