Nonprofit ERP Implementation Insights: Our View from the Ground
Mission-driven organizations play a crucial role in tackling some of the world's most pressing social, environmental, and humanitarian challenges. As political, economic, and technological shifts continue to transform their operating environments, ERP systems have become increasingly essential for these organizations to remain both operationally efficient and aligned with their missions.
In this article, we will explore what makes or breaks a successful ERP implementation effort for mission-driven organizations. Our discussion will cover four key areas: Setting the Foundation for Success, Selecting the Right Partners, Navigating the Implementation Journey, and Achieving Post-Implementation Improvements.
1. Setting the Foundation for Success
Client Challenges:
If mission-driven organizations could spend every unrestricted dollar raised on causes that directly impact their mission, they would, and in the early days, they often do. However, as these organizations grow in terms of staff, locations, and revenues, they face new challenges that require more sophisticated systems and processes to manage their operations effectively. Many organizations operate with antiquated and disparate systems resulting in siloed and manual operations. Their infrastructure may be immature, with minimal automation or integration between their financial systems, donor management, grant tracking, and human resources functions.
These issues become significant bottlenecks as nonprofits grow, making it harder for organizations to meet their goals efficiently. When it comes time to implement a new ERP, nonprofits face the challenge of lacking the internal expertise to initiate large-scale ERP projects.
Key Learnings:
The first step in addressing these challenges is to recognize the industry trend of migrating to an ERP system and to secure agreement among leadership that this type of large-scale transformation is essential for improving operations and scaling to achieve the mission. This may require educating stakeholders across the organization on the scope and impact of an ERP implementation. It's essential that the current siloed areas understand and are prepared for the time, investment, and organizational changes that come with an ERP transition.
Involving key business leaders alongside IT personnel from the outset is crucial. This should include the CFO, Head of HR, CIO/CTO, as well as leaders from Grants Management and Program Delivery, since successful ERP implementations are cross-functional initiatives, not just IT projects. Broad buy-in is needed to ensure success. By rallying the organization around the benefits of modernization and fostering a sense of ownership across teams, resistance to change can be minimized. This can be achieved by including the right business leaders in Steering Committees and governance models—not just leadership from Finance and IT, but also from Grants and Program Delivery, for example.
2. Selecting the Right Partners
Client Challenges:
After receiving leadership buy-in and organizational commitment, selecting the right ERP system and implementation partner, as well as establishing project management support for the initiative becomes the main focus and biggest challenge.
Mission-driven organizations may not be well equipped to run a large-scale competitive RFP (Request for Proposal) process for selecting ERP technology. They may not be familiar with the various ERP systems out there or do not have the time or resources to gather requirements from each area of their organization to feed into the RFP. Mission-driven organizations often lack an internal project management office (PMO) that can help lead and facilitate the project. Without a clear governance structure for evaluating proposals and choosing a vendor, they may struggle to make informed decisions that serve their long-term goals.
Key Learnings:
Gathering the right requirements unique to a nonprofit’s mission, size, and geographic reach is essential for a successful ERP implementation. It is critical to capture the needs of various staff members performing different business functions, especially those working under diverse rules and regulations across multiple locations. All unique business requirements must be fully understood, documented, and clearly addressed by ERP vendors in their proposals.
Selecting the right ERP system and implementation partner hinges on how well they align with these essential requirements. Failing to execute this step properly can result in downstream adoption challenges and unforeseen costs.
Furthermore, ensuring that these unique requirements are included in contracts with the selected vendor and implementation partner is crucial for avoiding future disputes or unmet expectations.
If the appropriate internal expertise is lacking, organizations should seek external support through a skilled Project Management Office (PMO). A PMO that has managed ERP implementation for other mission-driven organizations will bring alignment with organizational goals, effectively manage timelines and resources, mitigate risks, and ensure a smoother implementation process, ultimately maximizing the benefits of the ERP system investment.
3. Navigating the Implementation Journey
Client Challenges:
Once the ERP system and implementation partners are selected, one common challenge nonprofits face is clearly defining roles and responsibilities at the start of the implementation. Without clear delineation, confusion can lead to project delays, miscommunication, and inefficiencies.
Additionally, nonprofits often struggle with the concept of implementing a Minimum Viable Product (MVP) for go-live, which may not align with the comprehensive vision they have for their ERP system. Ensuring that the solution implementer's RFP response accurately translates into the Scope of Work (SOW), and that the final product delivered is consistent with the SOW, can also be a significant challenge, particularly for organizations unfamiliar with large-scale projects.
As discussed above, nonprofits that lack the internal project management expertise to manage projects of this scale can be overwhelmed with the burden the implementation is putting on their key resources that are forced to execute and project manage this initiative. Delays in planning and budgeting activities can cause cascading effects, slowing down critical downstream components such as Budgeting and Forecasting, which are vital for maintaining operational continuity during the ERP implementation process.
Key Learnings:
One of the most crucial lessons learned is the importance of thoroughly vetting the implementation partner before selection to ensure they can deliver the Minimum Viable Product (MVP) on time and within budget. An effective PMO plays a key role in managing the overall transformation roadmap, ensuring that the ERP solution implementor—and other vendors—are held accountable to the agreed-upon delivery timelines.
Creating a clear vision of the MVP scope for stakeholders is critical to driving adoption and ensuring a successful system rollout. Leveraging the PMO to uphold and drive this MVP vision is essential. Continuous communication across the organization ensures that all teams remain aligned and focused on the same goals throughout the implementation journey.
4. Achieving Post-Implementation Improvements
Client Challenges:
After the ERP system goes live, nonprofits often face new challenges in setting up adequate system support helpdesks to address any ongoing technical or operational issues. Addressing postponed priorities around the ERP implementation and pursuing complementary system implementations also become critical post-launch activities. Only once the new system is live can the organization start to integrate the live system with peripheral systems which is a priority to streamline cross-functional operations,
With a new system in place, nonprofits may realize they need further training and support to fully leverage the ERP’s capabilities, especially for staff spread across various geographies.
Key Learnings:
If possible, ERP system administration in-house can significantly reduce dependencies on costly vendors for ongoing support. Nonprofits that invest in developing internal expertise in ERP systems are better positioned to maintain and improve their systems without constantly relying on external help.
Surveying business units and geographic regions to identify where further training is needed can help ensure that all teams are using the ERP system effectively. Nonprofits should also focus on long-term planning for future ERP enhancements, continually evolving the system to meet the organization’s growing and changing needs.
Conclusion:
Through discussions with our mission-driven client base and contacts, Clarendon Partners has identified key learnings that emphasize the importance of laying a strong foundation, selecting the right partners, meticulously managing the implementation journey, and focusing on continuous post-implementation improvement.
By leveraging these valuable insights, the Clarendon Partners team can help your nonprofit organization successfully implement or modernize its ERP system through thorough planning, strong partnerships, and a commitment to continuous improvement.
Contact us at info@clarendonpartners.com to discuss how we can help evolve your organization’s ERP journey, driving toward a more impactful, transparent, and resilient future.