Human resources management aspects of Enterprise Resource Planning (ERP) Systems Projects
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Transcript of Human resources management aspects of Enterprise Resource Planning (ERP) Systems Projects
Human resources management aspects of Enterprise Resource
Planning (ERP) Systems Projects
by Helena Tadinen
Master’s Thesis in Advanced Financial Information Systems
Swedish School of Economics and Business Administration
2005
ii
Abstract
HANKEN - Swedish School of Economics and Business Administration Department: Accounting Type of Work:
Master of Science Thesis
Author: Helena Tadinen Date: 04.02.2005
Title of Thesis:
HUMAN RESOURCES MANGEMNT ASPECTS OF ENTERPRISE
RESOURCE PLANNING (ERP) SYSTEMS PROJECTS
Abstract:
The purpose of this research paper has been to investigate the importance of human
resources (HR) aspects in ERP systems implementation projects and study their
variance in the case of successful and unsuccessful implementations. In addition, the
research has intended to examine when HR practices are the most prevalent across
ERP life cycle.
The theoretical part of the thesis has aimed to gain information about human
resources and their implications in ERP implementation process. Large part of the
academic literature suggests that people are the key factors for successful
implementation of ERP projects. Others have questioned their significance.
The subject of the empirical research has been to examine the validity of the
comments in the ERP literature regarding successful implementation of ERP projects
and human resource management practices in the case of Finnish corporations. The
study was conducted in a form of an on-line survey, which was targeted toward
personnel/IT managers in organizations that had already implemented an ERP project.
The analysis of the research results showed that HR practices differ in the case of the
successful and unsuccessful ERP implementations and their significance changes
across the project life cycle stages.
Keywords: human resources, HRM, ERP, critical success factors, people issues,
human factors, stakeholders, soft factors, ERP success
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Table of Contents
ABSTRACT....................................................................................................................II
LIST OF ABBREVIATIONS ..................................................................................... VI
1 INTRODUCTION ....................................................................................................1 1.1 RESEARCH BACKGROUND ..................................................................................1 1.2 THE RESEARCH OBJECTIVE .................................................................................2 1.3 EMPIRICAL METHOD...........................................................................................2 1.4 STRUCTURE OF THE THESIS ................................................................................3
2 ERP SYSTEMS IMPLEMENTATIONS...............................................................5 2.1 WHAT IS ERP?...................................................................................................5 2.2 REASONS FOR THE MNC TO GO ERP .................................................................6 2.3 BENEFITS OF ERP ..............................................................................................7 2.4 ERP IMPLEMENTATION PROCESS........................................................................9
2.4.1 ERP implementation phases .............................................................................................. 9 2.4.2 ERP implementation approaches.................................................................................... 10
2.5 CHAPTER SUMMARY.........................................................................................12
3 ERP IMPLEMENTATION SUCCESS AND FAILURE FACTORS ...............13 3.1 ERP IMPLEMENTATION CHALLENGES ..............................................................14 3.2 ERP AS A CHANGE PROCESS.............................................................................16 3.3 ERP IMPLEMENTATION FAILURE......................................................................18 3.4 CRITICAL SUCCESS FACTORS ...........................................................................20
3.4.1 A taxonomy of players and activities across the ERP project life cycle....................... 22 3.4.2 A case study of interrelations between critical success factors..................................... 27 3.4.3 A model of ERP project implementation ....................................................................... 31
3.5 CHAPTER SUMMARY.........................................................................................36
4 MANAGING HUMAN RESOURCES IN THE ERP IMPLEMENTATION PROCESS ......................................................................................................................40
4.1 KEY STAKEHOLDERS INVOLVED IN AN ERP IMPLEMENTATION PROJECT..........40 4.2 HUMAN RESOURCES REQUIREMENTS FOR A SUCCESSFUL PROJECT ...................45 4.3 WHY IT PAYS TO PAY ATTENTION TO PEOPLE ...................................................49 4.4 FACTORS INFLUENCING THE PROJECT SUCCESS: THE IMPACT OF HRM.............52 4.5 CHAPTER SUMMARY.........................................................................................56
5 EMPIRICAL PART, A SURVEY ........................................................................59
5.1 HYPOTHESES DEVELOPMENT............................................................................60 5.2 THE PROPOSED RESEARCH MODEL....................................................................62 5.3 HYPOTHESES TESTING......................................................................................63 5.4 RESEARCH METHODOLOGY ..............................................................................65
5.4.1 Research method .............................................................................................................. 65 5.4.2 Data and sample selection................................................................................................ 66
5.5 QUESTIONNAIRE CREATION..............................................................................66 5.6 ANALYSIS OF THE RESEARCH RESULTS.............................................................69
5.6.1 The response rate.............................................................................................................. 69 5.6.2 Sample description ........................................................................................................... 70 5.6.3 Overall success and critical success factors.................................................................... 71 5.6.4 Soft factors ........................................................................................................................ 73 2.1.1 Findings on testing Hypotheses 1 and 2.......................................................................... 79
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2.1.2 Findings on testing Hypothesis 3..................................................................................... 91 5.7 LIMITATIONS....................................................................................................92 5.8 CHAPTER SUMMARY ........................................................................................93
6 CONCLUSIONS.....................................................................................................94 6.1 CONCLUSIONS ..................................................................................................94 6.2 FURTHER RESEARCH SUGGESTIONS ..................................................................95
REFERENCES..............................................................................................................96
APPENDICES ...............................................................................................................99 APPENDIX A.................................................................................................................99 APPENDIX B ...............................................................................................................102 APPENDIX C ...............................................................................................................104
List of Tables and Figures Tables TABLE 2-1: REASONS FOR IMPLEMENTING ERP – RATING 1 (NOT IMPORTANT) TO 5 (VERY IMPORTANT) ... 7 TABLE 3-1: FACTORS IN ERP IMPLEMENTATION FAILURE .......................................................................... 19 TABLE 3-2: THE LIST OF CSFS BY SOMERS AND NELSON (2004) - KEY PLAYERS AND ACTIVITIES ............. 23 TABLE 3-3: CSF OF SOMERS AND NELSON (2004) REMAINING IMPORTANT THROUGHOUT THE
IMPLEMENTATION PROJECT ................................................................................................................. 26 TABLE 3-4: THE SUMMARY TABLE OF ARTICLES ON CSFS .......................................................................... 39 TABLE 4-1 SUMMARY TABLE OF THE ARTICLES .......................................................................................... 58 TABLE 5-1: SOFT (S) AND HARD (H) FACTORS IN SOMERS AND NELSON CSF LIST (2004) ......................... 60 TABLE 5-2: SOFT FACTORS UNDER THE HR RELATED HEADINGS................................................................ 61 TABLE 5-3: SAMPLE DESCRIPTION (PERCENTAGE OF RESPONDENTS) .......................................................... 70 TABLE 5-4: THE SUMMARY TABLE OF THE OVERALL SUCCESS OF ERP IMPLEMENTATIONS........................ 72 TABLE 5-5: THE IMPORTANCE OF CRITICAL SUCCESS FACTORS IN ERP IMPLEMENTATIONS – RATING FROM
1 (EXTREMELY LOW) TO 5 (EXTREMELY HIGH) ................................................................................... 72 TABLE 5-6: THE IMPORTANCE OF THE HR REQUIREMENTS FACTORS IN ERP IMPLEMENTATION – RATING
FROM 1 (EXTREMELY LOW) TO 5 (EXTREMELY HIGH) ......................................................................... 73 TABLE 5-7: THE KEY PEOPLE IN THE PROJECT IMPLEMENTATION TEAM (PERCENTAGE OF RESPONDENTS).. 74 TABLE 5-8: THE KEY SKILLS THESE KEY PEOPLE HAVE TO EMPLOY IN ERP IMPLEMENTATION PROJECT
(PERCENTAGE OF RESPONDENTS) ........................................................................................................ 75 TABLE 5-9: THE IMPORTANCE OF TRAINING IN ERP IMPLEMENTATION – RATING FROM 1(EXTREMELY LOW)
TO 5 (EXTREMELY HIGH) ..................................................................................................................... 77 TABLE 5-10: THE IMPORTANCE OF THE CHANGE MANAGEMENT STRATEGY IN ERP IMPLEMENTATION-
RATING FROM 1 (EXTREMELY LOW) TO 5 (EXTREMELY HIGH) ............................................................ 78 TABLE 5-11: THE IMPORTANCE OF EACH COMMUNICATION FACTOR IN ERP IMPLEMENTATION................. 78 TABLE 5-12: THE IMPORTANCE OF THE EACH REWARD SYSTEM FACTOR .................................................... 79 TABLE 5-13: TIME SELECTION CRITERIA (N=13) ......................................................................................... 82 TABLE 5-14: T-TEST RESULTS FOR PROJECT TEAM COMPETENCE FACTOR BASED ON TIME ......................... 82 TABLE 5-15: T-TEST RESULTS FOR TRAINING AND EDUCATING FACTOR BASED ON TIME ............................ 82 TABLE 5-16: T-TEST RESULTS FOR CHANGE MANAGEMENT FACTOR BASED ON TIME.................................. 82 TABLE 5-17: T-TEST RESULTS FOR COMMUNICATION FACTOR BASED ON TIME........................................... 83 TABLE 5-18: T-TEST RESULTS FOR MANAGEMENT BY EXPECTATIONS FACTOR BASED ON TIME .................. 83 TABLE 5-19: COST SELECTION CRITERIA (N=15)......................................................................................... 84 TABLE 5-20: T-TEST RESULTS FOR PROJECT TEAM COMPETENCE FACTOR BASED ON COST ......................... 84 TABLE 5-21: T-TEST RESULTS FOR TRAINING AND EDUCATING FACTOR BASED ON COST............................ 84 TABLE 5-22: T-TEST RESULTS FOR CHANGE MANAGEMENT FACTOR BASED ON COST ................................. 85 TABLE 5-23: T-TEST RESULTS FOR COMMUNICATION FACTOR BASED ON COST........................................... 85
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TABLE 5-24: T-TEST RESULTS FOR MANAGEMENT BY EXPECTATIONS FACTOR BASED ON COST.................. 85 TABLE 5-25: SYSTEM PERFORMANCE SELECTION CRITERIA (N=16) ............................................................ 86 TABLE 5-26: T-TEST RESULTS FOR PROJECT TEAM COMPETENCE FACTOR BASED ON SYSTEM PERFORMANCE
............................................................................................................................................................ 86 TABLE 5-27: T-TEST RESULTS FOR TRAINING AND EDUCATING FACTOR BASED ON SYSTEM PERFORMANCE86 TABLE 5-28: T-TEST RESULTS FOR CHANGE MANAGEMENT FACTOR BASED ON SYSTEM PERFORMANCE..... 87 TABLE 5-29: T-TEST RESULTS FOR COMMUNICATION FACTOR BASED ON SYSTEM PERFORMANCE.............. 87 TABLE 5-30: T-TEST RESULTS FOR MANAGEMENT BY EXPECTATIONS FACTOR BASED ON SYSTEM
PERFORMANCE .................................................................................................................................... 87 TABLE 5-31: THE SUMMARY TABLE OF THE P VALUES OF THE T-TEST STATISTICS FOR ALL FACTORS......... 88 TABLE 5-32: THE SUMMARY TABLE OF THE MEAN VALUES FOR ALL FACTORS – RATING 1 (EXTREMELY
LOW) TO 5 (EXTREMELY HIGH) ........................................................................................................... 89 TABLE 5-33: THE IMPORTANCE OF THE SOFT FACTORS ACROSS THE PROJECT LIFE CYCLE STAGES (N=18) . 91
Figures FIGURE 3-1: PROJECT SUCCESS CRITERIA BY KUMAR ET AL (2001) ............................................................ 21 FIGURE 3-2: THE RANKED LIST OF CSF BY AKKERMANS AND HELDEN (2002)........................................... 28 FIGURE 3-3: THE IMPORTANCE EACH CSF IN PPM PHASES, CASE STUDY FINDINGS ................................... 33 FIGURE 4-1: THE HUMAN ACTIVITY SYSTEM DIAGRAM ............................................................................... 41 FIGURE 4-2: A SUMMARY TABLE OF SKILLS REQUIRED BY THE PROJECT MANAGER.................................... 48 FIGURE 4-3: THE PROPOSED MODEL OF A. BELOUT AND C. GAUVREAU (2004) ......................................... 54 FIGURE 5-1: THE PROPOSED RESEARCH MODEL .......................................................................................... 63 FIGURE 5-2: MEAN VALUES FOR ALL SOFT FACTORS– RATING 1 (EXTREMELY LOW) TO 5 (EXTREMELY
HIGH) .................................................................................................................................................. 89
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List of Abbreviations BPR Business Process Reengineering
CFO Chief Financial Officer
CIO Chief Information Officer
CSF Critical Success Factors
ERP Enterprise Resource Planning
HR Human resources
HRM Human resources management
IT Information Technology
IS Information Systems
MNC Multinational Corporation
PPM Project Phase Model
SAP Systems, Applications and Products in Data Processing
Y2K Year 2000
1
1 Introduction
1.1 Research background
Enterprise Resource Planning systems have been considered as the most important
development in the corporate use of information technology in the 1990’s (Davenport,
1998). Nowadays, ERP systems have become very important in modern business
operations and ERP market is expected to recover from the sharp downturn in 2000 and
2001 and grow to $9.5 billion by 2006 according to a study by the ARC Advisory
Group (Clouther, 2002).
Major business drivers behind ERP implementations have been the various technical,
financial, operational and strategic benefits these systems promise. As summarised by
Olson (2004), expected benefits of ERP systems include, for instance, quicker
information response time, increased interaction across the enterprise, improved order
management cycle, reduced financial and operating costs, improved interaction with
customers and suppliers, improved on-time delivery and cash-management, and so
forth.
However, these benefits are often difficult to meet. Implementing an ERP system is
usually an extensive and costly process involving substantial amount of human and
other resources, integrating different interest groups, managing the time pressure and
facing other challenges. In fact, ERP implementation failure rate is high. A large
amount research has been done on factors that affect the implementation process to
identify the critical success factors that are necessary for successful ERP
implementation. These factors usually include top management support, project
champions, vendor relations, user training, use of consultants, interdepartmental
collaboration and communication and the like.
Many researchers have listed people factors in their critical success factors list and have
agreed that managing human resources in an appropriate manner is a key for a success
in ERP implementation projects. Also, launching an ERP project results an inevitable
change process, which accordingly brings in many behavioural and managerial
challenges such as user resistance, management resistance, employees lack of
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motivation, high turnover of key personnel, lack of expertise, insufficient human assets,
lack of training and so forth. These people challenges are considered to be more
difficult to manage than the technical difficulties encountered. Likewise, many
academics suggest that the reason why large number of software implementation
projects fail is because management is paying too little attention to human factors. In
brief, in order to succeed in an ERP implementation project human needs and concerns
have to be addressed.
Today, human resources management is being renewed in organisations and becoming
one of the fundamental functions of the project management. HRM has changed from
an inactive and problem-solving role to a strategic, focusing on the retention and
development of the best human resources (Clemmons and Simon, 2001). Traditional
HR practices consisted of activities such as payroll, hiring activities, records
management, reporting and termination activities and similar. Nowadays, HRM takes
more of a full service role providing employee support beyond pension planning and
career development. With the arrival of ERP systems, HR functions became fully
integrated with the operations side of the business. However, the research on HRM in
the context of ERP is relatively new and not many studies have been done on the topic.
1.2 The research objective
The aim of this paper is to investigate the importance of human resources (HR) aspects
in Enterprise Resource Planning (ERP) Systems implementations projects and study
whether their significance varies in the case of successful and unsuccessful
implementations.
1.3 Empirical method
´The empirical method of this study is on-line survey, which is targeted toward
personnel managers in Finnish corporations that have already implemented an ERP
project. The scope of the empirical research is to examine the validity of the comments
in ERP literature regarding successfulness of the ERP implementations and the
importance of the HR aspects in such projects.
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1.4 Structure of the thesis
This thesis contains 6 chapters. Chapter 1 introduces the research area background,
defines the research objective, and describes the research method and the structure of
the thesis.
Chapter 2 starts by giving the overall picture what is ERP, identifies its major vendors
and characteristics, discusses what are the driving forces for the multinational
companies to implement an ERP system and shortly introduces the ERP implementation
process. All ERP implementations go through a sequence of stages and in spite of their
different naming and focus extend throughout the beginning of the project until going
live. Furthermore, according to the range of characteristics projects possess, these can
be placed in one of the categories that represent the project’s undertaking from the most
ambitious to the least risky one.
Chapter 3 explains that implementing an ERP system is costly, time consuming and
complex process with relatively high risk of failure. Deciding on going ERP launches
an inevitable change process, which accordingly, brings in behavioral and managerial
challenges such as user resistance, turnover of key personnel, resistance to change and
so forth. However, the future benefits seem to overweight the threats as companies are
in favor of those computer based systems designed to process their transactions in
integrated and real time manner. This chapter also compares the success against the
failure and summarizes the factors, which have been the foremost reasons for project
failures. A particular emphasis is made on the factors that are critical for ERP success
and various list and models proposed in the literature are covered.
Chapter 4 takes a closer look on managing human resources in the ERP implementation
process. Understanding of various interest groups such as management, users, software
vendors and consultants is also regarded as a key factor since different people view
success differently. Therefore, a variety of stakeholder groups and their issues of
concerns are discussed closer. In addition, this chapter covers the subject of HR
requirements for successful project focusing on the skills required to assure the
victorious outcome of the ERP implementation. Large body of the academic literature
brings out the importance of the human resources; however, some academics have
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belied this major viewpoint and confirmed that HR factor has a marginal effect on the
project success. This chapter illustrates both of these judgments.
Chapter 5 contains the empirical part of the thesis and includes the development of the
hypotheses, the proposed research model, hypotheses testing, a survey creation, research
methodology, analysis of the research results and limitations of the study. The research
methodology part introduces research method, and data and sample selection criteria.
The selected research method is on-line survey and the key focus group of the research
is the CIOs in Finnish corporations that have already implemented an ERP system. The
intention of this chapter is to investigate the validity observations reviewed in the
theoretical part of the thesis regarding the successful implementation of ERP projects
and the impact of HR practices in such projects. After reasoning the choice of the
hypothesis to be tested, the questionnaire structure is described in detail. Next, research
results are analyzed using t-test and descriptive statistics. The chapter concludes with
the limitations of the current research section.
Chapter 6 summarises the key points of the research results and makes suggestions for
further research studies.
5
2 ERP systems implementations
Enterprise resource planning (ERP) systems have become increasingly popular in
modern business operations over the last decade. These software systems have been a
matter of interest for various organisations and researchers reasons being the benefits
promised and problems encountered in achieving those. This chapter provides a brief
introduction to what ERP is, its major vendors and characteristics, reviews reasons for
implementing an ERP system, discusses the advantages of ERP and shortly reviews the
ERP implementation process.
• What is ERP? Major vendors, characteristics
• Reasons for the companies to go ERP
• Benefits of ERP
• ERP implementation process (stages, approaches)
2.1 What is ERP?
Enterprise Resource Planning (ERP) is a computer-based system designed to place
companies’ major activity areas: planning, production and customer service under an
umbrella. ERP system is a software package of different modules such as fixed assets
management, controlling, financial accounting, manufacturing, human resources,
planning and development and so forth. Each module is business process specific.
Generally companies choose one ready-made package available for their industry but it
is also common to select the modules that best meet their needs. There are hundreds of
ERP vendors available on the market; however, this field is mainly dominated by J.D.
