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Business Transformation

Top 5 ERP implementation failures in HQ-subsidiary organizations

Saturday, July 11, 2015

Not a single of the top 5 most common ERP implementation failures in subsidiary is directly IT-related. I’m sure it comes as a surprise to you, but in our daily work implementing ERP worldwide, we do not see technology as among the most frequent reasons why implementations across borders are being challenged. In our experience, most of the time the greatest risks are mainly hidden in the organizational and procedural challenges. Several external cases point to the same conclusion.

In the blog below you will also find the answers to overcome the challenges.

Let me take you through my empiric top 5 list of ERP implementation failures:


#1: The HQ defines processes for ERP subsidiary implementations

In most cases, international ERP subsidiary implementation projects are a top-down decision originating from the head office. Typically, a person or a group of persons from HQ with the best overview of the company’s subsidiaries is asked to define “best practice” processes and the functional delimitation of the ERP system. In reality, it is rarely a lack of overview that is the biggest challenge. It is the knowledge and understanding of the small local details.

How do you solve that? The most obvious is to involve local, future power users – preferably the persons who have the potential to become local change agents, who are able to understand and defend the company’s best practice processes from the pressure that inevitably will come from some of the other users who consciously or unconsciously resist change and do the work “as they have always done”. Your local change agent should be good at formalizing and anchoring a process, have in-depth knowledge of the local sub, be at least Middle Manager or be a professionally respected colleague, and excel at communicating.


#2: Underestimation of local requirements

Global organizations that have a globally harmonized brand may still have room for local adjustments or deviations. Take Coca Cola for example. Despite a strong brand, the company actually offers over 60 different soft drinks according to the region where they are sold. Likewise, when it comes to your ERP system implementation, you will always run into additional local requirements, whether they are local regulatory requirements for financial statements, accounting practices or market requirements that must be met in order to do business in the local market. Subsidiary-specific local requirements are typically underestimated, or unknown, when a project is initiated. The biggest challenge about local requirements is to determine whether or not a requirement is necessary to comply with, or whether it is a historical reminiscence. If they are business-critical ignoring them would not just endanger your project, but could disrupt your business.

How do you solve that? Involving local knowledge and expertise is of course essential when defining local requirements. However, the timing of the involvement of local stakeholders also has a very significant impact on the success of the project. By involving local stakeholders too early in the ERP project you risk to add complexity to the company’s overall processes and solutions. If you involve them too late, you could end up having unhappy local users who consciously or unconsciously work against the project goals. A good way is to involve the local users to review the solution description and make comments instead of letting them participate in the initial functional definition.


#3: Lack of readiness from the main office/subsidiary

A lecturer at an ERP Conference I attended once said:

“An ERP subsidiary implementations project is a more complex and extensive task than a heart transplant, and it requires careful planning and preparation of both the patient and the surgeon”.

Implementing a new ERP system will mean a serious increase in workload for your HQ and local resources in order to plan, prepare and support the implementation. This increased work pressure is usually underestimated. This could result in a decrease in the quality of the decisions made during the project, with the risk of seeing bigger problems emerge later.

How do you solve that? Your project plan should include all the activities in your project – whether it’s internal or external activities — so that you can make a realistic readiness assessment of your own organization. This readiness assessment should also include an analysis of the general understanding of the purpose, objectives, resources and expectations for the project and process. It is becoming more and more common to apply agile and iterative project management methods to complete the projects faster. It makes the results visible and motivates the project participants to embark on the next phase of the ERP project.


#4: A lack of cooperation from subsidiaries

A competent local manager will make objections to the decisions that do not support his local business. Many local users will resist change and without a doubt prefer to do the work as they have always done. Whether they are doing this consciously or unconsciously, they are challenging the success of your ERP project.

How do you solve that? In order to have a successful ERP subsidiary implementations project you must have a respectful approach to the local subsidiaries and their requirements – yes, even if the project is centrally managed, and there is a desire to get the project completed “as quickly as possible”. And remember that those who are protesting today are those who will have to be the supporters and evangelists of the system tomorrow. To get buy-in from your local offices, you need to make sure that the solution strategy is explained and reconciled with their most important stakeholders.


#5: Roles and responsibilities are not clearly defined

I have insisted on the importance of local need and requirements. You want to make sure the local voice is heard, the local needs are met. On the other hand, if your company wants to preserve the advantages of having a uniform platform, you also have to maintain a uniform platform, meaning that you must also have a strict control of extensions and customizations to the solution. You need to find the right balance.

How do you solve that? Just like in any national ERP subsidiary implementations project, it is essential that the tasks and responsibilities of the various components of the project are clearly defined and agreed upon. In order to get a good flow, it is important to clearly define how to handle, approve and implement change requests. There are many more stakeholders in a project covering several countries, and if roles and responsibilities are not clearly defined, it can slow down the progress of the project and be the cause of misunderstandings and increased costs along the way. It is a good idea to carry out a stakeholder analysis and describe the communication and responsibilities that will be applicable in the ERP subsidiary implementations project.

Machines are easier to control than humans and cultures. We simply have to accept it and make sure to include these human factors in the planning, as timely as possible.

Get help to avoid ERP implementation failures

Let us at Pipol help you avoid an ERP implementation failures in your HQ-subsidiary setup. Take a look at the clients that we’ve helped or contact us for a chat about your upcoming ERP implementation.

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