Change Management White Paper
Change Management White Paper
Sauce to
ERP SUCCESS
Disclaimer: Third Stage Consulting is an independent
ERP consulting firm. Third Stage has no financial ties
to ERP, OCM, or digital transformation technology
vendors, either directly or through parent companies
or affiliates. Accordingly, the below perspective is
completely technology-agnostic and 100% free of
vendor bias or influence.
INTRODUCTION
Technology and culture have always had a strong
connection. While it’s usually thought that cultural
and social needs often drive technological change,
the resulting tools also have a profound effect on
its culture. Even though we experience the changes
that come with better technologies, we seldom
pause to appreciate the connection between
them. Thus, the need to discuss the importance of
Organizational Change Management (OCM).
To anyone working in today’s corporate environment, the office of just a few years ago will look
utterly unrecognizable. BYOD, digital nomadism, remote working, telecommuting and working
from home would’ve been unthinkable as regular work practices a few years back.
Of course, while the changes are welcome, most companies found themselves unprepared for
the process itself. After all, 70% of all change initiatives fall short of their intended goals. What is
surprising is the sheer consistency with which this failure rate has held up over the years.
In 1996, John Kotter in his seminal work Leading Change mentions that only 30%
of change programs achieve their intended goals. Similarly, McKinsey conducted
a survey of 3,199 executives in 2008 and found that only one in three culture
transformations succeed. Although some of these references date back 20+ years,
little has changed to move the success meter.
Clearly, there’s something here that managers and executives are failing to grasp. The difference
is often failure to recognize the change management practices required to influence the shift
in culture that comes from organizational change. An organization’s culture is built around its
modus operandi, which consists of processes, procedures and technologies that enable them.
Organizations and their members are not only proud of their products, but the ways with which
they create them, too. “This is our way,” “this is how we work,” and similar phrases are inspired by
great pride in companies big and small.
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Nowhere is this more visible than in ERP, which usually sits at the core of a company’s IT
infrastructure. Since an ERP suite comes with predefined processes and workflows, a company’s
culture essentially must wrap around it. As an ERP’s workflows are internalized, they become part
and parcel of the organization’s culture. It is only natural when these processes are disrupted
via system upgrades or replacements, they will result in a company-wide “culture shock” where
employees are forced to readapt.
The problem here is that integrating process change with cultural change is often taken for
granted by management and employees alike. Most leadership teams tend to focus on the “outer
game” focusing more on components such as supply chains and CRMs and less on the “inner
game” which constitutes the company’s operating model and culture.
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COMMON ORGANIZATIONAL
CHALLENGES FACED WHEN
IMPLEMENTING AN ERP SYSTEM
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Changing from a landline phone to a smartphone is also a smaller leap than to a new
ERP. New ERP systems are often replaced every 10-30 years where the change
in technology is far more significant and the consequences of failing to adapt are
far more severe. There are significant challenges to overcome when upgrading to
modern ERP, the most common of which are:
Resistance to change does not surface right away. In fact, at the beginning of a
project, most employees are excited for change. They cannot wait to get rid of their
old legacy systems, burdened by manual workarounds and limited by unavailable
functionality. Excitement obscures the magnitude of what comes next.
But, lurking underneath the tip of that iceberg are dark and murky human fears
and quirks. We are okay with the idea of transformation until we realize that
our own interests might be thwarted by it. Some of the everyday tasks might be
automated. That spreadsheet that someone spent years creating, fine-tuning and
managing is about to become useless. All the tribal knowledge that has made a
team so indispensable to the company for 20 years is about to become data.
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ASSUMING CHANGE MANAGEMENT FOR ERP IS THE SAME AS TRAINING:
The problem with boiler-plate training material provided by ERP vendors and
integrators is that they seldom take an organization’s own cultural nuances and
quirks into account.
A well-oiled organizational change strategy and plan will include a variety of tactics
to address resistance to change and mitigate the risk of operational disruption
during your transformation. This will not only consist of tried and tested methods
that are industry standards but must include strategies that address the unique
issues that a company is going to face because of the circumstances and internal
situations that accompany change.
