Searching for the Other Silent Killer of ERP Systems: Organizational Change Management

Last week, we posted a blog post about how Microsoft Excel spreadsheets can slowly and silently kill the effectiveness of ERP systems. When employees use spreadsheets, they create the very problems that ERP systems are meant to address: silos of data, inconsistent information, manual tracking of information, and broken business processes.

We also discussed how it’s not the spreadsheets themselves that are the problem; rather, it is more commonly due to employees’ and end users’ lack of understanding of new business processes. Without this solid understanding of how new business processes should work, where to find important information, how to generate reports, and why the need for centralized data is so important, employees will often revert back to what they’re used to using for such things, such as Microsoft Excel.

This lack of employee alignment and understanding begins with effective organizational change management. Lack of organizational change management is the root cause for the sequence that follows:

1. Employees are confused and lack the clarity required to do their jobs in the new ERP system, which leads to
2. Reverting back to broken or ineffective business tools, such as Microsoft Excel spreadsheets, which causes
3. Newly implemented ERP systems to be less effective.

In other words, organizational change management is the real silent killer of ERP software initiatives.

Of course, reverting to spreadsheets outside the ERP software is just one of many symptoms that might point to these deep-seeded organizational change management issues. We’ve all seen some of the other common symptoms: inefficiencies after go-live, inability to do simple tasks that the old system could do, mass chaos, or, as is seen in over 50% of ERP implementations, a material operational disruption once the switch is flipped. Again, all of these are just a few symptoms of the underlying organizational change management challenges that many ERP software initiatives experience.

So if we understand the root cause of these problems, why don’t we fix it? And why do so many companies repeat these same mistakes despite the lessons learned and battle scars from others? Because ERP systems are so complex (due to people and process issues, not because software is necessarily complex), CIOs and other executives often point to the things they can see and touch: the software, the project plan, the total cost of ownership. The irony is that the real key to addressing the complexities isn’t to fix the software, tighten up the project plan, or cut the budget – it is to better managing the organizational impact of the new ERP system. Unfortunately, despite their importance to a successful project, “people issues” and “organizational change” are relatively nebulous terms that lead to misunderstanding among CIOs, CFOs, and other executives, hence the focus on the more seemingly tangible aspects of ERP implementations.

So the key is to address the six key work streams of an effective organizational change management program as part of a successful enterprise software rollout:

1. Marketing and communications
2. Change impact analysis and organizational risk assessment
3. Organizational readiness
4. Training
5. Benefits realization
6. Stakeholder and executive alignment

These are just the high-level categories of items that need to be addressed as part of an effective organizational change management plan. There is a great deal of detail and pragmatic activities that goes into each of these work areas. Learn more by viewing our recent webinar presentation that discusses the six organizational change management work streams in the video below, or learn more detail about organizational change methods and tools by attending our upcoming ERP Boot Camp.

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