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Management Information System
Prof. Surojit Mukherjee
Vinod Gupta School of Management
Indian Institute of Technology, Kharagpur
Week - 03
ERP
Lecture – 14
Change Management and Conclusion
Hello everybody, in this session of ERP lecture we will discuss Change Management and
we will do little bit of the conclusion part on ERP that we were talking about. I was
discussing in the previous session also change management. It is a big thing because
everything goes for a change. Major changes happen when we do an ERP
implementation, because it is a major restructuring program. The business processes get
change, the whole organization gets transformed.
So, it is a transformational exercise not just implementing a software. It is a special
software because the entire business works across all functions on this single software.
So, that is why this is not like any other simple software which you implement may be a
sales related software, HR related software, or a payroll related software or a finance
related software or your stores purchase related software. Those were individual
software’s and they had impact primarily on that individual function or for a few limited
functions.
But this is one software your implementing which is impacting every process of your
organization. So, it is a major transformation which is happening across the organization
and all kinds of employees starting from even the security watchman for example, he has
to do an SAP transaction because when he does a goods receipt he is doing a very
important transaction.
When a material comes in a truck supplied by a vendor he is the first person who sees the
delivery challan and then he puts in all those critical numbers like the quantity, name of
the material and vendor and it has to be accurate. It is online real times and he cannot do
a mistake. I mean he cannot say talk on his phone and do these transactions casually and
instead of 50 he writes 70. As this works real time thing and this mistake is impacting the
entire company’s valuation. Instead of 50 pieces, he types 70 pieces. So, this is an
important role which is being played by a security person and he may not be computer
educated enough or he may not be a graduate for example. Every type of people will be
handling this software. With SAP software implementation, the change management
thing comes in a big way.
So, research and experience consistently indicate the same factors influence the failures
or success of ERP transformation initiatives. So, there are change barriers and there are
success factors and you know you can rank them by percentage of companies
encountering the barriers. So, this data is from lot of ERP programs which have actually
failed. There are many failure stories because of all these problems and difficulties.
And that is why we are discussing this in this course because it is such an important
aspect of a business enterprise environment. So, change skills; if you see it is 42 percent
here, communication 34 percent. So these are some of the major elements which I have
highlighted. To make project a success these two factors, including Communication,
plays a major role.
As a project manager you will have to talk to everybody, make them aware what is
happening, give them knowledge, share things; so that everybody is aware of what is
required etcetera. Whenever a person is working he should not waste time looking for
knowledge or information and these should be available to him easily. Communication
plays a key role for this.
So, I do not have to waste time. Things are available and I know where to go and search
and I will get it; so time is of essence here. There are various other issues also we can
discuss one by one but it will take time. But these are the two major things, namely,
change management skills and communication skills are what is we will be discussing in
this session.
If you see the success factors - ensuring top management sponsorship; quality of
communication and focusing on cultural skill and change management is 62 percent here
and is pretty high. Top management sponsorship of course, is highest at 82 percent. So,
majority of the reasons are related to people and you can see that ultimately it is coming
down to people related dimension. So, people is a very important element of the success
of these programs.
And people means, for the change management process, sometimes working with people
is very difficult. You can change the business process, you can change a machine, you
can change a technology, no problem. Just question of money, but when you are trying to
change a person’s way of working it is not money, and it can be very difficult to
convince him. And he has to get convinced as to why he has to do the new process
etcetera.
People, Process and Technology need to integrate well for successful ERP
implementation. You need of course, the technology which is the backbone and you need
the Process, and then finally, People. And unless these three gel together you won’t
realize the benefits for the organization. Your ultimate target or goal of doing this
investment on ERP software is for the organization to get some benefit.
After all the organization has to remain competitive and stand in the market. It has to
make profits then only it will become successful and you can hire more people and invest
and grow the business etcetera. Now to achieve this we need the Process-Technology-
People integration. This has been shown diagrammatically through integration networks.
The, typical reasons people resist change is very important for you to understand. What
are the major factors which people you know consider when there is a change? First one
is whether my job will remain? So, when any change / modernization happens, that is the
first fear which comes into the employee’s mind. Whether there will be you know
retrenchment of people. With modernization and new technology, you will probably
need less people to do the same work.
