A poll conducted by Panorama Consulting describes two primary sources of failure on ERP projects: not properly defining business processes and insufficient attention to change management.
This illustration shows the results:
Although this poll is not scientific, the results accord with common sense and experience: defining processes and change management both address how people will work in the post-ERP environment.
These people issues are a challenging problem on most technology-enabled business transformation projects. The letters ERP stand for "Enterprise Resource Planning", which unfortunately puts focus on resources rather than individuals. From a project success perspective, it would be more helpful to call it "Everything Requires People."
Poor change management can damage even the best ERP initiative.
ERP success demands that users adopt new business processes, ways of working, communication channels, software tools, and so on. This challenging proposition becomes even more complicated as organization size increases.
Large, geographically dispersed organizations face particular difficulty coordinating and communicating changes associated with an ERP project. Beyond communication, however, is the underlying need to foster engagement, understanding, and cooperation of those impacted by ERP-driven changes.
Even small and mid-sized organizations find change management difficult. In late 2010, Lumber Liquidators, a retailer with $650 million in revenue and 225 locations, reported a net income drop of 45 percent due to "reduced productivity" associated with its ERP implementation.
My blog post described the role of change management in creating this painful financial situation:
Lumber Liquidators problems arose because, apparently, the company did not anticipate the difficulty employees would have transitioning from the old system to SAP. Poor training is a common obstacle on enterprise implementations of this type.
The CEO of Panorama Consulting, Eric Kimberling, placed ERP change management into a broader context:
Unfortunately, Lumber Liquidators isn’t alone in its insufficient attention to organizational change management, ERP training, and communications. Most companies view these activities as optional, nice-to-have activities. However, as many companies realize the hard way, these are critical necessities.
Advice for enterprise buyers: Change management, which includes communications and other activities needed to engage employees, is an essential component of successful ERP. It's important to recognize that technology training alone does not address the business process changes that many workers and associates find challenging. True change management encompasses a broader scope.
Many organizations underestimate the need for a comprehensive change management program and suffer as a result. Don't fall into that trap.