Employee Teams Soft on the Front Lines? How to Train Effective Project Warriors.

The famous military general Sun Tzu, author of Art of War, once stated, “The general who wins the battle makes many calculations in his temple before the battle is fought. The general who loses makes but few calculations beforehand.”

Project management is not a far cry from battle. When a company hires an outside consulting firm, much like the military employing a Special Forces unit, they invest in an asset specifically designed to maximize their existing staff of soldiers. You want to get the most out of your specialists, or consulting help, by preparing a staff of project warriors who are battle tested and mission ready.

Although one team member’s actions may prove heroic in one battle, his or her efforts alone will never win the war. In the same way, a company’s hardest working employee can never guarantee success of the project in its entirety, even with the backup squadron. Wars demand a well-conditioned team, diligent forethought, and detailed environment understanding only true generals can identify.

Companies often rely on a team’s past success to gauge risk or profitability on a new project. But the project team will lose one small battle after another if team members can’t commit time, don’t have the background, aren’t awarded the authority to make decisions, or aren’t held accountable for results. Like an officer on the field of battle, a company must do a complete personnel gear check before lunging head first into a long-term project, whether it’s organizational restructuring or a full ERP system implementation. Here’s a simple questionnaire to answer about your team, straight from generals who have seen success and failure:

Do your soldiers have time?

Dynamic employees are typically pulled in every direction the company is heading, answering to many sergeants and wearing multiple helmets. The same dynamic soldiers will notoriously pile more on their plates than they are capable of completing proficiently. The best way to gauge your team’s bandwidth is to ask specific, direct questions about their workload and schedule. Instead of prompting a soldier with, “Do you have time to help our consultants with a project in the next few weeks?” try, “Can you commit to four to five hours of extra work during the next three weeks?” Direct questions beckon direct answers.

Do your soldiers have skills?

A necessary project, or battle, could arise at any time lending a company no time to train or fully equip an employee in detailed industry or software knowledge. Short of putting the business on pause, the only tool you’ll have to fall back on will be the preparation you’ve done before the blitzkrieg. You rely on a robust recruiting process, but do you apply a vigorous expertise filter to your future project teams? Spend a day gauging both the knowledge and the ability of employees assigned as stakeholders on the mission, outlining specific experience and understanding, while also gauging their desire to learn. Hesitancy to enlist a more adept soldier could result in financial, timetable and market losses.

Do your soldiers have authority?

Training and experience are invaluable qualities in a team member, but without the proper authority a soldier will not be able to make decisions necessary to the team’s success. By imparting the self-assurance that comes with control, you equip your squadron with instrumental decision-making confidence, allowing them to lead individually on micro projects within the larger schematic. For example, directing an accountant to maintain oversight on all financial decisions can be as simple as requiring cc’s on certain emails and has historically caught costly budgetary and ledger mistakes. Empower the team you trusted in your hiring process.

Do your soldiers have accountability?

By explicitly outlining the obligations of each team member, you’ve created clarity. You maintain harmony by holding each soldier to their duties. Just as our government operates with a system of checks and balances, every great project team needs outlined structure, constructs and limits to efficaciously complete their duty. To tangibly reach this goal, demand clear lines be drawn on specific responsibilities no matter how small the undertaking. Need a third party to assist? Outline their roles as well, communicating them up front and throughout the duration of the project.

 

Feel like you’re fighting a losing battle with your current battalion? Trenegy provides the expertise needed to build and maintain teams of your employees. Whether it’s change management, standardizing processes, or implementing a new back office system, we can help you prepare for growth and change, both quickly and painlessly. Read more about selecting an ideal team in The ERP Dream Team.

 

 

Does Strategic Sourcing Cut Procurement Costs? Do it This Way.

Oil Field Services (OFS) companies are being challenged by their customers to cut prices and manage to lower AFE budgets. Many OFS companies are taking a hard look at a variety of ways to reduce their costs from retiring underperforming assets to cutting payroll. Others are trying to implement strategic sourcing programs centered on establishing a centralized procurement organization.