ERP vendors and integrators often miss out on some of the most effective
strategies like change impact assessments, benefit realization, go/no-go
change readiness, communication plans, internal capability uplift, and process
improvements that should be the benchmarks of the reason they are changing at
all. Organizational change strategies become a result of their myopic focus on the
technology side of the process and more of an afterthought that will simply take
care of itself. Furthermore, simply affecting these strategies often isn’t enough.
Organizations also must assess how effective these strategies are by tracking their
success at various stages including during implementation.
Typically, change managers sell the need to change to employees in one of two
ways. Either the change is required because an organization’s traditional strengths
are being challenged by increasing competition and fast changing consumer
demands, or the organization’s performance is falling below new industry
standards being created by technological disruptions.
These factors are important for all generations in the workforce but seem to have a
larger impact on millennials, who as research has revealed look for more than just
a paycheck. The modern employee is searching for an employer who will invest in
their growth and are committed to making a difference in the world.
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Change managers are no longer able to address the reasons employees embrace
the need for change by sticking to the competition and profits narrative. An
effective change management program needs to address all the questions that an
employee will ask in order to generate as much buy-in as possible. Doing so will
also remove resistance to change up and down the value chain.
CREATING
AN OCM ROADMAP
Regardless of whether you are
implementing SAP S/4HANA,
Oracle ERP Cloud, Microsoft
D365, or any other ERP,
HCM, CRM system - having
a well thought out change
management strategy can
mean the difference between a
successful project and a failed
one. ERP vendors will always
focus on the technology part
of the equation. How their
technology will affect the people
is usually ignored because it
is the least understood piece
of the puzzle. Every person
responds to change differently and the magnitude of an ERP, HCM, or CRM-based digital
transformation puts additional pressure on an individual’s value proposition to the company.
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While popular change management toolsets can be good starting points, true
transformation success requires an actionable change management strategy that
brings your technology, operations, and overall business strategy together. There are
some key steps you need to take to get started on your digital transformation or ERP
change management journey:
Organizations may assume they do not need to over think change readiness
because employees want new technology. Intentional surface resistance is only one
type of resistance. The more prominent sources of resistance are less intentional.
These types of resistance manifest themselves more severely throughout your
digital transformation. When analyzing a company’s culture and organization to
identify resistance and other change management issues, look out for:
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Create an internal alignment strategy:
The next order of business is to ensure all members of your internal team are on
the same page and that the transformation effort is well-aligned with the overall
company strategy and objectives. This is pivotally important as organizations often
suffer from incredible internal misalignment, usually without the knowledge of
management. This creates a backdrop that is nearly impossible to succeed within.
Too often organizations come up with a strategy that looks good on paper but
fails at implementation because key stakeholders either end up chasing daily
emergencies or disagree on important points when push comes to shove. Ensuring
your team’s eyes remain firmly on the goal without being distracted by daily issues is
the key to keeping all teams aligned.
If your project leadership and alignment strategy is not in sync with your corporate
strategy and executive vision, then the rest of the organization is unlikely to be
aligned. Where there is misalignment, there is confusion, resistance, and possibly
chaos. These symptoms are enough to derail a digital transformation. Realize the
importance of addressing the heart of the matter rather than trying to resolve the
symptoms one by one. There are several ways you can incorporate everyone in your
company into your alignment strategy:
• USE AN ORGANIZATION-WIDE, SHARED VOCABULARY: While people within each
department will no doubt have their own verbiage, creating a shared vocabulary or
lexicon will help everyone speak the same language which can help foster common
understanding
• USE VISUALIZATION TOOLS: – Visuals like Kanban boards and flow charts can
help you put forward your views in a way that helps communicate to others in
the company in ways that they best understand. Friendly reminder: people learn
differently so mix it up
• SCHEDULE ONE ON ONE SESSIONS WITH YOUR EMPLOYEES: – Especially for
people who seem a little on edge or might pose a danger to your change initiative. Try
to get to the bottom of their issues and help them see things in a holistic manner that
creates safety and alignment. Above all, you’re letting them know that they are being
listened to
Warning: Do not count on your systems integrator to do this work for you. They
are focused on designing and building software – not managing organization-
wide change. This should be conducted by an independent and separate team,
preferably one that is also well-integrated into the overall project team and
project plan.
