CM critical success factors

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Copyright 2003 by ERP Research Group All Rights Reserved

Change Management:The real struggle for ERP systems

Andrew Stein, Paul Hawking, Susan Foster

January 2003


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Change Management: The Real Struggle for ERPSystems

Table of Contents

Executive Summary i

Introduction ii

Methodology ii

Demographics iiiPrimary Role iiiIndustry Type iiiCompany Revenue ivSAP Users ivR/3 Profile v

SAP Profile vi

The Role Of Change Management viiDefinition viiImportance of Change Management viiChange Management Budget viiiASAP Methodology and Change Management. ix

Change Management Practices ixChange Management Best Practices ixChange Management Worst Practices x

Approaches to Change Management xChange Management Teams xiChange Management Critical Success Factors xiiChange Management Barriers xiiiEmployee Resistance xiii

Key Insights xiv

Further Readings xiv

Author Details xiv

The ERP Research Group conducts research and surveys on a project basis. Projects arefunded and carried out under the auspices of the School of Information Systems, VictoriaUniversity. The ERP Research Group conducts the analysis and then writes the final reportsubject to editorial review. If you have a topic of interest for either project or sponsoredresearch please email us at [email protected]


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Executive Summary

Introduction

Nobody likes change! Resistance to change stems from habit and the perceived riskassociated with the new role. ERP systems force change on companies this is welldocumented. But how well companies manage this change is the crucial factor in adapting tothe new system.

Encouraging employees to embrace and support the change and to reduce resistance is

probably the single major issue of a change management program. This research seeks toidentify change management issues and practices in a variety of Australian companies.

The findings indicate that managers understand that change management is important and areable to articulate what works and what doesnt. However, most believe that their companieshave not got it right no matter how many implementations they have been involved in. Somemanagers view change management as no more than the provision of the right training to theright people at the right time. While others followed a far broader perspective, indicating thateffective communication to stakeholders and executive buy in were critical to any changestrategy; while incentives and rewards for change were considered ineffectual. Also the levelof resources allocated and the direction of the change strategy varied enormously from

company to company. Interestingly, there seemed to be no clear relationship between theamount of funds allocated to the change management programs and their success.

Managers when considering change management practices need to identify the impact of andreactions by the different stakeholders to the expected changes andthen develop changestrategies accordingly to lessen this impact. Stakeholders want to know before hand what isgoing to change, how it is going to affect them and what is to be done to assist them in thistransition.

In many cases the resistance to change is not solely a reflection of the system beingimplemented but of the company culture as a whole.


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Introduction

Many suggest that an ERP system implementation is primarily a people oriented project.Accordingly many of the major barriers companies face when implementing these types ofsystems and realising associated benefits, are people related. No matter how manyimplementations companies have been through the same problems continue to arise.Companies are realising that effective change management strategies can minimise the impactof the people related barriers.

To explore change management issues and the different approaches adopted by Australian

companies, Victoria Universitys ERP Research Group conducted a survey on behalf of theSAP Australian User Group (SAUG). The survey sought to identify change management

practices, issues and benefits in relation to SAP implementations by some Australiancompanies. The major aims of the survey were to determine the:

basic aspects of companies change initiatives

approaches, processes, and lessons learnt

critical success factors and obstacles which companies have identified aschange initiatives

Methodology

A survey invitation was sent to SAUG members during November, 2002. The Web basedsurvey consisted of four sections; company demographics, the role of change management,approaches, lessons in managing change, and critical success factors and barriers.Both

qualitative and quantitative questions were used. Semantically anchored 5-point Likert scaleswere used for the drivers and barriers. The results reported here are based on 37 completedsurveys collected during the study, representing a 24% response rate.


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Demographics

Primary Role

Respondents were asked to identify their role in the company

Role Number

SAP Manager 30

IT/IS Manager 4

SAP Administrator 3

Total 37

Summary:

The survey was sent to the SAUG primary contact in each company. Respondents are heavilyinvolved in SAP software and its implementation and therefore would be in a position toidentify change management issues relevant to their company..