The best and longest-term investment in cutting costs is to implement a set of fit-for-purpose procurement processes supported by technology, as opposed to an entire organization dedicated to strategic sourcing. We don’t believe that an external organization needs to be established specifically to create and enforce purchasing guidelines. We see strategic sourcing at its best when it’s part of everyone’s job—built into the supply chain process and governed by logical rules. A procurement program that is a combination of well-designed processes, accelerated by the right system, can provide:

  •  Spend data. A procurement database gives supply chain, finance and operations visibility into spend analytics and vendor organization. A company can ensure that they are not over purchasing or overspending by implementing a system that monitors inventory and vendor pricing per item.
  • Inventory visibility. A cluttered or nonexistent inventory management system makes for messy decision-making. Why would you need to buy additional pipe when you know you have a full pipe yard with exactly what you are looking for?
  • Compliance metrics. Cleaning up the organization of suppliers and catalog items will drastically decrease maverick spending (where employees buy unnecessary inventory or overpriced supplies), which is a major issue for OFS companies without an established procurement system.

Why are OFS companies hesitant to put a strong procurement program in place given the benefits? There are many reasons, but often, companies hear the term strategic sourcing organization and want no part of it. Procurement processes designed for your organization will help you receive all the benefits without the excessively complicated governance.

 

Implementing a Successful Procurement Program. 

Set high-level rules. The balance between standardizing processes and allowing room for impromptu decisions is difficult to find. Although emergency purchases are necessary on occasion, it’s important to determine limits and guidelines. For example, a purchase order may not be required for field personnel if a gasket blows in the middle of the night. But, when the need for additional pipe is known two weeks in advance, the proper sourcing activity will allow the OFS Company to receive the lowest possible price for the same item. Clarifying what defines an emergency situation is a critical task.

Create simple, shared processes. Procurement software alone is not a procurement system. To be sure that high-level rules of system use are followed, the process must be simple. Employees will work around the process if purchasing common items like sand and casing for drills becomes a burden. A logical process will allow them to see the benefits of the system and comply with protocol.

Train employees. Provide the proper training to field users. From the roustabouts to the production engineers, participation in training is imperative. By giving the field personnel the proper training, users will gain confidence in the system, their work and their role with the company. Confident users make for successful systems. When strategic sourcing becomes everyone’s job, the need for overhead-intensive procurement departments disappears.

Measure compliance. Be sure to set fair standards and enforce the rules. Measure compliance, but do it fairly. If you expect employees to use the system from the field and on the go, give them access through a mobile application. End users can access a procurement database from almost anywhere in the world with the advancements in procurement technology.

 

Trenegy helps companies successfully manage system implementations using a proprietary project management methodology tailored to our client’s needs. We help our clients get value of out their new system quickly and relatively painlessly. Learn how to ease field users into using new technology by reading Crew Pushers and Technology: It’s Not like Oil and Water.

The Halliburton Acquisition and Resulting Spinoffs: How to Achieve Success

The pending Halliburton acquisition of Baker Hughes will create tremendous opportunities for the new Halliburton and companies yet to exist. The U.S. Justice Department will likely require additional spinoffs as part of anti-trust enforcement. As part of the deal, Halliburton agreed to sell businesses that generate up to $7.5 billion in revenue (WSJ).

HAL BHI graphic

Newly created companies will be ripe for success. Why? Company spinoffs continue to outperform the market. The Guggenheim exchange-traded fund CSD focuses on investing in six to thirty month-old spinoff companies. CSD has outperformed the S&P 500 by almost twofold in 2013.

Spinoffs provide a unique opportunity for a company to start fresh. The spinoff’s executives are no longer under the directives of the mother ship and often experience a sense of euphoric liberation. We have worked with spinoffs to achieve outstanding results by focusing on the following core elements of success:

Eliminate Waste 

A new spinoff with eyes on success will simplify business practices and eliminate waste. Targets for simplification include back office administrative tasks. Budgeting and reporting is usually the first target. 

In Practice: We helped a large oil field services spinoff eliminate over 100,000 hours per year by overhauling the legacy budgeting process. The fallout was an elimination of over 100 reports and spreadsheets containing mounds of CYA data.

Select Fit-for-Purpose ERP 

In the immediate term, the spinoff organization typically has no choice but to use the former parent’s ERP environment under a transition service agreement (TSA). One of the first priorities is to shed this expense as quickly as possible by moving to a fit-for-purpose ERP.

