How CFOs Can Lead ERP Change for Long-Term Success

Enterprise Resource Planning (ERP) systems have become the backbone of modern finance operations that unleash integration of all functionality, streamline internal and external processes, and help in making better decisions. In spite of this, the other side of the coin reveals that ERP implementations have their share of misclassifications and oversteppings; they are usually tough, expensive, and prone to failure.

Reports indicate more than half of the ERP implementations fail at the level of expectations, creating costly disruptions and discontent for the staff and poor ROI. While ERP vendors highlight seamless transformations, the crux lies in weak change management, which basically is the top reason for failure in ERP projects.

The CFO, who is key to any decision-making of the organization, must justify decisions about future objectives of technology adoption for business transformation. Traditionally the CFO comes in as a support for the ERP implementation, handling approvals for the project budget and other financial activities. Nonetheless, as ERP systems take their breadth towards finance, business operations, and corporate strategic purposes, it is pivotal that they take leadership responsibilities in order to see to it that this gets translated into successful adoption.

Resistance to change anchors among challenges encountered in many ERP projects. Employees often take longer to adapt to new workflows, with updates occurring every so often, as is the case with cloud ERP systems. Furthermore, bad communication or inadequate training leads to less adoption, which finally results in inefficiency. Unless one gets a strong leader in the form of a CFO, the ERP project could just end up being a growing waistline for the company when it comes to investing.

This paper sheds light on the common ERP implementation pitfalls, hints on the critical role played by CFOs in those barriers, and key strategies that the CFO must put into perspective in order to encourage change and make the ERP work.

Why ERP Implementations Fail?

Despite the promising productivity and efficiency, respondents report that when it comes to lots of ERP implementations, expectations often fall short. Actually, research indicates that more than 50% of ERP implementations end in failure or fail to deliver the anticipated benefits. The reasons behind these failures are mostly organizational and strategic blunders rather than technical. Therefore, here are some of the biggest challenges that derail ERP projects:

1. Lack of Strategic Alignment

Failure to align ERP objectives with the broader business strategy is one of the more common mistakes that organizations make. CFOs, as guardians of financial sustainability and growth, must ensure that ERP is not only an IT project but business transformation. When ERP implementations are motivated by merely upgrading technology without clear-cut strategic goals, they frequently result in systems that simply cannot support key business functions.

For example, an organization may spend millions on an ERP upgrade to facilitate improved financial reporting, but later realize the system was not designed to line-up with developing business models, M&As, or market expansion. Independent of the direct connection with strategic objectives, ERP projects become costly experiments fraught with ambiguity on ROI.

2. Change Fatigue from Continuous ERP Updates

Previously, ERP implementations were mostly big projects and went for a big bang approach during rollouts. However, because of cloud-based ERP solutions, companies are subjected to almost daily ERP updates, with some companies doing so even multiple times in a year. Although this is certainly a plus in companies where staying updated with the latest features is regarded as vital, this change also involves significant stress on employees.

The constant updates demand from employees frequent adaptations to new workflows, interfaces, and new systems, almost always with insufficient training and preparation. This produces “change fatigue,” which sets in when employees display a restlessness to embrace yet another modification in their work processes.

A recent study suggested that almost 50% of employees view resistance to change as the largest obstacle to success in digital transformation initiatives. When employees feel there is an overwhelming amount of information to deal with, adoption rates plummet, and businesses do not succeed in maximizing their investments in ERP.

3. Inadequate Training and Gaps in Knowledge

An effective ERP system needs a workforce with adequate knowledge of how to use it. While it must not be stated that this is not understood, the lapse happens during practically every ERP rollout because oftentimes, it is undervalued. It is often replaced with the one-size-fits-all training that seldom caters to the varying needs of specific teams.

This is even a greater concern for remote and hybrid environments because employees lack hands-on training. Confidence in the adoption of enterprise resource planning systems stands in jeopardy when the users fail to use it, leading to operational inefficiencies, errors, and, thus, problems. This, over time, turns into a challenge, and ultimately into ERP failure.

4. Lack of Communication with Other Stakeholders

From procurement tariffing to billing cycles, companies must also consider how ERP implementations will impact external stakeholders, including suppliers or vendors, customers, and investors, but unfortunately, in many cases, they haven’t quite got the communication processes right that are required for dealing with external stakeholders in a way that will even keep confusion and operational hiccup at bay.

In such scenarios, a supplier may have to use a brand-new invoicing system all of a sudden, or customers may face delays stemming from a new order management process. Unless some communication occurs, companies might end up with damaged relationships, losses, and operational inefficiencies.

Furthermore, a lack of internal communication leads to discord between departments. When your finance, IT, and operations teams are not well aligned, ERP changes turn chaotic due to differing priorities, slow decision-making, and undefined accountability.

The Consequences of Poor ERP Change Management

Failure to actively engage in ERP change management by the CFO can lead to terrible consequences like:

• Overruns in the budget due to scope expansion and wastage
• Low productivity as employees get too acclimatized
• More resistance to the adoption of new technology and underutilization of ERP capability
• Causing damage in communications with suppliers
• Increased operational risk for errors, compliance issues, and disrupted work processes

Therefore, to avert these pitfalls, CFOs should become proactive and assume their places as the strategic directors of ERP change management. The next section outlines key solutions and best practices that CFOs can put in place to collectively drive ERP achievement.

