Change Management within ERP Projects

Working Paper Change Management within ERP Projects Benjamin R. Hoetzel* University of Applied Sciences Heilbronn, Germany Abstract Radical and incremental changes within an ERP project are essential for the success of the implementation. Although the success factors of such projects have been widely discussed, ERP projects still fail. Therefore, the paper critically discusses ERP-enabled change manage- ment, its critical success factors and best-practice management methods. Furthermore it iden- tifies several situations which are decisive for the occurrence of resistance to changes and suggests steps to overcome this resistance. The theoretical discussion is supported by a practi- cal ERP project within a small-sized company. Copyright © 2005, Benjamin R. Hoetzel, University of Applied Sciences Heilbronn, Germany Introduction tools of business processes across the or- ganisational supply chain. Moreover, ERPs In today’s economy with its dynamic and are beneficial because they are integrated fast moving markets, most companies seek instead of fragmented, embed best business to integrate Enterprise Resource Planning practices within software routines, and (ERP) systems as a contributing factor to provide organisational members with di- maintain their ability to compete. In this rect access to real-time information (Ross process the companies are disposing of 1999). Although ERPs provide benefits their antiquated legacy systems and replace such as: improving the effectiveness and them through ERPs. efficiency of the corporate IT infrastructure ERPs are an integrated set of applications or enabling the integration of global busi- which support organisational activities ness processes, many ERP projects fail such as finance and accounting, sales, pro- (Aladwani 2001; Robey et al. 2002). Al- duction, and logistics. Furthermore they Mashari and Zairi (2000a) report on failure can be seen as optimisation and integration which occurs due to the employees’ resis- * Benjamin R. Hoetzel is Research Fellow at the University of Applied Sciences Heilbronn in Germany. His primary field of research contains organizational process improvement and ERP-enabled change management. Change Management within ERP Projects tance to change. Many companies ignore whole. At last, a summary will pick up the that ERP implementation represents more core findings in this paper. than an incremental change. Moreover, it is ERP-Implementation – factors initiating a radical change of technical infrastructure, a resistance to change business processes, organisational struc- ture, the roles and skills of organisational In 2004, WZM Werkzeugmaschinen members, and knowledge management GmbH faced new challenges driven by the activities. All the changes in these areas growth of the company and the set-up of a are essential for the success of the imple- second plant. The company also received a mentation (Martin 1998; Davenport 1998). stronger demand for its products and ser- This paper analyses the importance of vices which created additional pressure to change management in an ERP implemen- expand its production. As it had not been tation project. It describes an implementa- necessary yet, WZM Werkzeugmaschinen tion at a small sized German manufactur- GmbH did not use any IT-support for the ing company named WZM Werkzeug- management of its company. But the maschinen GmbH (pseudonym name). The growth also demanded for an implementa- company is a classic SME (small- and me- tion of a new ERP system in order to not dium-sized enterprise) producing tools for lose control over the processes, and to re- presses in the automotive sector. It em- duce costs. WZM Werkzeugmaschinen ploys 120 people at two production sites in GmbH also recognized that it is not enough Germany. to change the IT system but also to adapt The paper first identifies the factors which the processes, to change workplace defini- initiate a resistance to change within the tions, and to familiarize the employees organisation and discusses the need for with the ERP system. quickly adopting to changes which are enabled by ERP implementations. Subse- However the implementation of an ERP quent, critical success factors – which are system often results in a need for Business an essence of ERP projects and decisive Process Re-Engineering (BPR) in parallel for managing change – are identified and (Al-Mashari and Zairi 2000; Al-Mashari their importance will be critically re- 2003). WZM Werkzeugmaschinen GmbH viewed. Furthermore we will focus on the realised quickly that forcing the ERP to change management aspect within such match existing business processes meant a projects and critically discuss the impact big effort in customising the solution. Fur- on the employees and the organisation as a thermore the customising of an ERP sys- -2- Change Management within ERP Projects tem is a continuous process which affects active opposition or even acceptance (Kot- not only processes but also hierarchies and ter and Schlesinger 1979). functional divisions. This is a major issue However, for a company it is beneficial to for the organisation and easily creates a quickly adapt to environmental changes, climate of perpetual change among the explore new ideas or processes, and reduce employees. fixed costs in order to be competitive. In the literature, Leana and Barry (2000) Some individuals also seek changes be- comment that organisations and employees cause this is providing a variety in their increasingly are willing to change their work, fulfilling self development needs, work, and the procedures. On the other and maintaining interest in and satisfaction hand they are looking to reduce uncertainty with their jobs. Piderit (2000) discusses the and seek for stability. Caruth et al. (1985) positive and negative aspects of a resis- found several factors, why people usually tance to change. Successful change man- are resistant to change. Resistance occurs agement in companies relies on generating especially when change: stands for a per- employee support and enthusiasm for ceived lower status or prestige, reduces changes, rather than overcoming resis- authority or freedom, causes fear, disrupts tance. In addition, we need to see the rea- established work routines, affects job con- sons behind resistance, especially if they tent, rearranges formal and informal group are unselfish, and not just the resistance as relationships, is forced upon employees a threat. One of three examples in this arti- without explanation, or because of mental cle results from an interview with a middle and physical lethargy (Caruth et al. 1985). manager in a large, diversified company, Exploring the organisational change litera- describing his response to the restructuring ture more in depth, the work of Kotter and and centralisation of his company around a Schlesinger (1979, pp. 107-108) diagnosed new enterprise-wide ERP system. In this four factors for resistance to change: paro- case, the employee started off enthusiastic chial self-interest, misunderstanding and but became dissatisfied due to the lack of lack of trust, different assessment, and low top management support, co-workers’ lack tolerance for change. As shown, most re- of interest and commitment, and what he searches in this field identify different, perceived as the dangers of a “behemoth multifaceted reasons for resistance which project” (Piderit 2000, p. 788). are all appropriate. Nevertheless, those reasons show that employees react differ- Returning to the WZM Werkzeugmaschi- ently to change: from passive resistance to nen GmbH, they also recognised that resis- -3- Change Management within ERP Projects tance evolved as the project advanced. Es- ployees are able to make a success, or a pecially some of the key users in the ad- failure, or neutralise complex systems such ministration department were not willing to as ERPs. use the ERP system for their daily work. Reasons therefore are trivial: ERP-Implementation – identifying the • Some employees are 50 years and critical success factors above and their experience with computers is very low. As discussed before, significant technical • Some employees do not accept the challenges posed by ERP are an important change of their processes. part within a project. Al Mashari et al.