Calibrating CFO and COO involvement on large ERP-projects

In this article we walk through the realities for the CFO and COO on large ERP-projects. Projects are different but at the same time they share similar governance mechanisms. We share what we believe are good and tactical ways of overcoming challenges and focus on delivery. Beyond their director job, they also have roles that unifies the corporate objectives with the ERP-projects.

Beyond the CFO and COO daily role, they have further roles to perform for large ERP-projects:

CFO, ownership and decisions

1. Decisionmaker and enabler of the financial continuity of the project, including pausing or termination. Budget approval and financial control of the project compared with the contract
2. Direct owner of the financial functionality the project delivers
3. Supporter of the project at the executive group

COO, the role is more operational

1. Overseeing the project management and deliveries
2. Balancing and allocating the personnel mix
3. Enforcing the corporate executive key requirement changes to the systems and ensure they are addressed even on the operational level on projects.
4. A liaison and decisionmaker between the executive group and the project management. Communicator of key decisions on project expansion, disruptions and change of vendors.

Projects are not the corporation

An ERP project can be considered a large cargo-ship on the ocean. It navigates to the next harbour delivering standardised modules, but the goods are decided by the customers and ultimately the route is shaped by market demand. Project staff are measured on delivery and not the metrics inside your corporation.

Projects have different pace

The delivery velocity has in recent years accelerated to lightning speed. Decades of project management practices and modern methodologies have enabled this in our industry. In comparison, the financial and industrial production environments are rather stable by design. There is a latent risk-factor that materialises in other ways if not properly managed.

Normally the CFO has hyperfocus on the burn-rate and cost trajectories. The COO is focused on the project deliveries. From the project perspective the largest risk is uncertainty from the managements side. Projects sense this, and the moment they think a closing is emerging, the personnel disappear and are out on the next project. As with everything else in business, the communication should therefore be deliberate, transparent and honest.

A project manager has a good situational overview and ability to provide the right information on short notice. From the outsider, teams might appear idle but that is the nature of large-scale project structures and plans, for various reasons such as buffers and contingencies. It is like a ship that is dimensioned with extra metal for robustness when things get though. Delivery is the output of projects, and the gateways are the milestones.

From velocity to the timeline

The timeline is the most important instrument for both the CFO and COO. From this we allocate Work Base Structures (WBS) that are allocated the project personnel and controlled by the CFO’s budget.

CFO are without exception pushing for cost-reduction. That’s the job. It is the executive management team that push for what’s optimal for the corporation. The CEO is the final decision maker. Professional project resources are accustomed to this and absorb some of this tension. Different vendors usually have strong incentive to deliver unless the initial estimates and scope have been altered dramatically.

The CFO and COO as owners

We believe the CFO and COO should behave as owners. Owners monitor and follow up, but do not micromanage, that’s for the project manager. The vendors do not own the project, but in practice this is what the corporation’s personnel pushes for. Defined roles and organisational clarity are the right tools to elaborate this the professional way.

Conflict resolution

We have project authority boards on industrial projects. These make decisions and resolutions. These are closed forums for joint corporate and project management to work out contrary views of the day. It is important for the motivation of project personnel that these mechanisms are professional, solution oriented and effective. The timeline depends on this. All sides see through the information fog. The CFO and the COO often have the last word, but they should be aware that communication is signalling and that the corporation’s view is not always aligned with the project’s way of delivering.

What’s in it for the CFO

The CFO has interest in the deliveries that affects the financial department through report harmonisation, increased precision and efficient workflows. The CFO also directly supervise the delegates lent to the project.

What about the COO

For the COO it is more the joy of seeing the project ship navigating in the right direction and avoid the known dangers along the journey. The offices of COO and the CEO are smaller compared with other divisions, so they are usually not affected directly by ERP changes. However, the COO often has a direct say and strategic visibility to the project and sets the culture. Therefore, it is always an advantage to be professional and positive despite challenges because such values multiply.

Calibrating the level of attention

When the weather is clear, it is easy to be unconcerned. Preparations and planning are the safe bets. Also, it is always good to routinely follow up the project to gain situational awareness and thus make informed decisions. There are always surprises and sometimes incidents. What matter is to have an open channel and decisive resolutions when needed. Because projects create amazing technologies and ERP-systems, it’s always tempting to give specific input, but be careful of bypassing the vendors domain, and rather let them be in charge of outlining options and you being the decision maker. Financial thinking is often common sense, but financial systems are very complex when you scale across countries and markets with a flair of logistics in between. The attention is the key factor. Transparent and balanced attention is beneficial for projects

Portfolios, strategic and large ERP-projects

Global vendors run project portfolios and part of that game is to outsource and cut costs that regional actors have zero capability to match. The larger the corporation grows, the more projects are added to the portfolio, including ERP-projects. The essence is that its less hands-on and rather more political and driven by initiatives. This has a diversification effect, and the portfolio approach is a complex way of managing projects.

Strategic projects are managed directly by executive management, but much our reflections are valid.

Large ERP-projects are unique in the sense that they resemble your full corporation in a smaller scale. It is more like an industrial factory in the digital world. This is a large topic with many considerations we will not elaborate on here.