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Mobilize your change team:
Once the full scope of change is understood, a clear strategy is defined and the
impact of change is assessed, it is time to mobilize your change management team.
The change team should include a core team responsible for providing central
change support, consistency and coordination among various change initiatives as
well as include other roles critical to facilitating change. Some examples include:
• CHANGE LEAD: A senior person within your organization who is trusted as a coach
and advocate and is “accepted” within your organization
• CHANGE AGENTS: People who will drive the change initiative through every
department, workgroup, and location as cheerleaders and advocates of the upcoming
change
• STAKEHOLDERS: Everyone who has an interest in the change initiative and whose
support is needed to implement the program successfully
• TRAINERS: Responsible for end-user training throughout the transformation.
Supplement training with superusers who are often perceived as more approachable
by employees needing help
• OUTSIDE CONSULTANTS: Who can help provide the frameworks, tools,
methodologies and agnostic opinions to support (and help steer) the overall
transformation. A best practice is to use independent consultants that don’t have
overlapping interests with your systems integrator or software company. Third Stage
Consulting is an example of such a resource
Depending on the size and complexity of your transformation each of these roles
could be filled by several individuals, or each person on your change team may wear
multiple hats and fill multiple roles. No project team ever regrets investing too much
in their change management activities after the fact, so be sure to err on the side of
actively investing in change activities and resources. Hint: When budgets get tight,
people will come looking to cut your OCM allotted funds.
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Create a change strategy, plan, and toolset:
The previously mentioned steps will provide the inputs required to create the
best change organizational strategy and plan for your SAP, Oracle, D365, or ERP
implementation (or any software you choose). Your overall strategy and plan should
include major work streams such as:
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MANAGING THE PEOPLE
SIDE OF ORGANIZATIONAL CHANGE
There are a number of problems with the traditional approach to ERP change management. First,
it neglects the many dimensions of change required to move employees through a big transition.
It is easy to assume that you just need to train people when new processes and technologies
have been implemented, and that will help the day to day details shake out on their own. While
months or years are spent working through the details with a transformation team, other
employees are often left in the dark while they perform their regular duties. Since stakeholders
other than the transformation team will become end-users, they need more than a few days of
training before go-live. This is a key reason for many ERP failures such as the SAP fiasco at Lidl
and Revlon.
Typical ERP training does not adequately address organizational change management. Software
vendors and implementers’ emphasis is on software deployment rather than transformation.
If you are being told differently it’s probably not true. This puts the onus on you to manage the
organizational change components of your projects - an area that most companies do not have
sufficient experience in, or the staff to do so. These problems can be managed, though:
Simply focusing on the database or module part of your ERP implementation may not
result in the changes you desire. As change management is a large field with diverse
impacts, you will need to pick specific strategies that will work for your particular ERP
implementation. These will need to take into account your organization’s structure, culture
and goals. For example, tenured employees will have different needs than more recently
hired younger employees. One size may not fit all, thus you may need multiple strategies.
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Real life example: Third Stage Consulting was called to help a company with
an ERP disaster when more than 80% of their most tenured employees retired
or resigned in the two weeks preceding their new ERP go-live date. These
employees represented more than one-third of their workforce and were a
major source of “tribal knowledge” for the company. Their departure was
directly related to the ERP initiative and how it was handled.
Addressing the technical issues of your ERP system is not nearly as important to success
as managing the people who will be using the software. ERP change management will be
the #1 key to your project’s success, so invest in and focus on it accordingly.
You’ve heard this mentioned previously in this paper, but let’s do a deeper dive into the
reasons why. Too many companies fail to recognize that their new ERP system is not a
silver bullet to address all of their needs. Systems integrators are good at configuring
and building software – not at managing the change that results from the implementation
process and go-live. These firms are incentivized to coerce adoption of as much ERP
software “as built” as quickly as possible This rarely leaves enough time to carefully put
together a change management strategy for each of the integrator’s clients (and it’s
probably not in their skillset anyway).
