The 4 ERP governance best practices you can’t ignore

With these key best practices, you can create strong ERP governance that will help you use your platform effectively, with an increased focus on the strategic objectives of your business.

1. The 4 ERP governance best
practices you can’t ignore
Greg Davis, Managing Director, Business Advisory Services
Enterprise resource planning (ERP) programs are
much more than the software brand that runs them
— they can be the foundation of business success.
Effective ERP programs start with a governance
structure of processes and controls, fueled by an
overall continuous process improvement mindset.
But many companies struggle to get the most out of
their ERP investment. Common questions include:
• Who owns it? Many organizations wrestle with
the accountability of ERP: IT or business?
• What is the best structure? For an ERP program
to be successful, a carefully defined organizational
structure must be in place.
• What information should it provide? Making
an efficient ERP program design means defining
specific goals and metrics.
• What governance is in place? Even with the
best software in place, lack of ERP governance
can diminish results significantly. We believe that
governance issues are the major reason why ERP
programs fail to meet their goals.
++15+T +70++N
We believe that governance issues are the major reason why ERP
programs fail to meet their goals.

2. If governance is central to ERP success, how do
companies improve their programs? There are many
ways to improve ERP governance. Here are four
important areas that you should consider right now —
prioritizing these areas could provide visible results.
“We struggled for years to get
results and accurate information
out of our ERP to manage the
business. Our inefficiencies
were rooted in our misguided
perception that ERP was software
… and we became repetitive in
our miscues in handling ‘system
issues.’ Only after we applied
a business focus, and realigned
process owners to establish an
ERP operating group, did we
make progress toward becoming
a strategic organization again and
obtaining value out of our ERP.”
— Vice president, HR, global manufacturer
Best practice No. 1: Institute an ERP
operating group
This is a good opportunity to take a step back and
look at your ERP organization. If it was cobbled
together over time (as most are), then this is the time
to reorganize. A best practice is to form an ERP
operating group (ERPOG) made up of business
process owners and technical leaders who manage
all initiatives and priorities. Successful ERPOG win
themes include:
• Consensus — A collective voice for all ERP issues
and strategic goals
• Efficiency — Suggestions for improved business
process efficiencies
• Visibility — Improved visibility to process metrics
and critical information
• Oversight — Commitment to best practices and
process improvement opportunities
Figure 1: ERP roles and responsibilities
Executive steering committee
ERPOG
Business process owners
Business analysts Functional area leads
Subject matter experts
Report
metrics
Performance
metrics
Technology services
ERP change
control
Help desk
issues
2
4 ERP governance best practices you shouldn’t ignore
4 critical ERP governance best practices

3. 34 ERP governance best practices you shouldn’t ignore
Figure 2: A sound ERP organization
Executive steering committee
ERP program champion
Business process owners
Functional area leads
Subject matter experts
Business analysts
Business leaders
ERP
operating
group
ERP support
Third-party app support
Infrastructure/network
Security admin
Change control
Development/business intelligence
Technology solutions
Enabling business decisions
These win themes are enabled by critical functions:
• Reporting — Report critical business information
and metrics to the executive steering committee.
• Project prioritization — Prioritize all
improvement programs and projects. All initiatives
cannot have the same priority.
• Project status — Provide regular status updates of
programs and projects.
• Issues management — Expedite issues
management, escalation procedures and resolution.
• Implementation/release management —
Methodical implementation of new ERP
functionality.
• Change management — Structured environment
change control.
• Software modifications — Review and evaluate
additional software components required to
support system health.
• Change evaluation — Review and evaluate the
integrated impacts of change.
• Communication strategy — Establish
communication between the business process
owners and the functional area leads, subject
matter experts and business analysts.
• Recommendations — Provide operational
recommendations to the steering committee.
• IT oversight — Integrate IT into the overall
process. Use technology as a service to enable
the business.
A strong and well-managed ERPOG will serve
as the foundation for successful ERP program
management. ERP is a way of doing business, not
an IT system. Technology services should be a part
of the process and enable and support business
decisions, but the business should own the ERP.