Industry Type

Respondents were asked to classify their company as to dominant industry type.

Industry Type NumberManufacturing/Distribution 10

Public Service 9

Retail/Wholesale 6

Energy/Natural Resources 4

Information/Communication Technologies 3

Consumer Markets 2

Health Services 2

Financial Services 1

Total 37

Summary:

The company respondents reflected a relatively broad range of industry categories in theAustralian marketplace. Manufacturing/Distribution and Public Service were wellrepresented. As members of the SAP Australian User Group all companies had implementedSAPs ERP software.


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Company Revenue

Respondents were asked to estimate company revenue as an indication of company size.

Spend ($AUDmillions) Number

Less 100 9

101-250 6

251-500 6

501-750 2

751-1000 3

Greater 1000 11

Total 37

Summary:Company revenue indicated that respondents ranged from very large companies to small tomedium enterprises (SME). A significant segment of the sample could be classified as SME.The Australian Government criteria defining SMEs as companies with annual revenue of lessthan $250 million was used.

SAP Users

Respondents were asked to estimate their companys total number of FTEs and SAP users.

Summary:

The majority of the respondents (59%) were companies with more than 1000 employees. Thecompanies indicated that a significant number of their employees were SAP users. At least10% of their FTE were SAP users.

Employees FTEs Number

Less 100 1

101-500 8

501-1000 6

Greater 1001 22

Employees SAP Users Number

Less 20 0

21-100 7

101-250 7

251-500 10

Greater 501 13

Total 37

FTE versus SAP Users

0%

20%

40%

60%

80%

100%

1001

Company Size (FTE)

501SAP Users


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R/3 Profile

To assess the maturity of Australian SAP customers, respondents were asked to indicate theyear of their first SAP ERP implementation and the number of implementations/upgrades they

have undertaken.

Year Implementations Implement/Upgrades #

5 10 4

2002 3 >10 1

Respondents were asked to indicate their current version.

SAP Version Current

2.1x 0

2.2x 0

3.0x 1

3.1x 4

4.0x 3

4.5x 6

4.6x 23

Total 37

Summary:

The sample indicates that Australian companies have reached a level of maturity in relation totheir ERP implementation with 87% of the sample using a SAP ERP system for at least 2years with 67% using for at least 4 years. Since the initial implementation 70% of companieshave undertaken at least one major upgrade of their ERP system with the majority of the

sample (62%) now using version 4.6x.

SAP ERP Implementations

0

5

10

15

20

25

2x 3x 3.1x 4.0x 4.5x 4.6x

Version


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Copyright 2002 by ERP Research Group All Rights Reserved vi


SAP Profile

To assess the extent of other enterprise wide implementations, respondents were asked toindicate any additional mySAP solutions implemented.

mySAP Solutions 1999 2000 2001 2002 2003

BW 4 3 1 2

APO

SEM 1 1

Internet Sales

EBP 1 1 1 2

CRM 2

KMSCM 1 1 2

ESS 2 2 3 2

Summary:

The results indicated that 18 (49%) of companies had implemented at least one of the mySAPcomponents with 61% (11) having implemented two or more components. Of the companiesthat had implemented mySAP components, the majority (72%) were using SAP R/3 4.6x.

In the majority of cases (61%), companies had been using their ERP system for at least 2

years before they had implemented a mySAP component. The most popular componentsimplemented were Business Warehouse and Employee Self Service.

The results indicate that many of the companies were involved in major implementations ofadditional components to their ERP system. This would also have a major impact on theircompany, requiring change management strategies to be implemented.


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The Role Of Change Management

Definition

Respondents were asked to provide a short description or definition of change management inorder to assess their understanding.