But you can think it in other way and we can explain them that we can have the same
people and expect that the they will be doing more work. So, instead of same work done
by lesser people it could be the same people doing larger amount of work. So, which is
good for the company, if the company wants to grow? So, I need the same people not
add more people, but with the same people I can grow my business to make it double for
example, because I am investing in technology software.
I will not spend more money on people, but by then business needs grow. So, that is the
answer, but this concern is what people have. What is in it for me? Why I should
change? Why I should put so much effort to learn and help implement new technology?
These are some common troubling points what individuals think about and you have to
as a manager, explain to them. What do you mean by – “what is in it for me”? It is a
development the company needs to remain competitive and survive in the market. You
need it and you will grow. You will understand new things and you will learn more.
See everybody wants to learn new thing or do you want to do the same work year after
year. Is it not very boring and dull? You are doing the same transaction year after year,
but now you are going to learn a new software. This software, which is very advanced
and well known all over the world. And you will be part of this program and you should
feel proud.
Can I cope up with new technology? Can I learn the software? Learn means; how to use
it you will learn you do not need to learn how to program it, but basically how to use it.
So, that is what the questions come and that is the answers what you need to give. After
the project is over; whether my new skill will be valued which I learned with so much
effort. This is typically the concern of the project team members. The people who
implemented the project (project team) were taken out from you’re their regular role
from each department and put them in this project implementation full time. Because you
need full time support they will work with a consultant for that period of 1 year or so to
implement and then train the people. Now these people will think that after that 1 year is
over and project is implemented then what happens. Can I go back to my department?
Because when I was not there during this 1 year the department was running. So, they
could manage, either they got a replacement or the same team could manage. So, where
is my role and where do I go back to?
Blue print reference framework change management - this is a slide I do not want to
explain in details but this just shows how complex project management stuff which goes
on. There are lot of activities which are happening in the blue print phase which we have
discussed earlier.
So, many activities happen which you do not need to really go through in details , but
you can just go through it and see the many activities which needs to be done. Now, if
you see that one which is blocked in red; the red rectangle here this shows the change
management value realization track. The change management value realization if you see
in the blueprint it is talking about stakeholder management and communication, change
impact analysis, training strategy and curriculum design.
So, what it means is that you have to talk to your stakeholders and find out what are the
various change impact and you have to do an analysis. Because of this program so many
things will change, so what will be the likely impacts. So, once you have done that
analysis then you have to design a training strategy and curriculum to ensure that the
employees will be able to manage the impacts.
So, you need to now train because the solution to change management issues, explain to
people, make them knowledgeable and accept the change brought by the new technology
etcetera is to be done through training. Solution is communication and training. You
have to keep communicating giving them information throughout the duration of the
project. At the same time, training is required because they have to actually work with
the new software. Training is very important as only training can help people overcome
their fear of the new technology and accept the change.
So, training is the major part for change management. So, here during the project
preparation phase for example, you talk about “identify impacted stakeholders”. So, you
have to identify which are the people roles which are getting majorly impacted. And then
you have to develop a plan for these people who are getting impacted. Whether we can
give them new role? Retrain them in some other activities etcetera or transfer them to
some other department. So, these are all part of the change management and value
realization domain which is across the horizontal domain shown in the slide. This is apart
from business process transformation, enterprise architecture, framework etcetera. These
are all part of the overall project plan. But we will not discuss all these as today’s
discussion here is restricted to change management.
So, driving successful business transformation ERP project requires focus on six key
focus areas. There are six focus areas which you need to know that the success of a
business transformation value realization depends on. A detailed value case that becomes
a living document and process to measure track and hold the team accountable for the
delivery of value. Because you have to tell the customer about this value during your
sales effort. Customer has to be told that if they invest so much money this is the value
they will get. This is the return on investment and these are the benefits for the
organization etcetera.
Business process improvement; - It is a targeted approach to leverage ERP embedded
best practices and we have already discussed this many times. So, all the best practice
will come to you automatically if you implement SAP.
Organization redesign structure and business model - The organization is redesigned as,
we want to get a new company structure. If you are keep your existing processes intact
and do not want to change then it would be like retaining old wine in a new bottle (as the
saying goes), but only that now you have an expensive bottle because doing this SAP
project costs lot of money.
