Articles by James A Robertson and Associates

Mzn 006 The CEO MUST be the custodian of ERP
Created by James on 6/14/2013 2:41:17 PM


The debate over who should serve as guardian over an organisation’s ERP can be settled with one answer - the Chief Executive Officer.

 

My ERP is not integrated and I do not have an end-to-end view of the business

 

I regularly encounter executives and managers who complain that their ERP is not properly integrated or that they do not have an end-to-end view of products, costs, inventory, etc.

 

The implication is that the ERP is defective or that the ‘wrong’ ERP was purchased. But this is not accurate.

 

Such problems are indicative of a poorly configured ERP which has not been implemented with end- to-end strategic information objectives in mind.

 

The most significant reason for this problem is inappropriate governance of the ERP project during the implementation - and the key issue here is that the only person who can provide this governance is the CEO and the CEO is seldom the custodian of the ERP implementation project, or, for that matter, the operation of the ERP.

 

The worst big brand ERP implementation I ever saw reported to the Legal Affairs executive – they had an amazing contract but the rest of the implementation was a mess and the contract was worthless.

 

ERP under finance – a historical disservice to business

 

Historically ERP has mostly resided under finance. The result is that finance irritates other functions by forcing cooperation and, more seriously, the ERP implementation ends up as a finance implementation with the other operational elements tacked on as an afterthought.

 

The worst example I ever encountered was a big brand ERP with a domineering Chief Financial Officer who forced everything from people, to plant to projects into the General Ledger - and then verbally abused anyone who suggested that the solution was technically fundamentally unsound. 

 

The organisation could not get the plant maintenance module to work because most of the information was in the General Ledger and not in the operational modules of the ERP.

 

Many organisations resolve this problem by having financial (or commercial) systems reporting in to finance and operational systems reporting into manufacturing, production, mining, etc because they cannot get end-to-end cooperation in the business.  These silos feed on themselves creating more and more problems because the two camps cannot collaborate in a constructive manner.

 

Only the CEO can resolve these problems.

 

The CEO is the custodian of the integrated view of the business and hence the ERP

 

Fundamentally the CEO is the custodian of the integrated view of the business. It is one of the principal functions of the CEO – to get all the divisions and functions of the business to pull together coherently.

 

Inherently, therefore, only the CEO can be the custodian of the ERP, or the data warehouse and business intelligence systems.

 

There is no practical alternative.

 

I have repeatedly seen sub-optimal ERP implementations (and I have seen dozens) where the lack of CEO custody is a significant and frequently dominant factor in an unsatisfactory situation.

 

Frequently the viability of the business is placed at risk.

 

Only the CEO has the authority to get all functions and divisions to collaborate as peers without bias and domination

 

Getting an ERP properly configured and operating effectively requires that all business units and functions operate collaboratively in the best interests of the collective whole that is the entire enterprise.

 

This requires that all disparate business elements work together collectively and harmoniously for the good of the whole.

 

This requires trade-off, strong leadership and guidance.

 

Firm discipline may be required if one or more business units fail to contribute and collaborate as peers.

 

Only the CEO has the authority and mandate to demand such collaboration and make it happen.

 

Where the CEO abdicates, massive system problems will follow which are frequently taken to be technology problems.

 

But the CEO does not have the time / knowledge / … to manage the ERP – not so!

 

I have been told by more than one client that the CEO does not have the time or the knowledge or the interest or the … to manage ERP.

 

Well, if the CEO does not know how the business should operate as an integrated whole then the business has greater problems than the ERP. If the CEO does know how the business should operate as an integrated whole then the CEO does know how the ERP should work.

 

A fundamental principle of an excellent ERP implementation is that the ERP implementation should accurately model the REAL WORLD characteristics of the business.  Any executive or business user should be able to look at the configuration of the ERP and say "yes, that IS my business".

 

If you cannot say that about your ERP it is because it is badly implemented.

 

When an executive says to me "Dr Robertson, I do not understand IT" experience has shown me that this translates to "I have seen the jumbled mess in my ERP and I cannot comprehend how that can do all the things the consultants say it can do, so, obviously, I do not understand IT"

 

NOT SO! The correct translation is "the consultants clearly do not understand my business and the way they have implemented this system bears absolutely no correlation with my strategic understanding of the business and this is a multi-million Rand mess" – the problem is NEVER your big brand ERP, it is how it was implemented and the almost universal lack of precision engineered strategic configuration in the form that I regard as essential and non-negotiable.

 

If the CEO does not have time to take custody of the ERP then, in the world of 2011, you should probably start looking urgently for a buyer for your corporation whose CEO does have the time. The future of business today will increasingly be determined by the ability of executives to take high value strategic decisions that lead to growth - while those that cannot do this will be taken over by those that can.  Otherwise it may be more cost effective to replace the CEO than it will be to replace the ERP!

 

I am NOT advocating that the CEO spends a lot of time managing the ERP, but I AM advocating that the CEO gives high level guidance and takes custody – once effective governance is in place this should require at most a couple of hours a week.

