June 3, 2011

ERP Project - Key Success Factor 4: Change Management

Organizational change management is a critical step to complete the ERP implementation project successfully within the budgeted time frame & cost and realize the measurable business benefits. We have found that more than 50% of mid-size organizations, come across change management, during a new ERP roll out. Few most common change scenarios are acquisition of another company or layoff, arrival of new CXO, addition of new office locations etc.,

Majority of the ERP implementing organizations assess their ability to deal with change as fairly poor or very poor. Organizations suffer from poor employee-management communication, less data visibility and lack of integration in their existing systems. Strong resistance & steep learning curves exist in such enterprises during a new ERP roll out. An effective organizational change management plan is critical to help employees understand and leverage the new found operational visibility in the new ERP system.

Despite the organizational challenges outlined above, companies expect their ERP systems to deliver real business value. Enterprise expect ERP to Improve business performance, Standardize business operations, Make employees’ jobs easier. These goals simply don’t happen without effective organizational change management.

Changes mean that top management, managers & low level employees have to stop the old approach and learn new ways of doing business. Some people would embrace the challenges & opportunities due to change and they would help the ERP project move forward. Others would fear the uncertainties associated with change and may resist the ERP project.

Examples of employees change resistance include:

· Those who object to short-term business interruptions caused by the changes, notwithstanding the long-term benefits.

· Those who object as they have performed the same manual tasks for decades and are afraid of or don’t want to learn new processes.

· Those who object as their job functions would change as a result of process re-engineering & automation.

· Those who object to give their top performers to the ERP project because their non-availability would have a negative impact on their departmental performance.

However, many of the above challenges which can disrupt the ERP-driven restructure can be mitigated early, during the planning stage of the project.

It is important to prepare the entire organization to embrace the change that an ERP solution brings in. Top management role is easy adapting to a new system as mostly, as they will only see the reporting and metrics delivered by the ERP system. IT team also would have an easier time because they mostly would have prior such experience and understand the benefits of ERP Implementation. Business user team are the ones who really need the most hand-holding & consideration on the change management, as most of them would be getting exposed on such initiative for the first time.

Effective ways to create employee buy-in for the new system:

· Good communication is critical as employees would understand that the changes, though difficult, add greater value to the organization in the long run. Open discussion on how process changes & improvements would increase the health of the company, can in turn allow employees to see that their own position be more secure and that there could be more growth opportunities.

· The more the end users trained on the new ERP, the more they will be confident on their abilities to manage ERP, take ownership & become valuable contributors to the ERP project success.

Some proactive organizations first bring in a business process consultant, to assess the current practices & make recommendations for ways to ease into the changes, before starting off the ERP project initiative.


  1. ERP goal setting and Budget planning are very important to ensure that there is a clear definition and understanding of the business value, that the ERP implementation project is intended to deliver.
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  3. Great post. You know we all think about this very topic
    There are many Benefits of erp system since it integrates all business management functions, including planning, human resources.Biggest benefit of ERP system is with its real time capabilities & the ability to see what is going on with your company as it happens.
    Thanks for such a nice blog...