Combining Current Performance Metrics with Ambitious Goals is Key to Successful Business Transformation
ERP implementations are notoriously difficult to pull off. Many businesses struggle with the process, facing challenges that can derail the project. Here are a few common reasons why ERP projects fail:
- Lack of clear goals and objectives
- Insufficient user training and adoption
- Inadequate project management and oversight
- Underestimating the complexity of integration
In the context of ERP planning, a common mistake is using KPIs (Key Performance Indicators) to talk about future goals instead of OKRs (Objectives and Key Results).
Understanding KPIs and OKRs
Key Result 1: Reduce inventory holding costs by 20% within the next 6 months. Key Result 2: Implement an automated inventory tracking system within 3 months. Key Result 3: Increase inventory turnover ratio from 4 to 6 by year-end.
The Chicken and Egg Situation
The relationship between KPIs and OKRs is like the classic chicken and egg scenario. You start by looking at KPIs to understand current performance. For example, how are we currently managing inventory or customer service? This initial assessment provides a clear picture of where you stand today.
Next, you set goals to improve via OKRs. Where do we want to be after this project? Your OKRs define the future state you aspire to achieve. Over time, as you meet these objectives, your OKRs today become your new KPIs tomorrow, setting a continuous cycle of improvement.
Why It Matters for ERP Implementations
Using KPIs to set future goals can lead to confusion and misalignment. KPIs are best used to measure the current state and track ongoing performance, while OKRs are designed to drive progress and achieve future objectives.
Focus of Each During ERP Implementations:
KPIs: Monitor the effectiveness of the current system and processes. For example, tracking the accuracy of inventory data ensures that the existing system performs well.
OKRs: Set strategic goals for what you want to achieve with the ERP implementation. For instance, aiming to implement a new inventory management system to reduce costs and improve efficiency.
How KPIs and OKRs Complement Each Other
- Alignment and Clarity: OKRs set the vision and strategic direction, while KPIs provide the data to track progress and performance.
- Goal Setting and Measurement: OKRs define ambitious goals, and KPIs ensure you are on track to meet them.
- Motivation and Focus: OKRs inspire and guide the team, and KPIs offer regular feedback on performance.
Together, KPIs and OKRs create a strong framework for successful ERP implementations. They ensure that you are not only tracking the current performance but also driving towards future improvements.
Getting ERP implementations right requires the right mix of KPIs and OKRs. They each serve a unique purpose and, when used correctly, can greatly enhance the process. This approach is not limited to software implementations; it can be easily applied to any business transformation. The main point to take home is that by understanding and leveraging the strengths of both KPIs and OKRs, you can ensure continuous improvement and strategic alignment. If you have questions about planning and delivering ERP projects or any business transformation, we're here to help. Connect with us today to ensure your project's success!
