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Chapter 11 is No Excuse

by Art Worster

December 20, 2010

How many bad experiences have there been with SAP as a tool for turning a company around who are undergoing Chapter 11?  The answer is - too many.  Why would this be, since there is obviously a compelling reason to change the status-quo.  You don't have to do too much analysis to intuitively know that the company will either be turned around or proceed to Chapter 7.  Then, if it is not about a compelling case for change (the cause of a huge number of other failures or sub-par performances) what could it be? 

First of all, the court overseeing Chapter 11 typically looks for someone who is not part of the problem to become transitional CEO - makes sense.  However, it is also often true that the transitional CEO knows less about the industry, and certainly about the company, than the discredited former managers.  Without industry knowledge, he/she tends to bring in a team to drive transformation, which also makes sense, but these folks are usually there more because they know how to drive costs out than because they know the industry better.  Next  the remaining industry leaders are committed to provide the company-specific business content necessary to support turn-around activities.  Often this leads the IT department to implement necessary Applications changes to drive ROI, however, if it is difficult to get executive attention in good times, it is even more difficult at a time like this.  Consequently, the IT group is delegated to design, demo, test and implement the new business process.  They also have no buy-in on the new process and typically it does not refect the industry-specific business content needed to gain t he support of already over-loaded managers.  My experience is that it is done conscientiously, but simplistically. 

It goes back to the basic premise.  The key to success is: total acceptance and involvement of the business, from executives to workers, which requires attention to success factors such as being "business-driven" and a commitment to Organizational Change Management throughout the program.  The fact that the company is in Chapter 11 makes this even more vital.  However, more often Chapter 11 is used as a pretense, as if business failures cause changes the basic laws of business.  There are fundamental truths that don't respond to external forces that create success.  The most improbable cause of these failures, from my experience, is failure of SAP.  Isn't it funny (odd) how lack of attention to detail cannot be excused by political expediency.  Maybe there is a lesson in that, beyond just business - just thinking - hmmmmm.

Art Worster

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