The Revlon SAP ERP Failure: A Cautionary Tale for C-Suite Executives
A failed SAP implementation can trigger personal reputational damage for C-suite executives.
Enterprise Resource Planning (ERP) systems are critical for integrating and streamlining business processes across different functions and departments. They are designed to improve operational efficiency, productivity, and decision-making. However, implementing such a complex and powerful system has risks and challenges. A poorly planned and executed ERP implementation can result in operational disruptions, financial losses, legal troubles, and reputational damage.
The Revlon SAP ERP failure is a cautionary tale for C-suite executives involved in or considering an ERP implementation. Revlon, a leading cosmetics company, launched a new SAP ERP system at its North Carolina manufacturing facility in February 2018. However, the system caused service-level disruptions that affected Revlon’s production and distribution capabilities. The company could not fulfil product shipments of approximately $64 million of net sales to several large retail customers in the U.S. The company also incurred $53.6 million of incremental charges to remediate the decline in customer service levels.
The SAP failure significantly impacted Revlon’s financial performance and reporting. The company reported a net loss of $70.3 million in the fourth quarter of 2018. The company also delayed filing its annual financial report for 2018 due to material weakness in its internal controls related to the SAP implementation.
The SAP failure also damaged Revlon’s reputation and credibility in the market. The company’s stock price fell 6.4% after it announced the delayed financial report. The company also faced several investor lawsuits that alleged that the company failed to disclose the risks and impacts of the SAP implementation and violated federal securities laws. The lawsuits claimed that Revlon’s stock price suffered due to the SAP failure and sought damages from the investors.
Moreover, the SAP failure had personal consequences for Revlon’s C-suite executives. Revlon’s Chief Financial Officer, Victoria Dolan, resigned in March 2019, shortly after the company announced its delayed financial report due to the SAP failure. Revlon’s Chief Operating Officer Christopher Peterson admitted that the company experienced issues during the SAP changeover that caused the plant to ramp up capacity slower than anticipated. He also acknowledged that the company had identified a material weakness in its internal controls related to the SAP implementation. The personal reputation damage to the individual C-suite executives involved in the SAP failure was significant, with Dolan’s resignation and Peterson’s admission of issues during the SAP changeover.
The Revlon SAP ERP failure highlights the importance of active C-suite executive engagement in every stage of an ERP implementation. ERP implementation is not just a technical project but a strategic and organizational one that requires careful planning, design, execution, and monitoring. It can also have serious consequences for the C-suite executives’ reputation if they fail to provide effective leadership and oversight.
The key takeaway for C-suite executives is that they must ensure strong leadership and governance throughout the ERP implementation. They must set clear goals and expectations, select the right vendor and partner, ensure adequate resources and training, communicate with all stakeholders, and resolve issues promptly. They must also have robust internal controls and risk management processes to prevent and mitigate potential problems or disruptions.
To avoid making the same mistakes as Revlon, C-suite executives need to learn from their failures. They must be aware of the risks and challenges involved in an ERP implementation and proactively address them. They should also engage in continuous learning and improvement to stay up-to-date with the latest trends and best practices in ERP implementation.
The following articles provide a more detailed analysis:
TechTarget reports on the investor lawsuit The Rosen Law Firm filed on behalf of Revlon shareholders, alleging that Revlon failed to disclose the risks and impacts of the SAP implementation and violated federal securities laws. It also explains some of the common reasons for ERP problems and the importance of executive support and organizational change management.
Computer Weekly reports on the class action lawsuits filed by different law firms on behalf of Revlon shareholders, alleging that Revlon failed to create measures to plan and monitor the implementation of its ERP system. It also describes the service level disruptions that occurred at Revlon’s North Carolina manufacturing facility resulting from the SAP implementation and the statements made by Revlon’s chief operating officer Christopher Peterson.
Panorama Consulting analyzes the lessons learned from the Revlon ERP failure and provides some best practices for ERP implementation. It highlights the importance of risk identification, design and controls, realistic expectations and returns on investment. It also offers some tips on how to avoid or recover from an ERP failure.
Taft Tech Law discusses the legal implications of the Revlon ERP failure and compares it with other ERP lawsuits. It points out that investor lawsuits are rare in ERP failures and that most disputes are between ERP customers and vendors or implementers. It also advises c-suite executives to know their fiduciary duties and potential liabilities when undertaking an ERP project.
Henrico Dolfing summarizes the Revlon SAP ERP failure and its consequences, such as delayed financial reporting, lost sales, damaged reputation and investor lawsuits. It also points out that Deloitte was responsible for implementing the SAP system for Revlon and suggests that Deloitte may have underestimated the complexity and scope of the project.