HCM and ERP Success/Failure December 5, 2014 Andersen Corporation HQ Eric Kimberling Founder and Managing Partner Panorama Consulting Solutions www.panorama-consulting.com Phone: 720-515-1377 Twitter: @erickimberling 1
About Eric Kimberling Founder and Managing Partner of Panorama Consulting Solutions Leading independent ERP systems expert, giving 100% unbiased advice to clients for over 20 years. Published over 1,000 ERP articles and blogs Quoted by leading media and blog outlets as the leader in ERP, including Wall Street Journal, Fortune, CIO, and Financial Times MBA with an emphasis in operational strategy and a Bachelor of Science in business administration from Daniels College of Business at the University of Denver Certified Six Sigma Black Belt and a certified practitioner of multiple ERP solutions Expert witness for the industry s highest profile lawsuits 2
About Panorama Consulting Solutions The world s leading independent ERP consulting firm Key Service Offerings IT Strategy ERP Evaluation and Selection Implementation Organizational Change Benefits Realization Business Process Management Expert Witness Our Team Global base of consultants 20+ years of industry, consulting, and/or vendor experience Six Sigmas, MBAs, PMPs, APICS 360 ERP Certified Offices Boston Chicago Denver Dubai Lima San Francisco 3
Today s Agenda Review of Panorama s 2014 ERP Report Confessions of an ERP Expert Witness What You Can Do Differently To Make Your HCM Implementation More Successful 4
Panorama 2014 ERP Report - Key findings for HCM 5
Overview of PCS s 2014 ERP Report Based on detailed quantitative study of approximately 192 respondents Polling was conducted over the period from January 2013 to February 2014 Includes companies of all sizes, industries and software packages 6
2014 ERP Report Findings Source: Panorama Consulting s 2014 ERP Report Copyright 2014 Panorama Consulting Solutions 7
Data Summary by Year 8
Reasons for Implementing HCM and ERP 9
Total Annual Revenue of Respondent Organizations 10
Implementation Outcome 11
Overall Satisfaction Levels Source: Panorama Consulting s 2014 ERP Report Copyright 2014 Panorama Consulting Solutions 12
Top Selected HCM and ERP Vendors Source: Panorama Consulting s 2014 ERP Report Copyright 2014 Panorama Consulting Solutions 13
Type of HCM and ERP Software 14
Cost Savings From Cloud Usage 15
Level of HCM and ERP Customization 16
Areas in Which Consulting Firms Provided Guidance 17
Why Organizations Used HCM and ERP Consultants 18
Implementation Costs 19
HCM and ERP Project Duration 20
Percent of Benefits Realized 21
Types of Benefits Realized 22
Timeline to Recoup Costs 23
Operational Disruption 24
Key Findings 1. 56% of companies implementing HCM and ERP systems were multi-national, while 77% were multi-site 2. A majority of HCM and ERP software purchases were for less than 100 users 3. 83% used consultants for some or all stages of their HCM and ERP implementations 4. 51% of organizations experienced some sort of material operational disruption at the time of go-live 5. Organizational change management issues was hands-down the number one implementation issue experienced by implementing organizations 25
Confessions of an ERP Expert Witness 26
Confessions of an ERP Expert Witness Overview of a Recent Failure Independent Analysis of the Failure: What Went Wrong? What Didn t Go Wrong? 27
Massachusetts Dept. of Revenue Fired their ERP Consulting Firm In 2013 after a $54M investment, the State fired Deloitte Consulting of New York A disastrous test run of the system intended to revolutionize the filing of tax returns prompted the action The State believes it can still bring the system in on budget ($114M) by using some of what Deloitte started The goal is to go on-line before the end of 2014
Marin County ERP Implementation Failure in 2010 County scrapped ERP (SAP) implementation after investing $30M in the project County is suing their SAP system integrator (Deloitte) Alleging fraud and misrepresentation during sales process in 2004 Alleges that Deloitte s consultants were inexperienced and that the software had a high error rate Deloitte counter-suing for unpaid consulting fees Settled for $3.5 million and paid $5 million in legal fees in January 2013
Lumber Liquidators ERP Implementation Failure in 2010 Lost estimated $12M to $14M in net sales due to troubled go-live Company revenues dropped 45% Company cites lack of user acceptance and adoption as keys to the company s failure
Other Recent Failures Our research of publicly announced lawsuits show no meaningful correlation between software vendor and failure See the complete list: http://panorama-consulting.com/an-appetite-fordestruction-the-erp-implementation-lawsuits-continue 31
Case Study Overview About the Company Multi-billion dollar US-based company sued Tier I ERP vendor in 2009 for failed implementation The company alleged fraud and misrepresentation by the software vendor Implementation failed to roll out software across 20+ locations, barely used by pilot location Both parties ultimately settled out of court Panorama hired as expert witness in the case