In Practice:A mid-size oil and gas spinoff was under a $10 million per year TSA agreement for ERP and systems support. When the spinoff implemented an ERP that closely reflected their business needs, the cost was less than half the annual TSA support fees. The new ERP annual administrative support cost was less than 10% of the TSA annual fees. The return was realized in less than one year.

Choose People for Success

The newly appointed spinoff executive team is in a position to hand pick management. Typically, the former parent company will first attempt to slough off the dead weight and move poor performers into the spinoff organization.

In Practice: The shrewd spinoff executive team from a newly formed chemical company resisted. The spinoff CEO and CFO halted the random assignment of employees and began an intentional selection process for management positions. The spinoff was marketed as an avenue for people to be a part of something new and exciting. Positioned properly, the best and brightest can be attracted to the spinoff.

 

Halliburton has the opportunity to gain significant market share. But the new company must go through some level of realignment of people, processes and technology to remain lean and nimble.

Reorganize the Corporate Structure 

Combining two organizations always involves the integration of two different organizational structures. The first priority is setting the structure of operating units.

In Practice: A global oil and gas drilling company merger allowed our client to examine the differing corporate structures and pick the best of both. The company completely reorganized global operations. Following the change in operations, the finance, human resources and information technology functions followed suit. A 30% reduction in general and administrative costs was achieved and the company outperformed analyst’s profitability expectations.

Rationalize Business Processes

A merger creates an opportunity to streamline and simplify business processes.  Rationalizing business processes should start at the corporate office.

In Practice: Trenegy worked with one of the largest energy company acquisitions and helped the company completely overhauled the planning, forecasting and reporting processes. The new process cut thousands of hours out of the planning process and reduced the mountains of reports by 50%. Operations was able to focus on execution instead of never-ending corporate planning meetings.

Shed Excess Information Technology 

Deciding which company’s ERP system is more suitable becomes overly political.  The buyer should immediately set the tone and move to a common ERP platform.

In Practice: Two major independent oil and gas producers merged and used the integration as an excuse for rationalizing their information technology. The newly combined company picked the best-fit solution for the business functions and began to sunset applications that were not effectively supporting the business. The merged company significantly reduced technology support costs.

 

For Halliburton and the spinoff companies that result, the months to come will be an exciting time for leadership. Read Teaching Elephants to Dance to learn more about executing a transformation effort in a large organization.

Stop Playing The Glad Game: Facing the Reality of Integration

Pollyanna is a best-selling novel written by Eleanor H. Porter in 1913 whose title character had an optimistic outlook no matter how dire the circumstance. Whenever Pollyanna found herself in a negative situation, she played the Glad Game and found something good in it. Companies commonly have a Pollyanna-like outlook when an integration is announced.

The Integration Glad Game starts immediately.

The buyer convinces involved parties that integration will be simple because both companies use similar systems, share accounting practices, and have similar cultures. Enthusiastically touted are new opportunities to cross sell, the prospect of sharing a highly motivated sales force, and the potential cost savings associated with a smaller back office staff.

The buyer tends to look for the positives without planning for the real issues.

Reality is much different. Synergies are overestimated and pro-forma financials are rarely achieved. Companies find surprises once the acquisition or merger takes hold.

Customers may not continue to do business as expected. Customers often perceive doing business with a company in the middle of a merger as difficult. Interaction with sales, operations and accounting can be confusing as those organizations are integrated. Familiar faces are replaced and relationships need to be rebuilt.

Loyalty is especially tenuous when customers perceive quality differences in the brands for like items. Customers will assume the lowest common quality denominator.

The integration team should develop and implement a strategy to ensure customer interaction remains transparent and positive.

Financial incentives are not enough to keep the best and brightest from leaving. Competitors will be eager to poach high performing sales and operations staff from both companies. Recruiters highlight the confusion that will stem from integration activities and play on fears that one organization or the other will win out from a staffing perspective.

Offering retention bonuses to high performers is not enough. Rumors need to be addressed immediately. High performing employees should be involved in the integration activities, and their future role within the merged organization should be clearly defined and shared. Poor performing employees should be terminated as quickly as possible.

