What is ERP change management?
EPR change management is a part of the ERP implementation process when deploying an ERP solution for your organization. It manages the people side of change to achieve the desired business outcome of using a new solution.
It refers to the actions a business takes to change or adjust a major part of its organization. In the ERP industry, this may include company processes, workflows, underlying technologies, infrastructure, and/or other internal processes.
Studies show that one of the main reasons why companies fail with an ERP project is due to people and poor change management and not software or technical problems. 60% of ERP projects fail generally because of poor management discipline, whenever faced with one or more extended implementation evolutions.
According to HBS, there are two types of change management as stated:
- Adaptive changes: are small, gradual, iterative changes that an organization undertakes to evolve its products, processes, workflows, and strategies over time. Hiring a new team member to address increased demand or implementing a new work-from-home policy to attract more qualified job applicants are both examples of adaptive changes.
- Transformational changes: are larger in scale and scope and often signify a dramatic and, occasionally sudden, a departure from the status quo. Launching a new product or business division, or deciding to expand internationally, are examples of transformational change.
And 95% of failed companies dedicate less than 10% of the total budget to education/training/change management.
Unfortunately, organizations that invest in an ERP solution or any solution do not realize that ultimately people will have to learn to effectively use the product to achieve the desired outcome. ERP system is just a tool that allows helping your business do more with less, but people are the ones that enable such options.
Why is change management important for ERP?
90% of the respondents who included change management initiatives in their projects estimated the impact of change management on project success as “very high” or “high.”
Change management for ERP is often treaded as something “extra” instead of an essential step in the overall ERP implementation process. These companies do not realize the importance of change management for their new ERP.
However, most of the ERP technologies will introduce some internal changes within processes and workflows and it is ultimately on businesses to learn and adapt new processes and workflows to improve business productivity.
As the saying goes: “What got you here, will not get you further”.
So if your business is serious about change and moving forward, implementing modern technologies such as an ERP system is a sure way to do that. However unless people within the organization accept the change and learn new ways of doing business including using new solutions, your business will not move forward and can ultimately fail with the ERP project.
Therefore, the business value of change management is this – companies often justify technology investments by developing business cases. There’s an implicit assumption in every business case that’s along the lines of, “our business community will use the new ways of working (the technology, the processes, the governance framework, etc.) as it’s designed.” You’ll probably never see this assumption written down, but it’s there.
Unfortunately, this does not always happen and businesses do not achieve the business benefits and outcomes as they would by learning using their new solution to its fullest.
Read more on: The Importance of Change Management after ERP Implementation: An Information Capability Perspective.
The 5 Step Process of ERP Change Management
Step #1: Start Early on with Preparations
The most important part of every change is to be prepared for it, especially when it involves many people and multiple departments in the organization. A company must be prepared logistically and culturally for the change.
In the preparation phase of ERP change management, the manager helps employees to answer any questions they might have and help recognize the benefits of implementing the new system, new processes, and workflows so they understand the change.
Employees and employers need to find common ground when it comes to identifying the benefits of the new system. Being aware of challenges the organization and employees are facing and how the system will help them will help everybody embrace the change. This will provide you with the initial force to general dissatisfaction with the status quo.
Gaining this initial buy-in from employees who will help implement the change can remove friction and resistance later on.
Step #2: Prepare ERP Change Management Plan
As you are preparing for ERP implementation you will be identifying areas where you will need to change your current processes and workflows in order for your business to become more productive and efficient.
Your project management team must help the change management team with preparing detailed plans. The plan should detail:
- Strategic Goals: Outline the important goals of how this change helps the organization.
- KPI: Set important metrics to measure the success of your change management plan for your new ERP system.
- Project Team Management: Outline who is responsible for what to keep them accountable. Outline both teams, implementation and change management teams, and the roles within. Often employees can be included in both teams.
- Project Scope: Set discrete steps and actions within the project and what falls outside of the project scope.
The plan should give you a concrete way to effectively prepare employees using the new system confidently to reduce the friction of using the new system and quickly boost productivity to achieve the desired benefits.
Step #3: Execute the plan
Once you have your plan the next step is to follow the outlined steps within it to implement the required change. Educating and helping employees to effectively use the new ERP system along with implementing the processes and workflows will help employees to learn to use the system effectively for day-to-day tasks.
Be ready that a lot of questions may arise, and some employees might get frustrated. It’s best to give time and not overwhelmed employees with many tasks as they could feel stressed and fall back into the old way of doing the job.
You want to encourage your employees to use the system and get familiar with the system and this includes giving them time and important materials to learn.
Get ready for your team to answer any questions and provide any help whenever necessary. Your change management team must be focused on empowering their employees to follow the steps of the new processes and/or workflows.
They should anticipate any issues, roadblocks and prevent, remove or mitigate them once identify. Providing constant communication of the organization’s vision and goals of the change managing project is critical throughout the implementation process to remind your employees why the change is happening.
Step #4: Adapt Changes to Company Processes & Workflow
As we already mentioned, in many cases employees may fall back to old ways of doing business including following old processes and workflows and even using old systems. The change management team must help to keep the plan going and avoid employees backslide into the “old way” of doing things.
Including initiatives such as shorter working hours, a rewards system, and gamification of the implementation process are some of the ways that can help employees to feel motivated to embrace the change and not go back.
Remember the bigger the chance the more effort needs to be put in to be successfully implemented. Once your employees will be confident using the new system, processes and workflows then they will understand why the change was so important.
However, until then, it’s important to keep adapting and motivating employees so they are embracing the change.
Step #5: Review Progress and Analyze Results
Lastly, it’s important to review the progress of your change to find any hiccups or resistance. Just because you have completed the planned steps doesn’t mean it was successful. Following up with an analysis of your change management and finding what went wrong and what should be improved will furthermore improve the change management implementation process of the new ERP system.
Look at the goals and KPI and if you met them. Did you get the expected outcome or is there anything that should be still improved?
Change management may take a long process way after you went live with the new system. It’s also important to develop a training program during the change management to help new employees on board and use the system.
And this is a perfect time to develop the training methods and ways so in future your company has an easier way to get new employees quickly catch up with the rest of the team, thus, maximize the business productivity.