In successful organizations, business initiatives are justified by a value proposition captured in a business case where a corporate action is defined and rate of return is specified. This return is specified before code is written, boxes opened, or training is completed. Based on numerous studies, the desired return is achieved less than 40% of the time. Our view is the following five elements need to be addressed in achieving the return on investment business case:
Given the first three can be met with a good planning process and the right PM skills, it is in the fourth element, process definition, and fifth, the human element that are really the keys to business case realization.
Two scenarios illustrate our approach. The first is a beverage wholesaler who intends to move accountability for profitability to the sales team level. In this case value realization which was expected to be a 20% increase in margin was built into the technical implementation. The second is a heavy construction company implementing the Oracle ERP where a 20% cost reduction was anticipated. In this case realization was a post technical implementation activity.
We would always recommend a joint client and consulting team with makeup depending on skills, availability, and budget. The steps discussed will always be adaptable to local corporate practice.
In each scenario, the key is understanding the gap in process and staff performance that needs to be closed before potential benefits can be achieved. The team will then determine which organization change strategy best fits the current situation.
The approach we would always recommend to our clients, building the steps required to get value realization into the deployment has a higher probability of success then to try and change and deliver after the technical implementation.
In this case, pushing P&L down to the sales team value realization was part of the design starting with planning. A conceptual vision of the future state was established. Process and technical systems design were done in concert to achieve the vision. The gap between current process and required process, current staff capability and future work, and the commitment to the new process as opposed to the full buy-in required were all assessed.
Closing the gaps was a priority throughout the project. Company staff including managers who would be accountable for success, sales people who had to convert the P&L data into action, and the accounting clerks who had to undertake a totally new process for handling payables were all engaged. At every step the team focused on communicating process, building skills, and ensuring buy-in.
The final step was to build performance management into that which would specifically measure this change into existing systems. This allows us to measure performance starting early in the transition, spot required adjustments and quickly gain feedback.
In the construction company example, the client felt incorporating major process changes not mandated by the software into initial implementation might put the $20 to $30 million implementation a risk. Two major challenges must be addressed to achieve the expected return on investment. First, since savings were not an initial priority, no one management or line employee has been accountable for savings. Second the workforce has just dealt with the significant jump to an ERP, will now be asked to look at further change to gain the required savings. Changes that may include head count reduction.
The process is much the same, however much more focus will be required to build buy-in and to establish the required changes in measurement and performance management to ensure clear accountability for the change.
(Roles may be full or part time depending on team, project size, and risks both to success and to the sponsoring organization)