Change management in ERP transformations: the winning duo

„For miracles one must pray, but for changes one must work.“

When the Italian philosopher Thomas Aquinas uttered these wise words in the 13th century, he surely hardly suspected that they'd be a fitting introduction for such a modern topic as the significance of change management in ERP transformations.

Actually, however, the quote summarizes a reality many companies face as soon as they go through such a momentous upheaval as an ERP switch.

It's long no longer a question that the conditions for organizations in the 21st century are anything but an idyllic stroll. In times of advancing globalization, unpredictable political and social developments as well as the digital revolution, only those who are adaptable survive.

Above all those companies that can adjust flexibly and efficiently to dynamic circumstances will hold their own on the market in the long term. But as Thomas Aquinas already noted: changes mean work.

That's also the reason why innovations around one of the most important IT software applications in companies don't happen like a miracle overnight. They have to be carried out actively and deliberately, which demands more commitment from all involved than would be the case with maintaining the status quo.

In this article you'll learn why this extra work is worth it and change management in ERP transformations leads to a substantially higher success rate.

What does change management have to do with ERP transformations?

Here a detailed theoretical treatise could now follow, explaining what influence change management has on transformation processes.

But instead of dry theory, we'd rather use a vivid case example: An organization based in the far north that operates worldwide and should be a household name to almost everyone.

Right, we're talking about Santa Claus's elf workshop.

No, we haven't mistaken the season. The little helpers are, after all, busy the entire year preparing the gifts for the coming Christmas.

But although that's been tradition for centuries already, the elves come increasingly under pressure in the process. From year to year, ever more letters with wish lists arrive, whose content has to be read, processed and produced.

That's why their boss with the white bushy beard has a surprise ready one morning – a new wish-processing system that manages the Christmas mail digitally. Santa is sure that the workshop will run smoothly again with this state-of-the-art aid.

But the opposite happens. Soon after, chaos breaks out.

Some elves don't know how to operate the new wish-processing system. Others stoically carry on as they've always done. Wish lists are partly processed twice, partly too elaborately and partly not at all.

And in the workshop the air is so thick that even Rudolph's nose turns pale.

Although the system is created to make the procedures in gift production more efficient, within a short time it has caused so much backlog that the next Christmas is endangered.

The reason? Even if Santa's strategic decision was logical and well-meant, he forgot an important component in his equation – getting his elves on board.

That wouldn't have happened if Santa had practiced active change management.

Various building blocks belong to a successful change. Change management is an essential one of them!

Change management as the secret ingredient for transformation processes

Admittedly, the case example is of course far removed from the everyday business of companies here. It describes, however, a starting situation that many organizations should know all too well:

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  • An organization has established itself over years and in the process created structures, guiding principles and workflows that all employees know and apply.

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  • Outer influences drive the company to develop further. Previous procedures should ideally be realizable faster and more efficiently.

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  • For that to be possible, new structures and tools are needed for the implementation.

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  • Management recognizes this optimization need and introduces new systems. Like, for instance, a new ERP system.

Now, however, an important momentum follows, in which, statistically viewed, 70% of all companies make a wrong decision (including Santa from our example):

They underestimate the effect of cultural and social aspects in a transformation process.

In every organization there exists a series of inner convictions that influence the thinking, acting and feeling of the employees. These include, among other things, habits and guiding principles with which the staff more or less consciously identify.

The elves from our little Christmas story are the best example. For many years, they've carried out the ever same processes. They receive wish lists, process these and produce gifts. If they're successful in doing so, they bring joy to children all over the world. That's what makes them who they are.

The abrupt introduction of a new system that intervenes so strongly in these procedures that even their role has to be newly defined is a shock for the elves.

A culture shock that practically always sets in when far-reaching changes are carried out without accompanying measures.

And with that we've arrived at the core of the matter…

 

Why ERP transformations without change management aren't a good idea

The introduction of a new ERP system in a company has the same effect as the impact of a stone on the water surface of a still lake.

An ERP system generally forms the core of an organization's IT infrastructure. Which means that nearly all other processes and workflows align with it.

Once this structure is established and internalized by the employees, it becomes a fixed component of the company culture.

But if a change now takes place in the core, then its effect spreads wave-like to all other areas.

That's the reason why a changeover of the ERP system involves substantially more than the pure technical or logistical component.

It's also a matter of solving numerous organizational challenges on the inner level, like for example:

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  • Too little adaptability that leaders have with regard to the new conditions.