From the analysis of the definitions, the following keywords were determined:

Manage/coordinate 42% Training 16%Communication 29% Planning 11%Transition 29% Monitoring/Assessment 11%Processes 18%

Summary:

The analysis of the definitions clearly demonstrated that respondents considered changemanagement was a strategy to aid in the organisations transition involving monitoring,managing and communicating. Based on the responses an aggregated definition wasdeveloped:

Change management is defined as the process of assisting the organisation in the smoothtransition from one defined state to another, by managing and coordinating changes to

business processes and systems. It involves the effective communication with stakeholdersregarding the scope and impact of the expected changes, to assist them to cope and adapt tothe transition.

Importance of Change Management

Respondents were asked to give a rating (1- not important to 5-very important) as to theimportance of change management when implementing or upgrading an SAP system.

Not Important Very Important

1 2 3 4 5

1 10 24

Summary:

The majority of respondents indicated that change management was important whenimplementing or upgrading a SAP system. However of the 34 companies that considered it to

be important, 61%(21) of these committed less than 10% of their overall implementation

budget to change management.


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Change Management Budget

To assess the level of importance placed on change management initiatives, respondents were

asked to indicate the percentage of implementation budget allocated to these initiatives. They

were also asked to identify the level of funding for training within the change managementbudget.

Change Management Budget

(% of implementation budget)

# Training Budget

(% of change budget)

#


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ASAP Methodology and Change Management.

The ASAP methodology includes a change management component including tools andaccelerators. To determine the suitability of this methodology for change management,

respondents were asked if they adopted the methodologys change component and if theyconsidered it to be suitable.

Summary:

Even though .the ASAP methodology includes a number of tools and accelerators to assistwith change management the majority of the sampled companies (70%) did not use them.This may have been due to the fact that they were not aware that they existed or that theyadopted an alternative methodology for change management. Of the companies that did usethe methodology 80% felt that it was suitable for their needs.

Change Management Practices

This section of the report identifies change management practices, which the respondents feltwere important, and the barriers that prevent good change management.

Change Management Best Practices

In an attempt to identify change management best practices, respondents were asked toidentify the best example of change management they have been involved in.

A summation of responses identified the following best practices:

Keeping staff informed by communicating changes and the need for these changes

Training staff before during and after implementation

Using staff for expert users and trainers staff could relate to them and they used staffmanuals to train from

Users of the system form part of the process

Employ a variety of change strategies

Adoption of ASAP Change

Methodology

# Suitability of ASAP

Change Methodology

#

Yes 10 Yes 8

No 24 No


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Change Management Worst Practices

In an attempt to identify things that go wrong change management, respondents were asked to

identify the worst example of change management they have been involved in

A summation of responses identified the following worst practices:

Lack of management buy in

None or poor training

Changes and their impact not communicated

Training post implementation to make up for the lack of training pre implementation

Minimal documentation

Approaches to Change Management

A number of approaches to support change management were identified from researchliterature. In an attempt to identify the importance of these, respondents were asked to rank

how important they considered each approach and how well their company implemented eachapproach. Respondents were also asked to indicate how successful they thought theircompanies were in implementing change.

Approach Importance

to

Respondent(1-not importantto 5-veryimportant)

Companys

ability to

achieve(1-poor to 5-verygood)

Trained people for the change 4.4 3.4Identified what is and is not working with the currentsituation

4.3 3.3

Communicated the need for the change clearly and widely 4.3 3.3Maintained the change after implementation 4.2 3.3Developed a business case to explain the need for change 4 3.5Described the changes needed for the change to succeed 4 3Assessed the success of the change 3.9 3Structured for the change (e.g., added personnel to managethe change)

3.8 2.9

Modelled the change from the top 3.8 2.7

Used a pilot program to demonstrate success before roll-outto target group

3.7 3

Identified specific changes in behaviour needed to implementthe change

3.5 2.5

Rewarded people for taking on the change 3.1 2.2

Companys Ability to Implement Change

Poor World Class

1 2 3 4 5

2 8 22 4


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Summary:

The respondents rated all the identified change management approaches important. Howeveralthough these approaches were considered important, many felt that there was room forimprovement when these approaches were implemented in their companies. This wasreflected in the respondents views of how successful their companies were in implementingchange. There was no relationship between the level of success in implementing change andthe level of expenditure allocated to the change management program.

