Change Management and ERP Implementation

Subject: Management
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Change Management and Project Management in ERP Systems Implementation

An ERP implementation results in massive changes in the implementing organization’s culture and business processes (Aladwani, 2001). Without a proper management of the disruptions, the benefits of the ERP system cannot be realized (Cookie & Peterson, 1998). Companies that are unable to utilize the ERP system mainly fail because they do not use technology properly to address the changes in their organization. Full realization of the benefits of ERP is only possible when the company makes appropriate changes in its structure, strategies and processes such that they fit perfectly with the system and the objectives of the organization. The implementation of an ERP system in an organization therefore is an undertaking of two tasks concurrently (Kee-Young & Jan-Nam, 2008). Management has to manage change in the organization and manage the project implementation of the ERP system (Ehie & M, 2005).

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Change Management in ERP Implementation

An Enterprise Resource Planning system integrates programs that assist in the delivery of results and performances of key processes in various organization services like logistics and finance. The major purpose for implementing ERP systems in an organization is to make it enjoy operational excellence through the synchronization and streamlining of the data flow in the organization via a single management system. Undoubtedly, ERP several organizations have had success with their implementation of ERP however, the picture is not all rosy. Many ERP systems are not successful in transferring the intended benefit to their implementing organization. (Aladwani, 2001) Presents a process-oriented approach that describes the reason why workers oppose the ERP system in their organization. The author explains that workers’ resistance is a complex problem for project managers in charge of the implementation of the ERP system. The author presents an analogy that marketers succeed in their endeavor despite the large inventory they deal with annually yet project managers are unable to replicate a similar success rate with a single project of ERP because of their faulty choice of an implementation strategy (Dong, 2001).

The author further faults the factor research that was used in past studies to review the ERP implementation noting that it’s rather static. Therefore, process research is presented in the paper as a worthy replacement because through it the explanation, of how worker resistance was won over leading to a success, can be obtained. To adopt benefits from both forms of research the author uses an integrated approach. The author offers a contrast of ERP and marketing perspectives to support the paper’s thesis that ERP field has a lot to learn from the marketing field in terms of overcoming resistance. Marketers overcome consumer resistance while managers of ERP implementation have to overcome resistant workers (Guptara, 2000). Workers resist a new technology like ERP mainly because of risk fear or in defense of their work habits. In the study, a three-phase process-oriented conceptual framework is suggested. The three phases are knowledge formulation, strategy implementation phase and status evaluation phase. During the knowledge formation phase, managers engage in practices that aim at pinpointing individual attitudes of each employee and influential group. In this phase, management will determine who is resisting, what are the needs of the employees, the values and beliefs that influence their opinions and their interests. The knowledge of these attributes provides management with a clear view of the environment and challenges that they are dealing with as they implement the ERP system (Dong, 2001).

At the implementation stage, users identified as friendly to the system implementation should be used to influence the resistant users into accepting the ERP system. In this stage, managers are encouraged to have a three-step approach of think-feel-do whereby they attack the resistance from a cognitive component and then make the employees feel the ownership and stewardship of the implementation and lastly have them influence their colleagues. When employees understand that the overall cost of implementation will be minimal in terms of additional cost, they are likely to get along with the idea of the ERP system. Management should keep highlighting the non-disruptive aspects of the ERP systems to minimize any resistance from the employees and influential groups. A hand on training is a proven way that marketers use to move beyond the skepticism of their target (Welti, 1999). Aladwani, (2001) suggests that the same strategy should be used in the implementation of ERP systems. During training, management has an opportunity to convert more resistance to accepting the implementation. An additional boon arises when an influential group or individual is converted because it leads to the subsequent approval of many other users.

(Aladwani, 2001) concluded that indeed marketing strategies are adaptable to the implementation of the ERP and the most important duty for management is to align specific and appropriate strategies with the appropriate stages of implementation.

Top Management

The top management of the organization has to ensure that change is managed properly so that resistance is minimized. They should have a flexible structure, a strong communication mechanism. Since top management does not have a hands-on involvement in the implementation of the system and relies on delegation and feedback, there has to be a proper decision-making process that is broad and strategic. As a result senior management has to be committed fully to the project and display this commitment explicitly. Implementing managers are able to exercise their authority and decisions confidently when they are assured support from senior management. Moreover, top management has to be familiar with the IT system and its functionality and capacities so that they are able to determine the objectives of the systems and its alignment to the goals of the organization (Dong, 2001).