Edwards, Baan, PeopleSoft, SAP and Oracle (O’Leary, 2000).
The major characteristics of ERP systems are: a packaged software system designed for
the client environment, the integration between the modules and across entire
organisation, access to data in real time, data storing and retrieving processes in an
enterprise-wide database, and management and analysis functionalities. Moreover, ERP
systems are expected to have additional characteristics such as support for multiple
currencies and languages, which is critical for multinational companies, and support for
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specific industries, for instance, oil, gas, banking, health care and chemicals industries
(O’Leary, 2000).
2.2 Reasons for the MNC to go ERP
Initially, in the mid- and late- 1990s, Y2K compliance has been a major concern for
many companies as well as the wish to replace the existing and poor quality systems.
However, the major reasons driving companies to choose ERP are related to improve
firms performance and decision making, to reduce labor costs, bureaucracy and errors.
Other reasons are: pressure from the side of the competitors, business partner
requirements wishing to receive faster service, integration between units, organizational
standardization across different locations and globalization of businesses. Acquisitions
and mergers between the units are forcing companies to change and function as a one
system. However, for each company the motivations for implementing ERP are
different as well as their priority order depends from the nature of the projects.
O’Leary (2000) has grouped the reasons into four types of categories: technology,
business practices, strategic and competitive. Holland et al (1999) have recognized three
main dimensions: technical, operational and strategic. Some studies narrow the reasons
down even to broader groups: technological and business performance. Based on the
literature, the foremost reasons that have caused a fast growth in the use of ERP systems
can be summarized as follows:
• Technical
- a need for a common platform and replacement of an existing IT
infrastructure
- an incompatibility of several information systems
• Operational
- process improvement
- data visibility
- operating cost reduction
• Strategic
- Y2K compliance
7
- globalisation of business
- the growth of an enterprise and a focus on standardisation of processes
- the consideration of an enterprise to reengineer its business processes
- improve customer responsiveness
- need for efficiencies and integration between the units and processes
- enhance firm’s performance and decision making
Olson (2004) summarizes two recent studies, which have examined the motivations for
ERP adoption. One research was done on the U.S. manufacturing organizations and
another on Swedish firms. Both of the studies ranked replacing legacy systems and
simplification and standardization of systems as their primary reasons. Other rationales
that received high ranking were improving interactions with suppliers and customers,
gaining strategic advantage, supply-chain aspects and linking to global activities.
Pressure to keep up with the competitors, ease of upgrading systems and restructuring
organization received low ranking from both of the studies.
Table 2-1: Reasons for implementing ERP – Rating 1 (not important) to 5 (very important)
Reason United States
Sweden
Replace legacy systems 4,06 4,11 Simplify and standardize systems 3,85 3,67 Improve interactions with suppliers and customers 3,55 3,16 Gain strategic advantage 3,46 3,18 Link global activities 3,17 2,85 Solve the Y2K problem 3,08 2,48 Pressure to keep up with competitors 2,99 2,48 Ease of upgrading systems 2,91 2,96 Restructure organization 2,58 2,70
Source: Olson D. L. (2004): Managerial Issues on Enterprise resource Planning Systems, Preface, p. v
2.3 Benefits of ERP
According to the literature, ERP systems implementations create the following benefits
for the companies:
• improves the firm’s performance
• eliminates inefficient manual processes
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• provides integrated, enterprise wide common tools and processes
• reduces the costs by improving the enterprise efficiency through computerisation
• includes improvements in logistics, production scheduling, customer service and
customer responsiveness
• provides enterprise-wide data visibility, reporting and decision support
• contains the ability to manage the extended enterprise of suppliers, alliances and
customers as an integrated wholes
The main advantage of these systems from the technological angle is that they provide a
common integrated software platform for business processes. These systems have two
important features: firstly, they facilitate a causal connection between a visual model of
business processes and the software implementation of those processes, and secondly
they ensure a level of integration, data integrity and security, which is not easily
achievable with multiple software platforms.
From the business and strategic perspective implementing ERP is seen as way to
improve corporation’s effectiveness and efficiency, reduce their operating, personnel,
inventory and IT costs, and improve their productivity, business growth, production
scheduling, delivery time, customer service, and overall quality. Additionally, data
visibility and timely information is important to make better business decisions (Ross,
1999).
ERP systems also enhance inter-organization communication and collaboration between
different functions and locations. Standardization of the processes across the units
works in favour of collaboration as it reduces the number of conflicts between the
processes. The single database system encourages communication across locations and
functional units through sharing the information. With ERP systems companies are
using the same database, which can be accessed on-line, in real-time and simultaneously
by many users. Since, virtually all users have access to the same information it
improves companies planning and control practices.
9
2.4 ERP implementation process
2.4.1 ERP implementation phases
Implementing an ERP system is generally an extensive challenge, with a typical ERP
implementation taking anywhere from one to five years (Poston and Grabski 2001). On
top, the performance of the firm will get worse before it gets better and firms are
expected to encounter the resistance throughout the stages of ERP implementation
(Ross, 1999). Several researchers have developed different models for ERP
implementations. For instance, Parr and Shanks (2004) introduced a model of three
phases: planning, project and enhancement. Markus and Tanis (1999) have a four-phase
model consisting of: chartering, project shakedown, and onwards and upwards. The
study by Ross (1999) illustrates the path of an ERP implementation consisting of five
stages: design, implementation, stabilization, continuous improvement and
transformation. In summary, in spite of different naming, definitions and particular
focus on some stages of implementation process all the implementation models extend
from the beginning of the project to going live.
The implementation model of Ross (1999) is described in more detail below:
• Design
In the design stage, companies face the question whether to change their business
processes or ERP software. Usually, ERP software comes in a ready-made package and
no software is likely to meet all the company’s needs. Therefore, many companies have
used this aspect as a chance to change their business processes and reengineer the entire
organization. Still, some firms have chosen to customize the software to fit their
processes (O’Leary, 2000). The way or another, process change is inevitable with an
ERP because of the process standardization procedures.
• Implementation
This is the stage of going live requiring continuity and commitment to a new way of
doing business. Training is needed to understand how ERP will change business
processes. Performance dip is apparent to customers. A fundamental decision which
implementation strategy: step-by-step and big bang being the most common ones, will
be used to implement ERP systems is based on the aspects such as organisation size,
10
complexity and structure, resources, attitude toward change and distance between the
various production facilities (Welti, 1999).
• Stabilization
After going live there is the period that typically takes up to 12 months to get back to
where they started. During the stabilization period, the processes that were planned are
now in use. People need to adjust to the new environment, data has to be cleaned up,
implementation teams needs to remain to support the users and close collaboration with
vendors and consultants is necessary to resolve software bugs. Firms need to evaluate
the success of the implementation. Benefits are analysed either based on cost-benefit
duration analysis or on original ERP choice rationales (O’Leary, 2000).
• Continuous improvement
This stage is a time when major operating benefits are created. Functionality of the of
the ERP system is increased by adding new modules and other improvements such as
electronic data interchange, sales automation, warehousing and transportation
capabilities, sales forecasting and similar. This is also time for redesigning processes,
structures and roles to leverage the system (Ross, 1999).
• Transformation
ERP offers companies an opportunity to transform themselves. By changing
organisational boundaries, redefining organizational decision-making processes,
becoming more customer and process oriented and being increasingly connected to their
suppliers, partners and customers companies progress continuous improvement and
transformation that lead to a constant change, new organisational environment and
management, and toward the long-term vision of the ERP implementation (Ross, 1999).
Not many companies have reported achieving that state.
2.4.2 ERP implementation approaches
According to taxonomy, developed by research conducted by Parr and Shanks (2000)
there are several implementation categories and characteristics. Combinations of the
characteristics serve to place the implementation within one of the categories.
11
Taxonomy is used by management to plan projects and allocate resources. It is useful to
compare projects and investigate what characterizes successful ERP implementations.
Implementation characteristics
Each approach is characterised by:
• Physical scope
- the number of implementation sites and countries involved, the number of
end-users
• Business process reengineering (BPR) scope
- from no BPR at all to extensive analysis of best practice and restructuring of
own business processes
- minimize BPR as much as possible
• Technical scope
- the extent the ERP software is modified
• Module implementation strategy
- selection of modules
- extent of functionality, module-by-module or all at once
• Resource allocation
- costs and duration of projects
Implementation categories
The range of combinations of these characteristics places an implementation within one
of these categories:
• Comprehensive
This category represents the most ambitious implementation approach. Typically, these
are large and expensive projects often implemented by a multi-national company
involving multiple sites across national boundaries. It is an implementation of the full
functionality of the ERP, which may involve industry specific modules. The scope and
level of BPR required is high trying to optimise business processes locally or work out
harmonized centralized processes. This approach implies large resource allocation,
challenging project management and excessive risk management but discloses the full
advantage of the ERP package.
12
• Middle-road
These tend to be 3 years projects implemented at the single site or at few similar sites.
Major decision is to implement only a selection of core ERP modules. BPR is required
but not as extensive as for a comprehensive approach. Depending on BPR results, small
or major modifications to system are needed. The projects involve some technical and
organizational risks, have no typical implementation strategy and require average
resource allocation.
• Vanilla
This approach is the least ambitious and least risky one involving small projects and
typically they may be implemented in less than a year. Usually, it is implemented at one
particular site with no coordination with other sites. The decision is to mobilize the core
ERP functionality only and do little if any BPR. These projects are least complicated,
contain no substantial technical or organizational risks and are least costly.
2.5 Chapter summary
ERP is a computer-based system that places companies major activity areas under an
umbrella. ERP system is a software package of different modules whereas each module
is business process specific. This chapter gave a short description to ERP definition,
characteristics and mentioned major vendors on the market. Companies choose to go
ERP for many reasons. From the technical perspective, a need for a common platform
and integrating several information systems or simply a replacement of an existing IT
infrastructure is attractive as it enhances single-data entry and information consistency
across the system. From an organisational perspective, ERP is attractive as it promises a
cut down in operating costs, better data visibility and process improvement. From the
strategic perspective, it is appealing because of cost reductions gained through more
efficient systems, improvements in productivity, decision-making, overall quality and
support in business growth.
Implementing an ERP is a serious undertaking, which requires an extensive use of
resources, have high costs and take anywhere from one to five years to implement. On
the top, before starting to reap the benefits of the system the firm’s performance will get
13
worse. There are number of implementation models developed by the researchers and
practitioners, which in spite of different naming, definitions and focus on some stages in
the implementation process, all extend from the beginning of the project to going live.
The taxonomy of ERP implementation approaches serves as a guideline to place ERP
implementations in one of the categories such as comprehensive, middle-road and
vanilla according to the range of characteristics the projects possess.
Understanding the basics of ERP systems, implementations strategies as well as what
are the driving forces for a corporation to go ERP are essential before moving to the
next chapter, which covers the success and failure of ERP implementations.
3 ERP implementation success and failure factors
On one hand, ERP systems promise to improve organisation’s key performance
indicators such as proficiency, efficiency, profitability, customer satisfaction and other
measures of value. On the other hand, ERP systems are highly complex information
systems and the implementation of these systems is a difficult and costly process
placing tremendous demands on corporate time and resources. Business Process
Reengineering (BPR) is a often a major component in ERP installations and this
requires companies to change the way business has been done, which, in accordance,
affects the employees work lives and can create a resistance. This chapter will give a
short overview to implementation challenges and the change process that employees
need to go through. The chapter also discusses failure against success in ERP
implementation and examines success factors found to be critical in such projects.
• ERP implementation challenges
• ERP as a change process
• ERP implementation failure
• Features of successful implementation
• Critical success factors
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3.1 ERP implementation challenges
A typical implementation of ERP project is costly, time-consuming and complex
undertaking. In fact, many companies have described their ERP implementation being a
nightmare. A recent study has indicated that 40 % of all the ERP installations manage
only partial implementation and 20 % totally fail (Chen, 2001). Depending on how
someone is defining failure, the percentage can be even higher.
• Complexity
The complexity of the system implementation arises from the fact that companies have
to integrate ERP software with hardware, operating systems, database management
systems and so on. Further, it initiates the changes throughout the entire organization.
As ERP software comes in a ready-made package companies are required to adjust their
businesses to fit the system requirements. The reasons being that even with the today’s
art of technology ERP systems do not fit all the requirements of a company. Moreover,
changes in one component might cause the collapse of the whole system, which is
designed as an integration of separate modules.
• Costs and benefits
The total implementation costs of ERP include software, hardware, consulting and
internal personnel costs, which usually sum to 2-3 % percent of the company’s revenues
(Chen, 2001). The huge investment has to be weighted against the future economic and
strategic benefits that the system should eventually provide. However, the benefits
might be difficult to quantify. Non-financial benefits such as improved customer
response, strengthened supplier relationships through information sharing and real-time
access to operating and financial data can be vital for the growth of many companies but
are hard to convert to monetary profits in the cash flow statements. Moreover, it might
take years for the companies to take the advantage of the all capabilities ERP systems
provide.
In addition, success depends from the point of view from which you measure it. It can
be viewed from many dimensions: in technical terms, in economic, financial or strategic
business terms, in terms of smooth running of business operations, from the point of
view of managers and employees or from the point of view of customers, suppliers and
15
investors (Markus et al, 2000). For instance, business executives might look at the
success from the angle of achieving tangible business results but the end-user user
values more the easiness and usability of the system.
• Time
On time and within the budget is another success criteria, which in practice is no easy to
achieve. Meeting deadlines is a primary concern of the ERP project management as any
delay costs the company additional money. The amount of time needed for project is
often underestimated. In length, the whole implementation process can take up from
three to five years. Besides, considering today’s business dynamics companies cannot
afford spending too much time on the technology implementation in spite of all the
benefits as competitors might have enough time to overtake them. Moreover, lengthy
implementations can increase the risk of project failure, reduce both the management
and staff commitment, decline productivity and delivery performance and cause the loss
of the customers.
• Training
Training and change management are matters that affect all the phases of the ERP
implementation project. Not surprisingly, there are many challenges related to training
as each user group has different needs, preferences and learning potential. For instance,
the steering committee members need to have a good project overview and general idea
about the functionality of the system. Project leaders instead require in-depth
knowledge about system’s functionality and project management. Users have to learn
only those functions that are related to their tasks in addition to the understanding the
new processes and procedures (Welti, 1999).
Moreover, training is expensive and underestimating the needs and the requirements are
the reasons for exceeding the budget. Skilled employees tend to switch their jobs and
training of new employees will remain a continuous effort. However, the importance of
training cannot be neglected and it is not something that should be conducted only
before or after the implementation but rather it has to be present in each part of the ERP
life cycle (O’Leary, 2000).
16
Other issues to take into account with training include:
• identifying what kind of training is needed
• different types of training for workers and supervisors
• measuring training performance and effectiveness
• providing the support for training
• documenting the training process
• preparing employees for change
• using different training methods
Moreover, ERP training has been identified as a critical requirement in ERP
implementation and this has lead to creation of an entire industry providing ERP
training.
3.2 ERP as a change process
The implementation of ERP system has a major impact on the company and its
employees. The sources and types of resistance to change are many. In general, after the
implementation of the ERP system the performance of the company gets worse before it
gets better in the stabilization process. It is hard for the people to change from the old
way of doing things, which they were good at into new ways.
As stated by Mital (1997): “The aim of implementing a computer integrated software
system is not to limit the human influence on the project even though it is argued that
humans cause the major problems but to increase the efficiency and effectiveness of an
enterprise through the integration and exploitation of available technology. It is natural,
that this requires changes in management thinking and organisational structure”.
• Change perceived as negative
The people who perceive change as negative wish to hold on to the old way of doing
things. Employees can claim to be computer illiterate, say that they did an excellent job
before ERP system, feel uncomfortable to trust the computers, be afraid of failure and
have a common belief that their jobs are threatened by the new automated system (Welti
1999;Sumner 2000; Ross 1999). Determining who are resisting change, individuals or
17
groups, employees’ needs, values and interest may help to understand the employees’
resistance to the ERP system (Aldawani, 2001).
Management might resist the process changes ERP requires. They are ready to change
their technological platform but not the organizational processes. However,
implementing ERP means changing your business processes to fit the software not
another way around. Middle level managers feel uncomfortable with the change because
their job postings can be eliminated as decisions making is pushed down to operational
level (Ross, 1999).
Other sources for resistance are:
• not being aware of all the aspects of the change process as they have not been
involved from the beginning
• unclear strategic vision
• extensive project schedules
• modest financial return
• even higher costs exceeding the budgeted amount
• no value added to the company’s performance
• the pressure from the stakeholders’ side to provide tangible results
In order for the ERP implementation to be successful, top management must analyse
these sources of resistance and develop a strategy to overcome them. Building a user
acceptance the new system and new way of doing things is a major challenge for the
companies. A commonly used strategy to increase user acceptance is training the users
through in-house programs and courses. ERP skills are in shortage as there are a small
number of people who have a good understanding of business and ERP systems.
Organizations have to conduct training for project teams, implementers and users. Some
organizations develop key users that accordingly assist other users and so forth.
• Change perceived as positive
On other hand, there are people who are looking forward to the new system. They
perceive change as positive. The wider use of data throughout the company, access to
the data across different departments and locations, easier contacts with colleagues, task
18
enhancement possibilities and fast access to customer data increases the individual’s
insight into company’s operations and brings in satisfaction based on new opportunities
the system offers (Welti, 1999).
3.3 ERP implementation failure
In spite all the benefits implementing ERP is a risky undertaking. The truth is that due
to the behavioural and management related challenges in the implementation process
many ERP projects have been terminated. The reasons being: end-user not being ready,
resistance to change, lack of user education and training, high turnover of key
personnel, lack of communication and support documentation, the layer of consultants
in addition to pure technological problems such as software bugs and configuration
difficulties (Kumar et al 2003; Sumner 2000). In summary, several studies agree that the
biggest obstacles are people, organisational issues and change management (Chen 2001;
Gulla and Brasethvik 2000; Kumar et al 2003; Markus et al 2000). Moreover, people
challenges are considered to be more difficult to manage than the technical problems
(Kumar et al 2003; Skok and Legge 2001; Aladwani 2001).
In addition, ERP implementation usually requires an extensive level of BPR, which
means redesigning existing business processes in way that they are the best supported
by the system. The change BPR requires produces resistance from the employees side
as they see it as a threat to their job security. Many researchers (Evans 1994; Zucchi &
Edwards 1999: Marjanovic 2002) state that the major reason for failure of BPR is the
lack of attention towards the human issues. Olson (2004) lists the foremost reasons of
BPR failure from Sutcliffe’s (1999) study:
• Employee resistance to change
• Inadequate attention to employee concerns
• Inadequate and appropriate staffing
• Inadequate developer and user tools
• Mismatch of strategies used and goals
• Lack of oversight
• Failure of leadership commitment
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According to O’Leary (2000) all the risks throughout the ERP implementation cycle can
be categorised into three main groups:
• Technical
Technical risks arise largely from the information processing, for instance, problems
with software modifications, system integration, data errors, operating systems, network
capabilities et cetera.
• Business
Business risks derive from the models, artefacts and processes that are chosen for the
ERP implementation such as insufficient resources, competitor’s position in the market,
cost and benefit judgements, cost and time overruns, problems with customers and
suppliers, drop in company’s key performance indicators and similar.
• Organisational
Organisational risks occur from the people, organisational structure and environment in
which the system is implemented, for example, lack of end user and personnel training,
turnover of key personnel, cultural issues, choosing the right consultant, business
process reengineering and so forth.
Technical risks are largely related to the information processing technology and are
usually handled by the company professionals and vendors. Business and organisational
risks are the most critical and difficult ones to manage.
