Establishing ERP and IT Performance Measures
Most business cases develop high-level
corporate performance measures that define potential areas of an IT or ERP
project’s business benefit. Examples include reduced inventory, reduced sales
order processing time, reduced headcount, etc. The problem with these
high-level measures is that the associated benefits will not transpire unless
the metrics are pushed from the executive down to the operational levels of the
organization. This helps to drive accountability and visibility to achieve the
benefits outlined in the business case. It also helps drive overall ERP
benefits realization.
Let’s use an example such as reduced sales
order processing time. Perhaps, it was determined that an ERP system could
potentially reduce sales order processing by 30% and an annual savings of AED 1 million in reduced headcount
company-wide. This is a tangible benefit, but it means nothing to mid-level
operational managers of a global conglomerate that will need to contribute to
this benefit. So, if there is a Director of Sales and Marketing in charge of
Western Europe, that person should be given a specific target to contribute to
this AED one million savings so they are held partially accountable for the
project’s overall ROI. The same should be done for the directors in charge of
other areas of the business until the full AED 1 million savings target is
assigned to the appropriate people.
Obviously, this process is easier said
than done. In order for this performance management approach to succeed,
effective communications along the way will be crucial. Ideally, these
operational managers that will ultimately be accountable for project results on
the business side, should be involved in helping define the business case and
potential savings of an ERP system. In addition, they should also be given
support to help identify root causes of anticipated benefits that are not
realized. This will help ensure buy-in to the established targets, which is the
centerpiece of an effective ERP benefits realization program.
In short, the only way to achieve the ROI
defined in a business case is to cascade target improvements and accountability
out of the boardroom down to lower levels of the organization.
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