Not all the initiatives discussed above can succeed if the management is not committed to the whole ERP implementation process. Steering change needs a strategic vision to guarantee the long-term success of the system. Under the last phase of implementation as suggested by Aladwani (2001), monitoring and evaluation change management is undertaken. In addition to assessing the amount of apprehension of the attainment of the anticipated business outcomes, the organization should have a routine system, which monitors the advancement of change management initiatives that have been incorporated in the ERP. During this third phase of the project life cycle, management obtains dynamic feedback that is essential for managing the worker’s anxiety. The feedback obtained from the evaluation is important because it assists in finding out why there is persistent resistance (Welti, 1999). Furthermore, it points out specific areas that management have not handled properly in their implementation strategy as well as highlight resistance aspects that were previously not known by the implementation team (Aladwani, 2001).

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Communication

Summer (1999) identifies the major reasons that have led to the collapse of ERP implementation systems among seven companies. The author reviews the implementation of three popular software packages namely SAP, PeopleSoft and Oracle. During the implementation stage of installing ERP system in an organization, several factors that are paramount for its success are noted. For example, project managers realize that regular and properly structured communication is important for the implementing team to reduce project resistance from employees who are the end-users. Communication is one of the major causes of project failure. In the implementation of ERP projects, management needs to identify and communicate the critical success factors of the project to ensure that the project is successful. Projects should be justified on the cost and economics of scale (Slevin & Pinto, 1987).

Additionally, the ERP should not be modified to fit the organization, instead the business processes of the organization should be modified so that they fit into the software package. This is essential because it prevents additional costs to training and modification of the software (Bancroft, Seip, & Sprengel, 1998). Furthermore, business processes are more flexible compared to the ERP system. It is important to acknowledge that, managers have a general expertise in the organization’s process, and in most cases lack the specific expertise. As a result, the implementation team should incorporate business analysts and consultants who have the knowledge of business and technology systems. Effective management of the huge ERP projects is a new challenge to most organizations and requires strict control and management processes such as strict discipline. Contrary to smaller implementations of Management Information Systems (MIS), ERP is an organization-wide implementation that requires an emphasis on the definition of the user requirements and the alignment of the organization’s processes to fit that outlined structure. The success of this initiative depends on the effectiveness of management in communicating the changes throughout all organization levels. Top management plays a key role in supporting the implementation of the project. It should show commitment in a non-interfering way to ensure the success of the project (Bancroft, Seip, & Sprengel, 1998).

Training and Education

According to (Soh, Kien, & Tay-Yap, 2000) the implementation of ERP often involves many stakeholders and harbors many hidden costs that drastically increase the overall implementation cost to the organization. The implementation of ERP is not just a computer implementation and has to involve all personnel in the organization. A greater education and training of personnel, provision of positive stimuli to influence their attitudes ensures that employees stay committed to the innovation. ERP is a disruptive addition to the organization culture and when there is an inadequate change management effort then the project’s likelihood of failing is high. Consulting services have to be effective therefore; care should be taken when hiring external expertise to add to the project implementation team (Davenport, 1998). Social enablers of the success of the system implementation include a committed leadership. When the company fails at selecting the best system to match its organizational performance then the team implementing the system faces many hurdles. The implementation team has to a have the required expertise balanced among the team members. External experts should be incorporated into the team to ensure that the team is competent and has a deep knowledge of the process involved and technical aspects of the system (Gupta, 2000). During the implementation, it is desirable is there is little interference from the top management of the organization (Sumner, 1999).

Project Management and ERP Implementation

Apperlrath and Ritter (2000) note that ERP implementation is a complex initiative because it involves several organizational processes integrated into a single system. Project managers for ERP have to integrate different modules of standalone components of Information Systems, standardize the data input and outputs of the system to ensure that there is a smooth communication process within the organization. The implementation of ERP has to follow the business model that is identifiable with the best practices of the industry. In ERP project implementation the major risk factors are exceeding the budget and allocated time, stoppage of the project implementation, a poor business performance after implementation of the project, an unstable and unreliable system, minimal fitting of the system into the organization, end-user unfriendliness and minimal integration and flexibility ability of the system. In addition, organizations may face a bad financial performance (Peak, 2000).