Olson summarised the results of the study done by Willcocks and Sykes (2000), which
analysed the sources of ERP implementation failure. The authors concluded that the
failure is driven by the need for major changes in human, cultural and organisational
relationships. The table below displays the three factors related to ERP implementation
failure.
Table 3-1: Factors in ERP implementation failure
Scenario CIO/IT Focus Typical Outcome Technological determinism Technical Failure to gain business benefits Supplier/consultant driven Disregarded Cost overruns Outdated relationships and capabilities Insufficient talent Chaos
Source: Olson D. L. (2004): Managerial Issues on Enterprise resource Planning Systems, Chapter 7, p. 113
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Technological determinism is often a scenario when the CIO is too technically focused
and IT group is developed around technical skills. ERP system is seen as a packaged
solution to organization’s all technical and business problems. This implementation
approach often results high level of resistance and rates of failure. The IT group handles
the implementation process and focuses mostly to be on time and within the budget
instead of gaining business benefits.
The supplier/consultant driven situation occurs when senior business executives direct
ERP implementation without any consultation with the CIO and IT group. Reasons
being that top management sees ERP as a strategic tool or because it lacks in trust in IT
group abilities. In this case, the project is outsourced either to ERP vendors and
consultants or application service providers. The outcome of this kind of approach is
usually considerable cost overruns.
Outdated relationships and capabilities setting arises when the CIO and IT group are not
capable to cope with the challenges of the new technologies. For instance, they lack the
technical skills but are still responsible for the ERP system. Into the bargain, external
specialists are hired to fill the caps, relationships with business users are not developed,
focus is towards minimizing the costs rather than on strategic benefits and organization
fails to utilize ERP tools. This type of scenario is the most common even in the case of
the successful ERP implementations.
3.4 Critical Success Factors
Success is multidimensional and relative to both time and objectives. Rapid
implementations, tangible business benefits and fast paybacks seem to be the rationales
to evaluate success. The study of Hong and Kim (2002) has defined the success in terms
of achievement of predetermined goals regarding cost overrun, schedule overrun,
system performance deficit and failure to achieve expected benefits. Likewise, the study
of Kumar et al (2001) had concluded that the most popularly used success criteria were
on time and within or under budget (Figure 3-1). Project success was also linked with
the realization of the key performance indicators.
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Figure 3-1: Project success criteria by Kumar et al (2001)
Source: Kumar et al (2003): An investigation of critical management issues in ERP implementation: empirical evidence from Canadian organizations. Technovation, Vol. 23, Iss. 10, p. 800
However, the implementation success depends on many other factors like people
management, organisational issues, change management, process reengineering and
training. Many researchers have studied the critical success factors in ERP
implementations both based on literature and field surveys aiming to provide guidelines
for ERP implementation practice.
For example, the recent study of Umble et al (2003) has categorised the key factors
under 10 main points:
1. Clear understanding of strategic goals
2. Commitment by top management
3. Excellent implementation project management
4. Great implementation team
5. Successful coping with technical issues
6. Organisational commitment to change
7. Extensive education and training
8. Data accuracy
9. Focused performance measures
10. Multisite issues resolved
Also, various studies (Somers and Nelson 2004; Akkermans and Helden 2002; Umble et
al 2003) make a distinction between factors, which are critical for any IS project and
which are more relevant to any ERP project. Factors that can be applied to any IS are,
for instance, clear goals and objectives, top management support and user training.
Factors that are unique to ERP projects include interdepartmental control and
communication, change management, BPR and use of vendors and consultants. In
22
addition, some researchers go beyond the traditional listing of the critical factors. For
example, Somers and Nelson (2004) have investigated the temporal importance of CSF
over the ERP project life cycle and Akkermans and Helden (2002) examined whether
these factors are interrelated with each other. The study by Parr and Shanks (2000)
examined the two types of ERP implementations, unsuccessful and successful one, to
identify which CSF are necessary in each phase of ERP implementation project. These
studies are described in more detail below.
3.4.1 A taxonomy of players and activities across the ERP project life cycle
The research paper by Somers and Nelson (2004) investigated the importance of the key
players and activities in enterprise system implementations, and when their effect is
most critical across the ERP system life cycle. Authors argue that the current literature
on enterprise systems neglects several key variables. Even though the critical success
factors of ERP implementations are well covered, the temporal importance of key
players and activities is less understood.
The study explored the following two main questions:
1. Which key players and activities are playing the important role in an
organisation’s experience with ERP implementation?
2. At which stage of the implementation process it is critical for an organisation to
introduce a key player or activity in order to achieve major benefits?
Based on the previous research literature, both academic and non-academic, Somers and
Nelson classified a number of critical success factors using Markus and Tanis (2000)
framework into key players and activities. The six- stage IT implementation model
consisting of initiation, adoption, adaptation, acceptance, routinization and infusion was
used to determine the importance of each player and activity in the implementation
process for a particular time. The literature-based importance of each player and activity
was compared to survey results of 111 organisations. Altogether, 22 players and
activities were considered to be critical for ERP implementations.
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Table 3-2: The list of CSFs by Somers and Nelson (2004) - key players and activities
Key players Key activities Top management User training and education Project champion Management of expectations Steering committee Careful selection of the appropriate package Implementation consultants Project management Project team Customization Vendor-customer partnerships Data analysis and conversion Vendor’s tools Business process reengineering Vendor support Defining the architecture Dedicating resources Change management Establishing clear goals and objectives Education of new business processes Interdepartmental communication Interdepartmental cooperation
The importance of the key players and activities across life cycle stages in the ERP
implementation process according to the academic literature is as follows:
Key players
• Top management
Sustained management support and management’s active involvement in monitoring the
progress of the project and providing directions to project teams are essential
throughout the implementation project.
• Project champion
Project champion plays a critical role in acceptance of the technology by the users and
less during its use and incorporation into the organisation.
• Steering committee
The steering committee consisting of senior management from different corporate
functions, senior project managers and system end users ensures their active
involvement and is critical for the success of the project. Their impact is highest at the
initiation, adoption, adaptation and acceptance stages a at the project life cycle.
• Implementation consultants
Companies rely on outside expertise for set-up, installation and customisation of their
software systems. However, consultants’ role declines in the last stages of the
implementation when the system becomes operational.
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• Project team
The project team’s business and technological competence determines either the success
or failure of the project. Their expertise needs to compensate the team members’ lack of
knowledge. Project team’s role is more important during the earlier stages of the
implementation and less important after post-installation.
• Vendor - customer partnerships
A close relationship between the software buyer and vendor has a positive impact on the
success of ERP project and is critical at the earlier stages of the implementation.
• Vendor’s tools
Rapid implementation technologies and programs such as business process modeling
tools, industry specific solutions, bundling server hardware with ERP software, support
services and the like can substantially reduce the cost and time of ERP implementation.
These tools provided by the vendors have a central role during adoption and adaptation
stages.
• Vendor support
Implementing an ERP system is a life-long commitment and requires continuous
investments in adding new modules and upgrading the system. Thus, vendor support,
for instance, technical assistance, emergency maintenance, updates, user training and
the similar is essential through post-implementation stages.
Key activities
• User training and education
The role of training is well covered in the management of the information systems
literature. Lacks of user training and understanding how software system is changing
the business processes have been the foremost reasons for ERP implementation failure.
Due to ERP system complexity training is essential at the acceptance stage and at the
latter stages of the life cycle.
• Management of expectations
Managing user expectations successfully is closely related to the successful
implementation of the project. Exaggerated promises of ERP systems fail to meet
employees’ expectations regardless of the positive contribution to the organisation.
Therefore, management of expectations is highly important from the initiation to
adaptation stage.
25
• Careful selection of the appropriate package
Right ERP package selection determines the overall success of the project and therefore,
it should be emphasized at the initiation and adoption phases.
• Project management
Project management activities spread out throughout the project life cycle. However,
effective project management including project planning and control activities,
organisational, political and human issues and many more is critical from the initiation
to acceptance stage but less significant during routinization and infusion.
• Customisation
The amount of customisation needed to the software has to be handled at the early
stages of the implementation process. Minimal customisation brings usually better
results as it means less costs, shorter implementation time, less dependence on vendor
services such as system maintenance and upgrades, and et cetera.
• Data analysis and conversion
Timely and accurate data in a single consistent format is a fundamental requirement for
the effectiveness of ERP systems and data issues are especially critical from the
initiation to adaptation stages and less important during the system acceptance and use.
• Business process reengineering
As ERP software comes in a ready made package organisations need to adjust their
business processes to the software. Business process reengineering plays a crucial role
at the early stages of the implementation but its importance starts to decline from the
acceptance stage.
• Defining the architecture
Architectural choices and planning must be in place at initiation and adoption stage.
• Dedicating resources
Having sufficient resource available for the project is crucial to guarantee success.
Resource requirements have to be set up early in the process.
• Change management
ERP systems initiate change that causes organisational and employee resistance and
confusion. Without proper change management ERP implementations fail to
accomplish the benefits. Change management activities must be there already from the
early stages of the implementation process and continue throughout adaptation and
acceptance stages.
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• Establishing clear goals and objectives
Well-established business vision and clear goals make a foundation for effective project
implementation and are important throughout all the stages of the project life cycle.
• Education of new business processes
Business process reengineering requires managers to educate and communicate their
goals long-term perspective and general direction of the project to all the members of
organisation affected by change in order to win their support. This activity should go in
parallel with BPR and is particularly important during adoption, adaptation and
acceptance stages.
• Interdepartmental communication
Communication across departments an appropriate network and ensures that all the key
players in the project are well informed and aware of the system impact on their
responsibilities. Communication helps to reduce user resistance and has a high impact
from initiation to system acceptance.
• Interdepartmental cooperation
As ERP systems integrate various functions and business units across different locations
cooperation and involvement of all the people involved is highly advisable. Like
interdepartmental communication it is important throughout initiation to acceptance
stages.
The results of the data analysis of ERP implementations in 111 organisations showed
that the importance of players and activities in each stage of the implementation process
changes. More than 50 % of the respondents considered each player and activity to be
very important at the adoption phase. Patterns are similar for the initiation and
adaptation phase. However, the number of factors that were considered important
diminished significantly at the last stages of the project life cycle.
Table 3-3: CSF of Somers and Nelson (2004) remaining important throughout the implementation project
Any IT project Unique to ERP systems Steering committee Interdepartmental control and communication Top management support Change management Clear goals and objectives BPR User training Vendor support Use of vendor tools and consultants
27
As a conclusion, the research results suggested that the temporal importance of the
critical success factors is less understood than their overall importance. Some players
and activities that were crucial during any IT implementation could also be applied in
ERP implementations. As results, key activities and players that remained crucial
throughout the project or throughout the first four to five stages of the implementation
were steering committee, top management support, clear goals and objectives and user
training. Surprisingly, user training turned out to be vital even at the post-
implementation stages of the project in order to maximize the utility of the system.
Other key players and activities were unique to ERP systems. The most important
factors over here were interdepartmental control and communication, change
management, BPR, vendor support and use of vendor tools and consultants. Change
management and BPR had a much greater importance than expected especially during
the initiation stage. The importance of consultants did not decline after the first three
stages but their presence was also necessary at the latter stages of the implementation.
The contribution of the study was the advancement of the theory and providing a
guideline of the ERP implementation practice. The temporal perspective on the critical
success factors in ERP implementations was not only focusing on listing the critical
actors and players but investigated when their effect was most common across
implementation stages.
3.4.2 A case study of interrelations between critical success factors
The article of Akkermans and Helden (2002) had taken the list of critical success factors
of Somers and Nelson previous research (2001), ranked them by senior level managers
and applied the top ten CSF to a specific ERP implementation case study. The research
proved that the list of Somers and Nelson is helpful and appropriate in analysing and
explaining the root causes of success and failure of ERP implementation process. In
addition, the authors investigated how these CSF are interrelated in a sense that changes
in one of them influenced all the others either directly or indirectly.
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As a research methodology the list of Somers and Nelson was used because of the
sound literature the study was underlying. Plus, the list provided an interesting mixture
of “hard” implementation aspects such as clear goals and objectives, and strong project
management, and “soft” aspects such as team competence, and interdepartmental
communication and collaboration. This list was then rated by 52 managers at the top
management level. The table below shows the ranking list.
Figure 3-2: The ranked list of CSF by Akkermans and Helden (2002)
Source: Akkermans H., Helden van K. (2002): Vicious and virtuous cycles in ERP implementation: a case study of interrelations between critical success factors. European Journal of Information Systems, Vol. 11, p. 36
Most of the success factors listed here hold for any IT implementation project but some
are more relevant to ERP implementation projects. The top ten CSF of the executives
list are summarised as follows:
• Top management support is essential for backing up ERP implementations,
especially at the early stages of such projects; otherwise, the there is little hope for it.
Middle management and other staff are as equally important but they have different
roles. However, it top management delegates all the responsibilities to technical experts,
the project failure rate is high.
29
• Project team competence was not ranked high on Somers and Nelson’s list;
however, the executives who filled out the survey marked it very important. As a matter
of fact, not much research has been done about the impact of project team’s competence
on IT implementation success.
• Interdepartmental co-operation was again linked high on executives list and
low in Somers and Nelson’s original list. The explanation for such variation is that the
former one is based on the assessments by management and the latter, on literature
review. As ERP systems are to integrate various business functions, close co-operation
between these business functions are a required.
• Clear goals and objectives have long been the common knowledge that any IT
project starts with clearly defined goals and ways to achieve these, however, which with
ERP projects can be problematic to determine. Therefore, there have been suggestions
to manage ERP projects as new business ventures rather than IT projects or to employ a
path based approach to ERP implementation process. On a methodological level, this
viewpoint supports the concept of IS development.
• Project management is recommended as one approach to overcome the
complexity of hardware, software and organisational issues in ERP implementation
projects. This advice is mostly found in IT literature. However, as organisations and
projects evolve over the time, so do the project management priorities. Therefore, ERP
project managers’ skills should include some level of improvisation.
• Interdepartmental communication and its importance is also well known in
the IT literature. Similar to interdepartmental co-operation as mentioned above
interdepartmental communication across functional boundaries is particularly important
in ERP context because the main aim of ERP systems is to integrate the business
processes.
• Management of expectations stays important throughout all the stages of ERP
life cycle and it has been long known as one of the success factors on IT
implementations in general.
• Project champion has often been linked to the success of technological
innovations as that person performs the crucial functions of transformational leadership,
facilitation and marketing the project to end-users. Usually, he or she is from the senior
management level, either CEO, CIO or like, thus, that person possesses the authority to
make substantial organisational changes happen.
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• Vendor support, on one side, cannot be delegated to an outside party as a
strong reliance on an outside consultant or vendor has a negative impact on project
success. On the other hand, when the company lacks the required technical and
transformational skills in-house, it is not wise to manage such undertaking on its own.
Therefore, the project success is positively correlated with the fir of IT vendors
employed.
• Careful package selection has to be made at the early stage of ERP
implementation; otherwise, a company faces either a misfit between software package,
business processes and strategy, or a need for major modifications. An organisation is to
fit to a system not another way around.
The aim of the article was not only to test the Somers and Nelsons CSF list but also to
extend it to a richer framework that would describe the interrelations between individual
CSF. For this purpose, a cases study research was employed.
The two following research questions were formed:
1. Can the Somers and Nelsons list be helpful to understand the root causes of ERP
implementation success and failure?
2. If so, in what way can the Somers and Nelsons CSF be interrelated causally?
The case analysis demonstrated that the list of Somers and Nelson is sufficient for
explaining the root causes for ERP implementation success and failure. It also showed
that all the CSF were interrelated with each other either directly or indirectly and,
moreover, all CFS influenced each other in the same direction leading to a cycle of good
or poor performance.
As the goal of ERP systems is to integrate different business functions, the authors of
the current article concluded that the interdepartmental co-operation and communication
between the project team members is the core of the ERP implementation process.
These two CSF don’t only go hand in hand but also reinforce each other to the same
direction.
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The results also contained some additional exploratory thoughts of the authors:
1) Authors speculated that intensive communication between the representatives of
various user groups is directly linked to the success of the implementation
project.
2) Additionally, the authors proposed that the presence and attitudes of key
stakeholders such as (a) top management, (b) project team, (c) project
management, (d) project champion and (e) software vendor determine the
implementation success. Even the highly competent project team with superior
communication and collaboration practices will not perform at its best whether
there is a lack in presence, in attitude, or in both of these key stakeholders.
3) The use of (d) consultants, however, is doubtful. Earlier researches have
concluded that the extensive use of outside consultants is negatively correlated
with the implementation success and that the changes required for the successful
implementation are too important to delegate to a third party. This also explains
why this factor is lined very low in Somers and Nelsons list.
3) The authors claimed that it is possible to reverse the under-performance of an
ERP implementation to a successful one by simultaneous and reinforcing
changes in presence or attitudes in these stakeholders.
The contribution of the research was that it went beyond testing the existing CSF list of
Somers and Nelson and studied the interrelations between the individual CSFs.
Furthermore, the study contained supplementary thoughts and propositions concerning
the key stakeholders involved in ERP implementation projects.
3.4.3 A model of ERP project implementation
The research paper by Parr and Shanks (2000) presented the analysis of two types of
ERP implementations within the same organisation, unsuccessful and later a successful
one, with the aim to determine which CSF are necessary within each phase of ERP
32
implementation. The study highlighted the differences and similarities between these
two cases, and also provided explanations to these differences with a particular
emphasis on the successful case.
Project phase model (PPM) of ERP implementation was created consisting of three
phases such as planning, project, and enhancement. In addition, the project phase was
divided into five sub phases: set-up, re-engineering, design, configuration and testing,
and installation. PPM differed from previous models with centre of attention being on
the individual phases of the implementation project rather than on the project as a phase
in the implementation process. The CSF identified by the same author in earlier
research (Parr, 1999) were used to supplement this model. The aim was to investigate
the relationship between PPM and CSF.
The following research questions were formed:
1. Which CSF is necessary in which phase?
2. What are the differences in relationship between the phases of PPM and CSF
when comparing a successful case with an unsuccessful one?
3. How are these differences explained?
PPM provided a research framework for interview questions. Interviews were
conducted with various stakeholders such as system managers, project managers,
project team members, business analysts, consultants and system users in order to cover
the possible viewpoints of many key players. The use of multiple sources of data and
multiple viewpoints as well as the cases of unsuccessful and successful implementations
were selected to in order to illustrate the transition from failure to success.
Both cases were considered to have brought considerable business benefits to the
organisation, while one, Oilco, was a complete failure and another, Exploreco, a
successful one in a project sense. However, these two cases differed in three important
aspects. Firstly, Oilco case is much larger in scope than Exploreco’s, secondly, Oilco
case included an earlier version of ERP system, and thirdly, even though these
companies were at different geographical locations, the implementation project of
Exploreco was driven from the Oilco head office.
33
Case findings- similarities and differences
Figure 3-3: The importance each CSF in PPM phases, case study findings
Source: Parr A., Shanks G. (2000): A model of ERP project implementation. Journal of Information
Technology, Vol. 15, p. 299
Similarities
• Planning phase was viewed as the most important phase by the both companies.
The CSF during this phase were: management support, project champion,
commitment to change and vanilla ERP implementation approach.
• Also, the installation phase was very similar in both cases and important factors
here were: management support, balanced team, commitment to change and
having the best people available for the project.
• The enhancement phase, which included system repair, continuous improvement
and organisation transformation didn’t receive much signification in both cases.
