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"Change management determines ERP implementation success" may be the most-ignored advice in the enterprise technology realm. That doesn't make it any less important.
ERP offers significant business advantages -- but only if it is widely adopted. And that means CIOs and other leaders must prioritize people.
"Particularly in this cloud era, people issues seem to be one of -- if not the -- most important factors in the success of an ERP implementation," said Kathie Topel, director of organizational transformation for global consulting firm Protiviti.
Indeed, the human factor can make or break an ERP implementation -- and far too often, it's the latter.
What is change management?
The Association of Change Management Professionals defines change management as "the practice of applying a structured approach to transition an organization from a current state to a future state to achieve expected benefits."
In simpler terms, change management is what leaders, managers and others do to prepare and help employees do things differently -- such as adopt a new ERP system -- or to ease them into changes such as organizational restructuring.
Here's a look at why change management is important and six keys to using change management for ERP implementation success.
1. Prioritize change management
Change management -- especially for something a major as an ERP implementation -- doesn't just happen.
Deepak LalwaniPrincipal, Deepak Lalwani & Associates
"[An ERP implementation] is truly a transformational change that doesn't happen naturally on its own, nor does it occur without some birthing pains that good organizational change management practices can help to minimize," said Travis Duncan, research director at IT research firm Info-Tech Research Group. "There are lots of interdependencies that need to be planned and managed more strategically than a typical change management effort [and] missteps can cost time, financial resources and careers."
As a result of such missteps, more than half (55%) of ERP projects reported being over budget, and two-thirds realized less than half of their anticipated benefits, according to Info-Tech Research Group research.
However, even if everything is planned, mapped and well executed, an ERP project will fail if the rank and file shun it.
"Change management is critical because when an enterprise system is implemented, it doesn't mean that employees use it and use it to its potential, and that's a big problem," said Deepak Lalwani, principal at Deepak Lalwani & Associates, a change management and business transformation consultancy specializing in ERP implementations. "If nobody is using the system, there's no point in having it, so adoption is critically important."
2. Ensure leadership buy-in.
Business leaders must be proactive and engaged in rolling out the new ERP system, since they function as the most important change champions.
"Change has to be led -- the effort from the senior leaders in the company goes a long way to support the change efforts," said David Ogilvie, ERP consultant and principal at David Ogilvie Consulting. "If this is missing, it makes the task of change that much harder and easier to derail."
That also requires addressing resistant leaders.
"People assume that the leaders of the company are aligned because the project was approved. However, in my experience, leaders driving change permeates throughout an organization and a single dissenter can derail the ability of an organization to adapt," said Sarah Broyd, associate partner at Clarkston Consulting.
People in the C-Suite aren't the only people in the organization that should take an active role from the start. Line-of-business leaders should too.
In general, anyone in the organization responsible for making the change, or whose job is affected by it, should be a participant from the start of an ERP project.
"Realize [users are] thinking, 'What's in it for me?'" Topel said.
3. Address employee fears and concerns
The saying may be that "familiarity breeds contempt," but when it comes to change management a truer saying would be "familiarity is comforting even when it doesn't work well." Employees often feel they have a certain expertise in the current system. And even if the existing ERP system requires workarounds, those issues are known. A new system requires new processes and behaviors and for busy workers, the prospect of spending time learning a new system that may not even be that great is a hard sell. Change makers need to recognize those concerns and address them.
"What you are sometimes asking them to do is not only new, but they are now novices with all the lack of prestige that means," said David Chaudron, managing partner of Organized Change, a consultancy. "Management must realize that organizational structure, measurements and pay may also need to be changed to accommodate a new ERP."
Project leaders can start by truly understanding how employees work currently and exactly what changes the new ERP system will require of them. Then they can consider what the benefits of the new ERP system are and truly market those.
"In IT especially, project planning often fixates on technology and underestimates the behavioral and cultural factors that [derail] user adoption," Duncan said. "Whether change management is project-specific or continuous, it's more important to instill the desire to change than to apply specific tools and techniques."
Emotional intelligence is a major factor in successful change management.
"Persuading people to change requires a soft, empathetic approach, but don't mistake 'soft' for easy," Duncan said. "Managing the people part of change is amongst the toughest work there is, and it requires a comfort and competency with uncertainty, ambiguity and conflict."
4. Consider past change successes and failures
Change management strategies vary with business goals and cultures.
Looking to the organization's strengths and weaknesses as they relate to change resiliency is an important factor in change management. What other changes has the organization weathered? How did leaders and employees handle those well? Which did they handle poorly? What can everyone learn from those lessons and apply to the current ERP implementation?
"The organization's history of successful change in the past will have a big impact on how successful any change efforts are," Ogilvie said. "Similar to sports where winning is a habit [or not], if the company does not have the habit of successfully making changes, this significantly increases the effort required to be successful with an ERP project."
5. Customize best practices
Whatever strategy CIOs and other leaders choose, it's important not to take a generic or cookie-cutter approach.
"Don't make change management a set of [generic] best practice communications, meetings and project protocols," said Lisa Anderson, founder of LMA Consulting Group, a consultancy specializing in manufacturing strategy and end-to-end supply chain transformation.
Instead, leaders can create a customized strategy of how each stakeholder can support the business objectives and get people on board, Anderson said.
6. Create a change roadmap
As with many complex endeavors, real-life ERP implementation change management doesn't have neatly demarcated stages. Still, creating a roadmap is important.
A roadmap can help identify change points, set and manage expectations, and provide guidance, said Annmarie Curley, founder of Newgrange IT Consulting.
To that end, leaders can use the following roadmap as a starting point:
- Stakeholder analysis. Ensure that all stakeholders are engaged.
- Current state analysis. Take time to document how work is done today, that is, look to current business processes.
- Future business process. Understand and document how work will be accomplished after the implementation.
- Check-ins. Conduct change impact assessments at several intervals throughout the project, for example, after design, initial builds and initial testing.
- Opportunity identification. Use the change impact assessment as a driver for the training, communication and any policy changes that are needed.