ERP Implementation-Critical Success Factors and Management Influence

ERP IMPLEMENTATION CRITICAL SUCCESS FACTORS 1

Literature Review: ERP Implementation Critical Success Factors

Matthew D. Pirie

McMaster University


Literature Review: ERP Implementation Critical Success Factors

Critical success factors (CSFs) in ERP implementations have been well researched. The

academic literature contains many studies confirming the primacy of certain factors over others,

which are sometimes subtly contradicted by further studies which reorder the most important

factors. The main factors do not change much across the analyses, and later papers' authors

reference earlier works as the basis for the authors' own research. This body of work has

converged on broad requirements or predispositions that, when possessed in sufficient quantity

and quality, seem to increase the chances of an ERP implementation that meets organizational

goals for functionality, schedule, budgetary constraints, and user acceptance. Adequate technical

skills, possessed both by internal stakeholders and users, and external consultants, are a

prerequisite for success in any ERP implementation. Adequate vendor support before, during,

and after the implementation is vital. The common elements in the literature, however, seem to

indicate a more basic, vital requirement: culture.

The culture of an organization must be aligned to allow change. This tolerance towards,

or preferably excitement for, change is a CSF that is highly correlated with successful

implementations. The propensity of an organization's members to work well in teams and

support each other laterally across the organizational chart, but also vertically up and down the

chart is indicative of an organization with a higher likelihood of implementation success than a

more silo-type organization. Top management is a driver of organizational culture and the

unwavering support and engagement of top management before, during, and after

implementation activities is generally the top, or one of the top, CSFs in the academic literature.

Considering the costs involved in ERP implementations, and the potential risks of partial

or full implementation failure, it is incumbent upon top management members to be in front of


their organizations regularly, displaying their full support and commitment towards the new

system. In this way, organizational members will be made to understand that the successful

implementation and adoption of an ERP system is a top company priority.

Strong, consistent and visible top management support is the vital component in

successful ERP implementations.

Critical success factors in the literature

Academics in the business world have studied critical success factors in ERP

implementations for years. Findings in papers tend to agree with earlier and parallel work, and

later papers build upon earlier efforts.

Early published critical success factors include the use of a project champion, a project

management approach to management of the implementation, a coherent business plan and

vision linking ERP to the organizational plans, unwavering support from top management, strong

commitment to communication, and a culture committed to change and an effective change

management program. Further literature review reveals the requirement for a strong and skilled

ERP implementation team, effective Business Process Reengineering (BPR), as little

customization of the system as possible, and efficient software development and testing.

Continuous monitoring of progress and appraisal of performance are also important. Other

factors include full engagement of employees during the process, nurturing of trust of affected

staff, and adequate system training (Loh & Koh, 2004).

A survey carried out in the early 2000s indicated that CIOs from Fortune 1000 companies

that had been through an ERP implementation project believed the top five CSFs, in order, were

top management support, existence of a strong project champion, ERP teamwork and


composition, use of project management techniques, and a change management program and a

culture aligned for change management (Fui-Hoon Nah, Zuckweiler, & Lee-Shang Lau, 2003).

Later research has demonstrated that training and education for system users is highly

correlated with successful implementations (Ram, Corkindale, & Wu, 2013). Indeed, later

research has revealed that CSFs can be bundled into higher-level factors, focusing on Technology,

Organization, and Environment. Top management commitment can be seen to affect many of the

factors, either directly with their involvement in actual projects, or indirectly, such as in their

budgeting, team setting, planning, and organizational change management (Schniederjans &

Yadav, 2013).

In order to understand how success in implementations is achieved, an understanding of

failure is important. Factors that are highly correlated with failure of ERP implementations

include a lack of user involvement in the implementation of projects, a lack of training, and

insufficient communication of the project directives and goals by management (Beheshti,

Blaylock, Henderson, & Lollar, 2014). Implementation failure can be defined by several metrics,

but a consensus view has it that failure represents time and cost overruns, loss of data

confidentiality, and server downtime or failure. Overall, a failure can be thought of as wasteful in

terms of capital, time, and competitive advantage, which may lead to bankruptcy (Schniederjans

& Yadav, 2013). The number of organizations that fail to meet their ERP implementation

objectives in one or more of those categories range from 55-75% (Beheshti et al., 2014).

