When Elizabeth Kubler-Ross first described the five stages of grief, she was exploring how people deal with the death of a loved one. When she wrote her definitive work, ERP software systems were not even a gleam in anyone’s eye.
Yet as attorneys who have spent our careers working with ERP software systems and litigating many of the disputes that arise when the transformation goes haywire, we’ve seen clients go through many of Kubler-Ross’ stages of grief as they come to grips with their ERP loss.
Anyone who took an undergraduate sociology course at university probably remembers the stages: denial, anger, bargaining, depression and acceptance. We’ve seen many company executives go through each of these stages as a result of a digital transformation failure. But don’t despair. There is a way for the bereaved ERP user to cope with their loss and, more importantly, create a strategy that sidesteps having to deal with the five stages of grief, whether you are upgrading or just beginning the process of acquiring an ERP software system.
Denial and Anger in ERP Failures
By its very nature, every ERP transformation is a huge, complicated, time-consuming and expensive project that may involve reviewing proposals, selecting a vendor and integrator and preparing the organization for the massive changes that will be coming. Implementation can often take more than a year.
When the first hints of a problem appear, like a family member confronting the imminent death of someone close, often a company will first deny it is happening, and then believe the integrator who utters comforting words that things will get better. Yet the condition continues to deteriorate, as time, productivity and money are lost.
Disbelief turns to anger. Consultants are brought in and phone calls are made to attorneys. The user tries to bargain with their vendor and integrator. Yet the reality of the situation begins to sink in and anger turns to depression – which psychiatrists say often is the result of anger turned inward.
As we have written about frequently – most recently here and here – far too many ERP projects run into massive problems where acceptance is all that remains. Litigation is a last resort because users seldom get a second chance to get it right. The real answer is to have a strategy from the outset that will enable you to avoid coping with the five stages of grief.
A Strategy to Avoid Coping with ERP Grief
Whether you are undertaking your first ERP project or upgrading a legacy system, any public or private organization can undertake the following eight-step strategy. These are general guidelines and specific situations may require additional safeguards, but this list can help ward off Kubler-Ross’ grief and grieving stages.
1 – Senior management must own the project from the outset. An ERP software system is a management tool, not simply a tech solution. Do not sign the contract and then leave implementation to the IT department, even if you have a Chief Technology Officer. ERP is about how the business operates and runs just as your accounting system is a management tool rather than a technology matter. The likelihood of integrators telling you about an incipient problem are small so the CEO and COO need to stay on top of how the project is proceeding.
2 – Retain an independent consultant upfront. A qualified ERP consultant will help a user identify the key things the organization needs the ERP software system to do. They can also assist in writing a RFP and reviewing responses. A good consultant will also know when a vendor and integrator is being honest about his or her experience in your industry. Consultants are not inexpensive but can save millions of dollars down the road.
3 – Meet the entire team from the other side. For many large-scale ERP projects, it is entirely likely the vendor and integrator will be employing sub-contractors on different parts of the project. It is wise to interview sub-contractors to ensure what you were told they have done or can do is, in fact, within their expertise and background. If you decide they don’t fit with your needs or even your culture, ask the suppliers to find other candidates.
4 – Don’t sign the template contract. The contract given to you by the vendor and integrator you select is written entirely in their favor. Negotiate and redraft terms and conditions so the agreement works to the benefit of both parties. As lawyers who have spent several decades working on negotiating ERP contracts for clients from both the vendor and user side of the table, we know where there is flexibility on the part of the seller.
5 – Include sales material in the contract. Vendors and integrators are notorious for making assertions about their expertise and experience in a given industry because the goal of the sales team is to get the order. Along with the proposal response, the contracts need to include any written material given to a user in the course of their discussions with the vendor and integrator. In the event of an ERP train wreck, this will help document for a court what the user relied upon in making a buying decision.
6 – Specify roles and responsibilities. Template contracts are deliberately vague about what the vendor or integrator will be responsible for as the project unfolds. To protect all sides, the contract needs to be very specific about precisely what the user will be responsible for doing, as well as what your suppliers will be responsible for handling. This also helps short-circuit “scope creep” down the road because only designated individuals are authorized to modify what is detailed in the contract.
7 – Include an internal change management initiative. Adding or upgrading ERP makes a significant difference to how a company operates. It is nothing like uploading a new version of Windows to everyone’s computer. Many things inside the organization will have to be done differently for the system to add value. Jobs and roles are likely to change, or at least be different than they were prior to ERP. People need to understand what will happen and how it will affect what they do. We’ve seen transformations where the technical side went smoothly but the lack of a change management program failed the people side.
8 – Senior management must own the project. An ERP software system is a management tool, not simply a technology solution. Do not sign the contract and then leave oversight of the implementation to the vendor or integrator.
If your public or private sector organization is considering acquiring an ERP software system for the first time, or are on the threshold of upgrading a legacy system and don’t want to resort to grief counselling because of the death of the project, feel free to contact us. We’ve worked with ERP for a long time and can advise you on the contractual pitfalls to avoid. We can also refer you to independent consultants familiar with ERP who can work with you.