"They think it's all over...

"
Managing organisational change after an ERP implementation

ACMP Africa Regional Conference Johannesburg November 2010

Shane Hodgson Organisational Change Management Principal Business Transformation Services SAP Emerging Markets

Agenda

What is an Enterprise System? Some Key Issues in Implementing an Enterprise System Change Challenges of ERP Implementations Major Organisational Challenges after Go-live So What Can We Do? Summary

What Is an ERP system?

An ERP system can be defined as: A packaged business software system that lets an organisation automate and integrate the majority of its business processes, share common data and practices across the enterprise and produce and access information in a real-time environment. The ultimate goal of an ERP system is that information must only be entered once (in Marnewick and Labuschagne, 2005) This means that an ERP system is a high-end solution featuring integration of information technology and business applications. ERP seeks to streamline and integrate operational processes and information flows in the organization to integrate the resources. The whole is greater than the sum of its parts and each implementation is unique and is designed to correspond to the implementer's various business processes.

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Some Key Issues in Implementing an Enterprise System

1.

Determine Your Primary ERP Implementation Focus - there are two primary ways in which an ERP system can be installed in your company; you make your company fit the software or you make the software fit your existing processes. These two methods provide the end-point markers or goal posts and all implementations fall somewhere between them. They present the classic options you have available, either you do a business process re-engineering project or you do a software re-engineering project Because an ERP system has a single database or a single instance of data, a full process chain of dependencies is developed. Every organizational function becomes dependent on the process steps before and after it no matter what department or area is responsible (Kallinikos, 2004). Because of these dependencies, a data error is no longer contained in a single isolated system as in times past. Each data error, or each problem that occurs has both upstream and downstream consequences and the corrections cannot be made in isolation. Improper configuration or system design can have huge impacts on the amount of effort to correct the data and to maintain the system in an ongoing fashion (Sia and Soh, 2002).

2.

3.

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Change Challenges of ERP Implementations

To successfully land and embed massive projects like ERP implementations we need to be thinking about transformational change; about engaging employees in both solution design and execution and about instilling a belief in the rightness of adopting continuous improvement. There are key things we can and should do in designing our change management programmes that will greatly increase our chance of success, and this presentation provides a framework for planning these activities.

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Change challenges of ERP Implementations (2)

Most companies implementing ERP systems do not fully execute plans for the period after go live, and only a small fraction of companies plan for ongoing training, change management and knowledge management. Despite spending tens to hundreds of millions of rand on enterprise system projects, companies usually insist on planning for the wedding but not for married life. As a result they often end up with low user adoption of the new systems, low business value achieved and low satisfaction in general.

To achieve a true return on an investment in an enterprise system, companies need to change the way they think about change. Moving data onto an integrated system; reinforcing a culture of measurement and analysis; and thinking in end to end processes instead of in departmental silos all create new and unusual demands on our employees, structures and resources .

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Change challenges of ERP Implementations (3)

According to Fister Gale (2002), ERP is more than just a new software system, it is a culture change.

ERP systems break down all functional barriers within an organisation and users are required to be multi-skilled and multi-managed. This means that it is often difficult to implement an ERP system in an organisation with strict hierarchical structures and line reporting. The culture of the organisation must first be changed for the ERP system to be successful.
Most importantly, implementing an ERP system is NOT an IT project; it is a business transformation. Thats because many companies, especially those that have expanded via mergers and acquisitions, are organized along lines of business, each operating as a separate entity with its own people, technologies and ways of working. It is critical for executives in these situations to identify and create a core group of activities that can be shared across all divisionsthings like recruiting, human resources, customer service and procurementto eliminate wasteful duplication of effort (Segars and Chatterjee, 2010). An ERP system can enable the transformation of these core activities.

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Surely if we manage change during the implementation it will be OK after Go-Live?

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Example - How is Change Managed During an SAP Implementation?

1 2 3 4

Project Preparation
A. OCM Strategy and Plan B. Stakeholder Management C. Leadership & Sponsorship Alignment D. Change Agents Mobilisation E. Stream Communication

Blueprint

Realisation

Final Preparation

Go Live & Support

Identify Change Requirements & develop OCM Strategy and Plan Identify Stakeholder Groups and Needs Identify Sponsors and Sponsorship Roles Identify Change Agents Identify Communication Requirements OCM STRATEGY, PLAN AND EXECUTION Impact Analysis Approach Analyse current structure and user base Identify requirements and review previous results

Execute, Manage, Report Progress & Review where applicable Management of Stakeholder Expectations

Develop Stakeholder Plan

Sponsorship Support and Involvement in Project activities Change Agents Mobilisation Communication Strategy & Plan Detailed Organisational Impact Analysis Role Mapping Approach and Plan Change Readiness Assessment Strategy Change Agents Support in OCM activities Rollout Communication Plan Action Plan & Communication of Impact to impacted stakeholders

F. Stream Impact Analysis G. User Role Mapping H. Change Readiness Assessments I. Go Live Support J. Milestone Celebration

