Change Management
and ERP Implementation : Side-by-side
Lukman Susanto - 2003
Abstract
In this paper, we will analyse the needs for
changing management as part of ERP implementation in a business / enterprise.
As businesses are gradually moving their orientation from production
perspective to customer perspective, they are expected to dynamically adjust
their production methodology to suit market and trend demands. This requires a
highly reliable management system to support overall business processes.
Businesses can no longer compromise with inefficiency and inaccuracy caused by
either human or system factors. Some success stories behind ERP implementation
will give us an inspiration and understanding in how this compound system
actually interpreted in business practices.
INTRODUCTION
In today’s life,
business means competition. Every business will contend to produce not only a
better and more reliable product but also providing a better customer service.
In the mean time, they are enforced to minimise their production costs as well
as their overhead costs. These can only be achieved through developing a better
information system, a highly reliable infrastructure and a more efficient
management system. ERP Systems born to bring a fresh air in bottleneck
business’s information system to provide an integrated system which capable to
handle far more complex transactions and yet providing a highly dependable
system. But, how about their “traditional” management system? How about their
“traditional” staff? How will “change” dramatically affect the stability and
existence of business? This paper will observe the needs of “change management”
in correlation with ERP Implementation and how “change management” plays significant
roles in developing an integrated
What is change
management
Change management is
one of the biggest tasks a business may be involved in. This does not only
require a significant amount of funding but also require unappealing commitment
throughout the whole business component. It is a deliberate approach to bring major
changes towards people’s expectations to move the business forward smoothly (
In most cases when the
need of change appears, businesses have no option other than responding it or
else losing their competitiveness in market. Changes will be more likely the
only way and yet a painful moment for business to survive (
By doing change
management, businesses are expected to be able to perform rapid changes to
minimise costs while maintaining its consistency and existence of its staff in
order to bring a new system into the current one such as implementing ERP
system. Apart from that, change management will also increase the flexibility
of business to deal with future changes (Mark
Schweiker & Jeff Beatty) and in the end, increase the productivity of
the business.
The main concept of
change management in ERP implementation is bringing an understanding that in
post-industrial phase business should be customer oriented rather than
production oriented. Business should prioritise the point of “what final product
is preferred by customers and how to deliver the product in the right time”
above “how to produce cheap, high volume sellable products”.
Market will not be
terribly amazed with state-of-the-art equipment, highly qualified staff and
beautiful final touch if business failed to deliver the desired products on the
right time. In more designated cases, business should be able to fulfil individual
customer order with all customisation in a limited time without affecting its
general production.
To accomplish all
those necessities, traditional approach of business processes must be replaced with
a modern system such as ERP. The right functional team in the right position
with the right strategies and the right timing will be able to produce highly
sellable excellent products. In the same time, as ERP requires standardisation
of the business processes, change management will be needed to ensure the damages
caused by transformation can be avoided / minimised.
change management
aspectS
As many other types of
system implementation, change management in ERP implementation are established
to build an understanding throughout business components so that they are well
prepared to accept the change and clearly understanding how the changes may
affect them (Island Consulting, 2000).
There are various
aspects may involved in change management and they are vary as different system
applies. Specifically with ERP implementation, change management will be
required in separately functional areas where the system will be applied such
as financial department, human resources or manufacturing (
Island Consulting describes
change management activities may include (2000):
·
Ensuring
support of key executives. At the end of the day if the implementation of the
ERP system fails, the company will still survive supported by the main sources
of funding and key people who importantly revolving the business.
·
Understanding
the implementation objectives in detail. If all components in the company
understand clearly what the objectives of ERP implementation are and how the
changes can be beneficial for them, they will more emotionally support the
changes and willing to give of their best to ensure the smoothness of overall
processes.
·
Gauging
potential impacts and corporate readiness. One of the most crucial analysis that needs to be done prior ERP implementation is
measuring the worst possible impact which may affect the continuity of the
business as well as the measuring thoroughly the readiness of the company to carry-out
the whole implementation. This may include determining reserved capital,
evaluating human resources capacities, identifying of all stakeholders (Instant Consulting, 2000) and degree of
support from key executives.
·
Developing
/ implementing strategies and creating counselling services. More and more
company these days are imposed to provide counselling services to mentally
support their employees. This became an imperative issue during ERP
implementation given that the number of employees who will be confronted with intense
situation is considerably increasing as ERP systems are likely to reinstate
completely the old systems (Neville
Turbit, 1995).
There are many other
things that needs to be considered in change
management such as synchronisation between management level and operation
level. Deliberating each individual accomplishments out
of the business may help change management to unite various expectations.