Employee Focus

Human Behaviour

A short look into the human propensity to follow our peer groups and perceived or actual

leaders will demonstrate the requirement for a strongly user-centric organization as a base


requirement for successful ERP implementations. As negative organizational feelings towards

ERP systems are associated with individual reticence to accept the implementation (Kwak, Park,

Chung, & Ghosh, 2012), the creation of effective implementation teams is good insurance

against failure (Nah & Delgado, 2006).

Herd behaviour is a significant driver of technology adoption. People are likely to imitate

observed adopters. Potential users' initial feelings about adoption of a technology can be

sufficiently adjusted by observing others that have adopted the technology, such that, even

though initial biases towards a technology may be negative, these will be integrated with others'

perceived opinions when one's own final opinion is generated. As people will often disregard

their own beliefs for the observed behaviour of others, this presents both an opportunity and

problem for ERP implementation success (Sun, 2013).

If an implementation team can create a core group of early adopters that can be expected

to sell the benefits to the organization at large, cultural barriers to success can be lowered.

However, large scale reticence can deter even those that are enthusiastic about change early on

(Sun, 2013).

Effective early adopters must be seen to be similar to targeted users; high profile adopters

may not be effective in creating a herd behaviour. With this in mind, it is important to create an

implementation team that is representative of the organization as a whole, drawing from diverse

backgrounds and departments (Sun, 2013).

Team Creation

Creation of effective teams from diverse areas of the company is highly correlated with

success (Fui-Hoon Nah et al., 2003). The best available people in the organization should be

attached to the implementation team and this group of people must possess specific business and


technical knowledge. This diversity of team members, preferably from all affected departments,

is designed so that the team members can carry their newfound expertise back to their home

departments at the project conclusion. A mix of external consultants should be included so that

internal staff can learn requisite system skills (Barker & Frolick, 2003; Loh & Koh, 2004).

The ERP team should not have competing work duties. That is, the implementation

should be their only requirement and they must be assigned to it full time. Remuneration and

incentives must be appropriate to the work and team members must be rewarded for on-time and

on-budget implementation (Barker & Frolick, 2003; Loh & Koh, 2004).

In addition to the creation of effective teams, top management must assign a competent

project champion. This project champion should be a highly-placed executive possessing actual

powers to effect change. This person must be placed at the top of the project to ensure consensus

and oversee the entire implementation. This champion must ensure the morale of the entire

implementation staff and must also constantly advocate the benefits the system will provide to

the organization. The champion must act to resolve conflicts between organizational members

and fight resistance of the implementation (Fui-Hoon Nah et al., 2003). The project team and its

champion must also be granted wide latitude in their ability to make important decisions; the

team must not be required to constantly refer to top management for all operational questions or

decisions (Nah & Delgado, 2006; Soja, 2010).

The creation of the implementation team and the selection and empowerment of the

project champion are the direct responsibilities of top management. Even though top

management may not personally select each participant, it falls to top management to ensure the

team creation is correct in content and ability (von der Weth & Starker, 2010).


While team creation is an important consideration for top management, a stellar

implementation team is unlikely to fully succeed in their goals without an organization aligned

for change. Skeptical or excessively negative organizational members’ attitudes will reduce the

efficacy of communication, contribute to poorer performance and increased mistakes (von der

Weth & Starker, 2010).

Organizational culture that is misaligned with the objectives of an ERP implementation

can derail and destroy attempts at successful implementation very early in the process. Proper

change management is vital in this regard, as organizational acceptance towards adoption of new

technologies is correlated with ERP implementation success. An organization that is very

employee focused will have higher rates of success of ERP implementation. (Schniederjans &

Yadav, 2013).

Top Management Commitment

Supportive involvement of top management has been cited as the top Critical Success

Factor for successful ERP implementation. Conversely, non-optimal top management actions are

cited as a significant risk factor against successful implementation. While top management is

typically tasked with strategic planning activities that predate system implementation strategies,

and then hand off implementation to specialists, it is suggested that top management should

engage in careful management of employee behaviour. This can be accomplished by paying

careful attention to organizational cultural and environment (Martin & Huq, 2007).

In order to secure and maintain top management support for the lifetime of the

implementation project, top management bonuses should be tied to project success. Top

management must thoroughly, publically communicate their support for the project and identify


it as a top priority. Top management must be fully willing to allocate adequate resources (human,

time, capital) toward successful implementation (Loh & Koh, 2004).

Organizational change can easily breed fear: the fear of being rendered redundant, unable

to keep up with technological changes, and discomfort from being forced to change ingrained

habits, these fears can lead to large scale resistance to change. Reductions in personal power

from ERP implementations can cause resistance from middle managers in addition to resistance

from users (Naslund, 2004).