Role Mapping Process Execution

Handover to Training and Authorisation Conduct Post Implementation Review Co-ordination of Go Live Support Plan Go Live Celebration

Change Readiness Assessments, Reporting and Recommendations Go Live Support Strategy & Plan Integration Testing Sign-Off Milestone Celebration

Analysis of Go Live Support requirements Blueprint Kick-off/ Sign-off Milestone Celebration

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Major Organisational Challenges after Go-live

When sorrows come, they come not single spies But in battalions (Shakespeares Hamlet, 1602) 50-60% of application functionality is not used 30% of performance problems are caused by user behavior 75% of system and application errors are never reported 25% of reported performance problems are not real 45% of refresher training is not needed. (KNOA Customer Research)

We also have:

People still using parallel systems Loss of ERP knowledge and implementation project management skills Unclear ownership of processes and data Unstructured and disconnected training Misaligned expectations about benefits

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Its About the People.

As respondents make clear, the biggest challenge before and after implementation is not the technology only 19 percent of respondents cite technology as a prime challenge in the postimplementation period. Rather, as 51 percent of the respondents said, the biggest issues are people-related (Deloitte, 1998) ERP implementation success is found in modifying the organisational culture. Achieving business benefit requires the organisation to experiment with new process models, and this requires an orientation towards risk taking, rather than risk avoidance. Each of these aspects requires effective leadership in the management structure, and appropriate involvement and empowerment of the system users (Stewart et al, 2000)

Image: jscreationzs / FreeDigitalPhotos.net

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So What Can We Do?

Economist John Keynes once noted in The General Theory of Employment, Interest and Money, Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally. Nevertheless here are my Secret Seven tips for managing change after an implementation.

Review the Implementation Capture and Embed Knowledge From the Implementation Reinforce Cultural Changes Track and Manage User Experience and Adoption Manage and Develop User Competence Upgrade, Expand and Grow the Solution Revisit the Strategy

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Review the Implementation

Post-Implementation Review
1.

Most Change Management methodologies include a Post-Implementation Review(PIR) step. Five major components should be in a PIR
1. Review

2.

of the original business case and assumptions to see how these matched up to performance pre- and post- go-live to establish changes and benchmarks

reality
2. Measure 3. Identify 4. Identify

Training Gaps Business Process Improvement Opportunities the degree of adherence to project methodology

5. Estimate

And...

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Capture and Embed Knowledge from the Implementation

1) Make Use of Narratives and Learning Histories Instead of trying to measure the impossible... we propose the use of narratives as the means of disseminating knowledge, which ought to lead to improvements and enhanced action during the implementation and usage of enterprise systems (Hedman and Borrell, 2004) Narration is increasingly seen as the privileged mechanism for constructing and expressing ones own personal stories and organizations are viewed as narrative artefacts (Cortese, 2005; Klein, 2005). Therefore, the use of stories for helping organizations learn and transfer tacit knowledge is gaining widespread favour among both practitioners and academics (Cortese, 2005; Royrvik and Bygdas, 2002; Sole and Wilson, 2002). Learning histories can be appropriate in many different contexts. Stories are particularly well suited to capturing the dynamic and complex nature of Organisational Learning and knowledge transfer (Kleiner and Roth, 1997a). Moreover, since any change project can be seen as a learning opportunity, the learning history approach might be employed to help reflect upon, assess and evaluate any type of organizational change initiative.

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Capture and Embed Knowledge from the Implementation (2)

2) Establish an ERP Centre of Excellence

The ERP Centre of Excellence seeks to integrate application support staff and support technology into the business for competitive advantage. ERP Centres of Excellence are proactive and try to find ways to apply technology and resources to value propositions and competitive pressures in an ongoing manner. Centres of Excellence actively look for value opportunities (White, 2006) by:
1. 2. 3. 4. 5. 6. 7.

Aligning business owners with IT

Identifying value-added and non-value-added processes Benchmarking results against initial ROI projections Simplifying ERP instances Developing infrastructure and enhancement standards and procedures Committing to ongoing training and knowledge transfer Institutionalizing change management and project management

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Reinforce Cultural Changes

The institution will revert to its pre-change operating structure if cultural issues are inadequately addressed (Schein, 1992)

Establish a Continuous Improvement Culture

The key to a successful continuous improvement culture is the management infrastructure that effectively translates strategic agendas into continuous improvement initiatives aimed at maximizing value and results whilst directly linked to profits and loss through effective management and tracking of results (Aruleswaran s.d.)

Embedding the concept of continuous improvement into the organisations culture requires developing ...strategies to cope with organizational change and pass along the strategies to new members, settings, corporate values, artifacts and technology (Leidner and Kayworth, 2006)
Establish a Process Ownership Culture A process owner is responsible for ensuring all the processes which affect performance are responsibly developed and designed , using methods which aid collective involvement and disciplined thinking. These are the major, cross-functional processes that deliver value to customers and instilling the concept of ownership of these as part of the real management structure is critically important for gaining true value from ERP implementations.
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Track and Manage User Experience and Adoption

If users do not, or cannot, effectively utilize applications, then projects fail, so end-user performance and satisfaction are critical. This requires monitoring and measuring the end-user experience using this insight to target continuous improvement projects.(Gartner, 2008) We need to understand the degree to which users have adopted the software and are using it. We can do this by measuring the live performance of the system and the real errors and delays, whether they are application errors, user errors or performance issues (using tracking software from companies such as KNOA www.knoa.com ).

