The Crucial Role of Change Management in ERP Implementations

Successful enterprise resource planning (ERP) implementation goes beyond selecting the right software which helps to explain why between 50 and 75 percent of ERP projects either fail or do not meet their intended objectives.

The reality is that integrating new systems is often a complex and challenging endeavor and embracing organizational change management (OCM) can ensure that the adoption of the new technologies and processes is smooth, efficient, and meets its intended goals.

“Incorporating organizational change management (OCM) strategies from the beginning can help maximize the benefits of an ERP implementation. Additionally, viewing an ERP implementation through an OCM lens can encourage user buy-in and build a strong foundation for success,” writes Tom R. Reznicek, Nicole C. Sims, and Neal Baumeyer for Crowe, a company that provides audit, tax, and advisory services.

The key is recognizing the human element of change and implementing proactive strategies.

Understanding OCM and Its Evolution

Organizational change management (OCM) is a framework for managing the effect of changes within an enterprise.

OCM helps organizations implement change to achieve measurable results in their business strategies, work processes, structures, technologies, organizational cultures, and management styles.

“Simply put, OCM addresses the people side of change management,” says TechTarget.

The origins of OCM can be traced back to the 1940s and 1950s when psychologists and sociologists began studying the effects of change on individuals and organizations.

Over time, OCM has evolved, incorporating insights from various disciplines with the emergence of more holistic and integrated change management methodologies in the latter half of the 20th century.

Today, OCM is recognized as an essential component in the successful implementation of any transformative initiative, such as ERP adoption.

Importance of OCM in ERP Implementation

ERP implementation is a complex process that involves not only the integration of new software but also the restructuring of business processes and, more crucially, the transformation of the organizational culture.

Failure to address the human aspect of change through OCM can lead to ERP implementation failure.

When ERP implementations fail, the consequences are severe. Organizations may incur substantial financial losses, experience operational disruptions, and face employee resistance.

Additionally, failed ERP projects can strain relationships with customers and suppliers, erode employee morale, and damage the organization's overall reputation.

By incorporating OCM into the ERP implementation process, organizations can identify and address potential roadblocks early on, ensuring a smoother transition and mitigating the risks associated with resistance and reluctance to change.

OCM is important because it can help organizations to:

• Increase the likelihood of success for change initiatives.
• Reduce employee resistance to change.
• Accelerate the adoption of new technologies and processes.
• Improve employee morale and engagement.
• Minimize disruptions to business operations.
  
  

5 Strategies for Successful ERP Implementation with OCM

Here are five strategies to increase the buy-in across your organization when implementing an ERP system:

1. Understand the Change/Readiness for Change:

• Conduct a thorough assessment of the organization's current state, identifying areas that will be impacted by the ERP implementation.
• Gauge the organization's readiness for change by assessing the culture, leadership commitment, and employee mindset.
• Develop a comprehensive change management plan based on the insights gained from the assessment.
• Understand everyone who will be affected by the change, including internal and external stakeholders.
• Review lessons learned from previous failed initiatives or projects that did not achieve their goals.

2. Recognize Your Stakeholders:

•  Identify and categorize key stakeholders, including employees, managers, executives, and external partners.
• Understand the unique needs and concerns of each stakeholder group.
• Tailor communication and engagement strategies to address the specific needs of different stakeholders.
• Identify those who may champion or guide the change.
• Reach out to those stakeholders with experience in change and those groups who will be critical to the success of the implementation.
  
  

3. Determine Effective Communications and Training Platforms:

• Establish clear and transparent communication channels to keep all stakeholders informed throughout the ERP implementation process.
• Develop targeted training programs that address the skills and knowledge gaps related to the new ERP system.
• Utilize a variety of communication tools, such as workshops, webinars, and intranet platforms, to ensure information is disseminated effectively.
• Tailor communications and training to specific stakeholders' needs.
• Communication and training plans should be flexible and evolve as the technology evolves.

4. Engage Stakeholders:

•  Foster a culture of collaboration and involvement by encouraging feedback and input from all stakeholders.
• Establish cross-functional teams to facilitate communication and coordination among different departments.
• Create a sense of ownership among employees by involving them in decision-making processes related to the ERP implementation.
• Stakeholders' initial reactions to the communicated change should be assessed.
• Teams should be trained so that they feel well-equipped to successfully adapt to the change.
  
  

5. Implement a Change Management Team:

• Establish a dedicated change management team comprising individuals with expertise in OCM.
• This team should work closely with the project team responsible for ERP implementation, ensuring that the human and technical aspects of the change are aligned.
• The change management team should have dedicated resources and expertise to guide the organization through the ERP implementation.
• Involve the change management team from the early stages of the project.
• Ensure that the change management team has a clear mandate to address organizational change issues.
  
  

Create a Culture of Change

In addition to the five strategies listed above, it is also important to create a culture of change within the organization. This means fostering an environment where employees are open to change and are willing to learn new things.

Here are some tips for creating a culture of change:

• Communicate the benefits of change: Employees need to understand why the ERP implementation is necessary and how it will benefit them.
• Provide opportunities for learning and development: Give employees the training and support they need to use the new ERP system effectively.
• Recognize and reward employees for their efforts: Let employees know that their contributions to the ERP implementation are valued.
• Celebrate successes: Take the time to celebrate the successes of the ERP implementation, both big and small.
  
  

By following these strategies – and remembering that ERP implementation goes hand in hand with effective organizational change management -- organizations can increase their chances of success with their ERP projects. Contact KnowledgePath today to get started.