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ERP projects need organizational change management to succeed

The success of ERP projects depends on organizational change management, the right ERP software selection and executive buy-in, says a panel of ERP experts.

ERP projects usually carry a certain risk for costly failure. A panel of ERP experts said this can be avoided through...

strong executive buy-in, correct ERP software selection and good organizational change management. The panel provided the advice during a recent discussion at an ERP Boot Camp. The three-day seminar was sponsored by Panorama Consulting Solutions, an ERP consulting firm based in Denver.

Panorama Consulting works with clients to evaluate their ERP requirements and recommends ERP software that meets the client's needs. They often are called in as expert witnesses when failed ERP projects result in litigation between the ERP vendor and the customer. As such, they have extensive knowledge of factors that can lead to ERP failure.

Rich Farrell, senior account executive at Panorama, said three characteristics appear in every failed ERP implementation: lack of executive buy-in on the project, choosing the wrong software and poor organizational change management (OCM).

Executives must be visible in all phases of the project and act as cheerleaders, Farrell said. "They have to be present, they have to go to steering committee meetings and they have to push it through," he explained, "because there are going to be hard times throughout the implementation, and you need strong leadership at the top."

OCM is important because it can help build trust in the relationships of all stakeholders in the project, Farrell continued. This leads to better communication of project goals and can help identify people who may hold the project back.

"You know how to deal with the tough times, you know who the cheerleaders are and you know who the resisters are, and you can give them a little bit more love," Farrell said. "It also sets the foundation for training, testing and all that."

Daren Fields, senior account executive of manufacturing and production at New York-based Infor, who has experienced ERP implementations from the vendor side, echoed the call for executive buy-in. "You want to start with the vision; you want to hear them say why we are doing this," Fields said. "You want them to paint a picture of what the company is going to be like after this implementation."

Often, a change like this means job responsibilities for some people in the organization may change, or that jobs may be eliminated, and top executives must allay any fears that workers have about their future. "When we change business software, there are winners and losers, and you want to make sure that the losers -- the people whose job may be no longer important -- know that they will be taken care of," he said. "Maybe their job will be better. Those are things that executives can do to really help out employees, because, quite naturally, they may be scared."

Executive buy-in and visibility are required

Executive visibility and strong leadership throughout the project are critical, said January Paulk, Panorama's director of organizational change and business process management.

"A lot of times, executives are strong at the beginning, but then fade away and you never hear from them again, so you want to make sure they are visible and they're communicating often," she said. "I've seen companies where the admin will put time on the CEO's calendar to 'walk the halls,' because if you put it on their calendar as an event, they make time for it." This visibility is important, because executives get a sense of how the project is progressing and can learn about any negative feelings.

The panel agreed having an effective training program is important to the success of an implementation. Although the form that training takes will vary in different organizations, there are some common practices that increase its effectiveness.

"I think 'train the trainer' works. You have your core team and that first pilot test, which is like a training session for that first group of users," Paulk said. "Then, in the second pilot, you bring in more people, so that's reinforcing that first group, and you're introducing it to the second group and even more with the third pilot."

Repetition of training sessions is important to drive home the training, but keeping the content and format varied is vital, Farrell said. "You can't just use the same tired PowerPoint presentation, because after a while, you'll have a mutiny," he said. "That's also where the change management comes in, because you can know your audience and how they like to train."

It's critical to preface any training with comprehensive skills assessment, which helps you tailor the training to the individual's needs, said Bill Baumann, Panorama's director of expert witnesses. "One size does not fit all, and for different functional areas, you're going to have different requirements for the functionality and the system they're going to use," Baumann said. "You need to know where the people are, because you may have some [who] have never used Outlook, and now you need to train them to use an ERP system."

To be effective, training also needs to be ongoing and continue after the system go-live date. It also must incorporate more than just instruction on the system software. "Keep in mind that you're not just training on how to use the software, you have a business process and the software supports that process," said Ed Spotts, Panorama's senior ERP consultant. "So, you have business processes that you're training on, and the software training should be a part of that. We always talk about how this is a business project, not a software project."

Manage customizations and configurations

Out-of-control software customizations and configurations, a major reason for implementation failure, according to the panel, can be alleviated with strong project governance practices and a project plan.

"The first best practice is project governance, and making sure you have an escalation path for customizations and configurations," Paulk said. "You need someone to approve them when they come up in design sessions and say it makes sense from a financial standpoint to configure it that way."

Spotts agreed "one of the worst things that can happen is to have developers or anyone start to throw in changes willy-nilly. You need to have an orderly process, you need to make sure that you really want the change and that they are fully tested in a test environment."

Although many organizations may look at an ERP project as primarily a software implementation, managing people is the biggest factor in the project's success. This means dealing effectively with both workers who are negative about it, and those who are fully on board.

"The thing that scares me the most in organizations is that there's always a 'fix-it fox' [who] does everything, and will jump on to your implementation and just love it," Farrell said. "The problem is that they either burn out or get hit by a bus, and then you're stuck. So, you need to spread the wealth in all functional areas, and make sure that you have folks [who] know the system."

Deal with naysayers, but also listen

There may be naysayers who are resistant to the project, and you must deal with them, Spotts said. "We had a project where there was one person who was very negative about everything, but they gave him an ultimatum -- he had to get on the system and learn it, or face severe consequences," he said. "He was still not happy about the software, but he's very good and doing the job. You always try to bring everyone along." Action shouldn't be taken hastily, though. Spotts noted that you should listen to the naysayers, because they may bring up concerns with the project that have not been considered.

The other side of the coin in any ERP implementation is the relationship with software vendors, and how a customer manages this relationship is another key to success. You must keep vendors involved continuously, Infor's Fields said.

"You have to get them into the cadence meeting [a regular meeting of the main project stakeholders], keep them moving and fully engaged," he said. "Bad deals that go south do me no good, and I like lots of references and have people brag about my company. We want to stay with our customers, be partners for the long haul and have them in the room when things are going down. If things start to go down, go to the executives, escalate up the chain to the top level."

As an independent consultancy, Panorama recommends the vendor with the best approach for a client's particular needs. The vendor, therefore, should be invested in the project's success as much as the customer, Spotts said.

"References are huge, because it's more than just making the company look good," he said. "No one wants to be on the losing team. If you give a vendor a great reference, it makes them want to work harder for the next one."

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