Rubenstein Justman Management Consultants

Planning for Achievable ROI

by Jeff Dix

If Enterprise Resource Planning (ERP) software vendors can use a simple webpage questionnaire to tell a buyer what level of return on investment to expect from her purchase, why do many companies that buy ERP not achieve the levels of savings and increased sales that the ERP vendors promise? The answer lies with the buyer of the software – not the vendor. Software buyers must plan carefully to achieve their return on investment goals.

As most IT experts worth their salt will advise, the ERP project is a “business” project first and foremost and an “IT” project second. The goal of the ERP project is to enhance business value and create opportunities for managers and staff to add to the company’s bottom line. This goal must be the focus of most of the planning that is involved in an ERP implementation project if the company expects to see a substantial return on its ERP investment. Allowing ample time for hardware and network set-up, data conversion, and system training is necessary for a project that results in an operational ERP tool, but not sufficient for a truly successful ERP project in terms of value to the business.
Planning to create ROI (enhanced business value) is the only way to achieve the ROI you seek. We offer our five steps to Achievable ROI:

  1. Review Current Processes with Functional Teams: Most managers can identify at least a few things that her department could handle more efficiently if she had the right tools. Use some brainstorming sessions with your managers and staff to identify some of the “low-hanging fruit” that can be improved upon with the introduction of a new ERP system. Heavily paper-based or manual processes are the first targets for improvement.
  2. Diagnose Areas for Improvement: After the obvious inefficiencies have been identified, challenge your managers to ask about each process “Is this the best way to accomplish this task? What is the obstacle to improving this process?” The solutions to these challenges may be related to the system or may not be related at all. Either way, this is a good time to take a hard look at what each department is doing in order to target problems to be fixed.
  3. Understand the New System Tools: While training is critically important before the new ERP system goes live, initial user training (along with solution demonstrations) can serve as a tutorial for your managers and “super users” that allows them to envision how they want their processes to work once the system is live. Understanding what the new ERP system can do should inform that solutions that your managers develop to address their areas of inefficiency.
  4. Allow Functional Teams to Set ROI Targets: In setting your Return on Investment targets, make sure that the managers responsible for achieving the ROI are the same people who set the target goals. This is important for two reasons. First, it should provide you with goals that are actually achievable (although allowing those who will be measured to set the goals also means you must validate that the goals are not too easily achievable) as these are the staff that are most closely in touch with the processes to be improved. Second, allowing managers to set the ROI goals creates a buy-in from these managers that will ensure they do not abandon the goals without good reason. It is more difficult to abandon a goal you have set for yourself than to abandon an “arbitrary” goal set by your upper management.
  5. Measure Progress Towards the ROI Targets: Remember that if you can’t measure it, you can’t manage it. Clear measurements, clear timelines for results, and some good old positive peer pressure will help your team to the finish line – to the targeted ROI within the targeted timeframe.

ERP Selection - AchievableROI

The secret here is making sure that your plans for ROI are influenced by (if not outright created by) the managers and staff that will be responsible for achieving the results the company desires. Allow your people to plan for their success, measure their efforts, and reward their success. The ERP system is a tool to help your business achieve its goals. Remember this throughout your project and you will be on your way to achieving the ROI that you expected.

Rubenstein / Justman Management Consultants (RJMC) is a management consulting firm that prides it on the strong relationships it has established with its many clients over the past 24 years.  RJMC is vendor and solution independent and does not sell hardware or software or perform system implementations.  Visit www.RJMC.net to better understand the scope of RJMC services.