The impact of leadership style and behavior on the success of an ERP implementation has been well chronicled over the last several decades. Do a simple internet search and you will literally find hundreds of papers and articles on the subject. Despite the abundance of opinions and advice on how leaders should behave DURING an ERP implementation, I was surprised to find very little written about how leaders should behavior AFTER an ERP implementation. This is a critically important, but often neglected, aspect of building a world-class ERP system.
Life in an ERP system doesn’t just enable disciplined behavior – it demands it! Most leaders understand this, so it’s not usually the blatant intentional leadership behavior that causes issues, but rather the more subtle, unintentional behavior. Operations leaders need to be alert to this fact, and conscious of how their words and actions can impact the organization. In this article, I address 4 common, well-intentioned leadership behaviors that can unwittingly undermine operations in an ERP environment.
Encouraging out-of-system reporting solutions
The innocent behavior: Making an urgent plea without stipulations, such as: “I need my report, and I don’t care how you get it.”
The intent: To create a sense of urgency in the organization to resolve a critical reporting deficiency.
The unintended consequence: A request like this gives the organization a free pass to use whatever means necessary – including going outside of what should be the official system of record – to satisfy leadership. Since all employees want to please leadership, even the ERP believers may choose speed over an in-system solution, and the cynics will actually use this situation as proof that “the new system is not as capable as the old system”. Talk like that can be poison to a digital transformation initiative.
A better approach: When making a plea like this, add the stipulation that you are seeking a sustainable, in-system solution. For example: “I need my report. How can I get it from our ERP system?” This approach still conveys urgency, and encourages creativity, but closes the door to out-of-system solutions.
Caveat 1: There are times when speed is so important that you really “don’t care how you get it”. In a situation such as this, leadership should be careful to explain the short-term need, while simultaneously requesting a long-term, sustainable solution. For example, “I need my report, and I don’t care how you get it today, but we need to find a way to get this out of our ERP system going forward”.
Caveat 2: Although ERP systems are incredibly powerful and rich sources of data and information, not all data which is important to leadership will be available from your ERP system. So, be careful not to try force-fit a square peg into a round hole.
Rewarding siloed behavior detrimental to the business as a whole
The innocent behavior: Public recognition of individual (person, site or function) accomplishments without understanding the total integrated business impact. For example: “Congratulations to the Greenville plant for achieving record production this month”.
The intent: To boost morale via public rewards and recognition.
The unintended consequence: Public rewards and recognitions send a clear message to the entire organization as to what leadership considers important. As such, it is very important for leadership to reward the right kind of behavior. An ERP system runs much more smoothly and efficiently if the production output is predictable and consistent. Therefore, rewarding the wildly erratic behavior of one site can be extremely demotivating to the other sites that consistently meet their plan.
A better approach: While I am a big believer in frequent and public recognition, it is important for leadership to first seek to understand HOW the achievement (in this case “record production”) was accomplished. Was it at the expense of deferred maintenance that might come around to bite you later? Did it result in an unwanted inventory build of a product that is easy to make, but hard to sell? Or was it the coordinated effort of multiple cross-functional teams working together to accomplish a stated business objective? Or perhaps a technological breakthrough that stands to reset the production rate standard going forward?
In passing out rewards and recognition, leadership should seek to:
- Reward integrated teams working together to achieve important business goals. For example: “Congratulations to the Greenville plant and the Southeast Sales team for record performance this month which enabled us to hit our 3rd quarter goals.”
- Reward breakthroughs, especially those critical for long term business success. For example: “Congratulations on a safe and successful start-up of Line 12” or “Thank you to the ‘Packaging Kaizen Team’ for solving a defect issue which has plagued us for months”.
Caveat 1: When a business is in a growth phase, both Manufacturing and Sales may need to expand simultaneously. Ideally, manufacturing output would grow at exactly the right pace to keep up with expanding sales, but in reality, it rarely happens that way. Therefore, leadership might find itself in a situation today where they need to pull the reigns on either Manufacturing or Sales while encouraging the other. Two months from now that situation might be the complete opposite, and this chicken-and-egg game might go on for months. Throughout this growth period, leadership should always keep the big picture in mind and reference the overall business objectives as they reward and recognize the collective team accomplishments.
