We are presently helping implement a Government enterprise resource planning (ERP) software system that will manage several prison-based manufactories. The prison industries teach skills to incarcerated persons useful in restarting their vocational career after release. They are good examples of purpose-driven enterprises whose mission may sub-optimize efficiency and productivity – in this case to provide vocational experience in a highly unpredictable labor setting. We enjoy working with organizations having a broader mission than solely optimizing financial return to shareholders. In these cases, we are believers in separating claim on cash from missional governance.
The prison industries are constrained by law to sell only to other public sector agencies and certain non-profit organizations. This is to avoid competing unfairly on the basis of low-cost labor against private sector manufacturers paying a competitive wage. As a result, the prison industries enjoy oligopolistic advantages within their markets typical of State-Owned Enterprises (SOEs) in many countries. They do not need to compete for business, achieve superior productivity and quality targets, or provide exceptional levels of customer service. SOEs often have lead times, high return rates, outdated infrastructure, lagging innovation, and make demands on the Government to make good financial losses.
It is proving a stretch for our customer to implement an ERP system that is designed to plan and execute private sector best practices. Some of the challenges and responses include:
- There is a small bench of Government staff with the institutional knowledge needed to support the agency’s scope of work. Vendors installing and configuring the system rely on these staff to help guide the solution design and find it difficult to get key decisions made. The Government found that it needed to bring in a dedicated team of consultants to help its staff work effectively with the contracted solution vendors.
- The Government has little experience implementing a sophisticated system that touches all its operations. Integrated ERP databases by design tear down walls between departments and force a rethink of organizational business models. In the case of the prison industries, the various operating leaders are benefiting from facilitation that helps them adopt shared practices that can then be customized for specific exception needs. Many times the changes are to operating procedures rather than software configuration.
- Change is uncomfortable, and key members of the Government’s team have elected to leave the agency and will probably continue to do so. The discipline of Organizational Change Management (OCM) applies important techniques to manage employee expectations and soften the impact of change. A full-time OCM team was appointed to assist management. An important consideration for our customer is managing the transition of certain clerical work from incarcerated workers to Government staff.
- The Government selected a solution through competitive bid without understanding the full implications of the infrastructure requirements. Government policy encourages ERP solutions to be hosted in a specially secured public sector ‘cloud’, but this rendered key parts of the commercial solution unusable or unstable.
- The software vendors were contracted to deliver a ‘configured’ system to the Government available for use, but the Government misunderstood that it was responsible for much of the tailored setup and data provisioning required to operate the businesses on the platform. Preparation of this data is significantly slowing the rollout. There is an on-going tension inherent in vendor desire for configuration sign-off and payment, and the Government’s need to prove it has a usable total solution.
These challenges are not unique to ERP implementations. They frequently are found on public sector digitalization projects like:
- Introduction of Central Bank Digital Currencies (CBDCs)
- Extension of Government portals to support various e-Democracy initiatives
- Implementation of collaborative Government-Citizen work spaces
- Migration to integrated financial systems spanning agencies and departments
Our customer has internalized the following lessons in our present project:
- Protect, support, and free institutional experts to focus on their project responsibilities. Integrate OCM activities from senior management through operational managers to line staff. Ensure adequate Government resources are available to deal with contingencies and provide staying power.
- Develop a clear vision for business model changes before attempting to automate the solution. Document and gain agreement on all major process workflows and the roles that will perform the tasks.
- Engage all relevant stakeholders. Ensure they feel heard and proactively set accurate expectations. Ensure their inclusion in a process that also preserves the ability to make decisive decisions.
- Support the Government team with seasoned experts who can watchdog vendor scope and performance.
- Whenever possible stick with Commercial Off-The-Shelf (COTS) technology solutions. Customization is expensive. Competitive advantage derives from innovative use of technology as an enabler, not the technology itself.
There is much work yet to be done on this project. And further lessons to learn.