34
Differences
• For the unsuccessful company, Oilco, only the management support was
important throughout the phases of PPM. On the contrary, for the successful
company, Exploreco, seven CSF were considered to be essential. These were:
management support, champion, commitment to change, vanilla ERP,
empowered decision makers, best people full-time, deliverable dates and clear
definition of scope and goals.
• Overall, CSF in successful case were considered to be more important than in
unsuccessful case.
• The strategic differences were also present as Exploreco had the advantage of
learning from Oilco’s experience.
• In Exploreco’s case, the selected project champion was allocated to the project
full time and for the life of the project, and was a member of the board of the
company. Whereas, in Oilco this person was not officially recognised and his or
her role kept changing over time.
• Although in both cases in the set up phase balanced team and definition of scope
and goals were recognised, Exploreco had a strong focus on additional factors
such as implementing vanilla ERP and setting clear delivery dates.
• Re-engineering and configuration and testing phase differed the most. For
Exploreco, all CSF placed an equal weight on each stage of the project. On the
contrary, Oilco placed little effort on these. Additionally, in Exploreco’s case
management spent remarkable time on communicating the benefits, changes and
status reports to employees. Whereas, in Oilco management activity was more
remote and included travelling around and making presentations.
• The consistency and presence of CSF throughout all phases of the project in
both companies were dissimilar. Oilco’ s commitment to project was slow,
which can be explained by the fact that it was lengthy project. Exploreco had
many advantages over Oilco as it was smaller, self-contained project, which was
to replace the existing unpopular system.
Authors provided explanations to these similarities and differences between the
successful and unsuccessful cases. Mostly, these are related to organisational learning
and the scope and complexity of each project. The organisational learning of the
35
unsuccessful project was exploited at the ERP implementation in Exploreco case. The
project was piloted from the Oilco’s head office, required minimal customisation,
established solid deadlines and appointed a senior broad member as a project champion.
Moreover, learning from the past experience, system training was provided by the in-
house experts who were committed to the new ERP system rather than by the external
consultants or senior managers. In addition, the CSF were identified and their use was
ensured at each phase of the implementation.
The scope and complexity in Oilco’s case was much larger than in Exploreco’s case. In
an earlier research authors (Parr et al 2000) had categorised ERP implementations to
three main categories: comprehensive, middle level and vanilla in accordance with their
characteristics. In this scheme, Oilco was a comprehensive implementation, which is
large and complex in scope and contains a high level of risk and probability of failure.
On the contrary, Exploreco was a vanilla implementation, which are slighter in scope
and involve less risk and smaller projects. In addition, Oilco’s implementation also
involved an earlier version of the ERP software.
The results of the study showed that:
1) The large implementation projects are of high risk and are challenging to
implement within time and on budget. Instead, ERP implementations should be
divided into smaller, simpler projects identified as vanilla implementations.
2) In contrast with the previous studies of Ross (1999) and Markus and Tanis
(1999), no significant post-implementation phases were recognized. The
enhancement phase was not considered to be important neither in the
unsuccessful nor in the successful ERP implementation.
3) An experienced project champion with clearly defined roles and responsibilities
is essential for successful project.
4) The PPM together with CSF provides a guideline for the ERP implementation
projects for practitioners and a foundation for further empirical research for
academic scholars.
The contribution of the study was that it focused on the implementation project itself
and linked it to CSF. The research findings emphasise that ERP implementations should
focus more on the planning phase and ensure the utilisation of all CSF across all the
36
phases of ERP implementations. Authors also developed a model of successful ERP
project implementation.
3.5 Chapter summary
Major business drivers behind ERP implementations are the hope that they will improve
the firm’s performance and productivity, provide competitive advantage and satisfy
customer demands. However, these implementations are usually large, complex
projects, involving considerable amount of human and other resources, integrating
different interest groups, managing the time pressure and facing other challenges. In
addition, the firms adopting and ERP go through an initial period when they realise only
few benefits. Also, deciding on going ERP launches an inevitable change process,
which accordingly brings in behavioural and managerial challenges such as user
resistance, turnover of key personnel, resistance to change, lack of training and so forth.
Training of user personnel is critical in making ERP systems work.
Success is measured in different forms. On time and within the budget seem to be the
rationales to evaluate success. However, the fact is that the failure rate for ERP
implementations remains high. Reasons being from pure technical problems to business
and operational risks, which are the most critical and difficult ones to manage. Many
researches have investigated the key factors in ERP implementations in order to provide
the guidelines for ERP implementation practice and increase the probability of success.
A number of scholars have gone beyond just listing the CSF but have studied their
significance at different stages in the ERP project life cycle, the interrelation between
these CSF, the importance of CSF in successful and unsuccessful implementations and
so forth.
Somers and Nelson (2004) identified 22 CSF divided into key players and activities that
are important in an ERP implementation process, and studied their temporal importance
across ERP implementation life cycle. The research findings proved that the importance
of each CSF does change within the implementation process and some them remain
crucial throughout or almost throughout the implementation process. Similarly, Parr and
Shanks (2000) observed the importance CSF in each stage of ERP implementation
37
project according to a different model and notified the similarities and differences
between the successful and unsuccessful implementations. The results of the study
showed that in the successful project CSF were found to be important and their use was
ensured throughout the project whereas, in the unsuccessful project CSF were
considered to be less important. Additionally, authors concluded that vanilla
implementations tend to have higher success rate.
Akkermans and Helden (2002) proved that the CSF list of Somers and Nelson was
sufficient to explain the root causes of ERP success or failure. The theoretical list of
Somers and Nelson was then ranked by the high-level managers who had been involved
in such projects and the results showed that these differed. According to authors, the
ranked list of executives provides an interesting mixture of hard implementation aspects
such as clear goals and objectives and strong project management, and soft aspects like
team competence and interdepartmental collaboration and communication. Akkermans
and Helden also Somers and Nelson agreed that most of the CSF would hold for any IT
project whereas some are more important to ERP systems in particular. The ones that
can be related to any IT project are: steering committee, top management support, clear
goals and objectives and user training. The ones unique to ERP systems are:
interdepartmental control and communication, change management, BPR, vendor
support, use of vendor tools and consultants.
In addition, Akkermans and Helden demonstrated that these CSF don’t stand alone but
are interrelated with each other, directly or indirectly, leading to a cycle of good or bad
performance. The article concluded that the core of ERP implementation process is
interdepartmental communication and co-operation between the project team members.
Authors speculate that the intensive communication between the representatives of
different departments is directly linked to the success of the project. Furthermore, the
authors proposed supplementary thoughts that superior collaboration and
communication are not enough for the project to be successful but it depends also from
the presence and attitudes of the key stakeholders such as top management, project
team, project management, project champion, software vendor and consultants. The use
consultants, however, was ranked very low both in the managers rated list and in the
Somers and Nelson list. Authors claim that it is possible to save the “sinking” ERP
project and reverse the under-performing ERP project to a successful one by
38
simultaneous and reinforcing changes in the presence and attitudes of these
stakeholders. The perception of various interest groups is discussed in more detail in
next chapter.
39
Table 3-4: The summary table of articles on CSFs
Find
ings
The
impo
rtanc
e of
thes
e C
SF d
oes c
hang
e in
eac
h st
age
of th
e im
plem
enta
tion
proc
ess.
Som
e of
thes
e ar
e cr
ucia
l alm
ost o
r thr
ough
out t
he p
roje
ct.
Any
IT p
roje
ct re
late
d: st
eerin
g co
mm
ittee
, top
m
anag
emen
t sup
port,
cle
ar g
oals
and
obj
ectiv
es, a
nd
user
trai
ning
. U
niqu
e to
ERP
syst
ems:
inte
rdep
artm
enta
l con
trol
and
com
mun
icat
ion,
cha
nge
man
agem
ent,
BPR
, ve
ndor
supp
ort,
use
of v
endo
r too
ls a
nd c
onsu
ltant
s.
The
list p
rovi
ded
by S
omer
s and
Nel
son
is su
ffic
ient
to
exp
lain
the
root
cau
ses o
f suc
cess
or f
ailu
re.
Indi
vidu
al C
SF a
re in
terr
elat
ed w
ith e
ach
othe
r and
, m
oreo
ver,
all C
SF in
fluen
ce e
ach
othe
r to
the
sam
e di
rect
ion.
Inte
rdep
artm
enta
l co-
oper
atio
n an
d co
mm
unic
atio
n ar
e th
e co
re o
f the
ER
P im
plem
enta
tion
proc
ess.
Th
e pr
esen
ce a
nd a
ttitu
des o
f key
stak
ehol
ders
such
as
top
man
agem
ent,
proj
ect t
eam
, pro
ject
m
anag
emen
t, pr
ojec
t cha
mpi
on, s
oftw
are
vend
or a
nd
cons
ulta
nts d
eter
min
e th
e im
plem
enta
tion
succ
ess.
It w
as p
rove
n th
at p
ayin
g at
tent
ion
to C
SF in
crea
ses
the
succ
ess r
ate
for E
RP
impl
emen
tatio
ns. L
arge
pr
ojec
ts a
re o
f a h
igh
risk
and
Van
illa
impl
emen
tatio
ns sh
ould
be
pref
erre
d. In
con
trast
with
ot
her s
tudi
es, n
o si
gnifi
cant
pos
t-im
plem
enta
tion
phas
es w
ere
reco
gnis
ed.
Mai
n po
ints
CSF
list
(22
fact
ors)
: K
ey p
laye
rs: t
op m
anag
emen
t, pr
ojec
t cha
mpi
on, s
teer
ing
com
mitt
ee, i
mpl
emen
tatio
n co
nsul
tant
s, pr
ojec
t tea
m,
vend
or-c
usto
mer
par
tner
ship
s, ve
ndor
tool
s and
ven
dor
supp
ort.
Key
act
iviti
es: u
ser t
rain
ing
and
educ
atio
n, m
anag
emen
t of
expe
ctat
ions
, car
eful
softw
are
pack
age
sele
ctio
n, p
roje
ct
man
agem
ent,
cust
omis
atio
n, d
ata
anal
ysis
and
con
vers
ion,
B
PR, d
efin
ing
the
arch
itect
ure,
ded
icat
ing
reso
urce
s, ch
ange
man
agem
ent,
clea
r goa
ls a
nd o
bjec
tives
, edu
catio
n of
new
BP,
inte
rdep
artm
enta
l com
mun
icat
ion
and
colla
bora
tion.
Top
10 C
SF ra
nkin
g lis
t rat
ed b
y to
p m
anag
emen
t lev
el
man
ager
s:
1.
Top
man
agem
ent s
uppo
rt 2.
Pr
ojec
t tea
m c
ompe
tenc
e 3.
In
terd
epar
tmen
tal c
o-op
erat
ion
4.
Cle
ar g
oals
and
obj
ectiv
es
5.
Proj
ect m
anag
emen
t 6.
In
terd
epar
tmen
tal c
omm
unic
atio
n 7.
M
anag
emen
t of e
xpec
tatio
ns
8.
Proj
ect c
ham
pion
9.
V
endo
r sup
port
10.
Car
eful
pac
kage
sele
ctio
n
Proj
ect P
hase
Mod
el (P
PM) c
onsi
stin
g of
thre
e ph
ases
: pl
anni
ng, p
roje
ct, a
nd e
nhan
cem
ent.
In
terv
iew
s wer
e co
nduc
ted
with
seve
ral s
take
hold
ers s
uch
as sy
stem
man
ager
s, pr
ojec
t man
ager
s, pr
ojec
t tea
m
mem
bers
, bus
ines
s ana
lyst
s, co
nsul
tant
s and
syst
em u
sers
. Si
mila
ritie
s and
diff
eren
ces b
ased
on
two
case
s: su
cces
sful
on
e an
d un
succ
essf
ul o
ne.
Aim
To id
entif
y w
hich
are
the
key
play
ers a
nd a
ctiv
ities
in a
n ER
P im
plem
enta
tion
proc
ess
and
at w
hich
stag
e of
ER
P lif
e cy
cle
thei
r eff
ect i
s mos
t cr
itica
l.
To st
udy
whe
ther
the
list
prov
ided
by
Som
ers a
nd
Nel
son
is u
sefu
l to
expl
ain
the
root
cau
ses o
f suc
cess
or
failu
re o
f ER
P im
plem
enta
tion
and
whe
ther
thes
e C
SF a
re
inte
rrel
ated
with
eac
h ot
her.
To d
eter
min
e w
hich
CSF
are
ne
cess
ary
with
in e
ach
phas
e of
ER
P im
plem
enta
tion
by
com
parin
g an
uns
ucce
ssfu
l and
a
succ
essf
ul im
plem
enta
tion.
Aut
hors
Som
ers &
N
elso
n (2
001)
Akk
erm
ans
& H
elde
n (2
002)
Parr
&
Shan
ks
(200
0)
40
4 Managing human resources in the ERP implementation process
The improvement of enterprise’s performance relies on the success of the implemented
reengineering and integration projects. Usually, these projects are complex in nature and
using human resources in appropriate manner is a key for a success in such projects
(Hawa et al 2002; May and Kettelhut 1996). Many other researchers (Sumner 2000;
Welti 1999; Holland et al 1999) have listed people issues in their critical success factors
recommendations when dealing with ERP projects. Therefore, it is important to
understand the different parties involved in such projects. The human activity issues and
problems that companies are encountering should be looked from the different sides of
the staff, internal and external experts, system professionals, management, vendors,
users and other people involved in such projects. Also the skills people posses influence
the outcome of the project. Counterattacking the major opinion, some studies have
shown that the human resources factor does not have a significant impact on the project
success. These rather unexpected results have been largely criticized by the scholars.
This chapter elaborates the issue of the key stakeholders, analyses their role and main
issues of concerns in ERP implementation projects, examines the HR requirements for
successful projects and discusses the importance of HR from two different angles
whether HR factors have a significant impact on the project success or not.
• The role of key stakeholders/parties
• HR requirements for a successful project
• Why it pays to pay attention to human issues
• HR factors have a moderate impact on the project success
4.1 Key stakeholders involved in an ERP implementation project
The study by Skok and Legge (2002) dealt with the issue of the key stakeholders and
identified four main parties involved in ERP implementation projects: management,
users, developers and consultants. Differently from others this research derived its
results by using the stakeholder analysis to tackle the CSF. The research framework of
the study was based on the human activity system diagram, which illustrated these four
41
key stakeholders involved in any ERP project and examined the interrelations between
them. Areas of conflicts were studies as possible sources of project failure.
Additionally, the study investigated the key stakeholders power to influence the
outcome of ERP project and their strategies to gain support for the project.
Figure 4-1: The human activity system diagram
Source: Skok W., Legge M. (2002): Evaluating enterprise resource planning systems using an interpretive approach. Knowledge and Process Management, Vol. 9, No. 2, p.74
The results of the study are summarised as follows:
• Management
Incentives
Management is concerned retaining the key people with broad range of skills and
specific knowledge. The retaining of employees is closely related to the company’s
compensation policy through both, monetary and non-monetary awards such as bonuses
and salary increases, recognition and career development.
Top management and stakeholders
The involvement of top management from the start and support from the other key
players such as stakeholders can reduce the major challenges towards the change. The
42
role of the top management is to convey a message that ERP is not another technology
but a business project.
Customers
The study shows that customers need to be informed on the upcoming changes ERP
brings to give them confidence in the implementation plans and to avoid the
unpredictable and unfavourable behaviour from their side.
• Consultants
Consultants have a very important role of influencing ERP implementations, however, a
close monitoring and control of their involvement is required. Conflicts with consultants
occurred with the following matters.
Knowledge transfer
Consultants may be reluctant to transfer their knowledge to client company’s
employees. It has been also felt that the power and influence is too great and that they
don’t provide solutions for company’s problems.
Motivation
Consultants are involved almost throughout the project life cycle and their role is to
help to achieve the business benefits. Monetary incentives, for example, bonuses
facilitate keeping up their motivation.
Communication
Communication problems with consultants mainly took place because consultants used
a different language, which companies’ management and staff didn’t understand, their
documentation of the project process didn’t match companies needs and some of the
consultants were not able to communicate with the people at lower levels.
Agenda differences
Another conflict point with consultants that came out was that they wanted to get rid of
their current project as quickly as possible and to move on to the next client. Thus,
resulting the low commitment. In addition, many consultants seemed to lack the
required business and technical skills.
Influence of consultants
The power and influence of consultants may grow too big not only because of their ERP
knowledge and expertise but also because the management of the company is too busy
to come up with new ideas. Consequently, consultants generate the ideas and take
control over the project.
43
Contracts
It is important to have the contractual agreements with consultants in order when the
problems occur. For instance, inexperienced experts are not being tolerated, consultants
are made responsible for the promised results and companies are demanding more value
for their money.
• Developers
Developers are the staff, either out-sourced or in-house, designing the configurations of
the system.
Performance
They are people with specific technical skills who have no realistic understanding of a
marketplace, economics and competition.
Skills shortage
It is difficult to acquire people with these skills and to retain them because they
generally don’t have any loyalty to the company but are more interested in their
personal career development.
Communication
They might not have the same values or ways of operating as the business managers
mainly because they tend to be younger people. However, as the ERP packages are
technically complex the company needs the staff with these skills. In addition, these
young people are more accustomed to work within the rapidly changing environment.
• Users
As implementing ERP system means new way of doing things and cutting down job
positions. Users experience a huge range of emotions such as anger, fear and denial as
resistance to change. People want to know what will happen specifically to their jobs
not about the long-term vision of the company.
International dimension
Cultural differences are present with ERP implementations as people in deferent
countries have different ways of working.
Sharing culture
Employees of one department might be unwilling to share their knowledge and
information with another department.
44
Training
Training the users while providing support for the job changes help the staff to
overcome their attitudes toward the corporate and cultural changes due to ERP
implementation.
Super users
The key benefit of training super users among the employees is that they accordingly
train other end users, which helps to improve the communication and reduces resistance
to change.
The results expose that people with the right business and IT skills are essential to the
success of the project. However, the fact is that companies are losing more key staff
than expected at the end of the project. Therefore, substantial bonuses and other
incentives are essential to retain the talent in the organisation during the post-
implementation stage. The major conflict identified was the use of the external
consultants and developers. Companies tend to rely too much on external help during
the implementations whereas the competence and motivation of the consultants and
developers is questionable. Despite of the problems associated with the use of
consultants their knowledge and skills are still needed for the companies but it is critical
to have the strategies and agreements in place to manage them. Other main difficulties
with the ERP implementations are encountered with the change management. Cultural
and process changes have a destructive impact on employee attitudes and these
behavioural problems are more challenging to manage than the technical difficulties that
they come across with.
This study by Skok and Legge provided some insights into the different perspectives of
the four important stakeholders involved in an ERP project. The contribution of the
study was that the key parties involved in the project were used to tackle the list of CSF
by Bancroft (1998). The particular emphasis was made in the areas of staff retention,
conflicts in ERP projects, managing consultants, and cultural and business process
changes.
45
4.2 Human resources requirements for a successful project
Several studies have showed that it is essential to have people with right set of business
and IT skills to assure the success of a project (Skok and Legge 2002; Wateridge 1997).
Hawa et al (2002) pointed out that the improvement of an enterprise relies on the
success of software engineering projects, which respectively depends on the human
resources. The paper analysed the basic human requirements for the successful project
concentrating on the know-how, profiles and roles of the project team members, and the
ways of improving those. Focusing on the human competences has a direct impact on
the outcome of the project.
Authors emphasised that enterprise wide projects require the coordination,
comprehension and mutual acceptance of the multidisciplinary teams, which contain
management, technical personnel, end-users, consultants, vendors and others. This
posed the human factor as a key point in any enterprise improvement projects.