Change Management Teams

Respondents were asked to indicate who was responsible for implementing change in theircompany and how many people were involved.

Team Resource #

Hired external consultants as experts, facilitators, or advisors 23

Cross-functional team 20

Senior executive steering committee or team 20

Department-based team 13

Involved employees at many levels in the change team 12

Our company did not designate such a team to manage anyof the change

4

Size of Change Team #

10 5

Summary:

The majority of companies used external personnel to assist with their change managementstrategy. However only two companies relied solely on this resource. The changemanagement team was usually representative of a number of stakeholders supported byexternal personnel.

The size of the change team tends to indicate that the team was responsible for managingchange and utilised others to implement the change program. There appeared to be norelationship between the size of the change team and the number of SAP users.


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Copyright 2002 by ERP Research Group All Rights Reserved xiii


Change Management Barriers

Respondents were asked to identify the top five barriers, which restricted positive change

within their companies.

Barrier Rating

Lack of communication and channels for feedback 2.7

Employee resistance to change 2.3 Not all management levels were engaged in the change 2.1

Inadequate resources or budget 2Shifting focus or changing priorities too soon 1.6Executives out of touch with those affected by the change 1.6

Executives sending out inconsistent signals 1.5

Management behaviours are not supportive of the change 1.3Executives not directly involved with project 1.2

Summary:

The barriers to implementing positive change support the previously identified critical successfactors in relation to poor communication and inadequate resources being major barriers.However the barriers involving of executives/management and the allocation of resourceswere inconsistent with the previous findings.

Employee Resistance

In an attempt to identify how different companies cope with employee resistance, respondents

were asked to identify the different change management techniques adopted.

Technique #

Direct face to face communications about the behaviour 25Question and answer sessions and open discussions at meetings 23

Team communication meetings and performance reviews 20Re-communication of goals and needs for change 19

Immediate team or sponsor intervention 18Open, safe communications channels for feedback 18

Focus on goals and what needs to happen to meet the goals 18Coaching for performance 10

Development of personal progress plans 6

Summary:

Clearly communication is seen as the most important technique to overcome employeeresistance.


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Key Insights

Major findings of the report:

Change management is considered important to a SAP implementation

Change management strategies are not adequately applied, even though companieshave undertaken a number of implementations.

There is no relationship between the level of budget for change and the success ofthe program.

Effective communication and executive support are critical issues to successfulchange programs.

Incentives and rewards are not adequate motivators for change.

External consultants are used extensively to assist in the change process.

Further Readings

Additional research in the area of e-procurement can be found at: Aladwani, A. (2001), Change Management Strategies For Successful ERP

Implementation, Business Process Management Journal, Vol. 7, No. 3, 2001. Markus, M., Axline, L. S., Petrie, D & Tanis, C. (2000). Learning from Adopters

Experiences with ERPSuccesses and Problems located athttp://web.bentley.edu/empl/m/lmarkus/Markus_Web_Documents_(pdf)/Already%20PDF/Learning_From_ERP_adopters_April_2001.pdf

Other research conducted by Victoria Universitys ERP Research Group can be found atwww.business.vu.edu.au/sap/research.htm

Author Details

Andrew Stein is a lecturer in theSchool of information Systems inthe Faculty of Business and Lawat Victoria University. He hascontributed to the International

Journal of Management, Journalof Information Management and the Journalof ERP Implementation and Management. Heis a member of the ERP Research Group.

Paul Hawking is a senior lecturerin the School of InformationSystems at Victoria University.He is responsible for managing theuniversitys strategic alliance with

SAP and is coordinator of theuniversitys ERP Research Group. Paul ispast Chairperson (2002) of the SAPAustralian User Group.

Susan Foster is a lecturer in the School of Information Systems at MonashUniversity. She has qualifications in Information Technology, Teaching, andPsychology. She has a strong interest in change management and has written anumber of papers and books chapters related to this. She is an affiliate memberof the ERP Research Group.

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