2010 Organizational Change Management Report Released

Panorama Consulting Group, an independent ERP consulting firm, today released the next installment of the firm’s 2010 ERP Report. This report focuses on the sensitive issues that arise during ERP implementations and the organization’s ability to leverage the effects of organizational change management.

Organizational change management is a broad topic that encompasses employee buy-in, organizational design, communications and training. It also includes, but is not limited to, cultural assessments, organizational assessments, and executive alignment. The report reviews the seven key areas of a comprehensive ERP organizational change management plan and provides metrics for each area.

“The report highlights some interesting data concerning organizational change and how it relates to ERP implementations,” said Eric Kimberling, president of Panorama Consulting Group. “One key data point within the report is the average organization’s drivers for changing their existing business processes. The report findings show that 41% of respondents changed business processes to accommodate ERP functionality, while just 27% changed or customized ERP functionality to accommodate current business processes. Clearly some companies are allowing their ERP software to determine their future business processes,” which highlights the need for an effective organizational change management strategy.

To offer further analysis of the study results, Kimberling will present the free webinar, Thursday, on June 3 at 10:00 a.m. MDT.

The full report is available for download at: http://panorama-consulting.com/resource-center/2010-organizational-change-management-report/.

Panorama Consulting Group 2010 ERP Report

The 2010 ERP Report was conducted by Panorama Consulting Group via online polling and was supplemented with qualitative data gathered from focus group interviews with a sample of survey respondents. Information was collected from December 2005 to December 2009. The 1,600 participants represent global organizations that have implemented ERP within the last four years.

Fixing a Failed ERP Implementation

Most of my entries in this blog have focused on proactive measures that can be taken to ensure ERP or IT success. However, what happens if you're already in the middle of a failed ERP implementation?

The good news is that troubled IT implementations can be fixed, even if they are way over budget, behind schedule, and creating great organizational strain. In these types of instances, I often advise clients to reposition their projects as business improvement projects rather than IT projects.

At this point, you have forget about ERP. During or after a failed implementation, the software is likely creating huge difficulties. Just the mere mention of the letters E, R, and P probably cause employees to cringe, so it's important to focus less on ERP per se and more on how you are going to fix your business operations. With this change in mindset, you use ERP only as necessary to make business improvements to get your organization back on track.

Here is an approach I suggest to get a failed implementation moving in the right direction again:

1) Assess each area and department of the business that ERP is affecting. What are your key performance measures (order fill rate, time to close books, order accuracy, etc.)? Where are your biggest operational pain points? This will require you to reach out to key business stakeholders to get them involved, if they aren't already.

2) Develop two-tiers of potential solutions: stop-gap / "quick fix" solutions and long-term solutions. Determine the costs and time required to implement each of the options.

3) Prioritize your problem and solution combinations to arrive at the top 5-10 areas where you will realize the most immediate business impact at the lowest cost (low hanging fruit). Many of these solutions may or may not involve ERP functionality. It may require more training of the system, configuring the system to support new solutions. My experience has shown that business
processes and organizational change management are the most common problem areas in failed ERP projects, so many of your solutions may not even involve changing the system or implementing new functionality.

4) Begin implementing these low-hanging fruit solutions. The goal should be to build organizational momentum and confidence with these "quick wins."

5) Once you get some quick wins in place with the shorter-term solutions, begin prioritizing and implementing your long-term, more permanent fixes the same way you did with your short-term problems.

6) Begin implementing long-term solutions as time and resources allow.

By following this approach, you will better position your organization to make your troubled implementation a success and optimize the business benefits of ERP.

To-Be or Not To-Be: When and How to Design Business Processes for your IT or ERP Project

One of the most contentious issues in the world of ERP and IT is how much attention to give to as-is and to-be business processes.

Opinions on the issue run the whole spectrum on how this should be addressed; some people feel that companies should let their ERP systems dictate what new processes will be, while others feel that as-is and to-be processes should be documented and analyzed in detail before selecting IT software. Many people, including myself, feel that the approach should fall somewhere in between.