Hawa et al identified three groups of people involved in enterprise re-engineering
projects:
• Promoters are those who make the proposal for the improvement and set up
resources to do so.
• Inhabitants are those who know what they need and where the improvements
have to be made.
• Architects are those with the skills needed for the improvements and who can
consult inhabitants and promoters about each improvement.
Traditionally, the usual approaches in the enterprise are that:
1. the promoters are management, inhabitants are staff and architects are external
consultants.
2. the promoters are management, inhabitants are staff and architects are technical
staff of the enterprise.
None of these approaches fulfils all the expectations of re-engineering projects. The use
of external consultants creates a dependency toward them, as when the project is
finished and consultants have left, it is difficult to maintain and upgrade the outputs as
required expertise is missing. The use of in-house technical personnel brings limited
46
results as well because they might be experts in their field but they have no idea in the
development of such projects.
When talking about the human competences required to the project, the study states that
there have to be two types of different and elementary know-how such as operation and
engineering ones.
• Engineering know-how deals with the issues of methodology and architecture
of the development project.
• Operation know-how contains the issues related with the enterprise.
Only the existence of these two types of know-how is not sufficient condition for the
success of the project but these experts have to co-operate closely with each other. The
ideal solution is achieved when the same person has the both types of knowledge and
can smoothly run between the operation and engineering environments. However, in
reality it is difficult to achieve.
As a result, the study concluded that humans are a critical factor in enterprise daily life
and thus, have an important role in enterprise improving projects. The analysis of
project-necessary know-how, project teams’ profiles and roles has led to the definition
of guidelines that is to contribute to the improvement of the EEI projects. For further
research, the emphasis of the project team structure should not only be made in terms of
know-how, profiles and roles but also in terms of human competences and skills. In
addition, knowledge management issue should be addressed within an EEI project.
Welti (1999) considers the following HR requirements to be important for a successful
project:
• Availability
It is essential to have sufficient human resources available for the project. Engaging
full-time project members guarantees continuity and progress.
• Expertise
In the case if there is a lack of expertise in-house, companies can employ new
people or delegate the workload to external consultants. Recruiting new people
brings a valuable input for the company as they look differently at the processes and
47
procedures companies have, plus, contribute new ideas and ways of working. Hiring
consultants is an expensive solution but their expertise can accelerate ongoing of the
project. The major drawback is that they hardly transfer any of their knowledge to
employees. At the same time, without internal know-how companies are dependent
of the external help.
• Quality
The success of the project depends largely on the quality of the project members and
therefore, the best human resources must be made available for the project. The
project management team members have to be skilled individuals, capable, qualified
and with high learning potentials because of the complexity and high standard of the
project. The project management has to have authority and control over all the
aspects of the project, to be able to act quickly, effectively and independently on
project problems without constraints from the organisation side. The project leaders
have to have effective leadership skills such as clarity of vision, credible
communication and interpersonal skills, sincerity, self-mastery and high levels of
motivation and physical energy (Stewart et al, 2000). The stronger it is the faster
and more successful is the implementation of the project. In addition, the
improvement of the quality and co-operation of the teams can be improved through
education and training.
• Composition of teams
The composition of project teams with competent and skilful project team members
and external consultants influences directly the output of the project. Welti (1999)
recommends structuring the project team including a project leader, project
members and consultants.
• Trust
The relationship of trust has to be established among the project team members,
steering committee and consulting company to ensure success of the project. The
projects were more difficult to implement when distrust existed among the project
team members. Close personal communication among the team members, regular
meetings, honest and open information policy, good coaching and support by the
48
project leader and project manager, allocation of responsibility to project members
and giving incentives are the measures that help to build up trust.
The study of Wateridge (1997) indicated that project managers play a key role in
developing and implementing successful IS/IT project and by acquiring and applying
certain skills they can make these projects successful. This paper investigated the key
skills that project managers need to possess to manage the projects successfully and
which skills are more important than others.
Many researches have been done regarding the skills required by the project manager.
Wateridge had made an extensive review on them and summarised the results in the
following table.
Figure 4-2: A summary table of skills required by the project manager
Source: Wateridge J. (1997): Training for IS/IT project managers: a way forward. International Journal of Project Management, Vol. 15, No. 5, p. 284
Leadership appeared to be the most important skill identified by many researches. It has
been thought that technical skills are essential to possess but the summarised table
shows different results. Technical skills are necessary to have but their significance is
less important in project management as the technical expertise is not the primary
concern of the project managers unless they want to enhance their credibility in the eyes
of technical team members. Inter-personal and communication skills have higher
importance. Nowadays, the trend is toward people management, which involves
49
observation, listening, motivating teams towards project success, management of
conflict, delegation, understanding, empathy, patience and many other skills and
qualities. Administrative tasks such as planning and controlling are ranked high as well.
Furthermore, these skills are often mentioned in the critical success factors lists.
People have seen by many authors as key contributors to the success and failure of the
projects. Very often, projects managers need to lead, manage and communicate with the
large number of stakeholders, technicians, sponsors and users, and it is important to
satisfy all these interested parties and deliver benefits to the client and organisation
(Wateridge, 1997).
The article also brought out that the means to become better project manager is not only
learning through experience, instead, skills can be learned by reading, seminars,
schooling and workshops. Learning only through experience will take a long time.
Therefore, training is essential to accelerate the learning process. In addition,
professional development programs need to be in place and project managers must
develop their skills and competences throughout their career. Furthermore, the author
suggested that a great emphasis needs to be put on people management skills in winning
over users and other stakeholders.
The contribution of the study was reviewing the previous researches done on the topic
and recognising the trend sifting towards people management. The author also
suggested different methods in making an effective project manager even better.
4.3 Why it pays to pay attention to people
Experts estimate that only 30 –35% of the change and re-engineering projects initiated
are successful. The article by May and Kettelhut (1996) as many others suggested that
the reason why large number of re-engineering projects fail is because management is
paying to little attention to human factors. They illustrated the implementation issues in
the context of change with the help of a case study and finally, provided a list of
recommendations that have to be taken into account with human factors to increase the
probability of success in reengineering projects.
50
The viewpoint of the authors, which was supported by previous studies, was that re-
engineering projects do not offer positive incentives to most employees and employees
generally do not have the chance to influence the decisions that affect them. Moreover,
just the word re-engineering causes anxiety and leaves employees with concern about
their future. If management is not paying attention to employee issues, the project is
most likely to fail.
Identifying the human issues
According to the authors, successful implementation of the re-engineering projects
requires planning, allocation of resources, top management support and organisational
commitment. One research argues that the implementation has to address the employees
and re-engineering projects should be used to increase the desirability of firm’s products
or services not to eliminate jobs. This is one way to retain employee morale and loyalty.
The human issues that emerged from this case study and that are also covered in
academic literature were as follows:
• Employees lost their sense of identity
• Job functions changed
• The re-engineering project generated anger and frustration
• The employee skills had to be upgraded
• Jobs were eliminated
• Distribution of work has changed
• Changes led to a fear of criticism on individual’s performance
• Under pressure individuals may panic
Experts suggest that well planned re-engineering projects bring the major benefits to the
organisation. The authors proposed a number of steps that implementation caused
problems could be avoided.
1) Conduct an identity audit
Companies should investigate what are their employees believe to be central
about the company they work for before undertaking major reforms. Such as
identity audit, for instance in this case study, would have uncovered the
51
employees believes about their roles, the importance of their visibility in the
process and their assumptions about promotions.
2) Establish ground rules
According to author humans do not resist change as per se but the way they are
treated and the roles they play in the change effort. The resistance to change is
caused by the employees’ feelings of loss and ambiguity.
Change usually involves learning of new skills, knowledge and expertise.
Individuals need to feel competent and continuously develop their competences.
However, the re-engineering projects often place people in positions in which
they lack the skills needed.
Open communication and collaboration are essential as these to clarify
expectations and reduce ambiguity, and build acceptance and commitment.
The implementation process would be much smoother, it all the changes would
not be implemented simultaneously.
3) Define a framework for participation
There is extensive research done on the value of participation. When the
employees are involved already at the early stage of the major change process,
the quality of solutions is increased, the employees show greater commitment
and acceptance, conflicts are reduced and the likelihood of smooth
implementation is greater.
The number of conclusions drawn from this study were the following: it is easier to
specify reasons for re-engineering processes than to gain employees acceptance and to
implement desired changes, early involvement and participation will increase the
employees ownership of the new process, attention to the basic principles of change
management makes the implementation easier, employee fears that jobs will be
eliminated have to be addressed, and most of the projects fail because job losses create
long-term problems. To insure the success of the project and minimise problems there
52
has to be participation in the project definition and implementation by the people of
involved organisations.
To summarise, this article analysed the presence and the potential impact of the human
issues related to the major re-engineering projects. In one word, in order to success in
re-engineering or any MIS project, human needs have to be addressed. Still, most
published articles on re-engineering deal with the factors that focus on improving the
customer response time, reducing market entry time, improving organisational
processes and achieving the benefits.
4.4 Factors influencing the project success: the impact of HRM
The study by Belout and Gauvreau (2004) challenged the widely accepted opinion that
human resources determine the failure or success of the project. The authors claimed in
their research that although there is a clear link between the project success and the
human resources factor, this factor does not have a significant impact on the project’s
success. The results of the study also showed that the relationship between the critical
success factors and project success varies according to project life cycle changes.
However, many academics still agree that HRM is one of the most important element to
the project success. An early study by Pinto and Prescott (1988) contradicted this
viewpoint. They tested the changes in the importance of ten CSF across four stages of
the project life cycle and concluded that the human resources factor has minor impact to
project success. Not surprisingly, these results were severely criticised and further
researches on the matter were suggested. The aim of Belout’s and Gauvreau’s paper was
to retest Pinto’s and Prescott’s conclusions and to examine the issues of validity of the
measures used in their study. The objectives of the authors were twofold: first, to
address the lack of empirical data on CSF and second, to investigate the impact of life
cycle stages on the relationship between CSF and project success. Literature review on
the project management revealed that most models on the project success were based on
theory rather than on empirical findings.
53
The research framework included the ten independent variables, which presented CSFs
and three moderating variables such as project life cycle, project organisational structure
and project activity sector. In order to determine the importance of human resources in
the organisations and retest the impact of CSF on project success, the authors proposed
their first hypothesis:
H1: The personnel factor will have a significant impact on the project success.
The effect of different life cycle stages on CSF has long been investigated by numerous
academics and similarly, the second hypothesis tested the effect of CSF across project
life cycle changes:
H2: The relationship between the independent variables and project success in the
model will be affected by the four project life cycle stages.
In addition, authors decided to investigate the impact of two other variables such as
project structure and project activity sector, which they though to affect the relationship
between CSF and project success. The third hypothesis was therefore:
H3: Project structure has a moderating effect on the relationship between the
independent variables and project success.
The authors also proposed that the project activity sector, for instance, business area or
industrial sector, which has been identified in the literature as critical factor affects the
success of a project. One research notified that the environment has a significant impact
on the project and that there is a clear distinction between the projects that fail because
of external factors or management mistakes. Thus, the fourth hypothesis was as follows:
H4: Project activity sectors will have a moderating effect on the relationship between
the independent variables and project success.
54
Figure 4-3: The proposed model of A. Belout and C. Gauvreau (2004)
Source: Belout A., Gauvreau C. (2004): Factors influencing project success: the impact of human resource management. International Journal of Project Management, Vol. 22, p. 3
The results of the study show that even though there was a clear link between the
“personnel” factor and project success, this factor did not have a considerable effect on
the success of the project. Thus, the first hypothesis was rejected. This finding
contradicts the academic literature that suggests that people are key factor to
organisational success. Qualified and motivated personnel and effective people
management have a significant impact on the project result as most project failures are
related to human issues. Belout and Gauvreau justified that it is difficult to measure the
impacts of HRM on organisational success. Currently, numerous studies investigate the
measurement of the impact of the personnel management on the organisations and
projects effectiveness. However, because of the diffuse nature of HRM, ambiguity of
55
HR objectives and the difficulty in interpreting the results of an HR practice it is
difficult to measure the impact of HRM on organisational success. Moreover, it is hard
determine a clear link between an HR department’s actions and tangible results in terms
of their impact on a specific project.
The results confirmed that the relationships between the critical success factors and
project success vary according to the project life cycle stages. Surprisingly, the
personnel factor was not correlated with the project success in the planning phase
although most of the HR practices are carried out in this stage of the project. For
instance, allocating resources is in stage is crucial for making the project a success.
From this point of view, it raises a question about the importance of traditional HRM
practices in a project-based environment and how it should be measured. Three critical
factors in the planning stage were: project mission, top management support and client
acceptance.
Hypothesis three confirmed that project structure has a moderating effect on the
relationship between CSF and project success. Regardless of the organisational
structure, top management support and problem identification, project mission,
schedule, monitoring and control were significantly correlated with success. It was also
noted that a project team that operates in a project-based organisational structure must
possess all the necessary business and technical skills in order to complete the project
successfully.
The results of the study confirmed also the forth hypothesis, which referred that there is
a moderating effect between the independent variables and project success depending
on the activity sector. Overall, it was found that each project is unique, its
characteristics are directly linked to the project environment and all project impose
different requirements and challenges to their teams.
In conclusion, although many researchers agree that human resources are the most
crucial elements in organisational success, the authors presented surprisingly opposite
findings. The results showed, that the human resource factor has only a moderate impact
on the project success. Furthermore, authors proposed that research on HRM in project
management context remains undeveloped and future research on the topic are
56
recommended. In addition, future studies should also measure project success from
different viewpoints of various interest groups.
The contribution of the study was that it proposed that the human resource factor does
not have a significant impact on the project success, which is in contrast with the
previous studies. They also posed a fundamental question whether the HRM in the
context of project management differ from the traditional HRM.
4.5 Chapter summary
In addition to critical success factors, the perception of various interest groups such as
management, users, vendors and consultants involved in the ERP implementation
projects is also regarded as a key factor since different people view success in different
ways. Skok and Legge (2002) elaborated the issue of key stakeholders and identified
four main parties involved in ERP implementation projects: management, users,
developers and consultants. The human activity system diagram was used to illustrate
the interrelations between these various interest groups and the areas of conflicts were
brought out as possible sources of project failure. Similarly, the research by Akkermans
and Helden (2002) proposed that the presence and attitudes of key stakeholders such as
top management, project team, project management, project champion and software
vendor determine the implementation success. In summary, areas that these authors
considered to be important were management, developers and consultants. In addition,
Akkermans and Helden claimed that it is possible to save the “sinking” ERP project and
reverse the under-performing ERP project to a successful one by simultaneous and
reinforcing changes in the presence and attitudes of these stakeholders. Hawa et al
(2002) emphasised that enterprise wide projects such as re-engineering project require
the coordination of multidisciplinary teams, which contain management, technical
personnel, end-users, consultants, vendors and others. Wateridge (1997) added that
project managers need to possess the necessary skills to manage and satisfy the large
number of stakeholders involved in the project.
A large part of academic literature suggests that success cannot be achieved without
qualified and motivated personnel. The study by Hawa et al (2002) covered the human
57
competences required for the project and concluded that there have to be two types of
different and elementary know-how, engineering and operational ones, and that it is not
only enough to have them but these experts have to co-operate closely with each other.
The ideal solution is achieved when the same person has the both types of knowledge
and is able to run smoothly between different environments. Welti (1999) considered
the availability, expertise, quality, composition of project teams and trust being
important HR requirements for a successful project. Wateridge (1997) investigated the
importance of skills project managers need to possess to manage IS/IT project
successfully. On the top list were, leadership skills, administrative skills such as
planning and controlling, and interpersonal and communication skills. Surprisingly,
technical skills were ranked low by many researchers. Nowadays, the trend in project
management is towards people management.
The majority of the scholars share the though that people are the most important asset
we have and most projects fail because too little attention is paid to the human factors.
Therefore, many researchers have listed HR aspects in their critical success factors list.
May and Kettelhut (1996) analysed the presence and potential impact of human issues
within software re-engineering projects and showed that it pays to pay attention to
human factors. They also provided a framework of recommendations that have to be
taken into account with human factors in order to increase the probability of success of
re-engineering projects. Counterattacking the widely accepted view, Belout and
Gauvraeu (2004) pointed out that even though there is a clear link between the project
success and the personnel factor, this factor didn’t have a significant impact on the
project success. This study was retesting the conclusions of an earlier research, which
came to similar conclusions and was highly criticised on its validity. The authors also
drew attention to the fact that most models explaining the project success are based on
the academic literature rather than on empirical proof.
58
Table 4-1 Summary table of the articles
Find
ings
Ret
entio
n of
skilf
ul st
aff i
s ess
entia
l for
the
succ
ess o
f the
pro
ject
es
peci
ally
at t
he p
ost-i
mpl
emen
tatio
n st
age
and
is a
maj
or c
once
rn o
f m
anag
ers.
The
maj
or c
onfli
ct id
entif
ied
was
the
use
of e
xter
nal
cons
ulta
nts a
nd d
evel
oper
s. O
ther
mai
n di
ffic
ultie
s wer
e en
coun
tere
d w
ith c
hang
e m
anag
emen
t. Th
e em
ploy
ee a
ttitu
des w
ere
foun
d to
be
mor
e di
ffic
ult t
o m
anag
e th
an te
chni
cal d
iffic
ultie
s.
The
proj
ect n
eces
sary
kno
w-h
ow a
nd th
e m
eans
of e
nhan
cing
it,
proj
ect t
eam
s’ p
rofil
es a
nd ro
les h
as a
dire
ct im
pact
on
the
outp
ut o
f th
e pr
ojec
t.
Succ
essf
ul p
roje
cts n
eed
to h
ave
not o
nly
the
exis
tenc
e of
two
type
s of
kno
w-h
ow b
ut a
lso
the
co-o
pera
tion
of th
ese
two
type
s of e
xper
ts.
The
optim
al so
lutio
n is
ach
ieve
d w
hen
the
sam
e pe
rson
cov
ers t
he
both
role
s and
can
smoo
thly
run
betw
een
oper
atio
n an
d en
gine
erin
g en
viro
nmen
ts.
Lead
ersh
ip is
the
mos
t im
porta
nt sk
ill. T
hen
follo
w a
dmin
istra
tive
skill
s suc
h as
pla
nnin
g an
d co
ntro
lling
. Tec
hnic
al sk
ills a
re n
eces
sary
to
thei
r sig
nific
ance
has
dro
pped
. Int
erpe
rson
al a
nd c
omm
unic
atio
n sk
ills a
re m
ore
impo
rtanc
e as
the
trend
in p
roje
ct m
anag
emen
t is
tow
ards
peo
ple
man
agem
ent
It is
eas
ier t
o sp
ecify
reas
ons f
or re
-eng
inee
ring
proj
ects
than
to g
ain
acce
ptan
ce a
nd im
plem
ent t
he d
esire
d ch
ange
s. A
ttent
ion
to b
asic
ch
ange
man
agem
ent i
ssue
s inc
reas
es th
e ea
se o
f im
plem
enta
tion.