4. 44 ERP governance best practices you shouldn’t ignore
Best practice No. 2: Take a disciplined approach
to master data management
Data governance (or management) is the process
of setting policies, rules and processes that guide
information creation, use and management. Data
governance practices largely determine the reliability
of ERP information, so taking a disciplined approach
to ERP data integrity is a core best practice. Master
data management (MDM) business processes should
be standardized and centralized under one umbrella.
Defining information access and flow is an
important factor. In order to ensure the accuracy
of global data, companies typically design their
workforce to focus a small number of people on
managing specific types of master data. When
updates are requested, change request forms are
submitted to the MDM team for review. This team
is responsible for following all global policies related
to data field specifications and must follow defined
service-level agreements to ensure timeliness of
changes. Using data integrity reports and annual
audit procedures are also important factors in
maintaining accuracy across the business.
Figure 3: Master data management success factors
Best practice No. 3: Manage releases carefully
In a strategically planned and controlled ERP
environment, any changes or new releases must
be managed carefully. For large-scale, complex
ERP environments, a best practice is to define a
methodical, phased approach that includes mandatory
quality assurance. Strong release management
provides for a method to the madness that typically
consumes most ERP organizations. The alternative is
the perpetual firefighting scenario that often derails
overall program progress. It is especially important
that any third-party vendors follow all guidelines
for submitting and making changes, and that their
applications reflect any new releases. See Figure 4 for
an example of a release schedule.
A strong release management scenario for ERP
organizations should include:
• Identifying production release windows/
schedules that are ideal and will not jeopardize
the business
• Aligning both production fixes and newly
implemented functionality with a logical
release window
• Developing a detailed plan and quality review
cycle for each release
• Performing gate reviews for each environment
and test cycle
• Implementing all necessary testing cycles (e.g.,
load, acceptance) as the results will be reported
in the gate reviews conducted by the ERPOG
• Moving the release date if functionality or
development items fail or do not go through the
release management process
• Allowing end-user and executive-level visibility
to the functionality roadmap
Benefits or outcomes
• Clearly defined roles, responsibilities and accountability
• Centralization and coordination of methodologies and policies,
creating an entity-wide standard (data) language with a single
version of the truth
• Enable common view of data and information across the organization,
facilitating proactive management and better decisions
• Reduction of data inconsistency and integrity issues, decreasing
time and costs associated with turning data into useful information
• Improved user confidence in fact-based decision-making as
information is kept in one place, in a known and organized structure
Guiding principles
• Ensure data management is a business-driven function rather than
an IT-driven function within the organization
• Dedicate and commit to developing staff with clear roles,
responsibilities and measurable objectives regarding data
quality and usage
• Implement standardized processes, security and master data
tools, and promote common data repositories that share common
business rules and definitions
• Direct management attention to the data management process to
further its success

5. 54 ERP governance best practices you shouldn’t ignore
Jul 14 JDE–MAJ Release
Duration (days) Start End
162 01/10/13 08/23/13
Contract/Gate Approval for Development 20 01/10/13 02/04/13
Develop phase 115 02/07/13 07/15/13
Code/unit/string test 25 02/07/13 03/11/13
Submit plans for System Test 0 N/A N/A
Review plans/prep for 3rd Party Software for System Test 0 N/A N/A
System Test Environment Build Prework 0 N/A N/A
Drop Code/Tables for System Test (Modular CRP) 0 N/A N/A
Build environment for System Test 0 N/A N/A
Shakeout environment for System Test 0 N/A N/A
Execute System Test 15 03/14/13 04/01/13
System Test Review/Walk-through (Exit Review) 5 03/28/13 04/01/13
Integrated Test Environment Preparation 36 02/25/13 04/15/13
Submit plans for Integrated Test 1 02/25/13 02/25/13
Review plans/prep for third-party Software for Integrated Test 20 02/28/13 03/25/13
Integrated Test Environment Build Prework 5 03/28/13 04/01/13
Release Closed to Add’l Scope (SRs/Code & Schedule Impacting CRs) 1 04/01/13 04/01/13
Drop Code/Tables for Integrated Test 1 04/01/13 04/01/13
Build environment/data prep/refresh data for Integrated Test 5 04/04/13 04/08/13
Shakeout environment for Integrated Test 5 04/11/13 04/15/13
Integrated Test Window 60 04/18/13 07/08/13
Execute Interapplication Connectivity Test (ICT) for third-party applications 15 04/18/13 05/06/13
ICT Review/Walk-through (Exit Review) 5 05/02/13 05/06/13
Execute End-to-End Test (includes UAT/Reg) 45 05/09/13 07/08/13
End-to-End Test Review/Walk-through (Exit Review) 3 07/06/13 07/08/13
Production Readiness Test Environment Preparation 36 04/08/13 05/27/13
Submit plans for Production Readiness Test 1 04/08/13 04/08/13
Review plans/Prep for third-party Software for Production Readiness Test 20 04/11/13 05/06/13
Production Readiness Test Environment Build Pre-Work 5 05/09/13 05/13/13
Drop Code/Tables for Production Readiness Test 1 05/13/13 05/13/13
Build environment/data prep/refresh data for Production Readiness Test 5 05/16/13 05/20/13
Shakeout environment for Production Readiness Test 5 05/23/13 05/27/13
Review entrance criteria for Production Readiness Test 3 05/25/13 05/27/13
Production Readiness Test Window 30 05/30/13 07/08/13
Execute Enterprise Load & Performance Test 30 05/30/13 07/08/13
Execute Production Readiness Test 0 N/A N/A
Execute SAT 0 N/A N/A
Production Readiness Test Review/Walk-through (Exit Review) 3 07/06/13 07/08/13
Training Environment Load 2 07/02/13 07/03/13
Lock Code/Tables 1 07/11/13 07/11/13
Enterprise Release Management Go/No-go Director Review 2 07/14/13 07/15/13
Deploy Phase 44 07/11/13 08/23/13
Pre-Deployment Activities 5 07/11/13 08/23/13
Production Deployment 10 07/15/13 07/24/13
Production Warranty 37 07/18/13 08/23/13
Production Warranty (test environments) 7 07/18/13 07/24/13
Drop Code/Tables for Breakfix 1 07/18/13 07/18/13
Build environment/data prep/refresh data/shakeout for Breakfix 7 07/25/13 07/31/13
Production Warranty (Breakfix) 30 07/25/13 08/23/13
Figure 4: Example of a release schedule