Aligning systems and data is more difficult than expected. No two companies share the same systems with the same configurations, and most integration advantages will not be seen if the companies remain on separate systems. Getting an accurate view of inventory or sales would be difficult at best. Even if both companies have the same software, data is never clean or ready to convert.

Arguments break out in defense of each system, and reimplementation is often required. A well-defined system implementation approach with a realistic budget should be developed and included in the integration plan. Initially, the two companies will need to run separately with manual financial consolidation. But once integration efforts are well underway, the new system should be implemented.

Organizational roles differ more than expected. Buyers assume the easiest integration efforts will be around the back office. But no two companies structure or run their back office functions the same way.

Accounts Receivable in one company is responsible for handling claims, but Sales takes on that role in the other. And the list goes on. Tension between organizations will rise as responsibilities are reassigned. Customer service will suffer as employees focus on protecting their turf.

A clearly defined organization chart with roles and accountabilities needs to be developed and deployed. New, fit-for-purpose processes, policies and procedures should be shared across the new organization.

 

While we do advocate positivity and optimism, we also know how to plan for reality. Trenegy helps companies successfully manage integration and realize the expected profits by establishing an Integration Management Office and developing and communicating a clear vision for the future state.

We help our clients prepare for growth and change quickly and relatively painlessly. Read how to properly prepare for integrating acquisitions in Planning for the realities of M&A Integration.

How to Prevent Murphy’s Law from Overtaking Your ERP Implementation

Murphy’s Law (the simple, folk version) states that what can go wrong will, and at the worst possible time. Whether they admit it or not, this is the mind-set adopted by the vast majority of employees when it comes to system implementations. From the staff accountant to the V.P. of operations, there is a high level of doubt that a system implementation of any kind will be successful.

Why is this pessimism so pervasive? The answer is simple: Experience.

Most everyone has an implementation horror story where the go-live date was pushed out a year, vendors weren’t paid for six months, accounting was unable to close the books, or the budget was blown away. Or all of the above!

If asked what caused these issues in past implementations, the most common answer is, “That’s just how these things go,” as if the implementation gods are in control and waiting to impose Murphy’s Law on the project.

Truth is, there are proven ways an organization can modify their implementation approach to prevent Murphy’s Law from overtaking the project. (Author’s note: I realize that Sheldon Cooper would fill-up a whiteboard with formulas proving that, mathematically, Murphy’s Law can’t be prevented. But that’s not the point of this article!)

There are three oft-overlooked steps in an ERP implementation, which companies can incorporate into their implementation approach to drastically increase the probability of success:

1. Invest time and effort in the selection and planning phase.
Understand what every function is responsible and accountable for in the current state. Appreciate the amount of change an organization can absorb at one time when developing the implementation timeline. Develop a detailed and realistic budget that takes into account the magnitude and complexity of the implementation.

2. Understand the upstream and downstream impacts of the key business processes.
Conduct cross-functional design sessions to ensure that suppliers and customers of a process understand the requirements. This will prevent the system from being designed and configured in isolation, thus avoiding failure when attempting to integrate the system modules and associated business processes.

3. Clearly document decisions as they are made.
Too many times companies run in to trouble by failing to document decisions and revisiting them unnecessarily. Doing this ultimately results in rework and delays. Decisions should be clearly communicated and documented in a log maintained by the project manager. These decisions should be revisited only when changes in the business require the project team to change course. 

There will always be bumps in the road when implementing and deploying an ERP system. However, by performing the activities described above, a company can significantly reduce the probability of the worst possible outcome happening at the worst possible time.

Trenegy helps companies successfully manage ERP implementations using a proprietary project and change management methodology. We help our clients get value of out their new system quickly and relatively painlessly. Read more about how to prevent an ERP implementation failure in our Perspective: Boiling the Frog: How ERP Implementations Go Wrong!

Merger and Acquisition Success: 4 Traits Your Integration Leader Must Have

Theodore Roosevelt’s legendary character traits left an indelible mark on his legacy. His metaphorical quotes such as “The buck stops here” and “Speak softly and carry a big stick” are intertwined in many management and leadership discussions. Teddy Roosevelt is famous for identifying and completing impossible initiatives from organizing the Rough Riders to completing the Panama Canal and creating the Navy’s Great White Fleet. Roosevelt’s traits are a model for selecting the right executive to lead a complex change initiative in an organization. The most complex is the merger or acquisition integration process.

