Why ERP Fails – The Most Common Reasons for ERP Disasters

When used properly, enterprise resource planning (ERP) systems give organizations a global view of data, enhancing a wide range of business operations. Unfortunately, many ERP projects fail to provide satisfactory results.

The reasons for ERP failures are often connected to the implementation process. Companies may fail to define goals or processes, minimizing the benefits of ERP software. To avoid these mistakes, explore the most common causes of ERP disasters.

Failure to Set Clear Goals and Project Outlines

The most common cause of ERP deployment failure is a lack of clearly defined goals. Without goals, it becomes impossible to analyze the effectiveness of the software or deploy it.

The team responsible for implementing the ERP system requires goals to create a roadmap for deployment. Without a specific strategy, organizations may experience a wide range of problems during the implementation process, from inefficiency to poor adoption of the new processes.

ERP software provides a set of business tools for managing a wide variety of functions. Setting goals helps organizations determine which tools are needed and how to deploy them.

Along with operational goals, organizations should set goals related to the budget and timeline. Enterprise-level ERP software is often costly.

Vendors base the total cost on the variety of features and functions you require, along with the scale of deployment. Without a set budget, you are more likely to expend unnecessary resources.

Establishing a timeline keeps the implementation from rushing the process. It also allows everyone involved to provide input and minimizes the disruption to daily processes.

Failure to Clearly Define Business Processes

Along with clear goals, you need to define the business processes impacted by the ERP software. In fact, this is one of the first steps in selecting the right ERP system.

The most effective ERP systems can handle processes for a wide range of disciplines, including CRM, sales, finance, manufacturing, and human resources. Vendors can also tailor the software to suit the needs of the organization, adding or removing functions as necessary.

For the software to cover the needs of your organization, define the processes that it should manage. Determine which processes benefit most from automation and a central database.

Lack of Support from Upper Management

Planning the implementation of ERP software takes time and involves employees from every department. Without support from upper management, the implementation team may not have the time needed to evaluate every detail thoroughly, increasing the risk of failure.

Along with time, the implementation team needs feedback from the decision-makers in the organization. Management should frequently provide input and clearly outline their expectations for the project.

Support from management also helps improve employee engagement with the new software. Managers and supervisors are more likely to devote time to learning the new processes if high-level executives make it a priority.

Failure to Assemble an Effective Team Structure

It takes more than one person to implement ERP software. In fact, most organizations develop an implementation team to handle the process.

An implementation team ensures that the software covers all relevant areas of the organization. The team also keeps the project within budget and on time. However, these steps require an effective team structure.

At the top of the hierarchy for the team is the project committee or project owner. This may include CEOs and other high-level executives. The committee or owner communicates the company’s goals and provides support.

The project manager answers to the committee or owner and oversees the entire implementation. The manager is supported by a team of users and IT staff. This may include several super users with in-depth training and knowledge of the ERP software.

Finding the right manager is a key part of developing an efficient team. The manager requires organizational skills and knowledge of all departments, as they need to ensure that the software addresses the needs of the entire company.

Not Planning for Large Scale Data Migration

ERP software includes a central database used by a variety of business tools. Migrating data from existing software to the ERP database is a lengthy process.

Many businesses fail to understand the scale of the migration process, causing a disruption to normal business operations. It may take days or months to digitally transfer invoices, customer contact information, tax records, employee files, inventory data, and dozens of other records from existing software.

Planning the migration process is typically the responsibility of the implementation team and the IT department. Scheduling the migration of one department at a time helps provide a smoother transition.

Along with a schedule, businesses should update existing records. ERP business management tools are only effective when given accurate data. Clean up existing records by correcting spelling errors and removing duplicates.

Lack of Communication

Open communication is needed during every stage of the implementation process. This includes communication between high-level executives and the ERP project team along with communication between departments.

A lack of communication leads to unsuccessful employee adoption of new processes and inefficiency. If employees need to interact with the ERP software during their daily processes, they need training and clear communication from supervisors.

The decision-makers and upper-level executives within the organization need to communicate their goals to the ERP project team. As mentioned, every ERP deployment needs clear goals. Communicating these goals ensures that ERP software meets the needs of the company.

Departments also need to communicate their needs during the selection of ERP software. Without clear communication, the ERP implementation team may overlook key features for specific departments. For example, the human resources team may require an employee self-service portal.

Company newsletters, staff meetings, and training sessions help increase communication. This ensures that everyone clearly understands their roles and responsibilities.

Avoid the Most Common ERP Deployment Mistakes

The key to avoiding the mistakes discussed is to develop a detailed implementation plan involving everyone within the organization. Upper management, managers, supervisors, and workers need to remain on the same page to switch to a central system successfully with individual resources for each department.

Remember to set goals, establish an ERP implementation team, and maintain open communication.