by Louis Adams
Many companies spend months, even years, and millions of dollars to implement organization-wide technology systems – systems that support such functions as human resources, accounting, sales, manufacturing, service management, and resource planning.
But our Technology Services Group finds regularly that, despite the very significant system investments that are made, many companies lack the discipline and follow-through to assess how the system is working for them and what value they truly are gaining from the new tools that have been expensively put into place. As a result, companies may never realize the important benefits that were used to justify the system investment in the first place.
Follow-through problems most often begin shortly after Go-Live. Up until Go-Live, special task forces and project teams have been put into place, and they have been working diligently against well-defined project plans and with active leadership support, and lots of preparation and hoopla accompany the actual cutover to the new system. But, after Go-Live, project teams disband and people refocus on their “real” jobs, the vendor partners move on to other client engagements, and there is a general sense that the main work is done. In such context, over some period of time, things begin to drift back to a prevailing sense of “business as usual.”
In fact, for the IT department, the new system will likely move into maintenance mode. But, in the business units – like HR and Finance – where the positive benefits of the new system were expected to be realized, it is incumbent upon the business unit leaders to keep the pressure on in order to ensure that processes related to the new system and new roles & responsibilities are indeed implemented and integrated into the work.
System Process Audits to the Rescue
To enable this follow-through mindset, companies should consider adopting a plan for conducting periodic System Process Audits. Whether resourced with internal staff or external professionals, the System Process Audits should be focused on key aspects of the business with the general goals of: 1) evaluating the quality of system application, and 2) identifying additional changes and implementation steps required to move the organization closer to the desired state.
So, whether the system is a human resource information system or an inventory management system or an entire Enterprise Resource Planning (ERP) solution, vigilance in the form of System Process Audits can ensure that the “solution” truly is delivering on the promised improvements in talent utilization, financial reporting, cost control, inventory control, and/or customer service.
Elements of a System Process Audit – A Manufacturing Example
To illustrate the kinds of things that a System Process Audit might take into account, consider these 10 representative critical elements, as cast in the context of a manufacturing-related company:
- Open Order Status. Two of the most important pieces of information in a planning system are dates and quantities. The Orders module manages these, and the orders can come in many varieties depending on the nature of the business (customer orders, work orders, service orders, and purchase orders, just to name a few). A small amount of bad data in Orders, if not observed and corrected, can quickly grow to have material impact on the company’s operations. Auditing the Open Order Status can prevent this from happening and can avoid the all-too-frequent situation where, because of bad data, people begin to lose faith in the main system and start maintaining local “systems” of their own.
- Inventory Analysis. In many companies, inventory is a significant asset. However, all too many businesses do a poor job of managing this asset class. Besides the basic control of inventory in and out, companies need to understand their turnover rate and be able to identify and deal with slow- and no-moving inventory. An “ABC analysis” is critical to make sure parts are characterized properly and are taking advantage of system cycle counting functions. The ability to segregate inventory is also very useful, and there should be a material review process in place to minimize dead inventory.
- Planning Tools. In relation to this, contemporary technology systems have many different planning options and engines. An analysis to ensure the correct planning options are used in the right situations will help to maximize inventory turnover while minimizing stock outs. Having accurate lead times by supplier is also crucial to a planning system and, while most systems can calculate and update these, it is often an overlooked aspect of the technology capabilities.
- Resource Optimization. Making sure you get the most out of your people, cash, and other critical resources is obviously fundamental to the success of the business. Keeping human resource data, manufacturing labor rates, and skill profiles up to date all help to support more accurate forecast resource requirements. This is almost always a critical focus of a System Process Audit.
- Financial Records. A well-managed financial organization is armed with all the data it needs to make informed decisions. But we often observe that month-end and quarter-end results are prepared in spreadsheets outside the system of record due to underlying distrust of the financial system. An analysis of the financial record system can lead to improvements that drive much higher leverage of the financial components of the technology system.
- Key Performance Indicators (KPIs). Precise, well-defined metrics enable an organization to make good decisions based on real data. From our experience, many companies do not have metrics or they use metrics that are not aligned with their corporate goals. To be meaningful, timely, and complete in your performance reporting, it is critical that a company be able to pull reliable KPI data from the correct transaction tables in the system database.
- User “Pain Point” Analysis. Most users experience some discomfort when new technology is introduced. Process changes and new keystrokes are among the changes that take time to embrace and, as suggested above, some people never embrace the new way of doing business and create unproductive workarounds. Often all that is needed is a new perspective on the business and the underlying technology. Leveraging knowledgeable key users and subject matter experts to help others get bought into the improved processes can significantly mitigate the pain.
- License Review. Software agreements are typically quite long, and they have a lot of small print. Many times, key managers are not clear on even which modules were purchased or on what functionality is available. This is important information to surface. In addition, on review of licenses, it is not unusual for us to find consulting hours for support or upgrades that were included in the agreement but have not yet been used. In order to ensure the company is getting every bit of value, an audit of the software agreements and actual management practices can significantly reduce risk and maximize value.
- Reporting Tools. Data in the system is only useful if the data can be easily turned it into valuable information. Due to the complexity of today’s systems, it can be confusing to users who have to mine data if there is no underlying knowledge infrastructure. Usually, with a minimal investment, companies can create a structure that positions them to use the right tools to get the most out of the system’s reporting capabilities.
- Content Management and Collaboration. All too often, nudge content is an area that gets overlooked in the implementation process, which is unfortunate because efforts in this area can dramatically improve the efficiency and effectiveness of the system and the company as a whole. Whether it is the organization of current document libraries or designing internal or external collaboration portals, the solution should be seamless, easy to use, while preserving data integrity, with secure access given to only those who are required to have access.
Special Training Considerations
When problems are defined during a System Process Audit in any of the areas identified as critical elements, solutions can be appropriately targeted. In many cases, the “fix” might involve little more than better training. If training in the period up to Go-Live consisted primarily of teaching which buttons to push, there may be need to ramp up the program to include education on reasons why certain processes and transactions are important and what the implications are of process aberrations and data inaccuracies.
For some reason, most companies stop training when systems go-live. But the reality is that most users don’t know what they don’t know until they have to do their jobs the day after go-live. A plan to develop and deliver training that both fills user knowledge gaps and improves organizational efficiency should be embedded in the overall education strategy to improve people effectiveness.
From Go-Live to Stay-Live
When Go-Live finally arrives, it is a natural tendency to want to move on and to leave behind all the hard work it took to get the new system up and running. But, ultimately, the goal is Stay-Live, which is accomplished by having the new system contributing in strongly positive ways to the operational success of the business.
System Process Audits – working as regular check-ups, conducted by qualified professionals with an independent frame of reference – can be the ticket for instilling the discipline and maintaining the hard work needed to support ongoing assessment, recalibration, and continuous improvement. Only then may the company be positioned to realize all the system value that was promised and expected.
A Brand New Way to Think About Training for CPAs
CPAs need continuing education (aka CPE), and they generally get it. But, all too often, the way that education is served up to CPAs is a confusing mess. Check into next month’s issue of the Free-Range Learning News to see St. Charles’ pioneering new approach to organizing learning content for accounting, finance, and consulting professionals.