6. 64 ERP governance best practices you shouldn’t ignore
Best practice No. 4: Utilize metrics
Defining and actively using metrics or key
performance indicators for every business process
area is another best practice. Each process area needs
metrics reported by the process owner in the ERP
organization. These analytics are reported to the
executive team and evaluated at defined intervals.
Metrics should reflect the organization’s goals and
they should be SMART — specific, measurable,
achievable, realistic and time-bound. As the saying
goes, “If you can’t measure it, you can’t manage it.”
Managing your business with metrics works hand
in hand with the ERPOG to reduce the number of
decisions that are based solely on instinct or gut feeling
and enable decisions based on objectivity and facts.
These clear and factual views of business performance
are seen on a continuous basis. Metrics drive execution
and process improvement, while helping you closely
monitor the results of action or change.
7 keys to successful metrics
1. Reflect the organization’s and process area’s goals and
keys to success
2. Measure process performance effectiveness or efficiency,
including changed conditions or problems
3. Monitor reliably, repeatedly and accurately
4. Limit the number
5. Encompass the entire process collectively
6. Support with high-quality data
7. Address pain points
The ERP 2.0 concept
Some companies don’t have the luxury of
re-implementing or upgrading the ERP, but are
struggling and still in dire need of change or returns
on their investment. This paradigm can shift with
relatively simple and fundamental changes. By making
improvements to ERP governance processes and
controls, immediate positive returns can be realized.
Using elements of some of the four ERP governance
best practices we’ve discussed, ERP 2.0 changes can be
used to create an improved enterprise footprint made up
of both system and business process changes focusing on
the following areas:
• ERP governance and process excellence — This is
accomplished by establishing the ERP operating
group and is supported by performing business
process reviews.
• User enablement — User skills and knowledge can
be upgraded through continuing education and
training and carefully defined documentation and
materials development.
• Data and reporting improvements— Improvements
can be accomplished with better data management
policies and upgraded reporting tools and strategies.
• Methodical release management protocols —
Improved release management can be
accomplished through:
– Minor release(s): Identifying and grouping
several help desk tickets into a release schedule
– Major release(s): Identifying larger projects
due to project-based work, new
functionality or systems integration
– Emergency releases

7. 74 ERP governance best practices you shouldn’t ignore
Conclusion
If you are struggling to manage your ERP, follow
these steps to improve your situation and maximize
your investment:
1. Establish a sound ERP organization with
business process ownership and accountability.
2. Implement disciplined master data management
practices and protocols.
3. Manage releases diligently.
4. Use metrics that drive business performance.
With these key best practices, you can create strong
ERP governance that will help you use your platform
effectively, with an increased focus on the strategic
objectives of your business. All of these best practices
work together to allow your ERP experience to be
proactive and successful.
Contact
Greg Davis
Managing Director
Business Advisory Services
T 913.272.2720
E [email protected]

8. Content in this publication is not intended to answer specific questions or suggest suitability of action in a particular case. For additional information on the issues
discussed, consult a Grant Thornton LLP client service partner or another qualified professional.
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