Change management we have discussed.
Executive alignment and governance; - Very important because everybody needs to be
aligned and the ownership has to be defined as to who will be owning the whole program
etcetera of the transformation exercise. This is very important to enable sustainable
leadership action planning and accelerated decision making which is very vital for the
project to be completed in time. Decision making has to be accelerated because if it
slows down, for example -the marketing manager has to take a decision but he is
traveling and he is not available etcetera. The overall things get delayed because since
everything is integrated even if one area/function is delaying things everybody gets
delayed.
Knowledge transfer and end user training - I am repeatedly saying that it is very
important, for people to successfully work in this environment, that there is a proper
knowledge transfer through training of the end users.
Large scale transformation programs often do not succeed; - What are the major reasons
of failure? Why do some time such expensive programs fail? You need to know this so
that you are aware of these potential pitfalls and the mistakes which you need to avoid as
a project manager.
These are of four categories;
People issues: - Employee resistance, Lack of middle and senior management support,
Insufficient change management skills, Cynicism; where people are cynical and doubtful
whether this will work. The consultants talk big things as they are selling the product, but
whether it can really deliver etcetera. The other reasons have been discussed many times
and so, I do not want to repeat for the sake of time.
Project management issues; - Competing resource priorities as I said earlier that if there
are multiple programs running in their organization. So, that same people will be
working for some time on ERP project and sometimes they are busy on some other
quality program or may be a TQM project is going on. Every department have a few
good and knowledgeable persons and everybody wants to have them for their projects.
The same resources will get pulled in various directions. Long implementation time is
another problem for having key resources released for project management. Initiative
fatigue - sometimes you get a fatigue if you have to do this for a long time and it drags.
When too many initiatives take place simultaneously, then something called an initiative
fatigue happens amongst these resources.
Management should be cautious that they should do only one major program at a time.
Multiple small programs in parallel are fine, but complex program should be limited.
Lack of momentum; - Is important and should be kept under control as otherwise the
project there will have lack and it may get delayed which is very risky.
Communication or perception issues; - If employees perceive no need for change that is
people do not see the value and ask as to why should we change, what good will happen?
Value has to be shown that is again done through communication. If we do this project
these are the benefits you are likely to get. So, that has to be communicated because
otherwise people will not realize and they will not understand. Insufficient or ineffective
communication and lack of clarity of objectives and visions.
These communications related issues are very important and Communication is a very
important skill requirement, I would say for a project manager. So, he actually spends
almost 90 percent of his time in communicating and communicating. He has to
communicate to various people; to his team member, to the project team members of the
client, to the business leadership, all the CEO, CFOs, to his other stakeholders as they are
looking forward to getting information all the time. What is happening on that project, so
much money is going to the vendors, to the suppliers are things people want to know.
Senior leadership in his company, his bosses everyone need to know about the progress.
You might have to interact with the government agencies, the legal team, commercial
team, the purchase team, who are placing the purchase orders etcetera. So, you will see
here you will be really 90 percent of the time engaged in communication.
Communicating with various stakeholders.
So, that is one major skill both written and spoken communication for ERP project
managers, for that matter for any project manager
Integration issues; - integration issue in presence of functional boundaries where
integrating software cuts across functional departments. So, if you have build walls or
some people try to forcibly build a wall, then that is a problem and that is one of the
major causes of failures. Many departments refuse to divulge information for example,
and they do not want to give data because they are afraid that if I give my data, my data
will be known to everybody I will get exposed. And then maybe we have done
something wrong earlier and we had kept it suppressed. This wrong will now get
exposed. So, those things will come out then I will be penalized etcetera. So, these
functional boundaries need to be broken otherwise the project will not move.
Working across geographic boundaries; - Sometimes multinational companies are
working across multiple countries like say Coco-Cola has got business all over the
world. So, it is Coco-Cola India, Coco-Cola China, Coco-Cola France, Coco-Cola
Europe, Coco-Cola Germany etcetera, and they have to share information because they
are implementing the same software project across all the countries. Any lack of
coordination across change initiatives will creates problem for the project. So, again it is
a coordination issue, because there are multiple changes initiatives happening. So, things
have to be coordinated if they do not, then that will impact the project.