How CFOs Can Drive Successful ERP Change

ERP implementations have their fair share of challenges but the CFO has a chance to carve out leadership and success in this area. ERP deployment should not be considered as one-off IT projects but rather as the continuous business transformation that CFOs must approach to ensure long term value creation from ERP. Here are four key ERP adoption and value creation strategies that CFOs can enact to drive success.

Link the Objectives of ERP to Business Strategy

An important reason why ERP projects go to waste is they live on only in the IT environment without any alignment with the business goals. Organizations must have the guard rails of strategic investments in ERP and align them with key business objectives, not just a technology upgrade for CFOs.

Align Business Goals to ERP Performance Indicators

If ERP implementation is to have any impact, CFOs should have well-defined business Key Performance Indicators (KPIs) around which the implementation is measured. Instead of looking at it only in terms cost savings, then the ERP must also be measured by its ability to:

• Deepen financial statement reliability
• Optimise your cash flow landscape
• Close faster cycles
• Less manual data entry mistakes
• Gather demand in procurement and the supply chain

Linking the ERP with business KPIs results in finance professionals making sure that these systems stay strategy-aligned and bring value with every iteration.

Foment enterprise-wide accountability

ERP success is not the IT and the finance department’s alone; it must be company-wide. CFOs must:

• Expect department heads to pay attention to performance indicators of the ERP, including deliverables.
• Ensure all the other teams are a part of the discussions related to the ERP.

Assess Change Readiness and Customize Change Plans

A single dimensional change management will not work for ERP projects. Each department and job role in a company will encounter ERP change differently so CFOs have to change their change management strategies industry by industry.

Conduct an Impact Assessment

CFOs also must work with process owners to assess the potential impact before releasing an ERP change:

• Which department and roles will be severely affected?
• How the specific tasks workflows are altered or deleted?
• How disruptive is that to operations?

Example of a method that can be used for this is a heat map that depicts where the changes in ERP really happen by assigning rankings to different roles. In cases where specific teams get hit with several changes at once, we could extend out the release timeline or even apply some initial change management to get them prepped.

Focusing and Triggered Change Management Activities

CFOs then need to take action based on impact assessment, which may include:

• High-payback teams: Involve in the early stages, role-based training and sponsor.
• Weakly affected teams: Hold interactive workshop series, tech labs.
• Weak Learners: Publish your self-paced modules and keep at it after that.

This method guarantees that the proper amount of assistance is given to employees, minimizing change resistance and adoption rates for ERP.

Strengthen Training and Skill Development

An ERP system only works as good as the personnel working for it. When not trained appropriately, the employees may hit the wall and end up making mistakes that cost you money and increase turnover.

CFOs need to assure the following training:

• Iterative: Not only in preparation for go-live phase but also for any new ERP functionalities and enhancements that will be introduced.
• Freescale or flexible: Available in virtual, in-person and on-demand formats.
• Role Specific: provide custom fit trainings for the exact functions and responsibilities of employees

Making Training Interactive & Engaging

Most traditional ERP training is way too theoretical. Instead, CFOs should do this:

• Live Demos to show how ERP functions work out in tangible business events.
• Hands-on simulation implementation of ERP tasks in a safe testing area.
• Microlearning modules that take complex ERP tasks and dissect it to simplified videos.

Furthermore, the CEO should participate in the demonstrations, too. CFOs can thus, lead by example, signaling that learning is important for all areas in the organization.

Measuring the Effectiveness of Training

CFOs to check on the following to make certain the training is meaningful:

• Proficiency of each department in training
• Employee Performance Scores in tasks specific to ERP
• Any high Support ticket numbers can be indication of training gap

Improve Internal and External Communication

Communication failures are one of the main causes for ERP projects to fail. CFOs need to engage in proactive change communication, internal and external.

Internal Communication

This is done by company-wide meetings, as well at town halls or team discussions from the CFO.

• Describe the reas
• Define the transition time frame in a very real and practical manner
• Update teams regularly on any progress made and ERP milestones.

Furthermore, ERP process owners must also give the team weekly updates to keep them awake and on notice before big changes happen.

External Communication to get Suppliers, Customers and Stakeholders Ready

Although ERP changes affect employees, they also have customer and supplier/ investor credibility. The CFO needs to tell the other stakeholders that this information is important and now.

• Customers: Warning them of changes to their order processing, invoicing or payment process.
• Suppliers: Share the new procurement & invoicing requirements with your suppliers so that no one operations are disrupted.
• Investors/Board: Insights on how ERP implementation enhances business strategies through financial indicators

Emphasizing clear, and at times, immediate communication may be the only way CFOs can avoid confusion and help all stakeholders find their way.

Role of CFOs in the Future of ERP Change Management

By 2026, 40% of finance processes will need to be changed every year because ERP systems are upgraded frequently. This does not make ERP change management an event but rather a process that continues.

CFOs will have to focus on the following:

• Adopt a long-term change management mindset rather than treating ERP rollouts as one-time projects.
• Automation and AI to be used for automating repetitive processes and reducing human error.
• Develop cross-functional ERP leadership teams that include finance, operations, and IT representatives.

Conclusion

ERP implementations can either be a catalyst for business transformation or a costly failure. Overall, ERP success isn’t about the technology; it’s about people and processes learning to adapt in a changing climate.

CFOs must take up the mantle by ensuring accountability for the culture created and maintained towards continuous improvement, thereby transforming a high-risk implementation of ERP to a strategic business growth driver.