The selection of the right Acquisition Integration Executive could make or break the integration. Trenegy’s research has shown there are four core traits an integration executive must have for merger integration success.

1. Authority Roosevelt accepted accountability by announcing, “The buck stops here.” The chosen Acquisition Integration Executive should have the authority to make the final call on any and all decisions regarding the integration, regardless of popularity with the other executives and may include overriding other officers in the organization. It is not unusual for the target company to hold on to legacy processes, and a strong executive leader will immediately force the acquired company to adopt new processes. A strong leader needs the ability to “carry a big stick” and should not be an interim or contract executive. It is difficult for outsiders to have the authority needed for success.

2. Infectious Optimism Roosevelt’s optimism can be encapsulated in his quote: “Believe you can and you are halfway there.” Integration efforts are tough. Inevitable bumps in the road and seemingly never-ending issues can cause project teams to fall into a trap of negativity and hopelessness. The leader of a successful merger integration celebrates successes while encouraging optimistic problem solving. Moreover, the leader’s optimism should be reflected when providing integration team updates to the executive team and board of directors. When the integration team has encountered multiple failures and work seems endless, leaders should take heed. Scheduling an unexpected outing, such as bowling or paintball, can reinvigorate the team and enable fresh thinking.

3. Compassion Although an avid hunter, the legendary story of Roosevelt’s compassion for a black bear led to “teddy bear” becoming a household name. During a merger, people can easily get burned out or quit when the going gets tough. The Acquisition Integration Executive should be willing to listen when work life balance issues arise and be willing to budget for supplemental resources. Good leaders will budget an extra 10% in the integration G&A budget for potential resource needs. This budget line item should be above and beyond any contingency in the integration budget.

 4. Respect Theodore Roosevelt’s respect from foreign leadership enabled the United States to be elevated and highly respected. Likewise, the integration leader should be well respected within the organization. Respect helps in diplomatically negotiating and resolving challenges among executives. Further, the respect of the Acquisition Integration Executive should translate to respect for the integration team. Requests from integration team members should garner immediate attention throughout the organization. This ensures accelerated decision-making and a more thorough transition process.

This is not an exhaustive list of all the Acquisition Integration Executive traits needed for success. However, an executive’s traits are more important than the title or role of the executive in an organization. Many organizations automatically slot their CAO or CIO for the role; however, we have seen many clients fill the integration executive role successfully with Internal Audit and Operating Vice Presidents.

Trenegy helps companies successfully realign for growth by simplifying the organizational structure, developing standardized processes and implementing new systems. We help our clients prepare for growth and change quickly and relatively painlessly. Read more in Handcuffing the Kraken. 

The Blind Men and the Elephant: Why Major Spares Should be Managed Centrally

In the old anecdote of the Blind Men and the Elephant, six blind men each describe an elephant based on the part they touch. One man describes the elephant as a snake while holding the wiggling trunk, while another describes the elephant as a tree while feeling the knee. The differing perspectives mean that not one of the men has the complete picture of the elephant since each only knows a small portion of the truth. Decentralized management of major spares inventory by drillers often leads to the same result – a disjointed approach based on limited viewpoints.

Local operations exercise greater autonomy while held accountable for their P&L in a decentralized model. This structure is often necessary to meet the differing complexities presented by each geography but poses a challenge for managing major spares at the local level. A local operation often lacks the time, incentive, and visibility to make decisions that are in the best interest of global operations and rather does what is best for its own bottom line. The result of decentralized major spares management is often suboptimal sourcing decisions and excess or poorly maintained inventory that sits in the shipyard.