So, over all these are the things which you need to keep in mind and these are the
potential dangers. Not that they happen always depending on the organization, depending
on the culture, and depending on the top management, especially the CEO.
What sort of message has been given by the CEO is very important? He should
communicate the importance of the project for the survival of the organization. For
example, he communicates in that manner that – “today in this competitive world we
have to implement this project otherwise we will not be able to survive. The company
might have to be closed down, we might go out of business.” And these are very stark
reality in today’s world and the message must go down across the organization to each
and every employee.
So, when such sort of communication comes from the CEO, then employees give it a
very different perspective. They realize that there must be some serious problem there
which we do not understand. Of course, everybody cannot understand all these
complicated business issues and market dynamics etcetera. The economic situation of the
country, economic situation of the world, inflation, competition from China or whatever
there are so many things which can kill a business.
We need to become more efficient, we need to become more productive, we need to
become more smart, we need to be more transparent, we need to be integrated. So, many
things are required because information flow has to be very smooth and fast and across
the board and things need to move very fast. So, then people also think yes fine, then we
will have to participate. Then your level of participation and the quality of participation
will drastically improve and that is what you need to make such complex projects get
implemented successfully.
So, for each of these items you should go through and they may not seem very obvious,
but actually these are very serious issues. Take, employee resistances for example, it is a
very serious issue and difficult to solve, cynicism, competing resource priorities etcetera,
are all quite difficult issues to resolve.
Change management is an integral component. So, we are coming back to change
management because again everything has to be handled through change management.
So, if you see on top we have put the organizational timeline for change management
implementation. It starts with “Mobilize and Awareness” followed by the “Change
Impact”, then “Change Readiness and of course, “Training”. That is where you try to
solve the change management issue and then lastly, “Support and Go-Live”. So, after go
live also we have to give lot of support.
Now what are the elements there? Document organization and role change impacts; - so
you have to document that. What is the organization and role changes? What are the
changes going to happen? People need to know so after these, these will be changing.
The organizational structure will change, management roles will change, my role will
change so these are the new roles which he will be able to map with the existing roles.
So, this is currently my role and this will be my new role.
Implement organization assessments: - You can do an organizational assessment, culture,
resistance etcetera. And then explain it to your people like; this is your organization
culture, this is the organization resistance, etcetera. We have come from outside as your
consultant and we have experience of doing such assessments in various organization.
So, they will listen to you because they know that you are coming with more knowledge
than they have and you have also knowledge of multiple other clients and customers.
And your organization (consultant) has lot of information about other even global clients
and customers. So, you are bringing in lot of global or international experience and
sharing it with them.
Mitigation plan for change readiness risk: - What is the change readiness, what are the
risks involved? Then when we have this change as I said everything is a risk and for
every risk you need to have a mitigation plan. Say, if this happens that people are not
ready for change what is my mitigation plan? How do I handle the situation? Then roll
out the communication plan, that this is the way we are going to communicate with you.
So, we will may be sending you a weekly newsletter for example, say every week you
will get a newsletter in your desktop or in your mailbox which will tell you what has
been the progress so far. And what are the new things which are likely to happen in the
following week. So, getting a communication is very important for the employees.
You have to set them a plan. This is how we are going to communicate. May be for any
important announcements we will immediately send a mail to everybody. So, people will
know that yes we will be getting information.
So, we (employees and management) will not be kept in the dark. So, that is another fear
when such software projects are implemented. When you do a physical project like
building a house or making a bridge or installing machines; you can physically see things
are happening; that shop floor is ready, the electrical connections have been made, the
machine has come, civil foundation work is going on the electrical connections are made
etcetera. But in a software projects what happens? You do not see anything because
everything is happening in a computer and a server and physically you do not see
anything. So, unless you are told or communicated, you do not see any progress and that
is the problem. So, that is what you need to realize as a project manager is that this is a
serious problem. That is why communication is so important because nobody is seeing
any development or progress taking place.