Sp
onso
rs o
f the
re-e
ngin
eerin
g pr
ojec
ts n
eed
to a
ddre
ss th
e fe
ars t
hat
jobs
mig
ht b
e el
imin
ated
. Mos
t of t
he p
roje
cts f
ail b
ecau
se jo
b lo
sses
cr
eate
long
-term
pro
blem
s. T
o m
inim
ise
prob
lem
s the
re m
ust b
e pa
rtici
patio
n in
pro
ject
def
initi
on a
nd p
lann
ing
by th
e m
embe
rs o
f af
fect
ed o
r gan
isat
ions
. Th
e pe
rson
nel f
acto
r doe
s not
hav
e a
sign
ifica
nt im
pact
on
the
proj
ect s
ucce
ss. T
he re
latio
nshi
p be
twee
n C
SF a
nd p
roje
ct su
cces
s is
affe
cted
by
the
proj
ect l
ife c
ycle
stag
es. P
roje
ct st
ruct
ure
and
activ
ity
sect
ors h
ave
a m
oder
atin
g ef
fect
on
the
rela
tions
hip
betw
een
CSF
an
d pr
ojec
t suc
cess
.
Mai
n po
ints
Four
key
stak
ehol
ders
invo
lved
in E
RP
proj
ects
: man
agem
ent,
user
s, de
velo
pers
an
d co
nsul
tant
s.
Impr
ovem
ent o
f an
ente
rpris
e re
lies o
n th
e su
cces
s of s
oftw
are
re-e
ngin
eerin
g pr
ojec
ts, w
hich
resp
ectiv
ely
depe
nds o
n hu
man
reso
urce
s. H
uman
s as a
crit
ical
fa
ctor
in e
nter
pris
e im
prov
emen
t pr
ojec
ts.
2 ty
pes o
f kno
w- h
ow re
quire
d:
engi
neer
ing
and
oper
atio
n.
A ra
nked
list
of s
kills
requ
ired
by th
e pr
ojec
t man
ager
s der
ived
from
the
earli
er re
sear
ches
don
e on
the
topi
c.
A la
rge
num
ber o
f fai
lure
s are
cau
sed
by
man
agem
ent p
ayin
g to
o lit
tle a
ttent
ion
to h
uman
fact
ors.
A fr
amew
ork
to a
void
im
plem
enta
tion
caus
ed h
uman
pr
oble
ms:
1)
con
duct
an
iden
tity
audi
t 2)
est
ablis
h gr
ound
rule
s 3 )
def
ine
a fr
amew
ork
for p
artic
ipat
ion
Con
tradi
ctin
g th
e co
mm
only
acc
epte
d vi
ew a
nd c
laim
ing
that
hum
an re
sour
ces
fact
or d
oes n
ot h
ave
a si
gnifi
cant
impa
ct
on th
e pr
ojec
t suc
cess
. 4 h
ypot
hesi
s to
rete
st th
e va
lidity
of a
n ea
rlier
rese
arch
Aim
To id
entif
y w
hich
st
akeh
olde
rs a
re th
e ke
y fo
rces
driv
ing
the
ERP
chan
ge
proc
ess a
nd st
udy
thei
r pow
er
to in
fluen
ce th
e ou
tcom
e of
ER
P pr
ojec
t.
To a
naly
se so
me
of th
e hu
man
as
pect
s rel
ated
to so
ftwar
e en
gine
erin
g pr
ojec
ts a
nd
focu
sing
on
know
-how
, pr
ofile
s and
role
s.
To in
vest
igat
e th
e ke
y sk
ills
that
pro
ject
man
ager
s nee
d to
po
sses
s to
man
age
proj
ects
su
cces
sful
ly
To il
lust
rate
the
impl
emen
tatio
n of
softw
are
proj
ects
in th
e co
ntex
t of
chan
ge a
nd p
rovi
de a
list
of
reco
mm
enda
tions
that
hav
e to
be
take
n in
to a
ccou
nt w
ith
hum
an fa
ctor
s to
incr
ease
the
prob
abili
ty o
f suc
cess
. To
inve
stig
ate
the
effe
ct o
f pe
rson
nel f
acto
r on
proj
ect
succ
ess.
Aut
hors
Skok
&
Legg
e (2
002)
H
awa,
O
tritz
, La
rio &
R
os (2
002)
Wat
errid
ge
(199
7)
May
&
Ket
telh
ut
(199
6)
Bel
out a
nd
Gau
vrea
u (2
004)
59
5 Empirical part, a survey
The reason for selecting the articles used in the previous chapters was to gain
information about human resources and their implications within the ERP
implementation process. As there was not much information available about HRM
within ERP literature, the human resources aspects have been summarised from the
related topics such as software re-engineering projects, BPR and CSF in ERP. Several
studies have listed human factors in their critical success factors list. Others have
questioned their significance.
The aim of the empirical research is to examine the validity of the comments in the ERP
literature regarding successful implementation of ERP projects and human resource
management. The intention being to study whether there is a difference in HR practices
between successful and unsuccessful ERP implementations. Added to this, to examine
when HR practices are the most prevalent across ERP life cycle and to investigate
whether the various stakeholder groups have a significant impact on the project success.
This chapter includes the reasoning for the choice of the hypotheses, describes the
research framework, hypothesis testing and questionnaire creation, introduces research
methodology including research method and sample selection criteria, analyses the
research findings and points out the research limitations.
• Hypotheses development
• Research framework
• Hypothesis testing
• Research methodology (research method, data and sample selection)
• Questionnaire creation
• Analysis of the research results
• Limitations
60
5.1 Hypotheses development
The research paper of Somers and Nelson (2004) identified 22 critical success factors,
which were divided into key players and activities that are important in an ERP
implementation process. These CSF were based on the extensive literature review on
the topic. The study of Akkermans and Helden (2002) proved that the CSF list of
Somers and Nelson used in previous study in 2001 is sufficient to explain the root cases
of ERP success or failure.
According to authors this list provides an interesting mix of hard (H) and soft factors
(S). They also indicate that most of them would hold for any IT project whereas some
are more important to ERP systems in particular.
Table 5-1: Soft (S) and hard (H) factors in Somers and Nelson CSF list (2004)
Key players Key activities Top management (H) User training and education (S) Project champion (H) Management of expectations (S) Steering committee (H) Careful selection of the appropriate package
(H) Implementation consultants (H) Project management (H) Project team (S) Customization (H) Vendor-customer partnerships (H)
Data analysis and conversion (H)
Vendor’s tools (H) Business process reengineering (H) Vendor support (H) Defining the architecture (H) Dedicating resources (H) Change management (S) Establishing clear goals and objectives (H) Education of new business processes (S) Interdepartmental communication (S) Interdepartmental cooperation (S)
Most of the hard factors (H) such as top management support, clear goals and
objectives, project management, project champion and many more have been widely
discussed in the academic literature and mentioned in various CSF lists. Instead, I’m
interested in the soft factors (S) marked in italic in the table above: project team, user
training and education, management of expectations, change management, education of
new business processes, and interdepartmental communication and cooperation. The
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intention is to analyse how these factors are managed in organisations that have
implemented an ERP project and how important these are to success of the project.
I will focus on these soft factors under the number of HR related headings (Table 5-2),
which have been mentioned by Olson (2004) and which have also been covered in the
literature review part of this thesis.
Table 5-2: Soft factors under the HR related headings
HR related headings Soft factors Management of expectations needs and skills (HR requirements for the project)
Project team competence
Educating, training, developing
User training and education Education on new business processes
Termination of work places, task changes (resistance)
Change management
Communication Interdepartmental communication Interdepartmental cooperation
Reward system (recognition, compensation, benefits)
Management of expectations
As the target is to investigate the importance of the HR aspects in successfulness of the
ERP systems implementations projects, my first proposal is as follows:
Hypothesis 1: Soft factors have a significant impact on the project success.
The aim of this paper is also to study whether the significance of HR aspects varies in
the cases of successful and unsuccessful ERP systems implementations projects, the
next suggestion is therefore:
Hypothesis 2: There is a difference between managing the HR aspects in the case of
successful and unsuccessful implementations.
The studies of Somers and Nelson (2004), Parr and Shanks (2000) and Belout and
Gavreau (2004), which also have been explained in depth in previous chapters, have
proved that the significance of CSF changes according to the project life cycle stages.
Therefore, I will use the model introduced by Ross (1999), which is discussed in more
detail in Chapter 2 under the implementation phases’ part. Ross identified 5 important
stages in the ERP implementation process: design, implementation, stabilisation,
continuous improvement and transformation.
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Hypothesis 3: The importance of soft factors changes across the project life cycle
stages.
The perception of various stakeholders such as top management, project champion,
project team, software vendors, consultants and similar is also considered as key factor
since different people view success in different ways (Belout and Gavreau, 2004). In
addition, Hawa et al (2002) emphasised that ERP implementation projects require
coordination of multidisciplinary teams, which contain experts from various areas.
Wateridge (1997) suggested that especially managers need to possess the necessary
skills to manage and satisfy all the key parties involved like technicians, sponsors and
users. Akkerman and Helden (2002) proposed additional thoughts that the presence and
attitudes of key stakeholders influence the outcome of the project. I will elaborate this
proposal in this context and suggest that:
Hypothesis 4: Various stakeholders such as managers, developers, consultants and
users affect the relationship between soft factors and project success.
I chose to use these interest groups identified by Skok and Legge (2002), as these have
been included in most of the stakeholders lists mentioned by other researchers. Also,
these stakeholders have been covered in more detail in Chapter 4 of this thesis.
5.2 The proposed research model
The proposed model includes 6 independent variables, which are the soft CSF from
Somers and Nelson list (project team competence, user training and education,
education on new business processes, interdepartmental communication,
interdepartmental cooperation and management of expectations), one dependent
variable (project success) and one moderating variable (ERP project life cycle).
The first hypothesis aims to test the impact of the independent variables on the
dependent variable in the model. The second hypothesis seeks to investigate this impact
proposed by hypothesis one in the case of successful and unsuccessful ERP
implementations. The effect of the project life cycle stages on the CSF has long been
studied by many researchers. Thus, the third hypothesis targets to test the effect of the
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ERP life cycle stages on the independent variables. In this research, I also wanted to
take into consideration the perception of the various stakeholders (management,
developers, users and consultants) and the fourth hypothesis suggests that stakeholders
have an effect on the relationship between the independent and dependent variables.
The research model is illustrated in Figure 5-1.
Figure 5-1: The proposed research model
5.3 Hypotheses testing
To test the first hypothesis suggesting that soft factors have a significant impact on the
project success, research questions can be formulated under the five HR related
headings (Table 5-2): 1) skills requirements; 2) educating, training and developing; 3)
termination of work places and task changes; 4) communication; 5) and reward system.
These HR topics deal with seven soft CSF from Somers and Nelson list: project team
Project team competence
User training and education
Education on new business processes
Interdepartmental communication
Interdepartmental cooperation
Management of expectations
ERP implementation
project success - cost - time - performance
ERP project life cycle
Stakeholders - management - developers - consultants - users
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competence, user training and education, education on new business processes, change
management, interdepartmental communication and cooperation, and management of
expectations.
To test the second hypothesis, which is to compare the HR practices in the case of
successful and unsuccessful ERP implementations, a division of the companies into
these two categories needs to be made. Hong and Kim (2002) have applied in their
study a success metrics that defines the ERP implementation project success in terms of
achievement of predetermined goals regarding cost, time, system performance and
benefits. Likewise, an earlier study by Kumar et al (2001) concluded that the most
popularly used success criteria were on time, within or under budget and realizing key
performance measures. These studies are described in more detail in Critical Success
Factors part of this thesis. Based on these research papers, I use the success criteria for
evaluating project success in terms of cost, time and system performance. In this way,
I’m able to combine my study with the concurrent doctorial research of Oana Velcu at
the Accounting Department at Hanken. The purpose of her research is to collect
information regarding the successfulness of ERP implementations in Finnish
organizations.
The third hypothesis aims to investigate the importance of the soft factors across the
ERP life cycle stages according to the model developed by Ross (1999). The stages
identified in this model were: design, implementation, stabilisation, continuous
improvement and transformation. To test the hypothesis, first, these ERP
implementation stages are clarified for the focus group, next, they are asked to identify
in which stage(s) each soft factor is important.
To test of the fourth hypothesis, which suggests that the perception of the various
stakeholders identified in the literature such as management, developers, users and
consultants significantly affects the success of the project, is problematic. The similar
research of Skok and Legge (2002), which studied these stakeholders power to affect
the ERP project and different types of influence strategies, concluded that the best
research method in this case was in-depth case studies. A large timescale would be
needed to conduct multiple interviews at number of organisations with managers, users,
developers and consultants. In contrast, I plan to target only a particular user group from
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the top management level. Also in this case, questions would have to be asked in respect
of each interest group that would extend the research significantly. Furthermore, as
some companies are also unwilling to reveal sensitive information to outsiders, it would
have been wiser to concentrate on in-depth case studies. Therefore, I choose to reject the
hypothesis four from this study and suggest investigating it as entirely separate research
on its own or as part of some other study.
As a result, in this paper I selected to test the first three hypotheses:
H1: Soft factors have a significant impact on the project success.
H2: There is a difference between managing the HR aspects in the case of successful
and unsuccessful implementations.
H3: The importance of soft factors changes across project life cycle stages.
In summary, the aim of the empirical part remains to study the importance of the soft
factors on the project success, the differences managing these factors between
successful and unsuccessful ERP implementations and the significance of the soft
factors across the project life cycle stages.
5.4 Research methodology
5.4.1 Research method
The data for this research is to be collected by means of on-line survey, as the response
rate is considered to be the highest and fastest in this case. To be it more effective, it is
focused toward a particular focus group. In addition, this approach allows having a large
sample size and if the response rate stays too low, a follow-up reminder can be sent.
Other approaches considered and then rejected included delivering the survey by post
mail and conducting interviews in person. The former option would have had high costs
and been timelier. The latter option would have been the most time consuming, far-
reaching and the nature of the questions would have needed to be different.
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5.4.2 Data and sample selection
The target is to study large- and medium-sized Finnish organizations that have already
implemented an ERP project. Thus, only the companies with number of the employees
from 50 upwards will be taken into consideration. These organizations can be selected
from Voitto database available at the Accounting Department at Hanken, from ERP
systems providers web pages and respective journals. The key focus group of the survey
is primarily the personnel managers “henkilöstöpäällikkö/johatja”. The Chief
Information Officer (CIO) “tietohallintopäällikkö/johtaja” or another key individual
from the top management are considered as a secondary option. However, one person
per firm is gotten in touch with. The contact information of these people can be derived
from Blue Book company database available at Hanken library services. The link to the
on-line survey is distributed to them via e-mail with accompanying letters in Finnish,
Swedish and English (See Appendix B) stating the purpose of the research, defining
what is meant by ERP systems and ensuring confidentiality. Provided the contacted
manager is not the right person to answer these types of questions, he or she is asked to
forward the questionnaire to the person responsible for this area.
5.5 Questionnaire creation
The empirical research is done in cooperation with the Ph.D. student Oana Velcu as her
research aims to investigate the successfulness of the ERP implementation projects in
Finnish corporations and mine the importance of the HR factors in such undertakings.
Therefore, two questionnaires are combined in this survey (See Appendix C). The first
part investigates the ERP implementation success and the second; the importance of the
human resources factors in such projects. However, there is no clear line between these
two parts as some of the questions are integrated and some changed to keep the same
style format.
The questionnaire is in English and consists altogether of 20 questions: half are open-
ended questions and half close-ended with multiple-choice options. The questions cover
the topics such as defining the ERP implementation success, indicating the importance
of critical success factors and managing people issues in ERP implementations.
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The implementation success related questions (q1-q10) are associated with the incurred
costs, staying within the time schedule and realizing the system performance, which are
our chosen success criteria. Questions (q1-q8) are open-ended and the questionnaire
starts (q1-q3) by asking the respondents to identify the systems they are using now, used
before and for how long the systems has been in use in their organization. The target of
the study is to investigate the organizations that have already have implemented an ERP
system and these questions also verify that a system is in use. Time related questions
(q4-q5) aim to specify whether the implementation process stayed within the time
schedule. Questions dealing with the costs (q6-q8) ask respondents to state how many
modules were implemented, to estimate the original budget and the actual costs incurred
during their ERP implementation project.
In the next question (q9), respondents are required to indicate their extent of agreement
with three statements on a five-point Likert scale (from 1=fully disagree to 5=fully
agree). For each statement it is also possible to select not applicable (6=N/A) meaning
that the statement is not relevant to evaluative situation and also giving a respondent a
possibility to leave the question unanswered. The first statement is a control question
asking respondents to state their level of agreement that the ERP implementation project
has been completed within the budget. The following two statements deal with system
performance measures requesting respondents to indicate their level of agreement that
the current ERP system is used successfully and that the required functionality of the
ERP project was fulfilled. In addition, in the next question (q10) respondents are asked
to rate to what degree (from 1=extremely low to 5=extremely high, 6=N/A) the business
case was fully realized.
The following question (q11) enquires respondents to indicate the degree of importance
each critical success factor in their ERP implementations using a five-point Likert scale
(from 1= extremely low to 5=extremely high, 6=N/A). These CSF list includes 4 hard
and 8 soft factors. These soft factors will be investigated in more detail further on in the
questionnaire.
To state in which part of the ERP life cycle the effect of the soft factors is the most
prevalent respondents are asked to specify (q12) the stages in which they consider each
soft factor to be important. At first, to avoid misinterpretation the five stages of Ross
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implementation model (design, implementation, stabilization, continuous improvement
and transformation) are described.
In the skills section (q13-q15), respondents are asked to identify the degree of
importance of each HR requirement in their ERP implementation (five-point Likert
scale: 1=extremely low to 5=extremely high, 6=N/A). The next questions aim to specify
who are the key people in the ERP implementation projects and what are the key skills
that these people have to employ. The list of the skills covers the areas of project
management, people management, administration, and ERP and IT specific know-how.
In the subsequent two sections of the questionnaire (q16 and q18), some soft factors will
be merged into one factor, for instance, user training and education, and education on
new business processes will be merged into training and education. Similarly,
interdepartmental communication and interdepartmental cooperation will be merged
into interdepartmental communication and cooperation. To pinpoint the importance of
the training in ERP implementation (q16) respondents are asked to identify the degree
of importance of each training factor in their ERP implementation in a similar five-point
Likert scale. These training factors represent the training related challenges pointed out
in ERP literature. Likewise, respondents are asked to name the degree of importance of
each change management (q17), and communication and cooperation practices (q18) in
their ERP implementation. These factors represent the critical requirements recognized
by various researchers and the issues of concerns of people involved in ERP
implementation projects.
The last part of the questionnaire (q19) deals with the HR related issues regarding the
reward system. Once again, respondents are asked to identify the degree of importance
of each reward system factor in their ERP implementation. The reward system factors
include the personal and team performance, tangible and intangible rewards, personal
career development and pleasant working environment aspects.
To finalize, the last question (q20) asks respondents to specify the industry in which
their company is operating.
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5.6 Analysis of the research results
5.6.1 The response rate
Altogether, the questionnaire was distributed manly to Chief Information Officers
(CIO’s) or other IT management level person in 375 companies with follow-up letters
and 18 responses were received, giving a response rate of 4,8 %. However, some of the
respondents had left too many questions unanswered, which dropped the sample size to
16. Initially, the survey was targeted toward 126 HR managers, however, only 1 answer
returned. Thus, I concluded that HR managers was a wrong target group and changed
my focus to CIO’s. This approach brought better results, even though the response rate
remained low. One can speculate many reasons for this:
1) Managers in such high positions were too busy, as some of them noted with their
replies, that they did not have the time to fill in the questionnaire.
2) Even now ERP remains a novelty area to many and some of the CIO’s were not
familiar with this field. In addition, not all the companies contacted had an ERP
system in use.
3) Questionnaire was only in English not translated to Finnish or Swedish, which
might have resulted some respondents not answering it. However, one can argue
that people in these positions should possess high-level English skills.