 

If strategic decision support, that relies on information in your ERP, is necessary for your business to thrive - then it must be managed by a person reporting to the CEO

 

If you want to manage your business at a strategic level from information in your ERP then it is essential that the person who manages the ERP reports directly to the CEO.

 

Depending on the size of your organisation this is NOT necessarily an executive but should at least be a senior manager and they should at least be present at EXCO when system related matters and matters that impact systems are discussed – which is probably all the time J

 

This person should NOT be a technology person but a business person.

 

If necessary appoint an executive level strategic advisor to assist with bridging the technology to business gap – someone who can operate at a peer level with the CEO and who understands both business AND ERP.

 

Strategic decision support NOT process is the essence of the investment case for ERP and resides with the CEO

 

The general view of ERP is process, but process is operational and at the bottom of the organisational pyramid.

 

There is no such thing as "the strategic process". If there were it would look like:

Identify need for decision à convene EXCO à present information à deliberate à take decision …

 

Reference to "strategic process" is one of the absurd ‘jargonistic’ sayings that characterise the mystical mumbo-jumbo of the management consulting and IT / ERP fraternity and clouds the issues. The real issue is to supply the right information to the right people at the right time and in the right form in order to make the RIGHT DECISION.

 

In the absence of the "right decisions" the business will eventually go out of business – highly optimised business processes will simply help it to go out of business faster!

 

With consistent "right decisions" the business will thrive and optimized business processes will assist with this.

 

Professor Malcolm MacDonald defines strategy as "doing the right things" and, since the CEO is the custodian of the right (strategic) things the CEO must be the custodian of the systems that supply strategic information to support strategic, high value, decisions.

 

Overall governance of the ERP rests with the EXCO – precision configuration starts with the EXCO and so executives must understand the essence of the business and own the BUSINESS outcome

 

From the above it will be apparent that overall governance of the ERP flows from the CEO to the EXCO and then to the rest of the business.

 

Accordingly precision configuration starts with the CEO and EXCO and therefore executives must understand the essence of the ERP and own the business outcome of the use of the ERP.

 

By way of example, I am currently busy with a series of workshops with the EXCO of a mid-size South African company to develop the high level structure of all major taxonomies in their ERP system in order to ensure that the configuration of the ERP reflects their strategic view of the business.

 

This is the only way that we will ensure that the default view of the information in the ERP reflects the strategic executive view of the business and its long term priorities.

 

Only 15% of executive decisions are based on hard information, but without that information they are flying blind - strategic decision support should be the primary consideration in ERP implementation

 

But, I hear you cry, "executives only base strategic decisions 15% on hard information" – that is true, BUT, if they do not have that information they are flying blind on gut feel or by the seat of their pants.

 

That hard information is critical BUT it must be packaged in a way that accurately reflects the essence of the business and how it thrives (the strategy of the business). That is why the CEO - and through the CEO the EXCO, must be the custodians of the ERP.

 

Precision strategic taxonomies can be retrofitted to an operational ERP implementation through a data warehouse

 

I have written previously about the importance of precision engineered strategic taxonomies and configuration in ERPs.

 

Problem is that the cost of completely re-implementing an ERP in order to introduce rigorous precision configuration is more than most organisations can justify spending, particularly considering that at an operational and process level the ERP is probably working quite well – so we find ourselves faced with having to spend 80% of the budget re-implementing the stuff that is working in order to fix the 20% of the stuff that is causing 80% of the strategic pain.

 

There is, however, an alternative – leave the ERP implementation largely unchanged, develop precision engineered strategic taxonomies for all the tables in the ERP. Then map the old codes onto the new codes and transform the data in the load component of the extract, transform, load (ETL) portion of a new data warehouse and then build high value reports, graphs and models in the business intelligence environment.

 

This will require some changes to the configuration of the ERP but they will be incremental – provided they are carefully planned by someone with strategic insight into what is REALLY important.

 

Over time the high quality taxonomies and other configuration elements can be dropped into the ERP in small controlled deployments. As such unexpected impacts can be carefully trapped and managed until after a year or two a reasonably high quality precision configuration has been achieved in the existing ERP.

 

This represents a major opportunity for many businesses with established investments in ERP today.

 

The metaphor is one of taking a badly maintained and operated factory and systematically refurbishing it, one part at a time, until after a couple of years the whole factory has been refurbished.

 

CEO custody is critical to successful long term high value ERP operation

 

As with all the other components identified above, CEO custody and direction is vital to achieving a high value integrated business outcome cost effectively and sustainably.

 

Where necessary the CEO should seek to secure high level strategic advisory services at an appropriate scale to support them in taking on this responsibility.

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Table of Contents

Home

About Dr James A Robertson PrEng -- The Business Systems Doctor -- and Other Topics

Catalogue of Major Business Information System Failures

About the Engineering Approach

James Robertson's Value Add

Attributes of a HIGH VALUE solution

Recognizing Business System Failure

The Critical Human Foundation

Old Software IS Viable

From South Africa

Competencies of Dr James A Robertson PrEng

About Professor Malcolm McDonald

Table of Contents

About my relationship with the Almighty Creator, Yah the Eternally Self-Existing

Comments relating to the Business Systems Industry and other topics

Testimonials and other positive material regarding James Robertson

Reference Articles

List of Articles

Article Catalogue

Achieving High Value Business Information System outcomes

Executive Custody -- What is it and HOW do you get it?