Caveat 2: Sometimes one area of the business, such as a plant or functional team, might be in such dire need of “feeling the love” that leadership feels compelled to reward even the slightest hint of positive behavior coming from that area. As a leader, you need to sense and respond to this emotional need no matter what the logical guidelines suggest.
Accepting system outputs that appear out of step with the physical world
The innocent behavior: Accepting an explanation like “that’s just an artifact of the system” when a system output appears to be out of step with reality. For example: “Product XYZ is actually more profitable than the system shows because it’s usually the first product we run after a clean-up, so it gets an undue share of the product transition cost”.
The intent: To explain why some of the system data cannot be accepted at face value.
The unintended consequence: As a leader, willingly accepting so-called ‘system artifacts’ effectively gives the organization tacit approval to ignore what the system data is saying. One of the greatest values of an ERP system is improving the speed and quality of business decision-making, and if the organization is constantly questioning the validity of the system data, this will severely undermine that capability.
A better approach: It is important to understand that, in setting up an ERP system, there are often many combinations of configuration settings and data structures that can be employed, each of which has its own set of pros and cons. The goal of the project team is to select the combination which provides the best balance of ease of use and functionality across all the various business scenarios. Unfortunately, sometimes what looked like a good choice during the design, build and test phases, ends up falling short in real life. As a leader, it is important to recognize when a change is warranted and then pursue making that change in a manner that doesn’t cast a dark cloud over the entire ERP implementation.
In trying to assess if a change is warranted, the number one question a leader should ask is: Does the ‘system artifact’ prevent the business from successfully gaining a key business insight (in this example “profitability analysis”) that is important to the business? If it does, the next logical question is: What will it take to fix it? Answering this question can sometimes be a very complicated process, and leaders should be careful to take a very wide view and consider the following.
- Are the master data elements, business processes, and technical components all working as designed? If not, fix those first, then reassess if additional changes are necessary.
- What are the various options available, and what are the pros and cons of each? Be sure to ask what current capability may be lost if a given option is implemented.
- If no option presented seems viable, and you feel caught between a rock and a hard place, consider pulling in a subject matter expert to help. To make sure you get a truly fresh perspective, it may behoove you to seek an independent, third-party (i.e. someone not affiliated with the initial implementation), with a reputable track record.
- How easily could each option be implemented? Some changes are simple and can be implemented incrementally (e.g. one material at a time), while other options require more of a big-bang, wholesale, global change.
- Test, test, test! Your testing plan should be commensurate with the degree of difficulty and exposure to risk. For example, a change that could be implemented one material at a time may require very little testing, as the risk can be easily managed and mitigated. Conversely, a global ‘flip-the-switch’ kind of change must be tested extremely thoroughly.
Caveat 1: Don’t forget that “do nothing” is still sometimes the right choice. Once you have seen and heard all the possible options and risks, it is time to put your business hat on and decide if the business risk is worth the gain. Sometimes it is best to keep the system the way it is for now and consider making a substantial change during your next ERP upgrade project. In that situation, it probably makes sense to focus today’s efforts on developing a robust workaround.
Showing blind loyalty to customers
The innocent behavior: Succumbing to repetitive unreasonable requests of major customers. For example: “We need to break into our production schedule because our top customer, I. M. Needy, is running short again”.
The intent: Delighting the customer – what could be a more honorable goal than that?