How can offshore drillers effectively manage the most critical, expensive, and highly technical inventory across a worldwide fleet? Major spares should be managed by a group who understands the technical, operational, and financial components of managing such specialized equipment. Then it is important to:

  1. Determine scope of major spares:Develop and prioritize criteria for what constitutes a major spare. Criteria may include the potential for safety incidents in case of spare failure, cost of spare part, and lead time for fixing or replacing the spare. The major spares group manages equipment that meets the set criteria while all other inventory is managed by supply chain. The group also oversees major spare processes including sourcing, inventory planning, certifications, technical specifications, and retirement decisions. The group needs full visibility of inventory within its scope across shipyards, warehouses, and assets worldwide. When disputes arise regarding needs for major spares across geographies, the major spares group has the final say. Centralized management supports improved longevity of assets and financial decisions regarding inventory levels and allocations of spares on a global scale.
  2. Centralize decision-making, decentralize execution:The central group manages major spares, but coordinates with other parties (and geographies) affected by major spare activity. This includes consulting with the projects group regarding impact on newbuilds and overhauls, operations regarding their needs and concerns, and supply chain regarding the procurement and warehousing of major spares. While decisions are managed centrally, this does not mean that all spares should then be stored in one central location. In fact, spares should be located close to the local operations – such as strategic hubs that serve particular regions or time zones. The goal is to find the right balance between enabling a quick response time to operations and achieving economic cost efficiencies through pooling resources together.
  3. Align processes to support the new major spares program:The current processes need rationalization to communicate how decisions will be made going forward and the action steps required for activities involving major spares. This entails eliminating, modifying, and adding policies and procedures to reflect the new major spares process. Part of this process is data input, as the output is only as good as the data entered into the system. If end users lack uniformity and transparency of maintenance tracking or inventory levels, the major spares group will lack visibility into the information it needs to make informed decisions at a global level.
  4. Ensure the right systems and tools are in place:In order to have global visibility into the major spares inventory, the company needs a tool that captures inventory levels and tracks maintenance across geographic locations. A user friendly system will increase likelihood of effective data entry. A critical step often missed is the initial configuration of the system to meet the information and reporting needs of the business. Once in place, end user training and acceptance testing will allow the users to learn the system and catch any issues that need fixing for a smooth go-live.

While there are unique complexities faced by each company, Trenegy has the industry experience to help companies tailor solutions to meet their needs. Learn more about our comprehensive organization design methodology by reading Say Goodbye to Mediocrity: Basic Principles of Organization Alignment.

Jamming the Revolving Door

Tired of your highest-achieving employees jumping ship for the better offer?

Whatever happened to the company man? According to the U.S. Bureau of Labor Statistics the average job tenure in the United States is 4.6 years. Further research has shown that this statistic is almost halved among young professionals. Ironically, while employers shake their heads and bemoan the mercenary culture of young millennials, they simultaneously perpetuate the job-hopping phenomenon by constantly encouraging professional competition over cooperation.

So, how can employers foster excellence without the motivating pressure of competition? Focus on teamwork and individual development. Here’s a few quick fixes:

  1. Don’t pit employees against each other. There’s a scene in the 2006 James Bond film, Casino Royale, where Bond tells his boss that he can’t be “half-monk, half-hit man.” Ambitious young professionals frequently find themselves in a similar conundrum. Forcing employees to compete for incentives or projects is equivalent to asking them to sacrifice relationships for success and there is no quicker way to destroy an employee’s emotional investment in a company. Employers shouldn’t be surprised when the mercenary they’ve created turns the tables and jumps the company ship for a pay raise.
  2. DON’T play favorites; DO emphasize individual strengths. Sure, every company has a few go-getters that excel no matter what the situation, but they need to be careful not to put them on a pedestal. When other employees are pressured to “be more like John or Linda”, individual skills and commitment are minimized and the high-performers are ostracized. Every employee will bring a different set of strengths to the table. Fostering these diversified skills creates a well-rounded team and more fulfilled employees.
  3. Recognize team success. Individuals are commonly recognized for an extraordinary effort or accomplishment, but team success is often overlooked. What’s worse, a team effort often gets attributed to one individual. This not only creates resentment amongst the slighted parties, but it puts the credited employee in an awkward position and creates unrealistic expectations of them going forward. On the other hand, a team that is recognized for collectively excellent work develops a sense of pride and attachment to their teammates, fostering an emotional investment in the company.

These three methods are just a few ways to increase employee investment and decrease turnover. Here’s the bottom line: if employees feel like valued, capable parts of the team, employers will find that pesky old revolving door turning a whole lot slower.

Trenegy helps companies successfully implement change management strategies through innovative and practical solutions. We help our clients assess their organizational structure by identifying flaws and closing the gaps between vision and strategy. Read about our key principles of organizational alignment in our Perspective: Say Goodbye to Mediocrity: Basic Principles of Organizational Alignment.