As a guideline, Prosci (1994) classified change management
from different perspectives: managerial and individual. Management level will
focus on how to prepare appropriate strategies, communication plans and proper training
program in order to achieve expected outcomes / result oriented whereas
employees will be carefully instructed to help them to get through the changes
during ERP implementation.
CHANGE MANAGEMENT
DILEMMAS
When initiating
changes during new system implementation including ERP system, it is nearly
impossible to get absolute affirmative feedbacks from all components of
business. The problem will get even more serious when the percentage of
rejection is far higher then the tolerable amount. This is happen as the nature
of human which “resistant to have their expectation disrupted” (Bonnie Mincu, 1999).
Unavoidable but manageable. Many experts are agree, “it is not resistance itself that leads to failure” (Allen Web), but how the management level
dealing with resistance.
In order to understand
clearly what the actual sources of resistance are, project leader needs to talk
to all employees, especially shop-floor persons. Understanding their fears,
curiosity and sensing the level of opposition to determine ways of approaching
their resistances (Allen Web).
There are two primary
reasons why people resist change: lack of motivation and lack of ability (Bonnie Mincu, 1999).
Many employees within organisation usually have not been informed enough the
purposes of change and how an ERP system may beneficial for them. That is why
many of them are not motivated to support this new systems.
This can be resolve by initiating a good communication and vision sharing.
Lack of ability is
often become the main reason of resistance. Even though in one side, people may
agree and understand the needs of change, they are afraid to accept that
because of their limited ability. In most cases, new system means
back-to-school and require further training for each individual involved in
business, learning curves and degradation of productivity are become major
issues.
Adel argues user
resistance of a new technology, such as ERP is normally come from user’s
perception of risks associated with that technology (Adel Aladwani, 2001). This condition will be strengthened by their
preference in using habit in doing their work. Most of people would rather
doing their job in the ways they have normally done it rather than being
innovative to find a better way in doing things.
Failure in handling
such conditions will bring major damages both tangible and intangible
“unfortunate outcomes for the business” (Prosci, 1994) such as employees persistently resist the change, customers
are affected by the impact of upset employees, and valued staff may leave the
business.
Good project leader
will successfully carry out change management resulting a better feeling
throughout organisation and how the employees will gradually move their
expectation along with clearer understanding the needs of ERP implementation.
components of
change management
There are various
tasks need to be done before initiating changes as part of change management
strategy. Island Consulting define them as:
·
Communications
Strategy
Communication in this phase is far more complex than just asking the
employees to do things. Key persons in managerial level need to discuss their strategies
“to ensure a thorough approach” (
·
Impact
Analysis
This is a method to thoroughly determine the current business system and
analysis on how ERP system will affect the business environment. Current
business processes needs to be systematically documented especially for the
area which may be affected by the new system. As a standard method of
documentation, many experts are using data flow / work flow diagram. Included
in those diagrams are how formal and informal
information flows within the organisation and what tasks are carried out by
specific functions. Another information that needs to be documented is job
description and job history which will construct an organises
comparison on how the real business processes may vary from what has been
documented (
·
Skills
Analysis
One of the main issues during ERP implementation is training. As this is
a new system, most of the operator / user will require a certain specific
training for their job purposes. To find out who needs to be trained and what
kind of training required, the company need to perform skills analysis. Every
individual employees who may work in ERP system will
be audited their qualification, skills, internal and external experiences to
find the best position for each of them and to find out whether the company
will need to hire new staff or external consultants to ensure the business
operates adequately. The final result of
analysis will produce a detailed list of appropriate operator for each
position, training required for each personnel and overall calculation on
training costs.
initiating and
managing change management in erp
Summarising stages of initiating
change management described by John Kotter in his book ‘Leading Change” and
implementing them into ERP implementation.
·
Understanding
company pressure
As most of enterprises now are using ERP system for their technology
support, implementing ERP is no longer an option for this kind of business.
Businesses are enforced by the environment to implement the same system as
their competitors, or back-off from this aggressive market. Developing a sense
of urgency will normally bring the whole components in the company into one
voice.
·
Preparing
qualified team as pioneer
When a company plans to implement ERP, the first main task that must be
prepared is establishing a pioneer team. This team must be consist of highly
qualified personnel, they must carry one absolute voice and capable to conduit
and accommodate the curiosity of other employees to the new ERP system. They
will work together as a solid team to lead the change.
·
Establish
a clear vision and strategy
Nothing worse than planning a new system such as ERP without clear vision,
where the company will lead to and / or without understanding the whole
strategy how to achieve the aims. By drawing a clear vision and strategy in how
to achieve that vision, the employees will understand how the new system will
benefit them and they will progressively change their effort to support the
implementation.