It is helpful to break down the issues and look at each individual aspect of business processes to decide which approach is best for your company and your IT or ERP implementation.

As-Is Processes
This is one of the more controversial aspects of ERP projects. In my experiences with clients implementing ERP, IT, or any other large business change initiative, there needs to be a decent amount of attention devoted to defining current business reasons. The benefits of doing so are three-fold:

1) It helps get alignment and understanding among various business units and geographies on how things currently operate. More often than not, especially in very large organizations, many managers and key stakeholders do not have a big-picture view of what other parts of the organization are doing. Documenting as-is business processes helps develop clarity on what is working well and what is broken with the current business processes.

2) It helps define how employees are doing their work now, which will help define the gaps between the current and future states. This is critical when it comes to organizational change management and training initiatives later on in the project.

3) It helps determine the key operational pain points, and therefore the to-be processes and business requirements during the software selection process.

This is not to say, however, that companies should spend an excessive amount of time documenting or over-analyzing current processes. At a minimum, organizations should develop level 1 detail around their current processes.

To-Be Processes
This area is very important as well. In order to develop the appropriate business requirements and select the software that is most effective for your business, you need to understand how you want your business processes to look in the future. Doing so provides four key benefits:

1) It helps you define your future operational model and business processes independent of software. This allows you to think out of the box and look for opportunities to score big wins by leveraging IT as a tool to enable measurable business improvements. If you skip this step, you are more likely to be influenced by sales messages instead of functional fit.

2) In conjunction with the as-is processes, it helps you identify the gaps between the current and future jobs, roles, and responsibilities. This is critical from an organizational change management perspective.

3) It helps define key performance indicators to help drive business improvements and accountability. With new processes come new responsibilities and opportunities for improvement, so you need performance measures to enable this.

4) It helps prioritize customization, integration, and report-writing needs after the software is selected. Without this understanding of where you want your organization to go from an operational perspective, it is very difficult to determine where customization and additional development is appropriate.

In short, I have found it helpful to view the business process aspects of your IT projects independent of the software itself. Your future strategic direction and business processes should drive the IT project, not the other way around.

Read more blog entries in our corporate ERP blog on our website.

ERP Readiness Benchmarks: Do Companies Know What They're Getting Themselves Into?

One of our recent posts highlighted the importance of assessing readiness before any ERP or large IT project. Panorama Consulting Group provides a free on-line ERP readiness assessment tool, and the preliminary results from participants so far reveal some interesting thoughts.

It should be noted that the sample size is still relatively small (38 companies so far) and the initial data analysis is not yet validated in detail, but the initial benchmarks are interesting. For example:

1. 42% of participants say that their operations are poorly integrated across office locations
2. Over 50% of participants rate their current organizations poor in all the major areas we asked about: responsiveness to customers, efficiency, effectiveness, visibility to operational data, and integration between systems
3. Over 90% of companies have experienced a significant organizational change (in addition to ERP) over the last 3 years
4. Only 20% of participants have dedicated business process, performance measurement, or organizational change management groups in their organizations
5. 55% say employees at their organizations are poor at adapting to change
6. Only 15% of those planning to embark on an ERP project have completed a business case or ROI analysis

While we can begin to draw several conclusions from some of the data we've collected so far, the most significant observation is that organizational change management will be crucial to the success of these projects. These companies will face great obstacles during their implementations, and they will find it very difficult to deliver measurable business value without solid organizational change and benefit realization plans.

More data analysis over time will continue to shed light on organizational readiness. I'll keep you posted on the results. In the meantime, feel free to visit our resource center for more ERP tools and information.

Organizational Change Management in a Global Environment

Whether trying to standardize global business operations or implementing Enterprise Resource Planning (ERP) software in multiple countries, corporate executives face the issue of managing organizational change in an international environment. For any large change initiative, organizational change management is a challenging and difficult issue to address; however, with the addition of additional variables such as differing cultures, values, and languages in the international arena, the difficulty substantially increases.

