ERP change management: The silent killer

ERP change management: The silent killer

Summary: Insufficient attention to change management is key problem on many ERP implementations.

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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.

Topics: CXO, Enterprise Software, Software, IT Employment

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6 comments
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  • RE: ERP change management: The silent killer

    Was "Data Quality" one of the "deadliest sins" measured? If so, would love to know if/where that stood out. In our experience it often does. www.Perera-Group.com
    paperera
  • "which unfortunately puts focus on resources rather than individuals"

    The truly unfortunate thing is that most people don't realize that individuals are a resource. I agree with paperera that data quality should have made the list. The ability to bring data forward and generate reports utilizing data are two key elements to any software system, ERP or otherwise. I've seen far too many tables where users are allowed to enter whatever their hearts desires instead of being forced to pick something that is validated against another data source. Garbage in, garbage out has been an altruism for as long as we've been using computers.

    I highly agree with points 1 and 2 in the list. Change management is something that is far too often overlooked because it generally reqiures forward thinking instead of solely focusing on the task at hand. The attitude I run into the most frequently is "I'll make it work today and worry about how to bring the functionality forward when the time comes." Unfortunately, "when the time comes" tends to be when the original development team is long gone, documentation is shoddy at best and someone winds up having to reinvent the wheel...or the company realizes too late that the "new" software isn't performing the way they think it shoud because they assumed that what they had been working with before was part of the standard product.
    jasonp@...
  • Why can't the software evolve ?

    Given all the challenges of change management that ERP has seen for decades, why doesn't ERP software change to become more intuitive and hence need less training and change management?
    vijayasankarv@...
  • Culture versus Computer

    Data validation/Data Management and Ease of Use are very important to the success of all software projects. But the larger and more distributed the organization, the more complex changing the culture becomes. A structured Organizational Change Management program prepares the people and the process for the new system. Specific training that accounts for individual learning styles and effective communication throughout the project help increase adoption rates and overall satisfaction with the solution.

    Often, these parts of an implementation plan that are viewed as "soft costs" are eliminated or minimized to reduce project costs. The successful project requires a holistic approach that balances the people and the process.
    Scott Priestley
  • RE: ERP change management: The silent killer

    It is interesting that the poll used the term "Organizational Change Management". If the change management that helped support ERP truly was organizational rather than functional change management (I call it "Tactical Change Management") implementations would be more successful.

    When CM is approached with a project and timeline focus (most models follow that perspective) the resources walk away at the "Go live date". Real change needs to sustain and be culturized (the closer to transformation the more important this is).

    To think that ERP can succeed without a higher, broader organizational connection to leaders and the people doing the work seems a strange viewpoint.

    Take a peek at my blog if you are interested in learning more: horizontalchange.com
    ggitchell
  • Best Practice: Organizational Change Fit/Gap

    I think we can all agree that organizational fit is a key consideration for successful ERP selections and implementations. However, mention the phase “fit/gap” or “gap analysis” and most people will fixate on the ERP software. There are several examples of functional/software fit-gap templates/activities but very few organizational fit-gap templates/guides. The goal of this blog is to shed some light on this very important activity. http://gbeaubouef.wordpress.com/2014/03/09/erp-org-fit-gap/
    beaubouef@...