4) In the questionnaire two surveys were combined and in order to determine the
success rate respondents were asked to specify the details of the costs occurred,
which was not exactly the area of CIO’s but rather of CFO’s (Chief Financial
Officers). In addition, HR area is not really the CIO’s area of responsibility
either. Therefore, respondents might not have been familiar with the research
field.
5) The questionnaire was distributed to CIO’s in electronic format not in a paper
version. There still exists mistrust toward Internet and electronic applications,
and on the contrary paper version seems to be more secure and serious
undertaking.
6) Most likely most of the e-mails did not go through firewalls and were deleted as
spam.
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Reasons can be more, nevertheless, I will run the tests and decide further on whether the
data of the 16 companies is enough to make any significant conclusions or research
would need to be carried out with a different research method to bring better results.
Descriptive and t-test statistics are used to analyze the data.
5.6.2 Sample description
Table below (Table 5-3) presents the sample description.
Table 5-3: Sample description (percentage of respondents)
The current ERP system in use (n=16) % No of
companiesSAP 39 6 IN-HOUSE 7 1 Inreo Dealflow 6 1 MFG/Pro 6 1 Oracle Financials 6 1 PRMS 6 1 Sentera Enterprise 6 1 Solagem enterprise 6 1 TietoEnator Efekto 6 1 Unknown 6 1 Wintime Economa 6 1
Industry sector (n=15) % No of
companiesEnergy 19 3 Wholesale 19 3 Food 13 2 Manufacturing 13 2 Factory 6 1 Pulp 6 1 Retail 6 1 Media 6 1 Stainless steel 6 1 Transportation 6 1
Time of starting using the new ERP system (n=15) % No of
companiesIn the last year 7 1 1 to 3 years ago 26 4 3 to 5 years ago 27 4 5 to 7 years ago 20 3 More than 7 years ago 20 3
The most common system that had been implemented among the responding companies
was SAP, 6 out of 16, all the other systems were mentioned only once. Energy and
wholesale, also food and manufacturing were the biggest sectors that the responding
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companies represented. The current ERP system in use had mostly been implemented
within the time period of 1 to 5 years ago, that is, between 2003 and 1999. The number
of modules implemented varied from 2 to 10 with the most frequently occurring number
of modules being 4. The actual implementation of the projects lasted from 3 months to 2
years. Therefore, according to the range of characteristics of the responding companies,
the small number of modules implemented and short implementation time, their
implementations can be placed to Vanilla and Middle-road categories (Parr and Shanks
2000).
5.6.3 Overall success and critical success factors
Overall success
In general (Table 5-4), when viewing the differences between the planned and actual
ERP implementations time schedules, the results showed that 50 % of the respondents’
ERP projects were completed on time. When examining the degree of agreement with
the following statements, 53,3 % of the respondents agreed that the implementation
project stayed within the budget, 93,8 % agreed that at the present moment, the ERP
system is successfully used, 75 % agreed that the required functionality of ERP system
was fulfilled and 73,3 % of the respondents agreed that the planned business case was
fully realized. Based on these figures, we can presume that most of the ERP
implementation cases were completed successfully. The success here has been viewed
in financial terms, and from the point of view of the managers. Meeting deadlines is the
primary concern of the ERP project management as any delay in the project costs
company additional money. Therefore, companies are in favor of Vanilla
implementations as short implementations reduce the risk of project failure (Welti,
1999). Total ERP implementation costs usually sum up to 2-3 % of companies
revenues, and these are easy to quantify. However, non-financial benefits, such as
achieving full system performance, are difficult to convert to monetary profits. Hong
and Kim (2002) and Kumar et al (2001) have proved that the most common rationales
to evaluate success are on time, within or under budget and realizing key performance
measures. However, the implementation success depends from many other factors apart
from rapid implementations, tangible business benefits and fast paybacks. Critical
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success factors aim to provide guidelines for ERP implementation practice and increase
the probability of success.
Table 5-4: The summary table of the overall success of ERP implementations
Measurements of success (n=16) % ERP project was completed within the time schedule 50 ERP project has been completed within the budget 53,3 At present, ERP system is successfully used 93,8 Required functionality of the ERP system was fulfilled 75 The planned business case was fully realized 73,3
The percentage of respondents who ranked the factor high or extremely high.
Critical success factors
From a given list of CSF that included 4 hard (H) and 8 soft factors (S) respondents
were asked to rank the importance of the each factor in their ERP implementations from
extremely low to extremely high. Many studies (Akkermans and Helden 2002; Somers
and Nelson 2001) have stressed the importance of the hard factors such as top
management support and effective project management on their critical success factors
list and as we can see from the table below (Table 5-5), these were also ranked high by
the responding companies. From the soft factors user involvement, interdepartmental
cooperation, project team competence, user training and education, and
interdepartmental communication received high and extremely high importance. These
findings are similar to the CSF list of Akkermans and Helden (2002) ranked by 52 top
managers. Only, management of expectations was ranked high on the Akkermans’ and
Helden’s list but low by the respondents in this case.
Table 5-5: The importance of critical success factors in ERP implementations – Rating from 1 (extremely low) to 5 (extremely high)
Critical success factors (n=16) Mean Top management support (H) 4,25 User involvement (S) 4,25 The effective project management (H) 4,19 Interdepartmental cooperation (S) 4,19 Project team competence (S) 4,13 User training and education (S) 4,06 Interdepartmental communication (S) 4,06 Business Process Reengineering (H) 3,96 Change management (S) 3,50
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Education on new business processes (S) 3,44 Management of expectations (S) 3,38 Fit between ERP software and hardware (H) 3,19
(H) hard factor, (S) soft factor
5.6.4 Soft factors
Project team competence
In this section respondents were asked to indicate the degree of importance of each HR
requirement factor in their ERP implementations. The results showed (Table 5-6), that
the respondents viewed skilful and competent project team members to be the most
important requirement, which is in line with the large part of the academic literature that
suggests that success cannot be achieved without qualified and motivated personnel.
Next important were availability of sufficient human resources for the project and
availability of expertise. Composition of project teams was not considered as important
as Welti (1999) suggested. According to Welti the availability, expertise, quality and
composition of project teams were the most important HR requirements for success.
Table 5-6: The importance of the HR requirements factors in ERP implementation – Rating from 1 (extremely low) to 5 (extremely high)
HR requirements MeanSkilful and competent project team members 3,94 Availability of sufficient HR for the project 3,69 Availability of expertise 3,50 Composition of project teams 3,31
Additionally, he suggested that the composition of project teams with skilful and
competent project team members will directly influence the output of the project.
Wateridge (1997) and Hawa et al (2002) investigated the human competences required
for the project and skills the project managers need to possess to manage IT project
successfully. I elaborated this to a larger context and investigated in more detail the
composition of the project teams in ERP implementation projects and the skills these
people need to employ in ERP projects.
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Table 5-7: The key people in the project implementation team (percentage of respondents)
Key people % Management 66,7 IT personnel 55,6 Top management 44,4 Consultants 44,4 Vendor 27,8 IT consultants 11,1 Other 11,1
The results showed (Table 5-7) that the key people in an ERP project were
management, IT personnel, top management and consultants. Few responding
companies had an ERP vendor, IT consultants or other people in the implementation
team. This composition of the project team is in line with Hawa et al (2002) who
identified three groups of people involved in enterprise re-engineering projects:
management, staff, external consultants or technical staff of the enterprise. Similarly,
Welti (1999) recommended structuring the project team including project leader, project
members and consultants. According to Hawa et al, these people need not only to
possess the elementary know-how but also have to co-operate closely with each other,
which emphases the importance of interpersonal and communication skills.
The table below (Table 5-8) presents the importance of skills these people need to
employ for each key group. The percentage figure indicates the percentage of
respondents who considered the skill to be important and they are ranked in descending
order of importance. As a result, most important for top management is to possess
leadership and communication skills. Top management support and its active
involvement in monitoring the progress of the project and providing directions to the
project team are essential throughout the implementation project in order to ensure the
success of the project (Somers and Nelson, 2004).
The skills required by the management were communication, controlling, leadership,
planning and interpersonal skills. Different from the Wateridge (1997) research, which
summarized the skills required by the project manager from previous researches and top
ranked leadership skills, communication skills were given higher emphasis by the
responding companies. Nowadays, as the trend is toward people management,
communication and interpersonal skills have higher importance than earlier.
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Administrative skills such as planning and controlling remain high as project
management activities spread out throughout the project life cycle and involve project
planning and controlling activities, monitoring organizational, political and human
issues and many more. Similar to Wateridge observations, technical skills are not
important at the management level.
Table 5-8: The key skills these key people have to employ in ERP implementation project (percentage of respondents)
Top management % Management % Leadership skills 55,6 Communication skills 77,8 Communication skills 44,4 Controlling skills 55,6 Controlling skills 27,8 Leadership skills 50,0 Interpersonal skills 16,7 Planning skills 50,0 IT management skills 11,1 Interpersonal skills 50,0 Planning skills 5,6 IT management skills 27,8 ERP experience 5,6 ERP experience 22,2 Technical skills 0,0 Technical skills 0,0
End-users % Consultants % Communication skills 61,1 ERP experience 44,4 Interpersonal skills 55,6 Planning skills 38,9 Planning skills 33,3 Communication skills 38,9 Technical skills 27,8 Technical skills 33,3 ERP experience 27,8 Interpersonal skills 27,8 Controlling skills 16,7 IT management skills 22,2 Leadership skills 0,0 Leadership skills 11,1 IT management skills 0,0 Controlling skills 11,1
IT consultants % ERP vendor % IT management skills 22,2 Technical skills 33,3 Technical skills 16,7 ERP experience 27,8 Communication skills 11,1 Communication skills 22,2 Planning skills 5,6 Technical skills 22,2 Interpersonal skills 5,6 Planning skills 16,7 ERP experience 5,6 Controlling skills 11,1 Leadership skills 0,0 Interpersonal skills 5,6 Controlling skills 0,0 Leadership skills 0,0
IT personnel % Communication skills 72,2 IT management skills 72,2 Planning skills 61,1 Technical skills 61,1 ERP experience 50,0 Controlling skills 38,9 Interpersonal skills 38,9 Leadership skills 27,8
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For end-users is necessary to have only the communication and interpersonal skills.
This can be explained by the reality that the planning and controlling is taken care by
the management. Also, they don’t need to have specific technical knowledge. Users
have to learn only those functions that are related to their tasks in addition to
understanding the new processes and procedures (Welti, 1999). For the consultants is
essential to have the ERP knowledge, and planning and communication skills. An
external consultant provides the project team with valuable expertise on project
supervising, planning, customising and training. Good consultants have the major
impact on the throughput time and quality of the project whereas incompetent
consultants area major challenge in implementations (Kumar et al, 2001).
Communication skills are important as consultants need to communicate their ideas to
companies’ management and transfer their knowledge to client company’s employees
(Skok and Legge, 2002). IT consultants, ERP vendors and IT personnel need to possess
the specific technical skills. Also, it is necessary for the IT personnel to have the high-
level communications skills. It is not enough to have the technical know-how but these
people need to co-operate closely with other team members (Hawa et al, 2002).
Educating training and developing
The importance of training has been widely covered in the academic literature. Lack of
user training and understanding how the new system is changing the business processes
have been the foremost reasons for ERP implementation failure (Somers and Nelson,
2004). Not surprisingly, when respondents were asked to indicate the degree of
importance of each training factor the responding companies gave the highest
importance (Table 5-9) for learning the new system and job functions, accepting the
new processes and procedures, and preparing employees for change. Having qualified
trainers, identifying the type of training needed and providing support for training were
also ranked high. These findings are similar to the research of Kumar et al (2001). Also
as Welti (1999) stated, it is hard to have qualified trainers, to train the people and then
to retain them. People with right ERP skills are in shortage because there are not enough
professionals who would have a good understanding of both business and ERP systems.
In addition, each user group has different needs, preferences and learning potential.
Having sufficient budget was given a moderate importance. Yet, one of the major
challenges that the study of Kumar et al (2001) has brought out was running out of the
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budget. Documenting the training process and measuring training performance were
also given a low importance.
Table 5-9: The importance of training in ERP implementation – Rating from 1(extremely low) to 5 (extremely high)
Training factors Mean Learning the new system and job functions 4,47 Accepting the new processes and procedures 4,27 Preparing employees for change 4,20 Having qualified trainers 4,00 Identifying the type of training needed 3,87 Providing the support for training 3,80 Documenting the training process 3,47 Having sufficient budget 3,33 Measuring training performance 3,20
Managing change
In this section, respondents were asked to identify the degree of importance of each
change management strategy. Showing leadership commitment received the highest
importance. This supports the literature that suggests that top management commitment
is critical for the success of the whole ERP implementation process (Aldawani 2001). In
addition, top management support is mentioned in many CSF lists. Other strategies that
received high ranking were empowering employees and understanding the strategic
vision of ERP. A common strategy to increase user acceptance is to empower
employees and communicate the ERP change vision and benefits to them. Next
important is developing new business performance and control measures. This reason is
logical as the system change brings in the new way of going about things. Identifying
sources of resistance and who are resisting the change were ranked low by the
respondents. However, the literature has suggested these guidelines as a good starting
point to assist top management to analyze the sources of resistance and develop a
strategy to overcome them (Welti 1999). Surprisingly, building user acceptance was
given the lowest importance. Many researchers (May and Kettelhut 1996; Aldawani
2001; Welti 1999) have stressed the importance of gaining employees acceptance as an
important strategy to manage the ERP change process. Scholars agree that it is easier to
specify the reasons for going ERP than to gain user acceptance and implement the
desired changes.
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Table 5-10: The importance of the change management strategy in ERP implementation- Rating from 1 (extremely low) to 5 (extremely high)
Change management strategy factors Mean Showing leadership commitment 4,21 Empowering employees 3,93 Understanding the strategic vision of ERP 3,86 Developing new business performance and control measures 3,71 Paying attention to employee concerns 3,64 Identifying sources of resistance 3,57 Identifying who are resisting the change 3,50 Building user acceptance 3,43
Communication
As the goal of ERP systems is to integrate various business functions across different
locations, interdepartmental cooperation and communication are the core of the ERP
implementation process (Akkermans and Helden, 2002). In the communication section,
respondents were asked to identify the importance of the each communication factor in
their ERP implementation. The highest importance received open communication
between the key parties, and cooperation and involvement of the key parties. This is in
line with the literature. Open communication and collaboration are essential as these are
to clarify expectations and reduce ambiguity, and to build user acceptance and
commitment (May and Kettelhut, 1997). Additionally, Akkermans and Helden (2002)
suggested that intensive communication between the key parties is directly linked to the
success of the project. Communicating ERP benefits and change vision are an integral
part of ERP change management process. Establishing communication guidelines was
given the lowest ranking and clearly it is not the first priority of the communication
practices.
Table 5-11: The importance of each communication factor in ERP implementation
Communication factors Mean Open communication between the key parties 4,53 Cooperation and involvement of the key parties 4,20 Communicating ERP benefits 4,13 Regular communication practices 3,93 Communicating ERP change vision 3,87 Establishing communication guidelines 3,33
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Reward system
Managing user expectations successfully is closely related to the success of the
implementation project and stays important throughout all the stages of the ERP life
cycle (Somers and Nelson 2004; Akkermans and Helden 2002). The reward system is
based on managing user expectations and providing tangible and non-tangible
compensations. The highest importance was given here to building employee
commitment and creating an pleasant working environment. As it is difficult to find
people with the right set of ERP and business skills and training being expensive,
companies put all the efforts in retaining the employees. Celebrating success on the
basis of the performance was ranked higher than awarding the team. This can be
explained by the fact that we are not in a collectivistic culture and individual
achievements have higher value. Celebrating success was given a much higher
importance than recognition through intangible rewards and providing bonuses and
other financial benefits. Thus, money comes the last, fame second and having fun and
building up a team spirit first. Clarifying the future career opportunities was not
considered as important. The reason being that today, with flatter organization
structures promotions are less likely to happen but the trend is having cross-functional
career and moving across different projects and tasks.
Table 5-12: The importance of the each reward system factor Reward system factor Mean
Building employee commitment 3,93 Creating a pleasant working environment 3,87 Rewarding on the basis of performance 3,80 Celebrating success 3,67 Awarding the team 3,40 Recognition through intangible rewards 3,27 Awarding the individual 3,20 Providing bonuses and other financial benefits 3,20 Clarifying the future career opportunities 3,20
2.1.1 Findings on testing Hypotheses 1 and 2
H1: Soft factors have a significant impact on the project success.
H2: There is a difference between managing the HR aspects in the case of successful
and unsuccessful implementations.
80
With these two hypotheses, I’m aiming to test whether the soft factors have a significant
impact on the project success and whether managing these factors differs in the case of
successful and unsuccessful ERP implementations. Testing hypotheses with a small
sample size, I use the statistical technique called t-test. What I think is not true becomes
the Null Hypothesis (Ho) and my actual research question is the Alternative Hypothesis
(Ha). I set my alpha level to 0,05 and run the two-sample t-test statistics assuming the
unequal variances of the data.
Thus, the Null Hypothesis assumes that there is no difference between the means of the
soft factors of successful and unsuccessful implementations. The Alternative
Hypothesis states the opposite, that is, there is a difference between the means of these
groups.
ERP success rate and soft factors variables measures
As explained earlier, I have chosen the success criteria for evaluating ERP
implementation project success to be on time, within budget and realizing system
performance indicators. However, it is difficult to calculate the average value for the
success rate as the questions dealing with time (q4-q5), cost (q9 1st statement) and
system performance (q9 2nd and 3rd statements) use different measuring scales.
Questions dealing with time asked respondents to define how many months the
planned/actual implementation took place, as questions dealing with cost and system
performance were using Likert type scale measurement from 1 to 5. I decided to use
only these questions for defining success, as the replies to other questions in this section
did not contain enough data. Therefore, instead of having a single success rate, which
would divide ERP implementations to successful and unsuccessful ones, I’m using three
sub measurements such as:
• Time (On time vs. Late)
• Cost (Within budget vs. Over budget)
• System performance (Achieved vs. Not achieved)
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Thus, I’m examining the soft factors with each of this sub category. These soft factors
covered in more detail in the literature review part of the thesis were: project team
competence, user training and education, education on new business processes, change
management, interdepartmental communication and interdepartmental cooperation, and
management of expectations. Because of the way the questionnaire has been structured,
some of these factors are now combined. Therefore, the soft factors, which I test with
chosen success parameters: time, cost and system performance are:
• Project team competence
• Training and educating
• Change management
• Communication
• Management of expectations
The arithmetic means to the soft factors are easy to compute as all of them follow the
same format using a five-point Likert scale from 1= extremely low to 5=extremely high.
These can be calculated according to the following formula:
X= ∑ X / N
where X = the mean
X = sum of the scores given for qualitative questions
N= number of measurements in the sample
Time (On time vs. Late) measurement
Analyzing the time parameter questions (q4-q5), first, I calculate the difference between
the actual and planned ERP implementations. Based on the difference, I segment the
companies into three groups: 1) assuming that the ERP implementation project was on
time when it was completed earlier or at the deadline, 2) slightly late when it was 0,5 to
3 months late, 3) and very late when it was more than 3 months late. As the sample size
is small and to observe any remarkable differences, I’m using only the two far ends on
the time scale and excluding the middle group. Also, I’m leaving out the companies
where too much data is missing.
