Case Study: Successful ERP implementation for Construction
Drafting the ERP blueprint
The steady expansion of the construction industry over the last several years has pushed both general contractors and specialty subcontractors into new revenue brackets. Higher volume and larger projects make it both more challenging and more essential to increase efficiency, mitigate risk, and manage costs. Many contractors find that their processes for tracking costs and managing projects are no longer adequate. Project managers don’t know how the cost-to-completion is changing as accounts payable processes invoices. The CFO can’t get needed labor expense data in a timely manner because the payroll department manually triple checks figures to ensure accuracy. Existing control systems have trouble keeping up with the company’s growth, increasing vulnerabilities to scheduling errors, compliance shortcomings, and fraud.
The solution is to move from dozens of home-grown spreadsheets and company files with outdated charts of accounts to an enterprise resource planning (ERP) platform that can scale with your business. Many specialty and construction contractors, however, are put off by what can easily seem to be an overwhelming task. And while there is no denying that implementing an ERP platform is a serious undertaking, it can be made much more manageable by dispelling some common misconceptions, identifying requirements for success, and having a roadmap for moving forward.
Our ERP Implementation team has worked with many contractors to help guide them through both the implementation process and in post-implementation assessments so that they can get the most out of their ERP systems. We have found that the biggest challenge for many contractors is simply knowing where to start. Since the ERP platform will be standardizing and unifying a range of processes, many contractors believe the first step involves a detailed mapping of the contractor’s current processes, across the range of functions from payroll to operations. But because most contractors considering implementing an ERP system are doing so precisely because those processes have grown unwieldy, trying to map them – with all of their exceptions, redundancies, and informal work-arounds – would likely be an exercise in futility. Indeed, many contractors put off tackling an ERP implementation precisely because they dread such a task.
Start with people, not flowcharts
Rather than flowcharts, designing an ERP implementation blueprint should start with people. Drawing from 20 years of construction industry experience and working with a wide range of contractors, we understand the nuances of ERP implementation and how to effectively build an ERP platform. We begin by consulting with teams from each of the contractor’s functions. (In smaller contractors, some of those “teams” may consist of one person.) Our combined experience in both the technical and business aspects of ERP implementation enables us to ask the right questions and extract insight from the answers.
The goal in these discussions is to identify the “pain points” in how work is currently done. Uncovering where things break down highlights where the improvements need to be made. But while teams can often identify many places where processes can be improved, there are also frequently inefficiencies that have existed for so long that they are simply accepted as “the way things are done.” Our objective perspective and knowledge of industry-wide best practices allow us to introduce additional opportunities for improvement. We then work with each function to redesign their processes to both maximize efficiency and to leverage the ERP system’s capabilities. A sandbox is then created that allows, for example, the accounts payable department to test drive a streamlined process on 20 invoices and note any refinements that need to be made. Breaking up ERP implementation in this way, into specific, well-defined tasks – whereby numerous sprints run in parallel rather than one unending marathon – generates a string of concrete wins and makes the implementation project management much more digestible.
Open up communication
As each function goes through this discovery process individually, usually over the course of several sessions, it gradually builds a library of new processes within the ERP system – processes that have been designed by the people using them and refined to their specific needs. Not surprisingly, a frequent benefit of a correctly implemented ERP platform is notably higher employee engagement and compliance with processes that they understand and own.
In addition to having each function go through this discovery process individually, it is also important to bring functions together. After all, many of the benefits of an ERP system come from aggregating data from different points in the contractor to create a comprehensive, real-time dashboard of costs, budgets, operations, scheduling, and other factors. We find, however, that these larger meetings accomplish far more than merely aligning how information flows from one part of the contractor to the other. These discussions also allow the back office and operations to see how the other contributes to the contractor’s success – and what are the roadblocks that prevent it from doing so. These conversations usually generate empathy, a common vision for the future – and further ideas for improving processes and workflow.
Once the components have been assembled, plans can be made regarding the actual rollout. While it’s possible to migrate the entire contractor all at once to over to the ERP platform, contractors often choose to go live in stages, starting with well-defined, key areas such as payroll and cash management, and then to migrate the other functions. And contrary to popular belief, ERP systems don’t need to be rolled out at the beginning of a fiscal year or quarter. In fact, we have found that it is actually better to avoid these critical accounting periods altogether.
The path to ERP implementation is different for each contractor. However, there are three factors that dramatically increase the chances of a smooth journey:
Have a champion. ERP implementations require a sustained commitment over several months, as teams learn the new system and iteratively test and refine solutions. A C-level champion such as the CFO can help ensure that implementation-related tasks stay high on everyone’s agenda. In addition, they should continually be monitoring the general flow of the project so that any potential derailments can be dealt with promptly.
Provide reinforcements. In the two to three weeks leading up to the “go live” date, ERP implementations add additional work to each member of an already-overloaded workforce. Larger contractors can prevent potential bottlenecks by hiring temporary staff to support day-to-day operations during this crunch period. Contractors without that option can redistribute workloads to help minimize any increased demands.
Proactively identify resistance. Not everyone will embrace an ERP system’s benefits. Employees who have established themselves as the go-to experts on navigating current processes are particularly likely to feel that their value to the contractor will be undermined. They need to be shown that an ERP system augments rather than replaces their experience.
An ERP implementation is a significant milestone in a construction contractor’s maturity. The results include more streamlined processes, more engaged employees, more powerful tools for visualizing and managing the business – all of which can scale as the contractor continues to grow. While ERP implementations require an investment in time and energy, the right partner can help guide the process while minimizing impact on ongoing operations.
Most construction contractors never leverage more than 30% of their ERP system’s capabilities. This is usually because the system is not fully aligned with the business needs of the contractor and best practices for the demanding workflow management of the construction industry.
Our implementation team gets the results it does for our clients because we draw on both technical expertise in ERP implementation and extensive experience advising construction contractors on business issues. In 20 years of helping contractors, we are intimately familiar with numerous roles within construction businesses. This means that in our ERP engagements, we’re not just configuring software – we’re collaborating with you and your employees to determine exactly how to get the most out of your ERP system, and then doing what is necessary “under the hood” to make that happen efficiently and effectively.