Another factor to be considered when implementing ERP is that 90 percent of IT projects that deal with SAP R/3 ERP run late because of implementation difficulties and unforeseen costs. Given this minute success rate of ERP implementation, managers have to be well equipped in analyzing and managing the risks involved (Peak, 2000). Aloini, Dulmin and Mininno (2007), identify the main phases of risk management as the background analysis and identification of the risk. Others include examination of the risk, an effort to evaluate the risk and coming up with appropriate ways of treatment. Finally monitoring and review of the risk are done while along with the project implementation communication and consulting process are carried out.

Project schedule and Plans

According to Slevin and Pinto, (1987) successful implementation of an ERP project has to incorporate the two abilities of a manager as a brilliant strategist and an expert tactician. In their study, the authors break down success factors into the tactical and strategic subgroups. Projects have life cycles and these assist reviewers to note the dynamics of the project as time goes. Managers divide their work into stages in the implementation process of the project. In most cases budgetary allocation and organizational resources are the factors that influence the allocation of work segments into stages. At the initial implementation stage, managers conceptualize the necessity of the project. During this stage, the possible ways of implementing the project are identified and the intended outcomes of implementing the project are also specified.

Thereafter, project managers come up with formal plans to ensure the success of the project. In this section, managers will schedule, budget and allocate any other specific role and task. Next is the execution stage where the actual work happens. Materials and resources are acquired and the project is implemented as planned. Afterward, the capabilities of the implemented project are verified to indicate whether preliminary goals have been met. Lastly, the project implementation is terminated. Final activities are done after the completion of the project such as transferring the project to the end-users and reassigning project implementers to other duties in or outside the organization. At this stage, any external resources and expertise are released (Siebar & Nah, 1999).

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Monitoring and feedback

In project monitoring, a project implementation profile (PIP) can be used to access the critical success factors along the project’s life cycle (Schultheis & Summer, 1998). Among the factors to be monitored is the project’s mission that should have clarity of goals and provide the general direction for the implementation of the project. Secondly, the top management support should be monitored in terms of the willingness to ensure that necessary resources are availed and the authority for different implementation processes is assigned. Third, the project schedule and plans form another monitoring criteria. Plans outline the specific steps required in the project implementation stages. Fourth, the level of consultation with the client of the project should be monitored. In the case of the implementation of the ERP, the client is the employees of the organization who are going to use the system and their normal work routines and roles are disrupted by the ERP system. The recruitment of personnel to implement the project, the technical tasks required by the project and the availability of the personnel with the relevant expertise are other aspects that form the criteria for the monitoring task. Monitoring and feedback offer senior management a timely opportunity to control the information receivable at each implementation stage.

According to Welti (1999), monitoring forms one of the roles of a project management team. The SAP R/3 software package includes a standard roadmap that assists in the deployment of the system. A solution manager present in the ASAP component of the software allows project managers to utilize robust project monitoring and feedback capabilities of the system to ensure its functionality is maximized. The software includes a go-live and support section that assists managers to monitor the system’s performance and also obtaining feedback on processes handled by the system. In the initial stages of the implementation of the ERP system, the monitoring criteria for the long-term are determined through a learning process (Slevin & Pinto, 1987). This includes the system performance, the capacities and overall functionality. While line managers and users take ownership of the system, the project team has to keep on adjusting and redesigning the system according to the feedback obtained from the users. Moreover, the key issues raised by users as they interact with the system for the first time should form the criteria for subsequent monitoring initiatives and feedback mechanisms to validate the functionality of the system.

Risk Management

Aloini, Dulmin and Mininno (2007) analyzed articles that refer to the discussion and analysis of ERP implementation. They found out that managers have to take substantial risks in their implementation of ERP to realize the intended rewards of the system. ERP is a complex IT project that faces numerous implementation difficulties. Companies implement effective communication systems and integrated information systems in their business process so that they remain competitive by having an operational efficiency capable of reacting to customer signals. Companies have to incur huge sums of money to implement ERP in addition to the high cost of acquiring the system.