Top management must effect positive changes in employee attitudes towards the ERP by

carefully controlling the external cultural environment in addition to building intrinsic

motivation by engaging employees in the ERP pre-implementation and implementation

processes and be seen to be fully behind the project and actively engaged in its tasks. Top

management must identify which resources will be committed to the project, including for

members' training, be active in planning of vendor selection, in the piloting stage prior to roll out,

and in planning the roll out. Top management must ensure a market-driven approach is taken to

ensure the roll out will be sensitive to organizational members' needs, including making a

determination of in-house expertise and the requirements for outside assistance. It is vital that

emphatic communication to all organizational members that ERP implementation runs parallel to

all organizational. Top management must be willing to sit on steering committees, must approve

all implementation-related schedules, and must also assist in identification of risks and how to

handle them, including the loss of core team members to the implementation efforts (Martin &

Huq, 2007).

The organizational culture is of paramount importance to successful implementations.

One measure of this is social capital, which refers to levels of trust and overall relationship


strength inside organizations. Social capital, with related common goals and knowledge sharing,

can be supported, encouraged and nurtured by adequately responsible top management. This

support, along with an overall supportive organizational atmosphere, is critical to the successful

implementation of ERP systems. Without strong commitment from top management and the

requisite organizational attitude towards the change, the likelihood of implementation failure

increases (Schniederjans & Yadav, 2013).

The primary influences on implementation success according to the Klein-Sorra Model

are an appropriate atmosphere for implementation, and innovation-values fit. Atmosphere is

defined as organizational members’ shared feelings regarding management expectations for

behaviours and practices. Innovation-values fit speaks to the degree to which organizational

members' values align with the required innovation. The implication being that, as the magnitude

of the organizational climate for implementation increases, so too does the likelihood that

organizational members will happily and effectively support the implementation project and use

the system (Osei-Bryson, Dong, & Ngwenyama, 2008).

ERP implementation requires adaptation between the organization and its related IT;

change is inherently entwined in the process. Top management must carefully study and plan

how internal communications and relationships will be altered by the implementation, and also

how the organization's structure, business process, and external relationships will be altered. The

common factor is human; people must be fully engaged in the change from start to finish. As

new business processes will require a change in the way organizational members will perform

their jobs, this leads to strong levels of resistance to the new system. Top management must

analyze and determine which factors in the organizational culture will cause behavioural changes

towards the ERP. Since behavioural changes are easier to accomplish when the affected parties


have positive attitudes towards the change, top management's focus must be on positively

affecting members' attitudes towards the new ERP.

The two main levers top management can manipulate for this attitude change are their

involvement in organizational culture and the context in which ERP will affect members' roles,

responsibilities and interactions with the ERP. Organizational members' internal attitudes can be

positively dispositioned toward the ERP in the pre-implementation phase by actively engaging

them in the process. Top management must task as many members as possible to engage in data

gathering about why the ERP is necessary, what work tasks in the organization will have to be

modified, and how the organizational vision must be modified to fit the software. With regards to

personnel, active members should determine what training organizational members will require,

what new remuneration systems will be needed, how organizational structures should be

modified, and who will become members of the various ERP teams. Finally, required funding

may be examined, as well as what future changes may be anticipated. This full engagement of as

many personnel as possible will help create the buy-in necessary to ensure success (Martin &

Huq, 2007).

High levels of employee engagement early and often in the process is correlated with a

higher degree of implementation success (Beheshti et al., 2014). Research has indicated positive

correlation between company culture and implementation success. Not only does top

management foster company culture, but organizational members' support of top management is

also critical. In general, higher levels of performance can be expected to be seen from engaged

employees. (Schniederjans & Yadav, 2013)

Negative organizational feelings towards ERP systems are associated with individual

reluctance to accept the implementation. Clearly, management cannot assign every member of an


organization to work on the ERP implementation team, so management should be careful to

encourage all organizational members to use the new ERP as components are brought online. All

organizational members must benefit from constant communication from top management

regarding the utility and importance of the new ERP (Luminita & Ana-Maria, 2013).