Looking for the Achilles Heel … How to Select a ‘Tier 2’ Package

High growth companies that outgrow their small company accounting systems (QuickBooks, Peachtree, Solomon, etc.) are challenged with finding a cost effective and robust ERP. The Tier 1 ERP solutions, Oracle eBusiness and SAP ECC, provide fully functional ERP and reporting solutions across all industries and are excellent alternatives. However, the associated costs may drive a high growth company to look at Tier 2 options. The Tier 2 list is longer and includes SAP B1, Microsoft Dynamics, Infor, NetSuite and Epicor, to name a few. Investments by Tier 2 vendors over the past five years allow these applications to offer a tantalizing alternative by providing integrated solutions at a much lower total cost of ownership.

Selecting the right Tier 2 package is daunting given the number of alternatives available. How can a company be confident when determining which Tier 2 package will support a growing company? It is all about finding and addressing the Achilles heel of Tier 2 alternatives:

  • Chart of Accounts Structure. Companies implement new ERP systems to improve the quality and timeliness of information required to support the business. Capturing profitability across a variety of dimensions including geography, division, product or service line, and customer is critical. Most Tier 2 packages incorporate the profitability dimensions as part of the chart of accounts. In this case, all valid combinations will need to be entered into the system. This makes the chart of accounts difficult to use and maintain for larger companies with complex organizational structures. However, there are a few Tier 2 packages that support dimensionality. These solutions should be short listed when a company is considering implementing a new ERP.
  • Intercompany Processing. Accounting for the transfer or sale of products and services in a complex legal entity structure can be difficult for many Tier 2 packages. There are few Tier 2 packages that offer intercompany transaction processing as core package functionality. In this case, intercompany transactions would need to be processed and consolidated manually, resulting in data entry errors and delayed month end closes. Many fast growing companies have legal entity structures that result in intercompany transactions. These companies should only consider Tier 2 solutions that have automated intercompany processing capability.
  • Foreign Exchange Support. Many high growth companies differentiate services by operating globally. Sales transactions can result in product being sourced in USD but sold in local currency. Bills are generated and collected in local currency while profits are transferred to headquarters in USD. It sounds simple but many Tier 2 packages do not support this functionality without need for modification or third party solution. Either add cost and complexity to the implementation.
  • Configuration for Ease of Use. Tier 2 ERP solutions provide a variety of experiences for end-users. Some provide a ‘green screen’-like environment that is comforting for users who do not want to click through the transaction entry process. Other Tier 2 ERP solutions have completely rewritten the user interface to take advantage of modern technology and provide a Windows type interface. A few Tier 2 ERP solutions have taken the middle ground by taking advantage of the best of both options while providing powerful tools to simplify transaction entry processing. The packages that have taken the middle ground can be easily configured to support company specific ‘best practice’ processes.
  • Implementation Approach. The majority of Tier 2 implementation consultants take the ‘homework’ or ‘workbook’ model approach to installing and configuring software. The implementers bring in set up checklists and questions to decide how the system should be configured. Critical report design, workflow settings, and data integration work is assigned to customers and must be completed before the implementation consultant can configure the system for testing. Tier 2 ERP consultants leave and do not come back until the homework assignments are completed by the customer. This works well for very small simple companies. However, rapidly growing companies require more assistance to navigate the organization and leverage best practices from across the industry to determine the appropriate future state. As a result, fast growing companies require more systems integrator attention to ensure these tasks are completed correctly. Most Tier 2 ERP consultants are not comfortable working in this environment and should be vetted carefully.
  • Post Implementation Support. Tier 2 ERP solution providers vary in size and ability to provide post implementation support. Customers of smaller Tier 2 ERP solutions may have difficulty in obtaining support during critical outages because their one ‘support consultant’ is on vacation hiking Mt. Kilimanjaro. Selecting a Tier 2 service provider that has a sound financial position, invests in new functionality and offers the right level of post implementation support is critical for a successful implementation.

Trenegy helps companies successfully select the right ERP solution to support growth and change. Read how to properly prepare for implementation in: Preparing for an ERP Implementation….Reducing the Pain!