2010 ERP Benchmark Preview: Why Organizational Change Management is So Important to ERP Implementations

Although it is one of the key success factors for any ERP implementation, organizational change management can be difficult to quantify and rationalize.  However, a preview of our 2010 ERP benchmark study results begin to quantify the importance of a comprehensive organizational change management plan.

So far, over 2,000 organizations have participated in our study and we plan to publish results to our clients beginning early next year.  In the meantime, here are a few highlights from the study.

Highlights from Panorama’s Upcoming 2010 ERP Benchmark Study

  • Over 40% of organizations are dealing with significant change concurrent with a new ERP system rollout. An ERP system rollout alone will impose significant pressures on an organization and its resources.  Throw in other changes, such as a new CEO, acquisition of another company, or layoffs, and that change can be the straw that breaks the camel’s back.  Over 40% of companies implementing ERP software are dealing with either a new CEO or the addition of new office locations.  In addition, 26% experience a merger or acquisition around the same time as their ERP deployment, while 19% go through layoffs (that number is trending upward in the ongoing 4-year study).  The magnitude of these changes make a strong organizational change management program even more imperative.
  • People do not adapt well to change and organizational communication is weak. Over 53% of implementing organizations self-assess their ability to deal with change as fairly poor or very poor.  In addition, 47% say communication between management and employees is poor.  These types of environments are not conducive to effective ERP implementations.  Organizational change management tools, however, help address these organizational risks and barriers to make the rollouts more successful.
  • Over 60% of organizations suffer from poor visibility to data and poor integration in their old systems. This metric suggests that employees using a new ERP system have strong organizational resistance and a steep learning curve to overcome.  Poor integration between functional areas in the old system was cited by 64% of organizations as a driver for a new system, followed by poor visibility to reports and key operational data at 62%.  These metrics underscore the magnitude of change that a single, integrated enterprise software system such as ERP or CRM will entail.  An effective organizational change management plan is critical to helping employees understand and leverage the newfound operational visibility in the new system.
  • Organizations expect a lot from their ERP systems. Despite the organizational challenges outlined above, companies expect their enterprise software systems to deliver real business value.  Sixty-nine percent of companies expect their systems to improve business performance, while 39% expect the new system to standardize business operations and 39% also expect the new system to make employees’ jobs easier.  Not to be the bearer of bad news, but our experience and research shows that these goals simply don’t happen without effective organizational change management.
  • Most companies are not yet ready for the organizational changes of ERP software. Perhaps most alarmingly, a majority of companies are not ready to address the people, process, and benefits realization aspects of their enterprise software implementations.  Nearly 50% of companies in the process of implementing ERP software have not yet started their organizational change, training, or communication plans.  In addition, 42% have not developed a business case and ROI analysis, which suggests companies are not ready to measure and manage the business benefits they expect to achieve.  All of these areas need to be addressed prior to an effective implementation, which does not bode well for a large number of companies.

So what are the lessons learned from this benchmark data?  In case you don’t follow our other blogs or research briefings, organizational change management is one of the key reasons why companies succeed in their ERP initiatives, while lack of it is the reason most fail.  Success or failure has very little to do with software, which is why organizations need to carefully plan and allocate project resources to effectively handle organizational change management activities as part of their enterprise software initiatives.

How ready are you for your enterprise software initiative?  Take our organizational ERP readiness survey to find out.

Written by Eric Kimberling

After 15 years of ERP consulting at large firms including PricewaterhouseCoopers and SchlumbergerSema, Eric realized the need for an independent consulting firm that really understands ERP. He began his career as an ERP organizational change management consultant and eventually broadened his background to include implementation project management and software selection. Eric’s background includes extensive ERP software selection, ERP organizational change and ERP implementation project management experience. Throughout his career, Eric has helped dozens of high-profile and global companies with their ERP selections and implementations, including Kodak, Samsonite, Coors, Duke Energy and Lucent Technologies. In addition to his extensive ERP experience, Eric has also helped clients with business process reengineering, merger and acquisition integration, strategic planning and Six Sigma initiatives. Eric holds an MBA from Daniels College of Business at the University of Denver.

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