It may seem obvious to measure the success of any undertaking by comparing the before and after, yet surprisingly, this important step is rarely taken. To illustrate, here’s the story of Lucy.
Running in the Boston Marathon was Lucy’s lifelong dream. She didn’t aspire to win but just to simply run in it. The Boston Marathon, however, requires more than just showing up on race day to be a participant. Part of the race’s grand heritage is that all runners must first qualify. There are no exceptions, even for celebrities. Everyone faces the same rules of entry.
For two years Lucy trained specifically for the Boston Marathon. She bought expensive running shoes, started a new diet, and ran every day. Unfortunately, however, when she ran in her qualifying event, she fell far short of the required time. After all her hard work, Lucy wasn’t able to even submit an application to the Boston Marathon.
What happened? She had bought the best shoes and dietary supplements for runners. Day after day she ran in different weather, at different times of day, and on varying terrains.
What went wrong?
After the qualifying event, she noticed that her finishing time was very similar to times she had run in other marathons years earlier. After a brief discussion with Lucy, I saw what was missing from her two years of preparation. During her months of training she had failed to measure and record her progress, so she could continuously make adjustments to help her improve. She did not have a good handle on where she stood at the start of her training, and after all of the time, money, and effort she spent, it just “felt” like she was improving. Day after day she built a false confidence that was not validated by data to measure her progress. The end result was that after two years she was just slightly better than before.
Many ERP implementations end the same way. After a long career in the ERP software business, I am still amazed at the number of companies who, well after the completion of their ERP implementations, are relatively unsure if their software transition was worth the money and effort. Many will claim that it was marginally successful, but they are not really sure. I always encourage company executives to start measuring their performance long before their ERP selection. Without a starting point, it is very difficult to measure the true level of a project’s success.
The question many executives ask me is, “What should we be measuring?” Everyone measures sales and profits, but there are many other metrics or KPIs (key performance indicators) that reveal a clearer picture of extended performance within an organization.
What should we measure?
Where I like to begin is by looking at valid data about companies similar to mine. Many trade organizations publish statistics annually based on a relative sampling of companies. Most will then rank the sampled companies by size and other factors. By reading and studying these reports, executives can see where their company ranks among the worst, average, and best companies in their industry. Knowing where you stand today is the first step to understanding how effective investments are in ERP systems. Equally important from these statistics is to realize whether your objectives are feasible. There is no point in investing in projects that historically have not produced desired results for others.
While looking at other similar companies provides some value, executives should develop key indicators that are relevant to their own situation. Here are a few KPIs to consider:
Revenue/profit per FTE
Long term revenue/profit per customer
Cycle time of a customer order
Respond and resolve (the speed of “responding” to an issue and the rate to “resolve” it)
Error rates of various common tasks
Mastery cycle (how long does it take for a new hire to master their job)
Make your ‘marathon’ training worth the time, effort, and expense, so you can adjust as you go to maximize and realistically understand your results. Starting with key measurements today is a perfect start for the planning process of a future ERP initiative. Know what your “before” is, so after your ERP transformation is complete, you can know exactly how far you’ve come.