The Real Cost of ERP Implementation Project: Poor Governance

Introduction: The Hidden Price Tag

Enterprise Resource Planning (ERP) systems are the backbone of modern organisations, promising integration, automation, efficiency, and data-driven decision-making. Yet, for all their potential, ERP projects often become cautionary tales. One of the most underestimated risks is poor project governance—a silent but devastating force that can derail even the best-planned ERP initiatives. The real cost of poor governance isn’t just financial—it’s operational, reputational, and strategic.

Understanding ERP Governance

ERP governance refers to the structures, roles, policies, and decision-making frameworks established to ensure an ERP project is executed effectively. Good governance is proactive, transparent, accountable, and aligned with business goals. Poor governance, on the other hand, is reactive, ambiguous, siloed, and often disconnected from strategic intent.

Governance is not bureaucracy; it is the lifeblood of successful delivery.

Section 1: The True Costs of Poor Governance

1. Financial Overruns and Budget Blowouts

When governance is weak:

• Scope creep goes unchecked.
• Vendors overbill for change requests.
• Lack of cost control leads to spiralling expenses.

According to McKinsey, ERP projects with poor governance overshoot budgets by up to 45%. For large organisations, this can mean millions in unplanned spend with little value in return.

Case in Point: A global manufacturing company budgeted $50M for its ERP rollout. Poor steering committee oversight led to 60+ undocumented scope changes. Final cost: $85M—with several key modules abandoned midway.

2. Extended Timelines and Delayed Benefits

Time is value. Delayed ERP implementations stall operational benefits such as automation, accurate reporting, and integrated workflows. Poor governance manifests as:

• Delayed decisions from steering committees.
• Absence of escalation protocols.
• No accountability for missed milestones.

This often leads to project fatigue, a demoralised team, and missed market opportunities.

3. Loss of Stakeholder Trust and Executive Confidence

A lack of visibility and inconsistent communication breeds mistrust:

• Executives feel out of the loop.
• Business units perceive the project as “IT-driven.”
• Finance questions ROI.

Rebuilding trust takes years and may lead to leadership changes, reduced budgets, and reallocation of strategic focus.

4. Functional Misalignment and Poor User Adoption

Without robust governance:

• Business requirements are poorly captured.
• Users feel excluded.
• Training and change management are underfunded.

Result? The system goes live—but users reject it. Processes are circumvented, spreadsheets return, and the ERP becomes a glorified data warehouse.

5. Compliance and Data Integrity Risks

ERP systems often support regulatory compliance (e.g., IFRS, SOX, GDPR). Poor governance jeopardises:

• Audit trail setup.
• Role-based access controls.
• Data migration accuracy.

A compliance failure can cost millions in fines and irreparable reputational damage.

Section 2: Why Does Poor Governance Happen?

• Overreliance on vendors or integrators.
• Unclear roles and responsibilities.
• Lack of business sponsorship.
• No dedicated PMO or governance board.
• Failure to define success metrics upfront.

Governance failure is not a single event—it’s a slow erosion of structure, accountability, and clarity.

Section 3: The Path to Governance Excellence

1. Establish a Vision-Led Governance Model

Governance should start with the “why.” Align ERP goals with organisational strategy. Define success: Is it better visibility, reduced costs, faster close cycles, or improved customer service?

“If you don’t know where you’re going, any road will get you there.” – Lewis Carroll

2. Empower the Right People

A well-structured governance model includes:

• Executive Steering Committee – Strategic oversight.
• Business Process Owners – Decision rights on functionality.
• Change Control Board – Manage scope, quality, and change.
• PMO – Track deliverables, risks, and communication.

3. Define Decision Rights and Escalation Paths

Who decides on a module change? Who signs off on additional costs? Without this clarity, bottlenecks and blame games ensue.

4. Implement Transparency and Accountability

Use dashboards, regular reviews, and KPIs. Track:

• Cost vs. Budget
• Schedule vs. Plan
• Adoption vs. Target
• Risk and Issue Log

Let data drive governance—not emotions.

5. Prioritise Change Management and Communication

Governance without communication is dictatorship. Build a culture of inclusion:

• Monthly townhalls
• Functional deep-dives
• Change champion networks

Section 4: An Inspiring Outlook – Governance as a Catalyst for Transformation

Great ERP governance does more than avoid disaster—it unlocks transformational value.

It helps:

• Standardise global operations.
• Empower CFOs with real-time analytics.
• Enable CIOs to lead as digital transformation officers.
• Free up employee time for innovation, not firefighting.

Governance turns ERP from a system project to a business transformation engine.

Conclusion: Govern It, or Watch It Fall Apart

ERP systems are not plug-and-play. They require intentional, sustained governance to deliver on their promise. Poor governance may not appear on the balance sheet at first, but its impact is insidious—like a silent drain on your digital future.

The organisations that thrive are those that lead ERP projects like a business transformation, not just a technology rollout. They embed governance into every step—vision, design, delivery, and beyond.

The cost of poor governance is too high. The reward of great governance is enterprise excellence.

Final Takeaway

If you are planning or struggling with an ERP implementation, audit your governance first. Fix it now. Reinforce it continuously. ERP success isn’t just about choosing the right system—it’s about leading with integrity, clarity, and vision.

Need Help Navigating ERP or Transformation Projects?

If you’re planning, managing, or recovering an ERP, finance transformation, or digital initiative — governance matters. I bring over 17 years of hands-on experience across industries, helping organisations deliver complex projects with clarity, control, and confidence.

Whether you need support in:

• Project & Programme Management
• Portfolio Governance
• ERP Implementation & Recovery
• Finance Systems Strategy & Execution

I'm available to partner, advise, or lead your team to success.

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