Reaping the benefits of ERP: Before or after

The most satisfying way for a firm to increase profits is to increase sales – either by increasing market share in its industry, or diversifying into other industries.

But that isn’t always possible. Sometimes sales are static. In those circumstances, increasing profits comes from reducing costs, and one of the biggest costs for a firm is payroll. This means reducing headcount.

One of the ways to reduce headcount is to increase productivity. If 100 people can do the work of 150, the extra 50 become surplus. ERP systems can facilitate this via automation and business intelligence.

Many firms try and implement new ERP systems, or try and otherwise improve automation, by running a project first, with a view to reducing the resulting surplus labour after the project is complete. This rarely succeeds because by asking the surplus labour to engage with the project there is an element of asking turkeys to vote for Christmas.

Although it can be painful, there is much to be said for reducing the surplus labour first, and implementing new ERP systems second. This can result in a period of anxiety and trauma as the remaining workforce are overwhelmed by their initial increase in workload, but this provides them with a great incentive for the ERP project to be a success.

Sometimes the best way to learn to swim is just to dive in at the deep end.

 

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