For ERP success, create a culture change – Small, Medium, Large – enterprise resource planning
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.”
His communication techniques included a constant flow of written materials combined with frequent face-to-face presentations with departments and shifts to discuss the system and offer tool demos. He tailored his messages on the basis of feedback he gathered through focus-group studies and employee surveys. For example, an early survey regarding employees’ opinions about the impending ERP rollout showed that users were afraid they wouldn’t understand the technology and their new roles within the system. They were also confused about why the company invested so much money in an ERP when there were other important projects going unfunded.
In response to that information, he launched several communication initiatives, including a monthly ERP newsletter with stories about the project’s development, expectations, and training plans. To address specific concerns about role changes, he published a special double issue describing the alterations that were being made to various business processes and profiling role changes for specific job titles. For example, after the SAP rollout, sales reps became responsible for managing customer credit debts, a task previously done by the accounting team. The salespeople were annoyed at the extra work and the accountants felt threatened, Keebler says. He managed the problem by showing both groups the process stream map and pointing out that it made more sense for reps, who are the single point of contact for clients, to handle their debt information. This flow of communication reduced the amount of stress associated with the change and prepared users for training, he says.
Keebler delivers all of his ERP training in the month leading up to that phase of the rollout. For the most recent phase, which was completed in October 2001, that meant he and his team of four trainers conducted 120 classes in 19 days. “It’s important that training be close to the rollout date so people don’t forget what they’ve learned,” he says. “And you don’t want to train before the system is completely configured; otherwise, you may be teaching people to do things incorrectly.”
To make training as relevant as possible, each course that Keebler offered was role-based so that the functional groups–accounts payable clerks, service reps, manufacturing, and supervisors–received specific guidance on their particular role changes. They got overviews of the work processes that affected their jobs and looked at the impact of their actions on people upstream and downstream from them. “If people make a mistake recording data, the results can be exponential,” he says. “We want people to appreciate how serious their responsibilities are to the business.” For example, if a service rep records incorrect contact information for a customer, product shipping will be wrong, billing will be wrong, and the customer’s credit rating will be damaged.
Once the system phase goes live, Keebler offers refresher courses and watches for system errors that might reflect a need for retraining. He also offers self-paced tutorials at the Web site and context-sensitive help options within the application that let users practice transactions in a simulated environment so that they can make mistakes without affecting the whole system. “People will embrace a new system if you give them the skills and support to use it,” he says. “Otherwise, you are just leaving it to chance.”
Peggy Phillips learned the importance of ERP training the hard way. Two years ago Xilinx rolled out a self-service HR application to the company’s 2,600 employees with only fleeting efforts directed at training. “We held informal sessions telling people that we would show them the new system if they wanted to see it.”
The rollout team did little front-end needs assessment, so they had no idea what employees wanted or were capable of doing. For example, Phillips’s team assumed that managers wanted self-service options and that they understood how to perform administrative tasks such as documenting internal transfers or approving salary increases. It turned out that the human resources staff was handling all of those transactions and managers had no interest in taking them on. “It was challenging to get people to use the system and in the end was not accepted.”
Now the company is in the middle of an ERP rollout, and Phillips is determined to learn from the past. “This will be even more challenging than the HR self-service tool, because it’s going to change everyone’s roles and responsibilities,” Phillips says. She has a dedicated team to handle all training and communication needs related to the ERP software. “We are focused on teaching users about the processes, not just how to use the technology.”
This is especially critical since the company went with a generic version of Oracle’s enterprise application, an off-the-shelf system with little customization. That meant that all of Xilinx’s work processes, such as how to track performance reviews, change job titles, or transfer employees, had to be re-engineered to match the fields in the off-the-shelf tool. “With that level of change, there is going to be a lot of discomfort, but we are managing it by showing users the benefits,” she says.
In all of the ERP training her team offers, which is a combination of Web-based and classroom-based courses, users learn what the new processes are and why it’s important to incorporate them into their daily routines. “Context is key. It’s not enough to tell them to do these transactions or even to show them how. They have to see the benefit,” she says.
Because the system is self-service, many tasks that were formerly performed by HR now are the responsibility of managers and employees. “At first it just looks like more work,” she says, “so we talk a lot about the impact it will have on their productivity and benefits.” For example, managers are now expected to fill out Personnel Action Notification forms to alert management to changes in employee salaries or job titles. In the past HR had taken care of PANs, and Phillips began to receive complaints from managers about the added work, She responded by pointing out the dramatic reduction in turnaround time that would come from the new system. Inner-office mail delays and multiple sign-offs meant the old PANs took four to six weeks to be completed; now they take 48 hours. “By framing it properly, they can see the payoff to using the new process and they support it.”
If the benefits of the new system are not enough to encourage employees to take on extra work, Phillips points out how not using them correctly will cause them to suffer. For example, when managers put off filing an internal employee transfer, they continue to pay the transferee’s salary even if that person is already working in another department. “Most managers understand the value if you put it into financial terms,” she says.
In 1997, when Fairchild Semiconductor spun off from National Semiconductor, the new group was given two years to transition from National’s data-management system to one of its own. Instead of laboring to build a custom ERP, Fairchild bought a PeopleSoft enterprise application and set to work converting its own work processes to fit the fields in the tool. The new company had offices all over the world, and each group was already using its own set of processes, says Pat Johnson, senior IT manager. “It made more sense to start from scratch to create a new unified system.”
To manage the change, HR team leaders from all of the offices spent a month at headquarters reworking the business processes for HR, finance, logistics, and manufacturing to fit the generic, “vanilla” system. “I was named the Vanilla Queen,” says Johnson, who led the group and spent most of her time battling requests to customize.
It was an exhausting four weeks, but the team involvement went a long way toward winning support for the tool. “If you invent new work processes in a vacuum and then try to push them out to your people, you’ll never get buy-in,” she says. “You need participation for it to be a success.” Giving HR leaders a voice in the rework created ownership and made them advocates of the transition. “They brought that excitement back to their people.”
Intensive training before and after the system rollout bought further loyalty and support from users. Every course and performance-support tool was designed to address the importance of each transaction, not just how to execute it, she says. For example, the context-sensitive help offered in every screen of the application gives users a quick explanation of the role that each field plays in the overall business process, as well as directions on how to fill it out. “People get excited about a new application once they get past the fear of the unknown.” To ease their fears and build their confidence, Johnson gave users plenty of opportunities to practice with the system before it went live, and to receive feedback.
Even though most of the courses were designed as self-paced Web-based tutorials, trainers delivered them in classrooms so they could guide users through the system and point out places where it might be tempting to look for process short-cuts that could result in serious problems for another department. “Addressing why transactions are important was the easiest way to overcome the resistance to change.”
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RELATED ARTICLE: SMALL COMPANY
Communication Is Key
Name: SI Corporation
Location: Chattanooga, Tennessee
Type of organization: Manufacturer of industrial textiles
Number of users: 800
Learning from Past Mistakes
Name: Xilinx, Inc.
Location: San Jose, California
Type of organization: Provider of software design tools
Number of employees: 2,600
Starting from Scratch with a Generic ERP
Name: Fairchild Semiconductor
Location: South Portland, Maine
Type of organization: Supplier of power and interface products for computing, communications, consumer, industrial, and automotive applications
Number of employees: 10,000
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