Misalignment of goals is one of the common reasons why many companies fail to realize the full value of an ERP system. Goals alignment should be the starting point BEFORE any company starts the ERP selection process, and BEFORE it sets its performance and measurement targets (metrics) and objectives. Goals should be consistent with policy, they should be clearly defined, articulated, and communicated through the company. This is a top-down, not bottom-up approach.
- Policy, goals, and objectives should be the foundation for your ERP system. If they are not, your ERP system will not be aligned, and you will not get the result you expect. ERP will be working against you, not for you.
- When you have set policies, goals, and objectives you will be able to see the gaps in your existing processes and practices. This will give you a much clearer idea of what needs to change, why it needs to change, how it needs to change, who has to change it, and who is affected by the changes.
- You now have a starting point which will determine the requirements for your ERP system and the metrics (measures) that you will be using. Your selection and implementation teams need to understand them.
- Failure to do this will result in your selection team focusing on ERP systems that do things the way they are done now. They will be focused on features. The same applies to your implementation team who will, quite naturally, implement something that broadly does the same as your present system. You will get what you already have, which is unlikely to be what you wanted.
- If goals are not aligned the metrics that you use will be wrong.
- You will be spending a lot of money, time, and effort. You will drill into your people the importance of hitting their numbers (hitting their target metrics). In general, people do what they are measured against. They will do their best to hit or exceed their targets, and will be congratulated and rewarded for their achievements. Unfortunately, the better they perform the worse the result will be if the metrics are wrong. “The system said…. So I did it”.
- You will spend a lot more money, time, and effort fixing things after the event. This presupposes that the system you chose can be adapted. You may need functionality or information that the ERP system is not capable of providing.
- If you can’t fix it then you have a failed implementation. If you can fix it but at the expense of cost, time, and effort, you still have a failed implementation. The ERP system will be blamed, but it will be doing what it was asked to do.
- Failure isn’t ERP’s fault. It is lack of planning, preparation, and execution. That’s your fault. (I expect this will result in some heated comments, but unless you were mis-sold what is the alternative explanation?)
There are hundreds of goal setting methods and techniques. One that is quite easy to explain and be understood is the SMART goals method that uses Specific, Measurable, Actionable, Realistic, and Time-based concepts.
- Specific covers the interrelationship between high-level goals and objectives, as well as what actions or methods are required for a company to achieve them.
- Measurable and Actionable are where metrics come into play. Any required result must have a set of defined measurements, targets, and actions that can be taken to make the dial move on the metrics that are leading or trailing indicators of results.
- Realistic can be a challenge because senior management will often set stretched goals. If goals are daunting and people don’t believe they can be accomplished they may stop trying and give up.
- Time-based is important because every goal needs a target to keeping people focused.
Sustainable metric improvements require a continuous improvement methodology, which is a cycle that is never fully complete. Measurement and metrics are central components in any continuous improvement cycle.
Goals alignment is not easy. In my next blog I will outline some best practice steps that should help your organization to get started with this crucial process.