This is the second article in our “Be the Change Maker: Leading Change & Transformation” series.
Before we jump ahead into how to lead change and transformation effectively, I thought it might be helpful to step back and look at how large transformation initiatives can go badly wrong, the impact when this happens, and — most importantly — how to avoid it.
According to the Project Management Institute (PMI) Pulse of the Profession report in 2021, approximately 1 in 4 projects fail. Only 62% are completed within budget and 55% on time. Scope creep accounts for 34% of failures, and 35% of projects lose budget due to failures.
The failure rate for complex ERP and digital transformation initiatives is substantially higher. According to McKinsey, over 70% of digital transformation projects fail completely, and according to a report by Bain, nearly 95% fail to achieve their business objectives. Gartner estimates that 55 – 75% of ERP projects either fail outright or fail to meet their objectives.
The impact of failed or failing projects can be felt right across the organization – in addition to a substantial financial impact in terms of “sunk” or unrecoverable costs, it impacts motivation and morale, results in lost credibility with executives and stakeholders, and it is challenging for an organization to recover from this situation.
In fact, many organizations embarking on a new initiative will cite failures from a decade or more ago — these types of failures tend to become integrated into an organization’s DNA leading to risk-averse and change-averse teams for a long time afterwards.
From our experience in “rescuing” failing projects, the root cause for project failure is often due to one or more of the following:
- Selection of implementation vendor/partner based on lower cost rather than experience and proven ability.
- Insufficient budget allocated to hire the consulting expertise and team that is needed to lead the implementation.
- Unrealistic expectations on what internal teams can accomplish both from a skills and time perspective, resulting in failing to hire consulting expertise for key lead roles and failing to hire backfills for operational roles.
- Misalignment between executive sponsors regarding the priority of the initiative and how to set the project team up for success. Executive decisions are often based on financial aspects (i.e. keep costs down) rather than the reality of what is really required to be successful. Ironically, this perspective of “penny pinching” at the outset of the initiative often results in substantial overruns throughout the project as the limitations of the approach become apparent.
- Unrealistic plan for implementation that is often too aggressive (often due to the “keep costs down” philosophy), pushing too much change too quickly through the organization, at a pace that the team and organization cannot sustain.
Key Challenges & Lessons Learned
Our senior consultants have been leading client business transformations through complex business transformation implementations for several decades. We are often called in to rescue complex projects that have run into significant challenges or have had to be halted completely.
From our experience, from leading implementation projects and rescuing projects, there are a number of challenges with large transformative initiatives. The short-term costs of shortcuts in approach and in establishing an experienced team has long-term consequences.
I should warn you – this is a long list however it is worth the time to read and bookmark for future initiatives. You can use this list to evaluate your readiness to begin your transformation initiative. Share with your executive sponsors to help them evaluate readiness from their perspective.
Here are some of the challenges that we have experienced:
1) The project team is not adequately staffed:
- Many functional subject matter experts have never been involved in a major project and do not know how to complete their project activities.
- Team members do not have the right skills or experience for their role.
- Functional team members have a full-time operational role and generally are not adequately backfilled or supported in that role, so take on project work in addition to their current job.
- Current operations are mostly manual and relies on information in people’s head, which will make it difficult to backfill their role to allocate them to the project
- Implementation vendors often downplay client resources required so client team expectations are not aligned with the reality of what is required.
- Functional team members may not have required knowledge of requirements or decision-making authority for their area of expertise.
- The project team has limited time dedicated for the project due to other projects that are competing for their time and expertise.
- Team members are stressed, overworked and overwhelmed trying to balance their “day” job and project work
2) The project management team is not adequately resourced:
- Client Project Manager role often underestimated due to assumptions and misunderstanding of implementation partner “Engagement Manager” role.
- Often client project managers do not have experience with complex digital/business transformation initiatives or ERP implementations so are unable to provide the guidance and support that the team needs.
- Project level view misses program level context as multiple sub-projects exist within the larger program, and this requires a higher-level perspective to manage overall program risk.
- Initiatives consist of many projects under the initiative umbrella, which often requires additional project management support.
- An additional technical project manager is often required depending on scope of integrations effort.
- Clients often assign a project manager with either functional or technical skills but not both. These projects need a blend of functional and technical expertise to bridge both areas of the team.
- A new team of technical and functional resources, and multiple vendors, can take time to get to know each other & develop trusting relationships. Assumptions, missed expectations and distrust can result in stress and friction throughout a project if the Project Manager does not have adequate experience leading diverse teams.
- Resource deficiencies in other roles, such as Organizational Change Management Lead or Data Conversion Lead, can place additional burden on the project management team.
3) The right governance model is not established:
- The project sponsor role is not assigned, or this role is shared by several executives.
- Executives are not aligned on priority of initiative compared to other initiatives and have not deprioritized work that is not a priority. This results in competing priorities for resources for projects and operational activities across all teams involved.
- Executive leadership team is not engaged so are disconnected from what it takes to be successful and are unable to support the team.
- The decision-making process is not defined and a backlog of decisions occurs, which often delays progress.
- Program or project leader lacks ERP/transformation experience and is not able to guide and coach the team, or advocate for the support the team needs.
4) The team haven’t taken time before the project to fully understand the current state, and this results in issues throughout the project:
- Team lacks a full understanding of functional workflows “how” and “why”. Information is not well documented and is in people’s heads and is challenging to extract effectively.
- Data quality hasn’t been assessed and issues are identified during testing, resulting in timeline slippage or disruption.
- Lack of understanding of full systems context, both upstream and downstream can result in gaps being identified late in project or after go-live.
- Lack of understanding of reports or data required, so report requirements are missed.