The problem is that many organizations get “Accentured” (or Deloitted, Capped, etc.) into
thinking that the system integrator can and should handle organizational change, when
they should not. They have enough trouble figuring out how to effectively deploy the
ERP, so let them focus on that. There is also a conflict of interest in this space – effective
change management allows the client to become self-sufficient, no longer needing to pay
the expense of the integrator to fix their every problem by coming up with “creative” new
solutions/strategies that can just cause more problems.
Independent ERP change management experts on the other hand, are better equipped
to handle the people side of the change process. They also provide checks and balances,
since the good ones also understand ERP implementation. Beware: System integrators
(especially the large ones) will attempt to sell you their OCM services. We have even seen
them give it away for free to maintain control.
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ERP training should be treated as one component of an overarching OCM strategy:
With all of the moving parts and priorities of an ERP transformation, it is easy to defer
change management activities until you get to the training phase of the project. This is a
big mistake that sets up your team for failure.
Training is just one of several critical ERP change management workstreams. Training
should almost seem like a formality – one where employees have already worked through
the “freak out” moments of understanding how their jobs will be impacted but are just
learning the details of how the new world will look. If employees are hearing any of these
changes for the first time in the last stages of your implementation, you are in for a rough
go-live. These problems can be addressed with a strong change management strategy –
one that inspires user adoption through training and communication as well as ensures
go-live is carefully planned with a clear cutover readiness assessment. Hint: If you want the
most effective, honest readiness assessment - hire an independent ERP expert to identify
your areas of risk (and there are always areas of risk).
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CREATING
A CHANGE-READY TECHNOLOGY BASE
While managing cultural change brought on by technological improvement will require a
determined steady hand, you can circumvent many of the challenges by opting for software and
tools that require less adjustment to begin with. ERPs remain a core part of most company’s IT
environment. Newer working styles and expectations challenge these systems in unexpected
ways.
Employees are expecting new technology to Do not confuse the point of this section …
work the way is adopted at home (or in online some employees will want the new system to
retail). It’s not surprising that employees are look and perform like their old system. That is
becoming frustrated when they find themselves not realistic, and that expectation needs to be
wasting valuable time navigating complicated managed from the beginning of your initiative
systems and processes that utilize technology via your org change efforts. Additionally,
that’s not intuitive. They view it as complex, and your new system will not succeed if overly
possibly not for them. complex. There are many tools available
that help can streamline data entry into ERP
Enterprise applications are infamous for systems (examples such as bolt-on or add-
being poorly designed, with interfaces on solutions designed to easily integrate into
that have all the appeal of a brick and are larger software systems).
stuffed with needlessly long processes.
While companies can continue to push these
types of applications onto workers, doing
so can backfire in several ways. It can cause
companies to run the risk of losing their talent
to more enterprising companies that are taking
steps to make their digital work environments
more appealing. The point being, while
employee adoption is paramount, it goes hand
in hand with picking the right software and
integrating it in ways employees are likely to
use.
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CONCLUDING THOUGHTS
The reality is that doing organizational
change management well is hard.
Hopefully you’ve gotten that impression
from this paper as well as some helpful
suggestions. It also differs for every
organization and the uniqueness
and complexities of your business
should not be underestimated. If all
businesses were alike, we would create
and effective checklist for org change
and be done with it. Even the best
organizational change management
initiatives will suffer pain while going
through the process. Poorly planned
or executed OCM efforts will put your
entire implementation at risk.
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An overly simplified explanation of OCM is that you are actively preparing the organization for
change while uncovering and addressing areas of resistance. That’s the employee challenge that
we’ve written quite a bit about, but then there’s the executive or management challenge. We
have never worked with a business or for a client where the management team was completely
aligned. Think of it this way – are your executives:
On the same page on what the initiative will accomplish with a consistent
vision for a future state?
Engaged, informed, and consistently up to date about all aspects of the
initiative in addition to keeping the business running (or do they think that’s
what the project team does)?
Actively supporting org change efforts, recognizing that this is hard and costs
time and money?
Willing to compromise on technology or process changes that may disrupt
their specific area in greater ways than other areas?
Willing to own benefits realization - different parts of the company becoming
accountable for grasping and ensuring success?
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