Essential steps to maximize ERP project success

ERP failures can cost millions, tarnish reputations, and even trigger leadership changes. So why do so many projects still lack meaningful executive oversight? With the majority of ERP programs running significantly over budget, it’s time for C-suite leaders to rethink their role.

Executive oversight for ERP programs is mandatory and a standard industry practice, particularly in enterprises where senior leadership is accountable for the program’s success or failure. The executive leadership team plays an essential role, from approving the business case and allocating millions of dollars, to prioritizing the ERP program over other enterprise initiatives. Their decisions directly influence the direction, success, and future of the company.

Here, we cover the risk of executive oversight, its impact on your ERP program, and how executives can mitigate this risk in their programs by focusing on a few key areas.

The risk of poor oversight

ERP programs represent significant investment, often approved at the board level. Despite this high-level visibility, these projects are still susceptible to failure. Since the onset of ERP technologies, they’ve faced a long and documented history of budget overruns, elongated timelines, and frequent failures.

Insufficient oversight increases the likelihood and magnitude of budget overruns and project delays. Experience shows that ERP program costs can increase by 8% to 14% during the design phase. However, due to scope creep and other factors of value erosion, costs can ultimately rise by 50% or more. Additional academic studies have indicated that the perceived uniqueness of company processes often leads to even higher cost overruns.

We’ve seen instances with our clients where the absence of executive oversight led to significant cost overruns and program failures. As such, executives should engage with the project team in five key areas to help alleviate this oversight.

1. Financial management: Executives need to expect at least three measures: spending versus budget, contingency consumption, and a shared financial forecast for phase and contract completion.
2. Project scope management: Status updates should include scope changes compared to the original estimate, and the financial forecast of how those changes will impact both the program budget and post-live operating costs.
3. Risk management: Executives should receive a report on critical risks affecting the program’s critical path. This report should include risk mitigation actions, the likelihood of risk realization, and the potential impact on the program if the risk materializes.
4. Key decisions: An inventory of key decisions should be created and maintained throughout the program, ensuring alignment among the executive team, program management, and system integrator leadership. This inventory should answer questions such as what’s been accomplished and what to do next.
5. Stakeholder engagement: This is the oil of the transformation, and the executive oversight team needs a transparent picture of the quantitative and qualitative measures of stakeholder engagement throughout the program. This includes appropriate reporting on strategy, major activities, budget, resource spend, plans, participation rates, and outcomes. Executives should also compare reported stakeholder engagement with what they observe within their respective areas of responsibility.

Follow by example

The ERP executive oversight process is more than a PowerPoint slide in a vendor’s proposal deck. It involves in-depth discussion, negotiation, and formal documentation in contractual terms. In one program during the initial stage of a multi-year transformation, executive engagement enabled the project team to successfully manage scope challenges and risks while maintaining budget and timeline adherence. High executive involvement allowed program management to focus on execution, escalating only material items for executive intervention, including managing conflicts with other internal programs that posed a risk. By elevating this risk through executive governance, the threat was mitigated, allowing the project team to continue as planned.

In another, executive governance helped address significant budget and timeline overruns caused by both client decisions and vendor performance issues. The governance process allowed the client’s senior executives to differentiate between client-owned costs and vendor performance deficits. With this information, informed top-to-top discussions resulted in the vendor taking full responsibility for their performance issues. Executive oversight and active participation ensured that all parties were held responsible for their actions and subsequent results.

These are two examples of programs where the established executive oversight process benefited the program and the enterprise.

The bottom line

Effective governance is the cornerstone of successful ERP implementation. It ensures projects are aligned, internal teams and vendors are held accountable, and project objectives are met. For CIOs and digital leaders, treating executive oversight as a formalized governance function, not an ad-hoc checkpoint, can be the difference between transformation success and enterprise-wide disruption.