In our previous blog about the Ultra Business Improvement Process, we covered the need to document the future state processes for your organization. This is very much like deciding what you want to be when you grow up. Seriously, as the old cliché says, “If you don’t know where you’re going, any road will get you there.” So take time to go through the business process improvement steps and define the details of your future state vision.
Why a New ERP System?
Even after having done this a question remains – why are we investing hard earned capital and personal effort in a new ERP system? The answer is this – it’s a great idea. In addition, this investment is preparing you to manage the substantial growth you have planned for the future.
When the project was first considered, your core team could not have been more excited because many of their frustrations with current processes were going to be addressed. Vendors arrived with polished presentations showing state of the art software. Plus, everyone benefitted from positive feelings working with a high profile team to make everyone’s work life better. Life is good, right? It is, but ultimately there must be a financial reason for making this investment.
Creating a Business Case
At Ultra Consultants we coach our clients to create a business case to justify the investment. The business case defines how the organization feels they can reduce costs or create an environment that delivers significantly increased revenue and profits and maximizes ROI. Be careful how this message is presented to your core team. Timing is important here. The team understands the need for profits and return on investment, but these are very challenging concepts. They are much more challenging than the good feelings I mentioned previously. Lean on the trust that you’ve built with your team over the previous years and take time to explain to them in detail your vision for the future.
This should include the growth track for the business and what it means to their ongoing employment and potential future earnings. Realistically you cannot promise this result with certainty, but you must explain this in terms they can understand and in a manner that solicits their buy-in to the hard work ahead.
Key Performance Measures
Key performance measures you can use in developing the business case include:
- Reduced inventory levels – Take time to explain the impact on cash flow and why cash flow is the life blood of a business.
- Improved productivity – This includes from both salary and hourly personnel. More output can be realized without additional investment. Make a vocal commitment to the entire organization that this productivity will not result in anyone losing their job. However, their job in the future might be different than what they are doing today. Team members will learn new skills and be challenged in new ways.
- Reduced overtime expense – Can you return part of this savings in some form of a bonus program?
- Improved quality by reducing errors – This will reduce waste in all phases of the business.
- Reducing the cycle time – Especially from taking an order to collecting a payment. This means that both administrative and operational processes will move faster. Customers will pay for fast service. Think of examples like Amazon.com to drive this point home.
The positive impacts to these metrics should be developed with the ERP project team, which will create their ownership of the performance targets. Done properly, the team will own the resulting targets. When presenting these goals to the organization, take the time to explain how these goals will positively impact each individual’s compensation and long term well-being. This is critical and is best accomplished in small groups.
Finally, clearly present these updated goals in a graphical fashion on a weekly and monthly basis that can be shared with the entire organization. Have a simple, easily understood plan to return a portion of the resulting increased profit to your team members. They will have earned it. When you do share this bounty, take time to explain what is driving it, i.e. link the rewards back to the improvements made possible by the new ERP system. You’ll want to save some of the additional revenue to reinvest in the business. Share this knowledge with your team in the same manner.
To further your education on this subject, refer to our whitepaper “A Roadmap for Business Performance Improvement.”