The REAL Issues in Integrated Business Information System Success

Part 1: Introduction

Part 2 -- Mythology and Lack of Executive Custody

Part 3 – Strategic Alignment and Precision Configuration

Why your ERP is NOT delivering and HOW to FIX it

IT Project Management

Pulse Measurement

CEO Anthony Lee Comments on his experience of the Pulse Measurement

No Charge Guarantee on the Pulse Measurement Service

Examples of Pulse Measurement Outcomes

Critical questions regarding the Pulse Measurement™

The Pulse Measurement Workflow

The Critical Factors for Business System (ERP+) Investment Success in the Pulse Measurement

Indicative Pulse Measurement Durations

What is a JAR&A Pulse Measurement?

Survival of the fittest – why it makes sense to measure the pulse of your business

Examples of Pulse Measurement Outcomes over 24 years

Sample Pulse Measurement Reports

Strategy

Strategic Essence: The Missing Link in Business Information Systems

Strategic Essence: Overview

Strategic Essence: Part 1 -- Strategy Defined

Strategic Essence: Part 2 -- Differentiation

Strategic Essence: Part 3 -- The Essence IS Different

Strategic Essence: Part 4 -- The Essence should be the Point of Departure

Strategic Essence: Part 5 -- Discovering Strategic Essence

Strategy -- the Essence of the Business: What is it and how do you develop actionable strategic plans?

Simple Steps to Increase the Strategic Value of your ERP Investment

Free Strategic Snapshot Toolset and Manual

A strategy focused planning system beyond traditional budgeting

Tough IT and ERP Procurement and Contracting that Works

Robust Business Systems Procurement

Part 1 -- Introduction

Part 2 -- Bill of Services, Laboratory, Go-live Certificate, etc

Part 3 -- Executive Engagement, Bid Compliance, Adjudication and other matters

Procurement Documents

Guidance and Advisory Services

The Art of Project Leadership

Why Regular Communication with the CEO is Vital

The Business Simulation Laboratory

Precision Configuration and Strategic Business Information Architecture

Precision Configuration based on Strategic Engineered Precision Taxonomies

The JAR&A Cubic Business Model

Highly Structured Strategic Chart of Accounts -- a Vital Element of your Corporate Information Arsenal

The Product Catalogue -- an Essential Element of any Precision Configuration

Attributes -- answers to the questions you have NOT yet thought to ask

Case Studies of Notably Successful Projects with high value Precision Configuration

092 Doing things differently and better -- ASCO Case Study 2-- BPM Summit 2013

088 Strategic ERP Invesment -- ASCO Case Study -- Service Management Conference and Exhibition Africa

026 Information Architecture and Design of FIS for Rennies Group -- Financial Information Systems Conf

018 CRM Risk Control: Designing and Implementing an Integrated Risk Mgmt Sys -- Integrated Risk Mgmt Conf

011 V3 Consulting Eng: Benefits of MIS to Professional Practice -- SAICE 15th Ann Conf on Computers in Civil Eng

Strategically Enriching your Business Information Systems

Part 1 -- Introduction

Part 2 -- Principles of Data Engineering

Part 3 -- Steps in applying these recommendations

Simple Steps to increase the strategic information value yield from your Business Systems Investment

The Full JAR&A Taxonomy Manual

Part 1: Introduction, Problem Statement, Definitions and Examples

Part 2: Why Use JAR&A, Required Knowledge and Experience, Cubic Business Model and Chart of Accounts and Taxonomy Software

Part 3: How to do it, Case Studies and White Papers and other References

Example General Ledger Manual

Business Process -- Irrelevant, Distracting and Dangerous

The RIGHT Approach

Custom Strategic Software Design and Oversight of Construction

Standards for Custom Software Specification

What IS Software?

IT Effectiveness

Organizing Outlook

Critical Factors for I.T. Success

A Moral and Ethical Dilemma -- Systems that Fail

Case Studies examining Business Information System failures

The BBC Digital Media Initiative Debacle

The Bridgestone -- IBM Conflict

Speaking and Training

Showcase of Conference Presentations

Most Viewed Presentations

Briefings and Seminars

Why your ERP/BIS is NOT delivering and HOW to FIX it

ERP and IT Procurement that Delivers Results

The Critical Factors for IT and ERP Investment Success

Other Seminars

Conferences and Public Presentations

Conferences 80 to 99 -- 2009 to Present

Conferences 60 to 79 -- 2005 to 2009

Conferences 40 to 59 -- 1996 to 2005

Conferences 20 to 39 -- 1994 to 1996

Conferences 01 to 19 -- 1989 to 1994

On-Line Seminars (Webinars)

Webinar on Preparing and Presenting Webinars

Contacting James A Robertson and Associates Limited