In general, the higher the user satisfaction with the system and process of implementation,

the more likely the implementation will be successful. A positive correlation between top

management support and a favourable organizational result is also evident. This indicates the

importance of top management support, not only in communication of plans, but in the positive

effect management can have on organizational attitudes and behaviours. To accomplish this, top

management must visibly support the project, allocate required resources to its completion, and

carefully monitor progress. Top management must constantly and thoroughly communicate the

high-priority nature of the project throughout the organization, and further display their support

by setting up a strong project team (Dezdar & Ainin, 2011).

Top management must be careful to properly communicate the reasons and justifications

for ERP implementation throughout the organization; this is required so that end users'

motivation to properly use the system will be increased (Dezdar & Ainin, 2011). Failure of top

management to educate employees about benefits of the new systems can lead to destructive

reticence to accept new technologies, leading to ERP implementation failure (Beheshti et al.,

2014).

The Technology Acceptance Model (TAM) speaks to users’ acceptance and use of a

technological system, specifically, the system’s Perceived Usefulness (PU) and perceived Ease of

Use (EOU). PU is the subjective opinion of a possible user that use of the technology will

increase his or her job efficiency. Perceived EOU is the subjective opinion of a possible user


regarding the amount of effort he or she will have to commit to learning and using the system.

The greater the levels of these two variables, the higher a potential user's intrinsic motivation to

use the system (Kwak et al., 2012).

Extrinsic variables associated with high levels of PU and EOU include program features,

user training, program documentation, outside consultants' participation, computer literacy,

educational achievements, organizational role, and prior experience with ERP (Kwak et al.,

2012). This further reinforces the requirement for thorough and sustained user training since user

satisfaction is affected, in large part, by their competence in the use of ERP systems

(Schniederjans & Yadav, 2013).

Training

As training directly influences users' abilities to fully utilize the system, thorough training

regimes are necessary for management stakeholders and end users to ensure they have the

requisite skills to operate the system (Dezdar & Ainin, 2011). General education about the

benefits of ERP and specific training on the system should be undertaken throughout the

lifecycle of the implementation project. New or rotated employees must not be missed in this

continuing training. Not only will this help to reduce frustration, but will increase users'

effectiveness with the new system after implementation activities are complete. This training also

assists in the reduction of resistance against change (Ching-Chien et al., 2006; Garg & Garg,

2014).

As ERP training typically involves 10-20% of the human resources of an organization

and can take up to 10-20% of an implementation budget, it can easily end up being one of the

most expensive aspects of an implementation (Dorobăţ & Năstase, 2012; Pastor & Casanovas,

2002). Despite this being the case, training budgets are often the first thing to be cut when the


implementation exceeds the allotted budget (Fui-Hoon Nah et al., 2003). Training expenditures

are correlated with degrees of success, with less successful organizations sometimes spending as

little as 1% of their implementation budgets on training, whereas more successful organizations

can sometimes spend up to about 20% of their budget (Naslund, 2004).

Proper, sufficient, and timely training will reduce the organizational resistance to change

that typically accompanies ERP implementations while simultaneously increasing user

competence and confidence with the systems. Strong commitments to training also demonstrate

to users that the organization is willing to invest in them, which will increase their sense of job

security (Naslund, 2004).

Technical training regarding operation of the system is not the only aspect required.

Education about the purpose of the ERP, its integration into the business, the affected business

processes, and, especially, what their individual roles in the changed organization will be go a

long way to providing the buy-in required of organizational members and reducing their anxiety

about the changes (Naslund, 2004). Training has a direct effect on the variables contained in the

TAM, explaining nearly 80% of the variance involved in the Ease of Use variable towards the

ERP. Further to this finding, it was determined that user participation in the study and

implementation of the system is itself positively correlated with users’ view of the usefulness of

the system (Bradley & Lee, 2007).

Project Management

As ERP implementation success is measured in quantifiable terms, it lends itself well to

project management techniques. Implementation scope must be clearly defined and managed.

Expansion of the project scope must be measured against program timeline and budgetary

restrictions, and approved before changes are made. These changes must be supported with an


adequate business case (Fui-Hoon Nah et al., 2003). The scope management must be strict, with

the scoping document fully codified, agreed to by all stakeholders, and signed off. Early

successful deliverables are important to the project as wins for the team to celebrate, helping to

create motivation in the team. Constant tracking of project metrics is vital in order to determine

how the project is proceeding, and also to be able to take corrective measures when possible

(Loh & Koh, 2004).

Contributing factors to the successful use of the project management technique are varied.