·
Constantly
communicate the vision and strategy
Once the vision and its strategy established, the company needs to
constantly communicate them to the employees. Since ERP system has been built
as an integrated system which require a collaboration
between employer and its employees, harmonic communication is playing an
important role in the success of the system which leads to the success of the
business.
·
Strengthen
ERP implementation plan
Get rid of anything which may weaken ERP implementation plan, including
any unsuitable ideas, company structures, activities as well as existing system
which may potentially undermining or threatening the new system implementation.
However in doing so, company must try to keep its existence and avoid any
obstruction to their foundation (
·
Build
short term implementation wins
Many ERP implementation failures happened because long term wins / aims
are too abstract for most people. In most of the time “increasing productivity
and efficiency by integrating information system between production plant and ordering system from sales department” is more
understandable than just “increasing production and sales” as company’s future
win.
·
Formulate
short term wins as guidance and implement new ERP approach
Use the understanding of short term wins and imposed by new ERP system
approach, the company will start to increase their performance “through
customer and productivity oriented behaviour, better leadership and more
effective management” (Island Consulting,
2000).
change management
and erp implementation STRATEGIES : side-by-side
Many people are
assuming that change management is part of ERP implementation. In fact, because
of the level of complexity of the system, change management has always been a
continuing process required throughout ERP implementation. Some experts are
agree that ERP will not be successfully implemented without “a massive dose of change management otherwise the organization will
likely not be positioned to best use the new system” (Gerald Thompson and Winford (Dutch)
ERP is an integrated complex cross-departments application. That is why its implementation is a very costly process and yet most of the companies implemented ERP were always over budget and behind schedule. The main issue in any new system implementation especially ERP is changing the existing system with a new one. In a minor environment, change can be done quite easily. However, for a compound system such as ERP, change management became a crucial component to manage the changes systematically. Changes must be efficiently planned, scheduled, carried-out and documented to minimize the cost and disruption during ERP implementation.
When the Houston
Independent School District (HISD) which consist of 288 schools tried to
implement ERP systems (SAP and PeopleSoft), they’ve successfully implemented 11
ERP modules joined together to support 2000 users at 400 remote sites within
eight months. Compared with average time required to implement ERP system, their are deserve an absolute thumbs-up. Their key success
is their dedication a lot of effort and time in preparing change management “to
ease the transition” (Heather Harreld, 2000) and dedicating their best employees to configure
the ERP system. HISD has got 42 percent return on investment within 2 years.
Another success story has happened in Bombardier Aerospace. Because of the nature of the company, they have to implement multi-disciplinary (people, organisation, technology and processes) of change management to cover various expertise area in order to successfully implement ERP. Bombardier found that change management is not just dealing with human behaviour but also “industrial psychology, organizational development, human resources, training and communication” (Benoît Gowigati and Benoît Grenier, 2001).
CONcluding thoughts
This
paper suggest that in order
to successfully implement any ERP system, a company must establish a good fully
functional change management. Change management are required to prepare the
existing business’s human resources and infrastructure to match ERP system
requirement.
There are various
aspects that need to be considered when establishing change management. This is
depend on the type, size and area of the business.
ERP is a complex system which require depth understanding and
careful analysis to implement. Any rush during implementation will cause
nothing but disaster and bringing a huge lost for the company.
references
A Recurring
Improvisational Methodology for Change Management in ERP Implementation
Michelle M. Sieber, Fui Hoon Nah,
AllenWeb – Plan to Succed in
ERP Implementation
http://members.aol.com/AllenWeb/succeed.html
BPR OnLine
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Business Systems Group
(
http://www.bsg.co.za/ChangeMngmtPage.htm
Cap Gemini Ernst &
Young – Extended
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Change Management
Resource Library
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Change management
strategies for successful ERP implementation – 2001
Adel M. Aladwani, Department
of QM and IS,
City and
http://www.dep.state.pa.us/dep/deputate/oit/ec/factsheet/fs2681.htm
ERP Implementation –
The Traps
Neville Turbit
Fact Sheet –
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General Physics
Corporation – 2002 – Change Management
http://www.gpworldwide.com/training/it/svc_change.asp
Heather Harreld – http://www.civic.com/civic/articles/2000/july/civ-techtrends-07-00.asp
Information Week –
Customization of ERP Apps Requires Development Skills
http://www.informationweek.com/722/22iuerp.htm
Island Consulting –
Change Management
http://www.islandconsulting.com.au/IChange.htm
Leading Change
John P. Kotter,
Mincu & Associates – Change Management
http://www.bonniemincu.com/change.html
The on-line
discussions of The Istanbul (COF)
http://www.tayfundemiroz.com/New_Economy/Community/cof/Discussions/change_mngmt.htm
The Winds of Change – Change Management takes off at Bombardier
Benoît Gowigati,
CMA, and Benoît Grenier
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