June 21, 2012

Readiness Audit Importance in the ERP Project Initiative

ERP Readiness Audit is the process used to find out the readiness level of the organization to execute the ERP project initiative, and identify specific areas to focus on in its preparation process. It is the ideal first step for organization to take in its ERP Project Initiative. This would help organization to clearly understand its current readiness level and have an action plan to be fully ready to implement the ERP solution successfully. The key business users should be involved in this audit phase, so that they assume ownership of the ERP project initiative.
The purpose of the Readiness Audit is to
  • Evaluate the level of overall preparedness of the organization (in terms of Organization, People, Process, System, Project) to carry out a successful ERP implementation.
  • Assess effectively the readiness of the client employees to adapt a new ERP system
  • Develop employee buy-in to the project
Readiness Audit, to gauge how prepared the organization is, has to be done with a minimum target score, below which the ERP implementation has to be postponed. The organization should then first concentrate on improving the business process, systems and procedures before initiating the ERP Implementation. Many ERP implementations fail not because of any technical defect in the software but because the organization is not yet ready for it.
Organization structure, processes and culture impacts the ERP (in particular and IT in general) project success and it should be frequently audited & improvements areas to be identified. Audit should include how the enterprise is organized as well as the state of processes, company direction, culture and other factors. Audit should also review the formal / informal structure, staffing, processes and culture.
Organizations make considerable investments in ERP projects and expect early stabilization & benefits. While the benefits exist, normally the project timelines / budget exceed target, as challenges / risks normally occur in any such initiative involving varied business users and data sources. This is primarily due to lack of basic preparation done prior to initiating such a crucial initiative. Organization normally under-estimate the operational groundwork that need to be done before start of the ERP implementation project. At a high level these include:
  • What information is required?
  • How will the information be retrieved?
  • Who would have access to what information?
  • How should the Users be prepared for usage of the new erp system?
This phase is done before the ERP product / solution selection phase and so it gives neutral view of the business requirements & project readiness. This refers to business requirements identification and should be focused on requirement needed by business at different stages. While initiating this stage, it could be advantageous to review the business processes for rationalization, which in turn might refine the requirement. Some of the simple steps are:
  • Identify the business functions and start from the bottom up to determine the requirements of the various stakeholders in each of these business functions.
  • Deliberate with business users to classify requirements as ‘Mandatory’ (i.e. Show stoppers) & ‘Nice to have’ (i.e. Wish list not actually mandatory).
Organizations need to build further on the preparation steps based on their business and IT maturity. Readiness Audit is designed to help objectively evaluate business operations and point out problem areas before implementing ERP. Audit is to effectively assess the readiness of the client employees to adapt a new ERP system and to develop employee buy-in to the project. It is to analyze and optimize employee acceptance and address resistance to the potential ERP organizational changes. The audit activities are:
  • Conduct an executive survey / workshop to ensure that the project objectives are aligned with the enterprise strategic direction
  • Facilitate formal / informal communications with the organization staff
  • Determine largest areas of organizational resistance
  • Identify lessons learned from previous relevant project initiatives
  • Assess employee competencies relative to ERP skill requirements
  • Identify major organizational / job changes resulting from ERP implementation
  • Provide recommendation regarding organizational change management, training & communications activities to address organizational constraint as part of the broader ERP   implementation.
The purpose of this audit is to help identify specific areas for the organization and the ERP Project team to focus on as they prepare to select & implement the ERP solution. The purpose of the audit is to determine whether an organization is ready to implement an ERP. The audit is a measurement of the status of current processes before beginning an ERP implementation regardless of the chosen product. The results will help ensure that an ERP implementation meets or exceeds the established goals that have been set for the initiative. It involves a wide range of discussions in the following areas:
  • Corporate Philosophy, Vision & Mission
  • ERP Business Goals / Objectives
  • Organizational Structure & Culture
  • Process & Data Flows Documentation
  • Existing Technical & Data Infrastructure
  • Functional Breakdown
ERP Readiness audit impacts organization structure / process and the project implementation. Reasons for Readiness Audit are:
  • Better alignment between Management, Business & IT
  • ERP project costs are high and need justification.
  • Improve customer responsiveness
  • Organization growth plans
  • Enhanced process / system standardization
  • Challenges in realizing Project ROI
  • Organization restructuring
The above reasons drive the Readiness audit project’s scope, which focuses on key processes / structures with higher priority. Strong justification is required for the audit to get the required participation from the stakeholders. Readiness audit not only reduces some of these problems but also helps to:
  • reduce significant proportion of the resource costs & project elapsed time
  • achieve the projected benefits of ERP in a shorter time frame
Following improvements areas are to be identified once the current level of readiness is determined:
  • Assess educational requirements to improve the employees understanding level regarding business practices
  • Executive management must focus on prioritized activities that need attention
  • Determine the root cause of existing challenges & Assign a realistic due date to overcome them
  • Assign accountability & responsibility for determining the problem root cause and resolve them
  • Monitor progress & frequently review the status