As mentioned, a clearly defined scope is the absolute starting point. Detailed plans with full

visibility for all users are required. The participation of a skilled project team, including outside

consultant/vendor representatives and internal staff from diverse backgrounds inside the

company will help to ensure success and assist in the dissemination of system knowledge

throughout the organization (Ferratt, Ahire, & De, 2006).

Technical Focus

Organizational Capability Maturity

Organizational position on the Capability Maturity Model plays an important role in ERP

implementation success. In-house experience with IT infrastructure increases an organization's

abilities to deal with complex implementation tasks (Schniederjans & Yadav, 2013). The

Capability Maturity Model (CMM) is an objective benchmarking tool that contains 5 levels

ranking organizations based on the organizations' ability to reliably follow codified business

practices and produce consistent outcomes. Beginning from Level 1 (Initial) which describes

organizational IT processes as ad hoc through to Level 5 (Optimized) which describes

organizations using continuous improvement to better their controlled processes. As the CMM

scale is indicative of organizations’ ability to use IT to its full potential, positioning on the CMM


scale was predicted to be directly related to implementation project outcomes, which is what was

found. Not only does CMM positioning predict the quality of an installation, but it is also

positively correlated with superior project performance, such as reduced development efforts and

implementation times (Subramanian, Jiang, & Klein, 2007).

Business Process Reengineering

Business process reengineering is the act of modifying business processes to improve

efficiency. With respect to ERP implementations, BPR requires altering business processes to

match the pre-loaded best practices that come with the ERP system. Cited as one of the main

reasons that companies abandon ERP implementations, internal business processes must be

altered to fit the ERP system. Companies must endeavour to avoid customization of the ERP as

much as possible, as this increases costs and the likelihood of errors, and makes future upgrades

more difficult and expensive (Jarrar, Al-Mudimigh, & Zairi, 2000; Loh & Koh, 2004).

In order to benefit from system best practices, BPR must be performed frequently.

Organizations must accept ERP bundled best practices whenever possible. Once the ERP is

implemented, BPR must continue in order to take advantage of updated best practices when

available (Shirouyehzad, Dabestani, & Badakhshian, 2011). Interestingly, one study (Ram et al.,

2013) failed to find any causal link between BPR and implementation success. The authors note

that this finding was consistent with an earlier study from 2003, but that the results from 2003

were arrived at using a different method. The authors note that the effects of BPR may make

themselves felt through mediating effects on other aspects of ERP implementation, but admit that

testing this hypothesis would not be possible based on the authors’ study alone. The authors go

on to mention that other research has indicated strong relationships between BPR and internal

efficiency gains and improved user satisfaction. According to Ram et al., regardless of the


findings, based on the vast amount of studies supporting BPR’s positive effects on ERP

implementation, further study is required.

Conclusion

As an extremely expensive project in terms of both time and capital, an ERP

implementation requires the close coordination of many moving parts. Chief among those are

human behavioural considerations. As organizational change not only affects business processes,

but also the people performing them, the human capital of an organization must be carefully

managed before, during, and after an ERP implementation. Top management’s full and complete

commitment towards these human issues is a fundamental requirement of implementation

success. It is not sufficient that top management merely becomes familiar with the vendor and

sign the purchase orders; top management must be closely involved with all facets of an

implementation. Organizational members take their behavioural cues, in large part, from the

cultural norms of their organization that are largely affected by top management. Due to this, top

management has a major role in the implementation, on a scale consistent with the influence top

management wields in the operation of the organization as a whole. By communicating the

requirements frequently and fully, by being involved in day-to-day work for the implementation,

by involving as many organizational members as possible, and by committing the resources

required, top management displays to organizational members the absolute importance of the

ERP system and its unique strategic value to the organization. This visible commitment will

assist in breaking the inertia and resistance typical of large scale change in any organization and

help ensure the success of the implementation project.

In addition to overt support, top management must ensure adequate training is secured for

all affected parties, even when the implementation budget is stretched, and temptations to reduce


expenses are high. The staffing of implementation teams, including the best and brightest from

within the organization and from the vendor or implementation consultant is vital to not only

creating a positive disposition towards the system from all organizational members, but to

ensuring that system knowledge can be disseminated throughout the organization.

It can be seen that top management support encompasses not only directly encouraging

the implementation, but also ensuring the correct conditions, be they technical or human, exist at

the organization, for the duration of the implementation. In this way, top management can help

ensure the successful implementation of an ERP system, delivering a beneficial system on

budget and on time, that will help secure the future of the organization.


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ERP Implementation-Critical Success Factors and Management Influence

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