As discussed in my last entry, I presented four key change characteristics that must be considered for a SAP program to be successful in a client company. Remember that this construct is an arbitrary one, designed to talk about the relationships between the quadrants and business performance. They are:
1) Business Process Design
2) Cultural Barriers and Enablers
3) Dynamics of IT Strategy
4) Workforce Education
Cultural Barriers and Enablers
While nearly all discussions of implementation approaches and change within organizations include the role of culture, in either assisting or resisting changes, the discussions often tend to either treat culture as “bad” or as something to be overcome. While this may often be the way in which it manifests itself, an organization’s culture is as natural to its organizational design and performance as business processes are. Too often organizations look for silver bullets to deal with cultural issues and only focus on overcoming the resistance to change that may be exhibited. Rather than this approach, culture should be considered a natural part of any organization and it can and should be used to facilitate changes and to drive the search for more business value. This requires leadership to recognize that this is a complex issue and one that requires thought, design, buy-in, and continuous support in order to be successful. As a corolary of this, organizations must also consider educational opportunities to promote the development of these concepts in their staff. Too often, organizations will look for “Salvation in a Box”, and buy into a current program, without putting the real work into understanding the current culture, issues (both positive and negative to change), and opportunities to apply the principles involved, rather than just formulas, in order to achieve outstanding results. There are many examples of this, and I will discuss a couple as examples. These are:
1) Destructive incentives
2) Origins of the current solution
3) Legels of empowerment
1) Destructive Incentives
All organizations have incentives for management (may be top level, or may extend deep into the organization) that reward desired behaviors. Even when these are not directly tied to compensation, performance against them are recorded in appraisals that directly affect promotions or other assignments. Often, however, even tools or plans that are well conceived and managed can create barriers to successful implementation of new business processes in SAP. There are many examples, but I will describe one of the more common ones. It is typical for the Procurement function in a company to create incentives to reduce purchasing costs. Since most companies have a “standard cost” for materials that are inventoried, incentives are typically expressed as “positive purchase price variance” meaning that goods are procured at below standard costs. On the other hand, typical manufacturing incentives often reward reducing total raw material inventories in order to reduce working capital and save on cost of inventory. The problem with this is that one of the primary means of reducing purchase price is increasing order quantities, which of course creates additional inventory. This natural pressure between the two functions is exacerbated by the implementation of ERP systems where a single cross-functional business process is designed and installed. To effectively produce business value an organization needs to create a material control function where someone is incented based upon reducing total cost of inventory, which has to include purchase price and cost of working capital. There are myriad examples of this law of unintended consequences that must be dealt with when implementing the types of change required by conversion to an ERP system. This requires a broader type of knowledge of how organizations and business processes work cross-functionally, and is not a skill set that will occur by accident. Cultural norms such as incentive systems must be considered as management tools that may have to be reworked, regardless of how difficult it may be to do so.
2) Origins of the Current Solution
It is easy to neglect the “how and who” of the current situation, but it is a reasonable assumption that the current set of processes were defined and built by someone who “owns” the current systems, possibly has been promoted or otherwise incentivized for that role, and who must be brought on board with the impending changes or in some cases reassigned or replaced. Often the assumption with SAP teams, or any other ERP implementation team, is that the existing business processes and IT applications are not competent, are not properly operated and/or can simply be ignored in the future design. I have found that this is typically the result of the level of educational understanding and knowledge that team members (client and consultants) bring to the program. We, as industry leaders, have not defined the needed set of business skills that should be included in any SAP consultant’s educational process. This is no longer a purely IT project, it is a business project using IT Applications to drive business improvements. Project teams need to consider themselves as business teams using IT and not the other way around and this requires different educational opportunities.
The other reason that this occurs, is that it is easier to just dismiss the current processes than it is to learn why they are the way they are. Often, understanding their design can provide insight into business needs that they have been developed to satisfy at the time they were developed. Understanding these needs and the history behind the processes are critical to understanding the business issues involved and in untangling these as SAP is implemented. This, however, requires real work and understanding at a level of detail that few project teams or client teams are ready to tackle.
3) Levels of Empowerment
There are dynamics within implementation project teams and between the teams and their parent organizations. These dynamics determine how decison making and issue resolution will be managed and timeliness will be enforced. This is also tied into culture, as well as into individual leader personalities. Having a grand meeting where everyone agrees to see that decisions are made in a timely fashion without fully understanding the decision-making standards implicit in the culture is akin to deciding to change your lottery luck by wishing harder. This process has to be designed and defined within the culture it will live within. If, for example, the department leader is determined to make all of the process decisions themselves, then they essentially put themselves on the project team with proxies doing the hour to hour work. This, however, still requires the manager to be available full time, as needed, to make design decisions and resolve interdepartmental design issues. It simply cannot be otherwise.
So, how does this all relate to Education?
Although all of the above does relate to program design and project management, I have tried to point out the level of understanding of all of these processes that are required in order to manage a project to achieve successful delivery of intended business results. More typically, client project team members are selected for their knowledge of the functional areas that they represent, rather than their knowledge of how to analyze and deliver business results. Tragically, often the most qualified people are designated as “too valuable to lose” and consequently the members assigned to the team are the more easily replaceable. Regardless, these more replaceable people will still determine the future financial success of the organization. This is not intended to disparage conscientious people assigned to the team, but to point out that leaders need to ensure that their representative is truly the one they would want designing their future state.
In a healthy organization, programs have been established to continuously build knowledge and competency within the organization around how to assess the details of organizational and process design that ultlimately determine results and these people will play key roles, not only in the SAP process, but ultimately in all business design opportunities. These employees will see their roles as being master mechanics of the organization, on both the cultural and the applications level. In that role, they will typically continue to gain knowledge of current states, relationships within the organization and the tools that can be used to manage a continuous improvement process on all levels. This is not a “special” skillset, but one that should be incorporated into organizational expectations. These employees will be involved in graduate level programs (MBA and such), as well as in learning the tools that they will use to drive these business investments. For SAP, Business Process Certification (TERP 10) is a valuable tool that provides understanding of the processes available, and native to the product, that can be used. Additional MBA level training (and potentially combined programs to provide both together) should be encouraged to grow the ability of the organization to optimize their business results.
What then of consultants?
It is as important to a project that consultants have the same basic business and cultural knowledge as the client project team members. Today, most project consultants focus on deeper and deeper knowledge of their own functional areas, and there is certainly a lot to learn as consultants become true experts in all possible configurations and operations of their areas of expertise. Equally often, however, the solution to design issues is either across functions or is determined by cultural issues that must be addressed. It is as important that true expert consultants spend significant time on broadening their business understanding, as it is for company employees. Throughout my careers as a business leader and later as a consulting leader, the skill that I found the most difficult to find (and the one that the lack of created the most issues) was just this. Comprehensive understanding of business processes in SAP (TERP 10), knowledge of business operations at both the functional level and with cultural considerations, and knowledge of the decision-making and program management requirements are necessary to help a company to succeed.
The case I am proposing here is that both client organizations and consulting organizations need to establish educational programs to promote skill development in cross-functional design and in cultural perspectives in order to be effective organizations at producing potential business benefits. This should include SAP skills such as those developed in TERP 10, as well as MBA concepts at the University level. Through the University Alliance program, schools also offer training in a number of areas, up to and including the SAP Graduate Certificate program and MBA SAP Concentration program at Central Michigan University. Other university business schools should be encouraged to develop their own curriculum to deliver this knowledge at both under and post graduate level. Regardless, however, of how an organization achieves this goal, learning to design, implement and operate SAP to produce business benefits is a life-long learning experience that must be planned and managed.