Measuring the Success of Your ERP Initiative
When undergoing an (Enterprise Resource Planning) ERP initiative, it is often the case that businesses spend so much time and energy on the preparation stages they overlook what comes after implementation. A lot of effort is spent setting strategic goals, selecting the appropriate ERP vendor, calculating the estimated cost of ownership, formulating an implementation plan, communicating with employees, executing the processes, and so forth. It is the “after” implementation part—how we measure the success of an ERP implementation—that is often neglected until the project goes live.
However, the “after” implementation stage can be just as important as the earlier stages. After all, only after your ERP implementation is complete are you able to conclude whether or not the project was successful.
Here are some standard and nonstandard criteria for evaluating the success of an ERP implementation:
- Evaluate observable results. Visual indicators of success are a good place to start your post-implementation evaluation. It may seem too obvious to point out, but a new ERP system that is up and running without seriously compromising operations is the first indicator of success. Indeed, some executives are happy to simply reach the go-live stage without the project failing and putting the company in jeopardy. Additional observable success indicators include whether or not the project came in on schedule and within budget. Success isn’t indicated by meeting these goals entirely, but you should come close (or have good reasons for not coming close).
- Calculate measurable indicators. This involves taking a look at your quantifiable results in order to determine if the ERP implementation improved your bottom line. Review the objectives you set in the planning stages and measure your results six, 12, 18 and 24 months after the system is live. Some examples of measurable indicators include ROI, win rate, project profit margin, utilization rate, conversion rate, response times and total cost of ownership.
- Consider intangible benefits. ERP success can also be defined by benefits that are not as easily measured. They are still very real to your business—just more difficult to calculate. For example, indicators such as an improved customer experience, better internal communication and an enhanced public image all point towards ERP success. Yet measuring these benefits isn’t as straightforward as say, calculating an increase in sales or a reduction in costs. When looking at the intangible benefits, you may want to attempt to try to define them by more measurable indicators. For example, an overall improvement in customer satisfaction may be gauged by quantifiable indicators such as fewer errors, fewer returns, improved response rates and greater repeat sales.
- Don’t forget strategic gains. ERP can generate far-reaching strategic benefits for your business. For example, a successful ERP initiative gives executives greater awareness and control of the business. It can help them strategize major moves, develop new initiatives and be in a better position to respond to change. It may be challenging to quantify these factors, but they represent success. You should find a way to include strategic advantages in your post-ERP evaluation.
Finally, remember that there is really no end point to a good ERP implementation. The plan for the post live environment should include periodic reviews of policies and procedures to ensure that changes in the business environment are incorporated into the system. And the education and training that occurred during the implementation must remain in place both for new employees, and also for everyone when a new version of the ERP software is implemented. Your ERP implementation go live should be the beginning of your Continuous Improvement Program.