The authors acknowledge that risks are present in the three stages of an ERP project life cycle. Most literature analyzing risk identification by managers uses the terms ‘risk factors’, ‘critical success factors and ‘uncertainty factors’. The success of a project will depend on how and by whom the success is determined. Success may be linked to the duration, cost and scope as underlined in the mission of the project and the monitoring criteria. Success may also have an external focus that depends on the feedback on consumer satisfaction and client’s approval of the system’s quality. On the other hand, project failure occurs in four levels namely, process failure arising when the project does not meet the estimated budget and time (Hakim & Hakim, 2010). Expectation failure occurs when the system fails to satisfy user expectations. Interaction failure occurs when there is resistance to the re-organization by the intended users who in the case of an organization are the employees. Correspondence failure will arise when a match fails to be observed between IT systems and their intended use in the organization (Peak, 2000).

Another factor that determines the success of the project is the number of implementation modules and the complexity of the system architecture. Therefore, management should aim at implementing a system as is least complex and has a minimal module requirement to increase the probability of its success. There must be deep analyses of the processes of business value within the organization that are targeted for streamlining by the system. When the software in the system is incompatible with the business processes of the organization then the result is a system failure that has to be remedied by an expensive modification. Good management conduct is essential in improving user expectations. Managers need to have a structured method in the development and implementation of the project. In addition, they should be equipped with adequate and effective management techniques that cater to all stages of the ERP life cycle. Some vendors of ERP systems like SAP offer risk management methodologies that seek to ensure the competency of the manager is sustained throughout the implementation stages of the ERP system (Aloini, Dulmin, & Mininno, 2007). The IT system has to be adequate for the organization. Therefore; technical aspects should be looked into and these are the scalability of the system, how robust is the system at executing its intended functions, how many modes does the system have and how many are essential for optimum performance. The simplicity and upgradeability of the system also is a factor to consider. In addition to the adequacy, the system should also be maintainable. The operational objective of the system should be met with minimal expenditure to the maintenance effort. For most organizations, the maintenance cost for ERP systems is usually 25 percent of the initial costs and is conducted annually (Aloini, Dulmin, & Mininno, 2007). Inadequate financial management eventually results to project implementation failure because it leads to misallocation of funds to key processes and stages in the implementation plan (Slevin & Pinto, 1987).

References

Aladwani, A. M. (2001). Change Management Strategies for successful ERP implementation. Business Process Management, 266-275.

Aloini, D., Dulmin, R., and Mininno, V. (2007). Risk management in ERP project introduction: Review of the literature. Information & Management, 45(7), 547-567.

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Apperlrath, H., and Ritter, J. (2000). SAP R/3 Implimentation: Method and Tools. Germany: Springer.

Bancroft, N., Seip, H., and Sprengel, A. (1998). Implimneting SAP R/3: how to introduce a large system into a large organization. Manning, SC: Manning Publication Co.

Cookie, D., and Peterson, W. (1998). SAP Implimentation: strategies and results. New York; NY: The Conference Board.

Davenport, T. (1998). Think tank: making the mst of an information-rich environment. CIO Magazine.

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Ehie, C., and M, M. (2005). Identifying critical issues in enterprise resource planning (ERP) implimentation. Computers in Industry, 56(6), 545-557.

Gupta, A. (2000). Enterprise resource planning: the emerging organizational value systems. Industrial Management & Data Systems, 100(3), 114-118.

Guptara, P. (2000). Managment of Change. In M. Zeleny (Ed.), International Encyclopedia of Business & Management (IEBM), the handbook of information technology in business. London.

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Siebar, and Nah. (1999). A Recurring Impovisational Methodology for Change Managment in ERP Implimentation. Proceedings of the American conference on Information Systems (AMICS).

Slevin, D., and Pinto, J. (1987). Balancing Strategy and Tactics in Project Implimentation. Sloan Management Review, 33-44.

Soh, C., Kien, S., and Tay-Yap, J. (2000). Cultural Fits and Misfits: Is ERP a Universal Solution? Communication of the ACM, 43(4), 47-51.

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