The unintended consequence: If you are a leader who has been preaching to your organization about the virtues of schedule adherence, and what a key step that is on your journey to becoming a world-class supplier, good for you! That is music to my ears! You and your organization already know just how disruptive an unplanned break into the production schedule can be in an ERP system. Yet, seasoned manufacturing veterans also know that customers sometimes get in a bind and seek special treatment. If that request is infrequent and legitimately unavoidable – for example, as the result of an act of God, or a widespread labor disruption – we all understand and want to do our best to help. And rightfully so – extraordinary times call for extraordinary measures! But when the ‘extraordinary’ become ‘ordinary’, and leadership shows blind loyalty to the same customer, again and again, your organization will begin to question your own resolve to become a world-class supplier. The natives will get restless and you may start to hear rumblings such as “our leader really needs to talk to customer I. M. Needy!”. And you know what? They are right!
A better approach: This situation can challenge even the most seasoned leader. Convincing a customer that they need to change their ways takes tact, patience, and openness. Whether your company has recently gone live on ERP, or you’ve been live for decades, chances are that when your company first took the ERP plunge, it was for the purpose of improving your overall business performance. Perhaps, at the time, the shoe was on the other foot, and your own company was just like customer I. M. Needy – living a chaotic, scrambling kind of life, wondering how you were going to satisfy your customers when you couldn’t even stick to a production schedule yourself. Well, chances are that customer I. M. Needy is suffering too, and they may not see a clear path to success. As a leader who has already walked partway down that path (and it’s always ‘part way’ because the journey never ends), you may be able to help paint a picture for the customer of what that path looks like. To do that, you will have to engage your leadership counterpart within the customer’s organization, but you obviously don’t want to take an aggressive, confrontational approach. Instead, I suggest you take a heartfelt, from-one-leader-to-another kind of approach which starts with you openly sharing your own journey. That approach goes something like this:
1- Arrange a meeting with your customer.
If they conduct routine supplier reviews, and you are invited to one soon, terrific! Take advantage of that. If not, request an opportunity to speak with your customer for the purpose of sharing your own plan to become a world-class supplier.
2- Use data to paint your story.
Sticking to the cold hard facts helps take the emotion out of what could otherwise become a rather uncomfortable conversation.
3- Focus on the things of interest to the customer.
Typically, this would include performance trends for things such as On-time In-full, Lead Time, Quality, etc.
For things trending in the right direction, share how you were able to achieve that.
For things trending in the wrong direction, share what challenges you face, and what plans you have in place to turn things around.
4- Help the customer see exactly how they compare to their competition regarding their disruptive behavior.
Complaining openly about how their disruptive behavior negatively impacts your organization is not generally the most effective approach. While it may feel good for a minute, it immediately puts the customer on the defensive, and they may even consider that to be your problem, not theirs. If, however, you can help the customer see and draw their own conclusion that they are not competitive, this is a much more powerful message. And that is exactly the message you want the customer to receive.
5- Offer to keep an open dialogue going.
An offer to ‘help’ might be accepted or rejected, but an offer to keep an open and active exchange of data and feedback going will almost always get accepted. Hopefully, this will lead to the sort of changes that will benefit both you and the customer.
Caveat 1: As the old adage goes “You can lead a horse to water, but you can’t make him drink”. No matter how clearly you think you have painted the picture, the customer may still not pick up on exactly how disruptive their behavior is to both you and the customer. In that situation, you may have to be more direct in your discussions, and you may even have to go over the head of your leadership counterpart. If you decide to play that latter card, recognize that things could escalate quickly from there, so be sure you have a well thought out strategy with the full support of your own leadership. The key thing to keep in mind is that no matter how big and important the customer is today, if they show an inability or unwillingness to improve their disruptive behavior, they are vulnerable to competitive attack, and you can’t let their demise become your demise.
In summary, post-go-live leadership behavior – both conscious and unconscious – plays a critical role in how quickly and thoroughly the organization assimilates ERP disciplines and philosophies into everyday life. To develop an organization, it is not enough for leaders to encourage proper use of the ERP system: leaders must also seek to remove barriers that inhibit its proper use. With conscious effort and self-reflection, leaders can go well beyond learning how to ‘talk the ERP talk’. They will learn how to ‘walk the ERP walk’, and that is where true world-class capability is born!