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  • A possible rejection or even active resistance of employees toward the newly introduced system.

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  • Operational disruptions that can quickly arise through a failure to accompany change processes early through active change management.

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  • Conducting difficult dialogues with shareholders and stakeholders about the entrepreneurial decisions made.

These and further factors lead to more than half of all change initiatives in companies failing.

Fortunately, the probability of such a development can be considerably reduced. Namely, by not only picking up all important actors, but actively involving them in the transition processes from the start.

 

How an OCM strategy helps with the ERP switch

Organizational Change Management (OCM), for short also readily just called change management, describes strategies and measures companies deploy at a strategic turning point. The goal of OCM is to prepare, accept and implement fundamental and radical organizational changes, as they take place for example in the elf workshop.

The focus here lies not solely on structural questions, but on a full four dimensions – processes, organization, people and technology.

These elements are analyzed step by step in their current state, possible problem areas and goals are defined and subsequently it goes into a monitored implementation of the planned changes.

So instead of letting themselves be caught off guard by events and possible complications, companies safeguard themselves with change management through a multidimensional preparation and accompaniment of changes.

So far, so good. If only there weren't one fateful hurdle: The classic approach of change management often isn't yet enough for ERP transformations.

A typical example of this are the trainings many companies carry out to familiarize employees and leaders with the new resource planning system.

The further education of the users is in itself of course a correct and essential step. Only, organizations readily lull themselves with it into the false security of having already sufficiently taken into account the dimensions people and technology within the framework of a traditional OCM understanding.

Unfortunately, however, common trainings don't do justice to the versatile requirements of a comprehensive organizational undertaking like an ERP switch. They quasi only scratch the surface, instead of also taking effect in the depths. Which is why later in everyday life questions, problems and frustration come up more frequently. A vicious circle that, despite all good intentions in change management, can thus also manifest in other process phases and company areas.

If, for example, the elves are simply just explained in the framework of a training how the new system functions theoretically, but they haven't understood it in their deepest inner self and really carry the decision, the introduction of the new software will fail. Then the frustrations set in, the elves will question their activity and in the worst case throw in the towel. But all that can be avoided!

Our solution proposal: Go one step further and rely on…

 

Specific change management strategies in ERP transformations

Generally valid, rigid procedures will support you only conditionally in such a complex project as a switch of the ERP system.

Much more sustainable, by contrast, is to create a specific change management strategy that's fully geared to your individual situation and the special characteristics of a high-level transformation.

This should comprise, among others, the following aspects:

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   • Assess the current state of your company – Honestly scrutinize your starting position, your vision regarding the planned change and where deficits and fields of action currently still exist in this respect.
     Thus, before implementing the new software, Santa should, for example, have considered which obstacles could arise and which elves will perhaps be especially hard to convince.

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   • Initiate and establish a change team – Get expert support and involve already existing actors like leaders, employees and partners in the steering and implementation of the change.
     Here Santa could have gotten the heads of the individual departments and important employees who have a great influence on the team on board before the changeover of the software. Thus he would not only have increased the acceptance for his undertaking, but at the same time further improved the closeness to his team. The probability that arising problems are thus solved much sooner therefore rises enormously.

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   • Prepare the change – Plan every phase and dimension of the change exhaustively, without thereby neglecting the exchange with all involved.
     Together with the change team, the changeover of the software could have been fully planned through. Through the various viewpoints on the situation, further possible problems would have come to light, which Santa would otherwise possibly have simply overlooked. These could have been cleared out of the way early, which not only increases the satisfaction of the elves, but would also have saved a lot of time and money. A win-win situation, then!

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   • Master the change – Track the steps of the implementation in a controlled way, document your experiences and celebrate successes quite deliberately with your teams.
     Had Santa proceeded in a structured way with the help of his previously created plan and with a strong team in the background, we surely wouldn't have been able to report of the software chaos. Then Santa could have (and should have) celebrated the work relief and his magnificent team and Christmas would presumably have gone off better than ever before.

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   • Avoid common mistakes – Rule out typical factors for disruptions of the ERP transformation from the outset and thereby minimize the risk for a long-term failure. With good change management, further, common mistakes wouldn't have happened to Santa at all. To list all of these would go beyond the scope of this blog article. That, however, shouldn't worry you: they can simply be prevented once you know them!

Would you like to know how to tackle this concretely and avoid further pitfalls in the process? Then contact us!

We're happy to send you our exclusive whitepaper on the topic free of charge or, if desired, advise you in a first orientation conversation.