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Challenges of M&A and Complex Corporate Structures

Large, complex organizations frequently struggle to balance the efficiencies of standardization with some measure of autonomy for their subsidiaries and divisions. In many cases, they set out to streamline and standardize processes, only to encounter push-back from line-of-business leaders whose organizations have unique processes and business requirements.

The Elusive Quest for Standardization

All too often, standardization often turns out to be elusive, especially for companies that grow through acquisition. By standardizing around a single ERP platform, for example, leaders assume they can lay a foundation for a common chart of accounts, order-to-cash processes, aligned fiscal periods, similar reporting standards and formats, and many others.

The parent company decides to roll out standardized systems, with a common ERP platform as the foundation. They start with a pilot implementation at a single subsidiary, and things go reasonably well. Next, they apply that same standard to a new company, only to discover the nuances in the order entry process dictate something a bit different.

More exceptions begin to emerge. Multinational organizations face another layer of challenges arising from local or regional reporting requirements, tax regulations, and accounting standards. By the time the parent company implements its “standard” ERP system at a third, fourth, and fifth subsidiary, the objective of standardizing processes seems to have fallen apart altogether.

The ERP Standardization Solution

There is a path forward for organizations that want to achieve a reasonable level of standardization, though. It requires a keen awareness of the obstacles described above, as well as a commitment to a global design and implementation process that balances uniformity with the need to address the unique business requirements of each subsidiary or division.

Governance: Any successful ERP standardization initiative begins with global design and a solid governance framework. It ensures an effective plan that maximizes opportunities for streamlining systems while allowing for some deviation from the standard. This approach demands a disciplined change control process to mitigate such deviations as the project progresses from company to company, site to site, and through subsequent optimization and continuous improvement phases.

Coherent project teams: Foster continuity and consistency within the core project team such that institutional knowledge and experience carry forward from one implementation to the next. It ensures that the rationale for design decisions is clearly understood and communicated to stakeholders during each wave of new ERP rollouts. Knowing the kinds of deviations that have emerged in prior implementations, the team will be in a stronger position to balance standardization with company-specific business requirements.

Global design: Involve key users from key divisions and departments to capture the critical requirements from all sites under consideration. It provides a baseline for delivering on a broad set of functional needs based on present conditions and anticipated near-term changes. Although it’s impossible to anticipate all future requirements, especially concerning mergers & acquisitions, it is still worth taking an inventory and building a global design around those needs. Throughout this process, bring in users at strategic checkpoints to validate the design as it evolves.

Implementation of the global design: As each implementation progresses, bring in key users from other divisions or locations to review and validate the process design, support the rationale for standardization, and confirm the need for deviations from the standard. This group can also contribute to the training and education process and support change management efforts for the implementation. Given their experience with global ERP design, these key users can also offer hands-on support during the most critical phases of the rollout.

Expert Teams, Change Management, and Institutional Memory

As we have pointed out elsewhere, it’s critically important to acknowledge the human element as part of any ERP implementation process. When it comes to a standardized global design, change management is of paramount importance. Resistance to change is normal, but when an ERP rollout is accompanied by a perception of top-down control from faraway corporate bigwigs, the push-back tends to be even greater.

By assembling and maintaining a coherent core project team, the parent company can lay a foundation for a smooth, repeatable approach that legitimately balances standardization with real-world business requirements. As the organization proceeds with new waves of ERP implementations, it can develop a critical mass of subject matter experts across existing divisions and sites. That leads to an increasingly larger team that can transfer their institutional knowledge to new sites, offering support for parallel deployments and accelerating program completion.

Do not underestimate the need for disciplined governance throughout this process. Inevitably, teams will encounter resistance and need to make some difficult decisions along the way. As with any large-scale organizational change, you will encounter push-back as you seek to achieve synergies across multiple business units. With a balanced approach, though, complex organizations can achieve greater efficiencies and more visibility across their entire enterprise.

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Agtech providers of precision agriculture and robotic solutions providers are transforming agriculture and farming operations.  Pemeco helps its agricultural technology clients implement standard, scalable business processes to drive their high-growth businesses.