Identify the technology barriers to end-user performance, such as slow response times, quality problems and cumbersome user interfaces Identify which employees are not using the right transactions and reports to optimize their performance Target training program for maximum effectiveness Identify and Resolve end-user issues more rapidly

We can also survey the users to capture those errors not related to either system performance or user training (e.g. those related to acceptance of the solution or to lack of proper change management). Repeated surveying of the same population is the most accurate and reliable and we can do this using software such as Mirrorwave http://www.mirrorwave.com/#seq1
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Manage and Develop User Competence

At the user level then, there are two distinct forms of learning that appear to be taking place learning how to use the system and learning how to improve the system ... Both of these learning modes have to be in place before users can exploit the full benefits of the system and identify how to improve operational and financial performance (Kennerley and Neeley, 2001). If training does not cover why each task is important and how every transaction is part of a larger process, then the users are less likely to use the system correctly or consistently (Fister Gale, 2002). So we need to ensure that users:
Learn Learn

how to use the system by experimenting with system capabilities. how to improve the system by requesting new reports and data.

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Upgrade, Expand and Grow the Solution or, As Soon As youre Done, Start Another One
Specific findings indicate that ERP-adopting firms, which initiate early enhancements in the form of either add-ons or upgrades, may enjoy superior differential financial performance in comparison to other ERP-adopting firms differential performance (Nicolau and Battacharya, 2006) Early changes, irrespective of their form, represent firms ability to respond rapidly to organizational needs for ERP transformation Most of the value adding occurs in ongoing activities that closely follow developments in the construction, implementation and use of information systems. These results also provide empirical support for Nicolaous (2004b) qualitative findings that post-implementation factors are very significant for ERP-adopting firms ability to realize positive performance outcomes.

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Review the Strategy (1)

Although choosing and implementing an ERP system can be seen as an articulation of strategy, the dialectic between the system and the strategy does not stop at Go-Live.

Instead, the process of alignment between the enterprise system and the organisational elements will continue to unfold and take shape through successive post-implementation phases of the systems life-cycle (Markus et al. 2000).
We also know that Successful ERP implementation develops new cross-functional knowledge, capabilities and competence for the organization (Wan, Shan and Huang, 2001).

And we also know that turbulent markets are better served by emergent strategies than by deliberate ones however, implementing centralised control systems like ERP can tend to predispose companies to thinking in terms of deliberate strategy. ERP implementation in organizations tend to increase standardization, specialization and formalization (Sharma, Sharma and Krishna, 2008)

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Review the Strategy (2)

So implementing an ERP system opens up a new world of strategic possibilities. Sharma and Sarkar (2007) found that managers were getting freed from mundane activities with CRM implementation in an organization; and this freed time was used in doing more analysis and engaging the organization in participative management. Labovitz and Rosansky (1997) suggest that traditional, hierarchical organizational structures are designed to break up managerial tasks into pieces: departments and divisions. This segmentation makes it difficult to integrate the organisation's strategy, business processes and systems into a cohesive working whole. The organisational structure actually becomes a barrier to change and improved performance. So finally how do we use an ERP system to increase flexibility? And how do we realign our strategy towards that?

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Review the Strategy (3)

Emergent strategies are those strategies that have developed as part of a "pattern in a stream of actions" and are divorced from any preconceived plan (Mintzberg, 1987; Hamel & Prahalad, 2005). This strategy is the ability of the organisation to be responsive to the environment in order to maintain its competitive position. Bonnet and Yip (2009) refer to strategic agility, it is the ability an organisation has to constantly, "sense, assess and react to market conditions". They suggest that in today's turbulent markets strategic agility is necessary rather than the idea of sustainable competitive advantage. An Emergent strategy should focus on ...broad corporate intent, rather than fixed goals and should both inform and be informed by ...the application of well defined and broadly understood business models (Gardner and Ash, 2003) SAPs view is that advantage will be achieved through flexibly enabling the business process lifecycle by leveraging components and subsystems such as Business Rules, Business Activity Monitoring and Business Process Management. These are all technologies whose express purpose is to support emergent behaviour.

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In Summary

Go-live is not the end of the change process, but only the beginning. As users grow in experience and confidence, and as the organisation becomes more comfortable with real-time data and cross-functional knowledge, we have the chance to grow our original project-based efforts into a profound business transformation.

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Questions ? Please contact:

Dr. Shane Hodgson Organisational Change Management Principal SAP Emerging Markets SAP Business Park 1 Woodmead Drive Woodmead 2148 South Africa Phone : +27 11 235 6075 Mobile: +27 7947 84082 Email: shane.hodgson@sap.com

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