Independent Analysis What Went Wrong? Weak software evaluation and selection process Unrealistic implementation expectations Unclear business requirements Lack of executive sponsorship Poor project management Too much customization Poor organizational change management Poor risk management and mitigation
Weak Software Evaluation and Selection Process Requirements were not well-defined Company did not appear to leverage lessons from previous ERP failure several years earlier Roles and responsibilities between client and vendor were not well defined or understood Did not clearly understand scope of what was demoed vs. what was purchased contractually
Unrealistic Implementation Expectations Company expected a multi-site, global implementation in 18 months Expectation was that the company would use 100% out-of-the-box industry functionality with no software customization Expected to achieve these goals with little outside support
Unclear Business Processes and Requirements Business processes & requirements were not well-defined prior to selection or system design Company eventually defined requirements on a site-by-site basis, beginning with pilot location Adopted a requirements by committee approach, leading to heavy customization & inconsistencies across multiple sites Defined processes and system design were operational mismatch outside the pilot facility Definition continued through implementation
Lack of Executive Sponsorship Executive team took hands-off approach to implementation, pushing responsibility deep in organization As a result, unclear direction for project team Slow or non-existent decision-making support Internal executive misalignment, a problem that goes beyond the ERP project
Poor Project Management Multiple project managers, with frequent turnover throughout implementation Lack of direction, accountability, and incentive to make the project succeed Lack of previous implementation expertise Relied primarily on internal resources with little outside project management support
Too Much Customization Despite efforts to the contrary, system was heavily customized to meet requirements Over 100 customizations identified during design Very weak change control procedures, including validation of customization requests Did not adequately leverage functionality of the system Quickly became a custom system rather than ERP implementation project
Poor Organizational Change Management and Training Identified internal OCM team, but very little user involvement throughout project OCM activities were complicated by constantly changing business processes and system design Core team did not sufficiently understand system capabilities, leading to customization
Poor Risk Management and Mitigation Did not establish risk management and mitigation plan throughout project System was not well-tested, neither technically nor functionally Users were not adequately trained prior to go-live Data was not tested prior to go-live Company proceeded with go-live, despite internal audit report warning of severe risks
Independent Analysis What Didn t Go Wrong? The software worked, but it didn t work for the client s business The software could not define for the client how to run the business At the end of the day, software does not determine success or failure of the implementation
Lessons Learned (HCM or ERP) What Can You Do Differently? Establish a rigorous software evaluation process Begin with realistic expectations Clearly define your business blueprint Ensure solid executive sponsorship Augment team with strong project management Tightly manage customization Manage organizational change extremely well Establish a strong risk management process
What You Can Do Differently to Make Your HCM Implementation More Successful 44
The Role of Business Process Management Business Process Management is Critical and Should be Reviewed for the Following the Areas: Workforce Planning Implementation of Recruitment Solutions Recruitment and Hiring Job Analysis and Classification Position Management and Organizational Review Policy and Procedure Development Analytics and Metrics Strategic Plan Development 45
Recommended HCM Work Flow 46
Recommended HCM Work Flow 47
HCM Considerations Data Importance Employee Self Service HRIS Architecture Security Best of Breed Opportunity Recruitment Time Collection Payroll Benefits 48
HCM Implementation Considerations Planning Project Manager Steering Committee Project Charter Implementation Team Project Scope Management Sponsorship Process Mapping Change Management 49
Implementation Best Practices 1. Focus on detailed business processes and requirements first and foremost 2. Focus on achieving an ROI from your HCM and ERP investment 3. Commit strong project management and full-time resources to the project 4. Gain commitment from company executives 5. Take time to plan up front 6. Plan and begin data migration early 7. Ensure adequate training and change management 8. Understand the target benefits of HCM and ERP 50
Questions? Eric Kimberling Managing Partner Panorama Consulting Solutions Eric.Kimberling@panorama-consulting.com 720-515-1ERP (1377) Twitter: @erickimberling 51