L.A. Story: Though Painful, ERP Project Has Happy Ending

When the City of Los Angeles decided to implement a PeopleSoft ERP/procurement, it didn't bargain for the complaints, outright rejection and headline news that greeted the project long before its completion.
Posted September 27, 2002

Drew Robb

Drew Robb

When the City of Los Angeles decided to implement a PeopleSoft ERP/procurement throughout the city, it didn't bargain for the complaints, outright refusal to use the system and headline news that greeted the project long before its completion. So the project team took a step back, reevaluated the implementation process and pushed it through to the end.

Let's took at this project to determine what went wrong, what put it right and more importantly the lessons learned along the way.

Big Plans

Los Angeles is a city of 3.5 million, with 44,000 city employees and a budget of $4 billion. Yet two years ago each of the departments conducted its own purchasing. That meant 2000 people in 600 city buildings and 60 warehouses ordering material. Some 120,000 Purchase Orders (PO's) and 50,000 checks per year went to over 7,000 vendors. Inefficiency was rampant.

"There was a lack of financial responsibility in the old system and people could run up unauthorized expenditures," said Bob Jensen, the city's ERP project manager.

Each department maintained its own inventories on different systems. Expense-item mismatches piled up. One department purchased one way, others preferred a different approach. Their mainframe-based systems were isolated.

The City chose software from PeopleSoft, based in Pleasanton, Calif., as part of a $22 million project to integrate purchasing and financial reporting across the entire city -- Procurement Receiving Inventory Management and Accounts Payable (PRIMA).

During one critical part of the implementation, however, the newspapers were filled with stories about police without vital supplies, unpaid vendors and sales tax miscalculations. Most of it was groundless, but underlying the sensationalism were unmistakable signs of teething troubles.

When the project was evaluated, guess what they found? Those complaining about PRIMA were actually moaning about their own processes. Systems integrator AG Consulting of San Francisco implemented PeopleSoft in accordance with mandated city policies and processes. Yet many within the city were not in compliance.

Burdened by an old paper-based system that demanded central approval for everything, some took shortcuts to remove delays. With PRIMA, they were forced to follow procedure. When the system enforced policy, chaos briefly ensued.

Lessons Learned

Lesson No. 1: Jim McGlothlin, PeopleSoft's regional vice president for education and government, says you have to survey to see what processes people are really using. "Otherwise," he explained, "you get taken by surprise when you program the system to enforce them."

Lesson No. 2: Training is essential in a large-scale ERP initiative. "You have to train people on process and technology," said Jensen.

Jensen explains that as more people understood PRIMA, the complaints fell away and user/vendor satisfaction grew proportionally. He believes classroom training is best.

Lesson No. 3: A slower, smaller rollout is preferred. Undoubtedly, confusion would have been minimized in PRIMA had it been phased in more gradually.

Lesson No. 4: When a rolling-wave approach isn't possible, do your homework well for a big-bang implementation.

"We could only approach the project with all modules at once across the entire city as it would have proven unworkable to have half the city on a paper-based system and the rest on PeopleSoft," said Jensen. "I'd much rather have started smaller and burned that in before expanding across the city, but that wasn't possible."

Lesson No. 5: Change management is critical. "The only way to change a city is one person at a time," said Jensen. "Understand what it takes to change one person and multiply by several thousand users -- in the end, we underestimated the amount of change management drastically."

The City threw lots of money at change, invested in technology and training people many different ways, yet failed to measure up initially.

The reality is that new employees learn PRIMA five times quicker than veterans. It takes breaking the workforce into a series of core groups -- unions, accounts, inventory and managers. Develop a highly specific communication plan for each group with precisely targeted messages. Then roll your sleeves up for the long haul.

"You can have the best software, consultants, methodology, business processes and implementation team working full-time based on wonderful homework and top-notch training and still fail due to user perception and inadequate means of communicating change," said Jensen.

Lesson No. 6: Damn the torpedoes! There comes a time when you have to ignore the confusion and push a project through to a done. City Controller Laura Chick believes that when user feedback turns into whining and active resistance, it may be best to forge ahead and push through what you believe to be a first-rate system.

Hollywood Ending

In a classic Hollywood tale, the bad guy dies a gory death, the hero gets the girl, and the world is saved. In the case of PRIMA, check processing staff was cut in half while processing even more PO's faster than ever, the number of workers in warehousing was cut by 40 positions, inventories were reduced from $50 million to $15 million and each vendor now has a single point of contact.

In addition, $5 million a year has been saved in contract consolidation. LA reports a 5% increase in the number of vendor discounts taken by being able to pay rapidly (2% to 5% discount is offered by many if a bill is paid within 30 days). Users and vendors hail the system as a big improvement and the City of Los Angeles is seriously considering an upgrade to PeopleSoft 8.4 sometime next year.

User response is summed up by one particularly recalcitrant user. Despite the fact that the system has remained the same for the last three years, he came up to Jensen the other day and said, "Finally you got the system to work."

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