When introducing organizational changes at an international level, there are several factors to consider:

• Language Barriers. While most managerial types in countries outside the US speak English of some sort, not all front-line employees speak English or speak it well. Therefore, getting key messages across regarding organizational or process changes is a delicate and complex issue. It often involves translating messages into their native languages and reiterating the same message via different channels depending on the culture of the audience (e.g. email, phone conferences, meetings, etc.) .
• Culture and Values. Not all people in the world value or are motivated by the same things as Americans. Many western European countries value history, tradition, and work-life balance, while many developing Asian countries value hard work, entrepreneurship, and teamwork. Managing change in these very different environments requires differing approaches and messages.
• Propensity for Change. More established and developed countries have business operations that have worked well for a long time, while many developing countries have less mature operational models. Therefore, it is often common to see more resistance to change in developed countries versus those that are still emerging. For example, a small company in India that is struggling to keep up with new demand with a very limited staff and manual processes may be more welcoming of an operational improvement than a large office in the UK that has refined its operational model and implemented automated processes over a long period of time. On the other hand, the small office in India may be much less available to assist with a change effort due to a lack of employee bandwidth.
• Consideration of Local Requirements. Global changes that are pushed to the local level by corporate headquarters often do not adequately consider local needs and requirements. Each country has its own regulatory, resource, and employee constraints, so it is important to plan accordingly when implementing the changes. Obviously, completely localizing a global initiative defeats the purpose of having a single global change, but no solution is going to work for 100% of the world, no matter how well-designed it may be.
• Varying Degrees of Understanding of Best Practices. Employees in different countries have different levels of understanding of business and technical best practices and methodologies, which may affect the amount of change management required to "sell" the ideas to affected employees. Employees in eastern Europe are often less likely than Americans to understand the value and benefits of Six Sigma or business process management methodologies, which increases change management effort.
• Buy-in Is Important. This is true for even domestic change, but it is even more true for global initiatives. Involving affected employees across the globe early in the process will help identify and address some of the issues mentioned above. It also helps overcome potential pockets of resistance by ensuring that employees across the globe are involved in the decision-making and planning surrounding the particular change.

By incorporating these aspects into an overall project and organizational change management plan, executives are much more likely to ensure that their respective change initiatives are embraced across the globe. This ultimately leads to increased business performance on a global scale.

Everything Changes - Organizational Change Management in IT / ERP Implementations

Organizational change management is one of the most overlooked areas of large IT or ERP implementations. Several published studies cite this oversight as one of the most common causes of IT project failures.

So what does a large IT or business improvement project need to do from an organizational change perspective? Many of the more successful projects will focus on spending more on training, while others may focus more on communicating business changes through a formal communications plan.

A better way to think of organizational change management is as a comprehensive benefits realization program. Instead of thinking of change management in the traditional sense, such as focusing on formalizing communications, training, or organizational design, an alternate approach is to think of it as one of several mechanisms that can be used to drive tangible business value and optimize the potential benefits of the IT or business change you are implementing.

This shift away from using organizational change as a means to an end accomplishes several things. First, and probably most importantly, it focuses your project and business resources on activities that will improve the business from a quantifiable Return on Investment (ROI) perspective. For example, a large consumer products company implementing SAP determined that it was going to achieve most of its tangible business value from three major areas in the business: Finance, Global Purchasing, and IT. So rather than reorganize the entire company's job and work roles as a result of the SAP project, it focused on those three areas where it had identified 80% of the ROI in its business case.

In addition to the tighter focus on ROI, a comprehensive benefits realization approach also focuses on activities that will drive true business value, regardless of whether or not those activities are related to change management. For example, it allows you to discover business processes that are inefficient by measuring process results. By measuring processes against benchmarks and identifying areas with the most room for improvement, a benefits realization approach allows managers to continuously improve results after the IT or business implementation. It focuses attention on measurable continuous improvement rather than conducting change management just for the sake of it.

In other words, it is helpful to treat organizational change as one of many possible enablers of business change rather than a final solution. Focusing on ROI and business value allows you to implement organizational change activities that add tangible value and minimize time and money spent on those that do not.