4 Steps to Achieve Strong ERP Governance & Get the Most Out of Your Investment

Featured article By Greg Davis, Grant Thornton LLP

Enterprise resource planning (ERP) programs are much more than the software brand that runs them — they can serve as the foundation for business success. However, the majority of companies that operate ERP systems today (no matter the platform) struggle to get the most out of their ERP investment, primarily due to issues with governance.

Does IT own the ERP? If not IT, then who does? Many IT leaders are frustrated by these questions and perpetual conflicts with business functions over ERP issues, but this paradigm can shift with relatively simple and fundamental changes.

Effective ERP programs start with a governance structure of processes and controls, fueled by a collective mindset of continuous process improvement. Following four best practices will help establish strong ERP governance and will free up time and resources so that both business functions and IT can focus on the business’s strategic goals.

Step 1: Institute an ERP operating group

A strong ERP operating group (ERPOG) made up of owners of business process areas (such as order-to-cash, procure-to-pay, etc.) and technical leaders who meet regularly will serve as the building block for successful ERP program management. This is a good opportunity to take a step back and look at your ERP organization. If it was cobbled together over time (as most are), then this is the time to reorganize.

A successful ERPOG should reflect the fact that ERP is a way of doing business, not an IT system. While technology services should be a part of the process and enable and support business decisions, the business functions ultimately should own the ERP. The ERPOG needs to govern and manage all activity that touches the ERP.

Step 2: Take a disciplined approach to master data management

Data governance is the process of setting policies, rules and processes that guide information creation, use and management. Data governance practices largely determine the reliability of ERP information, so taking a disciplined, dedicated approach to data integrity is crucial in effectively managing your ERP.

Master data management processes should be standardized and centralized under one umbrella, and should be a business-driven (not IT-driven) function within the organization. Commit to developing staff with clear roles, responsibilities and measurable objectives around data quality and usage. Ideally, only a small number of people will have access to updating specific types of master data, and will review change request forms from outside the group. Master data management representation should be included in your ERPOG.

Step 3: Manage new releases carefully

Strong release management provides a “method to the madness” that typically consumes most ERP organizations. This is vitally important for companies with many third-party interfaces. The alternative is perpetually putting out fires, a scenario that often derails overall program progress.

Strong release management for ERP organizations should include:

– Identifying production release windows/schedules that are ideal and will not jeopardize the business

– Aligning both production fixes and newly implemented functionality with a logical release window

– Developing a detailed plan and quality review cycle for each release

– Performing gate reviews for each environment and test cycle

– Implementing all necessary testing cycles (e.g., load, acceptance) as the results will be reported in the gate reviews conducted by the ERPOG

– Moving the release date if functionality or development items fail or do not go through the release management process

– Allowing end-user and executive-level visibility to the functionality roadmap

Step 4: Use metrics that drive business performance

Defining and actively using metrics or key performance indicators for every business process area is a best practice for ERP organizations. Each process area needs metrics reported by the process owner in the ERP organization. Metrics should be driven by the business and enabled by IT from a reporting perspective. These analytics should then be reported to the executive team and evaluated at defined intervals.

Metrics should reflect the organization’s goals and they should be SMART — specific, measurable, achievable, realistic and time-bound. Examples of metrics that matter include leadership’s targeted improvements, industry benchmarks, competitor results, measurement of cross-functional processes and key performance indicators that engage and align the organization.

ABOUT THE AUTHOR

Greg Davis is a principal with Grant Thornton LLP’s Technology Solutions practice. Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd, one of the world’s leading organizations of independent audit, tax and advisory firms. Based in Kansas City, Mo., Davis leads the Oracle JD Edwards (JDE) platform Solution group for the firm. Davis has nearly 20 years of consulting experience and specializes in providing ERP financials, distribution and supply chain solutions across a broad range of industries. He has experience working directly with business leaders in the analysis, strategy, implementation and upgrades of ERP and integrated solutions.