5) The complexity with data quality and conversion is often underestimated:
- Legacy systems often have data gaps or integrity issues, such as fields that are used to store multiple values or have different intended meanings. If known, this results in additional cleanup and transformation during conversion, slowing down the process. When not resolved during conversion, this results in delays to testing, or requires additional re-testing.
- Some data may be held outside of the legacy system in spreadsheets that are often not up to date and may have data that conflicts with the legacy system.
- It may be difficult to extract data from some systems and legacy system vendors may not wish to support the project.
- Data conversion resources may not be skilled in developing scripted extracts, or in transforming data into data gathering workbooks format as they lack a functional knowledge and understanding of the data.
- Multiple spreadsheets for transforming data into a new system may be complex and confusing to the team.
- Functional subject matter experts are not experienced in validating data from spreadsheets or reports, so quality issues are often identified later during testing.
- Data is often not validated until loaded into a new system, and this then delays the build or testing schedule.
6) Testing is inadequate:
- Lack of current and future state workflows and gaps in design documents can make it challenging to develop comprehensive test plans and scripts.
- Functional team members often do not know how to develop test scripts, or how to test and “break” a system, and often testing is inadequate due to this.
- Test cycles can be challenging to manage if data quality gaps are not caught during data validation as these can be mistaken for functional configuration issue, resulting in wasted time spent troubleshooting.
- Working groups testing in “silos” will mean that the end-to-end perspective is not fully vetted prior to go-live.
- If integrations are not ready for end-to-end testing, this can result in issues being discovered in production.
- Resource allocation to test preparation and execution is considerable, and this is often underestimated, and resources are not fully dedicated to the work. This then results in quality issues.
- Parallel payroll can be challenging to execute successfully if there are data gaps that persist through each build, and if payroll resources are not fully dedicated to validation.
7) The scope of work associated with integrations can be significantly underestimated:
- Integrations are generally scoped out after functional design which shortens runway to complete development prior to end-to-end testing.
- Depending on the scope, vendor management can take substantial time and often requires a separate technical project manager to coordinate.
- Vendor lead time can delay integration testing/sign-off, and some vendors will only sign off based on validation of a pre-production dataset.
- Integrations may require changes on both systems and often resources aren’t allocated from other internal teams early in the project.
- Integrations generally results in multiple cross-dependent mini-projects within the larger program.
- Close coordination required with vendors through deployment and cut over.
- Cross-project dependencies with other ongoing initiatives that increase coordination and complexity.
8) Insufficient focus and resources assigned to organizational change management:
- Project managers rely on the organization’s communication team to lead change and they often have no systems transformation experience.
- Project management activities are separate from organizational change management, and this results in lack of readiness for changes in job function, roles and operational workflows.
- Lack of engagement of stakeholder groups internally and externally can result in misaligned expectations, negativity, disengagement and disruption.
- Inadequate communication and engagement across the organization can result in anxiety, resistance and stress regarding change.
- Insufficient training for core team to prepare them for their project role or post go-live operational role.
- Organizational training strategy is inadequate and results in gaps in operational knowledge during and after the project.
- Organization is not ready to adopt change, resulting in escalation of issues post go-live.
9) Lack of discipline and planning for deployment and cutover results in disruption at go-live:
- Lack of planning and mock-runs through the cutover plan can result in gaps in the plan.
- Lack of a detailed plan can result in timing issues between operational runs of production integrations and deployment of new integrations.
- Missed coordination across implementation projects, integrations and downstream systems has an impact downstream and throughout the organization.
- Close coordination required with external systems and vendors.
- Data issues can impact payroll and/or employee benefits, directly impacting employees.
- Disruption has organizational-wide impact and diminishes employee confidence in the system and in the implementation team.
Recommendations – How to Avoid The Pitfalls
We recommend that our clients complete a readiness assessment to assess the areas listed above, and ensure that the right resources are ready, and in the right roles before the project begins.
Additional recommendations include:
- Don’t believe all you hear during the vendor pre-sales phase – vendors are selling their expertise and the simplicity of the implementation so often underplay what it takes.
- Be realistic about your team’s experience and capabilities, and the areas or gaps where they need support.
- Identify resources who can help support your team – hire consultants if you need to; the cost of consulting resources is minor compared to the cost of a delayed project.
- Hire and train backfills for your operational staff ahead of time so the subject matter experts can be dedicated to the project.
- Include the project manager and team in pre-planning to ensure readiness to begin the project.
- Be realistic about the plan – it is a bigger lift and will take longer than you think it will.
- Provide coaching and support for the team – project work can be intense and stressful if they are coming from an operational background.
- Say no to competing initiatives and demands to allow the team to focus.
- Allow time for stabilization – don’t expect the team to sprint into the next project.
We believe that it is critical to evaluate readiness from a staffing, budget and operational perspective prior to starting the project.
If there is insufficient budget to resource the project appropriately, it would be more judicious to approach the initiative in phases that the organization can genuinely execute and support. This approach would introduce less risk to the overall success of the initiative.
These types of initiatives are complex and multi-dimensional, and the desired business transformation will not be achieved if not adequately resourced, funded and supported.
Over the next few weeks, I will be publishing additional articles on how to be a catalyst for change in your organization, how to establish the climate for change, and how to lead change effectively. I hope you can join us in the conversation here.
Drop your feedback into the comments:
Is your organization embarking on a major change or transformation?
Are you ready?
Where are your readiness gaps?
What is the risk and potential impact of moving forward without addressing those gaps?
I hope these insights inspired you to take action.
We love setting teams up for success and would love to help you evaluate your readiness for change. If you’d like to explore having our help to evaluate or enable your team or accelerate your transformation, please reach out so we can find a time to talk.