For ERP success, create a culture change

Workforce, Sept, 2002 by Sarah Fister Gale

When enterprise resource planning software fails, it's usually because the company didn't dedicate enough time or money to training and managing culture-change issues. "Faulty technology is often blamed, but eight out of nine times, ERP problems are performance-related," says Pat Begley, senior vice president of educational services at SAP, an ERP software company in Newtown Square, Pennsylvania.

One of the biggest mistakes that companies make when they launch new ERP applications is assuming that they are going to be like any other piece of software, says David Stanvick, vice president of marketing for Knowledge Impact, an enterprise-system consultancy in Wayland, Massachusetts. "Microsoft Word is a productivity tool--whether you use it doesn't impact anyone else in the company--but an ERP is a totally new environment. Everything you do in an ERP affects the success of the company."

When used appropriately, ERP software integrates information used by the accounting, manufacturing, distribution, and human resources departments into a seamless computing system. A successful ERP can be the backbone of business intelligence for an organization, giving management a unified view of its processes. Unfortunately, ERPs have a reputation for costing a lot of money and providing meager results, because the people who are expected to use the application don't know what it is or how it works.

Training is often last-minute and weak. It usually covers only how to do specific job-related tasks, without exploring the role those actions have within the rest of the business cycle. "ERP is more than just a new software system; it's a cultural change," Stanvick says. "If training doesn't cover why each task is important and how every transaction is part of a larger process, then end-users are less likely to use the application correctly or consistently." That results in flawed data and a skewed view of the business. "You can't just teach end-users how to fill in fields and click buttons; you have to show them how their actions impact their colleagues."

New ERP systems usually require employees to do more or different administrative tasks that don't add obvious value to their jobs. If they don't understand why that information is important to other members of the company, they will find ways to work around it, Stanvick says. For example, a salesperson using a new sales-force automation process might be expected to fill out a "lead source field" validating where he finds each new client. It doesn't help him with his customer-tracking process and he's never had to do it before, so he skips it without realizing that the marketing department bases its productivity rates on that information. As a result, the budget for marketing is cut because their efforts appear to be ineffective, and suddenly the salespeople are outraged because their leads have disappeared. "You have to connect the task back to the 'what's in it for me' factor or end-users won't do it," Stanvick says.

To ensure that users fully understand the necessity of using the tool correctly all of the time, you should begin with a needs analysis to evaluate their technical savvy, their existing job processes, and the impact the system will have on their roles, says Susan Charley, vice president of compensation and HR operations for Oracle, an enterprise-software company in Redwood Shores, California. "Look at where your people are now and what they will need to change in order to assimilate the new tool." Training should include information about their new roles and responsibilities, the business objectives of the initiative, and the projected benefit to the company and to users.

Early and constant communication is also critical to ease them through the transformation, Begley says. Explain why you are implementing this tool and how it will make them more profitable or satisfied. "End-users will want to know why they can't do it the old way," she says. "They need to know why the change was necessary and why management thinks it's important."

When SI decided to implement SAP three and a half years ago, management was so concerned about the cultural impact it would have on employees that it created a new position for a "change management leader," whose sole responsibility would be to manage the human element of the effort. "People needed to understand what we were doing and how it would impact them," says Patrick Keebler, who landed the job. "When you focus on managing the change and on building strong executive leadership, you can succeed at implementing an ERP."

He began by assessing users and the environment for risk factors that could affect system performance, such as lack of basic PC or Web skills, hiring fluctuations, or a history of resistance to change. Then he built a change-management strategy that included an extensive communication plan to support performance-based training.

"Communicating a project's purpose and goals as well the impact that it will have on the organization and its employees is the best way to minimize resistance," he says. "If you show up one day and announce you've launched a new system, you'll get a lot of push back, but if you share your strategy and why it's important early on, people will embrace it."