If I am building a building I can see the building is coming up - ground floor, first floor,
second floor, the doors are getting fixed, it is getting painted etcetera. But here what do
you see? You do not see anything and you just see some people they are looking at the
screen and doing something. But what is happening inside the computer you do not
know.
Execute stakeholder engagement; - Executing stakeholder engagement is what you need
to do, because as a project manager, you have got many stakeholders - from the company
senior leadership, your team members, your vendors, your project team members, your
end users, they are all your stakeholders and everybody is looking towards you. So, you
have to execute that stakeholder engagement part.
How you want to engage each of those elements in your program. You have to tell them
about their role and importance in the project. You will need to invite them for
discussions and meeting and involve them in decision making. For example, we will give
you a presentation and you have to give your decision by this time. So, everything is
fixed time wise and there is a project plan. He cannot say, “yes I have seen it, but I will
come back may be one week or two weeks later”. Your response will have to be, “sorry
we do not have time because unless you give the decision my entire team gets stuck and
they will not be able to do anything without your decision and we cannot move any
further.” This is the type on interactions you can have as project manager with some of
your key stakeholders and you will have to take hard decisions otherwise you will not be
able to keep the project on track.
Help identifying super users as internal change drivers. So, this is another important
thing from within the organization you identify people who are you know smart people
the good ones who have knowledge. And they can be trained in SAP etcetera easily they
will pick up the things and they can then become your ambassadors for future the
internal change drivers. So, they will then learn from you learn the SAP what is
happening about the project and then they will go back to the department and talk to
people.
And the employees will accept more something from their own collogue rather than
something from an outsider (the consultants). They may not trust the consultant because
the consultant maybe telling lot of big things. But when your own colleague says no I
went there I studied that I saw that and I read something and they gave me lot of
information I am convinced yes that this will happen etcetera. This will be more
acceptable to the employees.
So, it is very important to have such band of you know internal change drivers. We also
called them “Super Users” because they are more knowledgeable than a regular user. So,
that is why we call them super user, but you can also call them as internal change drivers
or change agents. So, they actually go and finally, do that real change part i.e. give
training.
Design training strategy and curriculum for all stakeholders: - I have talked earlier also.
So, it is when I mean that is one of the thing which you do in practices for change
management and the most important thing you do is actually deliver the training.
Because without training without knowledge the change will not happen. This training is
applicable for all and right from the CEO , down to the Security officer at the gate will
need to undergo training. The training content, of course, will vary from role to role.
So, change management for ERP transformation to summarize there are two things;
focus on strategic execution and focus on the people part. So, what is the strategic part
and what is the people dimension. Strategic part involves program strategy management,
program leadership and governance and organization design. So, at the center core is
value realization because end of the day you want to you know the company needs to get
some value out of it through all these changes.
So, at the strategic level what is happening? There is a program strategy and
management which has to be worked out. The program leadership and governance. So,
the new Leadership and the Governance structure how they will manage once the project
is over. So, that has to be designed properly.
So, these are the new leadership team because there might be some changes of role and
this is what you mean by the governance plan this is how you want to administer. These
are the levels you will have within the organization structure and everything will change
from the old to the new. That is the organization design so you will design the
organization structure fresh as many roles will change.
Now the people part which I have also mostly talking about earlier I mean earlier slides.
You have a cultural transformation, and new skills and knowledge. So, they will need to
be trained, what I was talking about earlier - training and communication. So, skills will
change and they will have to acquire new knowledge.
Stakeholder engagement and communication. - I have also told about this earlier it is so
important for communicating and engaging with them. Because they do not see anything
physically, it is very important that you have to engage them, you have to often show
them some demonstration.
So, we have some presentation session to show the new purchase order form will look
like, how the new invoice generation system will work, how the MRP (material
requirement planning) will be executed by the planning guy etcetera? This is how the
senior stakeholders are engaged and kept informed about how the future design of the
business processes would look and work.
So, show them demonstrate them see this is my proof of concept -POC; this is how it
will work look like. And there also you can take feedback if they approve not approve or
they want some change. So, give them the chance to react with you interact with you. So,
that will increase the engagement part. See if I call some people here that planning
department and show them on the screen this is how the MRP run is going to take place.
And then the project team takes their feedback. This makes them feel engaged when they