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Table 5-13: Time selection criteria (n=13) ERP implementation based on time (percentage of respondents)
No of companies
on time (50 %) 7 moderately late (28,6 %) 4 very late (21,4 %) 2
After performing the t-test statistics, I got the following findings:
Table 5-14: T-test results for project team competence factor based on time
On time Over time
Mean 3,958333 2,875Variance 0,460417 0,03125Observations 6 2Hypothesized Mean Difference 0 df 6 t Stat 3,564655 P(T<=t) one-tail 0,00593 t Critical one-tail 1,943181 P(T<=t) two-tail 0,01186 t Critical two-tail 2,446914
Table 5-15: T-test results for training and educating factor based on time
On time Over time
Mean 3,777779 4,555555Variance 0,329217 0,024693Observations 7 2Hypothesized Mean Difference 0 df 7 t Stat -3,19186 P(T<=t) one-tail 0,007619 t Critical one-tail 1,894578 P(T<=t) two-tail 0,015237 t Critical two-tail 2,364623
Table 5-16: T-test results for change management factor based on time
On time Over time
Mean 3,928571 3,75Variance 0,415923 0,28125Observations 7 2Hypothesized Mean Difference 0 df 2
83
t Stat 0,399255 P(T<=t) one-tail 0,364152 t Critical one-tail 2,919987 P(T<=t) two-tail 0,728304 t Critical two-tail 4,302656
Table 5-17: T-test results for communication factor based on time
On time Over time
Mean 4,119046 3,91667Variance 0,775134 0,125Observations 7 2Hypothesized Mean Difference 0 df 5 t Stat 0,486232 P(T<=t) one-tail 0,323682 t Critical one-tail 2,015049 P(T<=t) two-tail 0,647364 t Critical two-tail 2,570578
Table 5-18: T-test results for management by expectations factor based on time
On time Over time
Mean 3,523809 3,5Variance 0,595531 0,5Observations 7 2Hypothesized Mean Difference 0 df 2 t Stat 0,04113 P(T<=t) one-tail 0,485464 t Critical one-tail 2,919987 P(T<=t) two-tail 0,970929 t Critical two-tail 4,302656
Cost (Within budget vs. Over budget) measurement
The cost associated question (q9 1st statement), uses the five-point Liket type scale from
1=fully disagree to 5=fully agree. Based on the agreement level with the statement, I
segment the companies into three groups: 1) assuming that if the mean value of the
statement is >3, the ERP implementation was fully within budget, 2) 3 equals to
indifferent, 3) and if the mean value of the statement is <3, the implementation was over
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budget. Similarly, as explained in time section I’m using only the 1st and 3rd groups and
excluding the responses where data is missing.
Table 5-19: Cost selection criteria (n=15)
ERP implementation based on cost (percentage of respondents)
No of companies
within budget (53,3 %) 8 indifferent (6,7 %) 1 over budget (40%) 6
After performing the t-test statistics, I got the following findings:
Table 5-20: T-test results for project team competence factor based on cost
Within budget
Over budget
Mean 3,642857143 3,15Variance 0,49702381 0,9875Observations 7 5Hypothesized Mean Difference 0 df 7 t Stat 0,951143752 P(T<=t) one-tail 0,186604291 t Critical one-tail 1,894577508 P(T<=t) two-tail 0,373208582 t Critical two-tail 2,36462256
Table 5-21: T-test results for training and educating factor based on cost
Within budget
Over budget
Mean 3,833332125 3,7333328Variance 0,342149959 0,73209799Observations 8 5Hypothesized Mean Difference 0 df 6 t Stat 0,229905776 P(T<=t) one-tail 0,412901251 t Critical one-tail 1,943180905 P(T<=t) two-tail 0,825802503 t Critical two-tail 2,446913641
85
Table 5-22: T-test results for change management factor based on cost
Within budget
Over budget
Mean 3,984375 3,625Variance 0,345703125 0,40625Observations 8 4Hypothesized Mean Difference 0 df 6 t Stat 0,944496797 P(T<=t) one-tail 0,190689311 t Critical one-tail 1,943180905 P(T<=t) two-tail 0,381378622 t Critical two-tail 2,446913641
Table 5-23: T-test results for communication factor based on cost
Within budget Over budget
Mean 3,97917 3,833334Variance 0,598717302 0,152777222Observations 8 5Hypothesized Mean Difference 0 df 11 t Stat 0,449215279 P(T<=t) one-tail 0,330999081 t Critical one-tail 1,795883691 P(T<=t) two-tail 0,661998161 t Critical two-tail 2,200986273
Table 5-24: T-test results for management by expectations factor based on cost
Within budget Over budget
Mean 3,48611 3,133334Variance 0,571207443 0,280250086Observations 8 5Hypothesized Mean Difference 0 df 11 t Stat 0,988160517 P(T<=t) one-tail 0,172155969 t Critical one-tail 1,795883691 P(T<=t) two-tail 0,344311939 t Critical two-tail 2,200986273
86
System performance (Achieved vs. Not Achieved) measurement
System performance questions (q9 2nd and 3rdst statements) use the similar five-point
Liket type scale from 1=fully disagree to 5=fully agree as the question associated with
the cost. Based on the mean value of agreement with the statement, I segment
companies into three groups: 1) assuming that if the mean value for the system
performance is >4, the system performance was for fully achieved, 2) if the mean value
remains 4, the system performance was achieved, 3) and if the mean value remains
≤3,5, the system performance was not achieved. The reason behind this division is to
have enough data in each group. Once again, I’m excluding the companies in the middle
and using only the 1st and the 3rd groups.
Table 5-25: System performance selection criteria (n=16)
ERP implementation based on system performance (percentage of respondents)
No of companies
not achieved (50 %) 8 achieved (31,3 %) 5 fully achieved (18,8 %) 3
After performing the t-test statistics, I got the following findings:
Table 5-26: T-test results for project team competence factor based on system performance
Achieved Not
Achieved Mean 3,375 3,833333333Variance 1,0714286 0,083333333Observations 8 3Hypothesized Mean Difference 0 df 9
t Stat -
1,1397718 P(T<=t) one-tail 0,1419029 t Critical one-tail 1,8331139 P(T<=t) two-tail 0,2838058 t Critical two-tail 2,2621589
Table 5-27: T-test results for training and educating factor based on system performance
Achieved Not
Achieved Mean 3,7499989 3,925923333Variance 0,6022912 0,670777737Observations 8 3
87
Hypothesized Mean Difference 0 df 3
t Stat -
0,3217944 P(T<=t) one-tail 0,3843635 t Critical one-tail 2,353363 P(T<=t) two-tail 0,7687269 t Critical two-tail 3,1824493
Table 5-28: T-test results for change management factor based on system performance
Achieved Not
Achieved Mean 3,703125 4,125Variance 0,3479353 0,5Observations 8 2Hypothesized Mean Difference 0 df 1
t Stat -
0,7787279 P(T<=t) one-tail 0,2893951 t Critical one-tail 6,3137486 P(T<=t) two-tail 0,5787902 t Critical two-tail 12,70615
Table 5-29: T-test results for communication factor based on system performance
Achieved Not
Achieved Mean 3,812505 4,11111Variance 0,5114182 0,398145185Observations 8 3Hypothesized Mean Difference 0 df 4
t Stat -
0,6733774 P(T<=t) one-tail 0,2688059 t Critical one-tail 2,1318465 P(T<=t) two-tail 0,5376119 t Critical two-tail 2,7764509
Table 5-30: T-test results for management by expectations factor based on system performance
Achieved Not Achieved Mean 3,23611 3,703703333Variance 0,5764999 0,374484033Observations 8 3Hypothesized Mean Difference 0 df 5
88
t Stat -
1,0537945 P(T<=t) one-tail 0,170107 t Critical one-tail 2,0150492 P(T<=t) two-tail 0,340214 t Critical two-tail 2,5705776
Summary of the results
The table below presents the P-values for each soft factor in one table based on time,
cost and system performance measurements.
Table 5-31: The summary table of the P values of the t-test statistics for all factors
On time Within budget Syst. perf. achieved Soft factors Late Over budget Syst. Perf. not achieved 1) Project team competence
0,00593 Reject Ho 0,186604 Accept
Ho 0,141903 Accept Ho
2) Training and educating
0,00761 Reject Ho 0,412901 Accept
Ho 0,384363 Accept Ho
3) Change management
0,36415 Accept Ho 0,190689 Accept
Ho 0,289395 Accept Ho
4) Communi-cation
0,32368 Accept Ho 0,343100 Accept
Ho 0,268805 Accept Ho
5) Management of expectations 0,48546 Accept
Ho 0,172156 Accept Ho 0,170106 Accept
Ho
According to the t-test results, P values are significant only for project team
competence, and training and educating factors based on time (P<0.05). Thus, for these
factors, there is enough evidence to reject Ho. However, the P values to most of the
factors are higher than alpha level (P > 0,05). As a result, there is not enough evidence
to reject Ho in favor Ha. However, before drawing any conclusions the sample size has
to be taken into account. There is no statistical support for making conclusions with 16
responses. In fact, as I classified companies into three groups based on time, cost and
system performance and used only the far end groups to indicate visible differences, it
dropped the sample size even lower. Therefore, I use the descriptive statistics to see
whether there exist any signs of differences for the soft factors between the groups: on
time vs. late, within budget vs. over budget and system performance achieved vs. not
achieved.
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The table below (Table 5-23) presents the mean values for all soft factors based on time,
cost and system performance measurements and Figure 5-2 the graphical presentation of
the data.
Table 5-32: The summary table of the mean values for all factors – Rating 1 (extremely low) to 5 (extremely high)
Soft factors On time Late Within
budget Over
budget Achieved Not achieved
1) Project team competence 3,39 2,88 3,19 3,15 3,83 3,83 2) Training and educating 3,78 4,56 3,83 3,73 3,75 3,93 3) Change management 3,93 3,75 3,98 2,9 3,7 2,75 4) Communication 4,12 3,92 3,98 3,83 3,81 4,11 5) Management of expectations 3,52 3,5 3,49 3,13 3,24 3,70
Figure 5-2: Mean values for all soft factors– Rating 1 (extremely low) to 5 (extremely high)
Based on this, the following conclusions can be drawn:
• Project team competence factor differs clearly in terms of time and fairly in
terms of cost and does not differ in terms of system performance.
• Training and educating factor differs clearly in terms of time and system
performance and fairly in terms of cost.
0 1 2 3 4 5
Project teamcompetence
Training andeducating
Changemanagement
Communication
Management ofexpectations
Soft
fact
ors
Mean
On time
Late
Within budget
Over budget
Achieved
Not achieved
90
• Change management factor differs clearly in terms of cost and system
performance and fairly in terms of time.
• Communication factor differs clearly in terms of time, cost and system
performance.
• Management of expectations factor differs clearly in terms of cost and system
performance and fairly in terms of time.
Even though the t-test statistics does not show any significant differences between the
means of the soft factors except for project team competence and training and educating
factors in terms of time, the graphical presentation of the mean values for all factors
shows that differences exist. The only exception is the project team competence factor
in terms of system performance, where the mean values are the same. When viewing the
more detailed data on each soft factor (Figures 1-5 in Appendix A), the differences in
the means of this factor can be detected.
As a result, based on the t-test and descriptive statistics, I can conclude the following:
• Managing soft factors differs in the case of on time and late ERP
implementations.
• Managing soft factors differs in the case of within budget and over budget ERP
implementations.
• Managing soft factors differs in a case of achieving and not achieving system
performance ERP implementations.
Therefore, it is logical to conclude that managing soft factors differs in the case of
successful and unsuccessful ERP implementations. Thus, the second hypothesis is
approved.
However, the reasoning in this section does not give enough evidence to indicate that
soft factors have a significant impact on the project success. Therefore, testing of the
first hypothesis requires conducting, for example, correlation analysis of the
independent variables (soft factors) and the dependent variable (project success), as was
done by the Belout and Gauvreau (2004), which would confirm or not confirm the link
between these variables.
91
2.1.2 Findings on testing Hypothesis 3
H3: The importance of soft factors changes across project life cycle stages.
With the third hypothesis I’m aiming to prove that the significance of the soft factors
changes according to the project life cycle stages. The table below shows the
importance of the five soft factors for each implementation stage (the implementation
model of Ross, 1999). The percentage figure indicates the percentage of respondents
who considered the factor to be important. The table shows the soft factors in
descending order of importance.
Table 5-33: The importance of the soft factors across the project life cycle stages (n=18)
Design % Implementation % Project team competence 55,6 Project team competence 66,7 Interdepartmental communication 50,0 Change management 55,6 Education on new business processes 33,3 User training and education 38,9
Change management 11,1 Interdepartmental communication 38,9
User training and education 5,6 Education on new business processes 22,2
Stabilization % Continuous improvement % Project team competence 66,7 Interdepartmental communication 55,6
User training and education 66,7 Education on new business processes 50,0
Change management 61,1 User training and education 38,9 Interdepartmental communication 44,4 Change management 33,3 Education on new business processes 38,9 Project team competence 27,8
Transformation % Change management 38,9 Education on new business processes 33,3 Project team competence 33,3 User training and education 27,8 Interdepartmental communication 27,8
The percentage of respondents who considered the factor to be important in an implementation stage.
The results of the data analysis of the responding companies showed that the importance
of soft factors changes across the ERP project life cycle stages. Project team
competence was top ranked in design, implementation and stabilization stages given
over 50 % of importance. However, its significance dropped down to 30 % for
continuous improvement and transformation stages. As the project progressed, the
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factors that were considered important diminished considerably at the last stages of the
project life cycle. These findings are concurrent with the similar research of Somers and
Nelson (2004).
On the other hand, the factors that were ranked low in the beginning of the project
gained their significance when project was progressing. Change management was
ranked low at the first stage but its importance became the most prevalent in the
implementation, stabilization and transformation stages. Similar pattern can be noticed
with user training and education. Its importance arose significantly in the
implementation and stabilization stages. Education on new processes only became
important in the continuous improvement stage, at which company is achieving its
major benefits and increasing the system’s functionality by adding new modules (Ross
1999).
The soft factors under study received the highest ranking at the stabilization phase,
which is where a company is starting using the new system and planned processes. At
this stage it is important to have qualified and skilled people available because of the
complexity and high standard of the project (Welti 1999). People need to adjust to the
new environment, therefore, change management, user training and education, and close
collaboration and communication between the departments is necessary (O’Leary
2000).
In summary, these results confirm that the importance of the soft factors varies
according to the project life cycle stages. In addition, these results are in consonance
with the literature. Thus, the third hypothesis is confirmed.
5.7 Limitations
There were many limitations in this study. First, I focused on a limited number of
variables, which were soft factors from Somers and Nelson (2004) list. These soft
factors were representing the HR aspects I aimed to study.
93
The distinction had to be made how to classify the list of the companies under
successful and unsuccessful implementations. As the success criteria questions dealing
with time, cost and system performance used different measuring scales, it was difficult
to calculate the average value for the success rate. Therefore, instead of having a single
success rate, the soft factors were analysed in the cases of on time and late, within and
over budget, and achieved and not achieved system performance ERP implementations.
Also, as two questionnaires were combined in a survey it was complicated to find the
right target group. Success related questions were targeted toward CFOs and HR related
questions toward HR managers. Finally, the survey was sent to CIOs as they were
thought to have the required ERP knowledge. However, considering busyness and time
limitations of these people, the online survey had to be kept short with closed-ended
questions.
Furthermore, it was difficult to measure HR impact on the project success in form of an
online survey and the data available was insufficient to test some hypotheses. In
addition, one can argue whether it is possible to have any significant conclusions with
the relatively small sample size. The t-test results couldn’t show any significant results
with the sample size of 16 and the descriptive statistics had to be used to show the
differences between the variables.
5.8 Chapter Summary
The aim of this chapter was to examine the validity of the comments suggested by ERP
literature regarding the successfulness of ERP projects and the importance of human
resources aspects is such projects. Based on the articles covered in the previous
chapters, hypotheses and research model were developed. After reasoning the choice of
the hypothesis and their testing methods, the fourth hypothesis was dropped from the
study. Thus, the aim of the empirical part remained to study the importance of the soft
factors on the project success, the differences managing these factors between
successful and unsuccessful ERP implementations and the significance of the soft
factors across the project life cycle stages.
94
The selected research method used was on-line survey as it was considered to give the
highest and fastest response rate, however, it didn’t bring the expected number of
responses and the response rate remained low. The target of the study was medium and
large sized Finnish corporations that had already implemented an ERP project. The
empirical research was done in cooperation with a Doctorial student and therefore, two
questionnaires were combined in the survey. T-test and descriptive statistics were used
to analyse the data.
The results showed that the majority of the respondents considered their ERP
implementations successful. The success here had been measured in terms of staying
within the time schedule, within budget and realising the system performance. In
summary, analysing each soft factor based on the sections the questionnaire was formed
showed that the research findings were in line with ERP literature with few exceptions.
Testing the second hypothesis proved that there is a difference in managing HR aspects
in the case of successful and unsuccessful ERP implementations. These HR aspects
resented the soft factors and included project team competence, training and educating,
change management, communication and management of expectations. However, the
analysis performed was not enough to conclude that soft factors have a significant
impact on the project success. Therefore, testing first hypothesis would require applying
a different statistical method, for instance, correlation analysis. Testing of the third
hypothesis confirmed that the importance of the soft factors changes across the project
life cycle stages.
6 Conclusions
6.1 Conclusions
Many academics have agreed that managing human resources appropriately is one of
the most crucial elements to organisation’s success. Nowadays, the trend in project
management is toward people management. Today, HRM has taken a strategic role in
business. They teach you at business schools that people are the most important assets
that you have. Implementing an ERP project involves numerous individuals, internal
95
and external experts and integrates different interest groups across locations. Companies
agree that people challenges are more difficult to manage than any technical difficulties
they encounter.
The aim of this paper was to investigate the importance of the importance of the HR
aspects in the ERP systems implementation projects and study whether their
significance varies in the case of successful and unsuccessful implementations. The
results of the study showed that managing HR aspects differs in case of successful and
unsuccessful companies and that their importance changes across the project life cycle
stages. My findings were in consonance with the literature. On the other hand, because
of the diffuse nature of HRM and ambiguity how to measure HR impact on the tangible
results, it was difficult to determine whether HR factors have a significant impact on the
project success.
6.2 Further research suggestions
There are many suggestions for further research. First, the statistical methods used were
not enough to conclude that soft factors have a significant impact on the project success.
Thus, investigating this proposal requires a different research method, for example,
correlation analysis. Additionally, a totally different strategy how to measure HR impact
on the success can be proposed. Furthermore, analysing the similarities and differences
between successful and unsuccessful ERP implementations with a bigger sample size,
would provide more insight to the topic.
Also, I dropped the fourth hypothesis, which suggested that the perception of the
various stakeholders significantly affects the success of the project as testing it was
problematic. It would have required using a different research method, for instance, in-
depth case studies and can be studied as an entirely separate research project on its own.
In general, as mentioned earlier, the research on HRM in the context of ERP is
relatively new and not many studies have been done on the topic.
96
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Appendices
Appendix A
Figure 1: The importance of the project team competence factor
0,00 1,00 2,00 3,00 4,00 5,00
Availability ofsufficient HR for
the project
Availability ofexpertise
Skilful andcompetent project
team members
Composition ofproject teams
Proj
ect t
eam
com
pete
nce
fact
or
Mean
On timeLateWithin budgetOver budgetAchievedNot achieved
Figure 2: The importance of the training and educating factor
0,00 1,00 2,00 3,00 4,00 5,00 6,00
Identifying the type of training needed
Providing the support for training
Having qualified trainers
Measuring training performance
Documenting the training process
Preparing employees for change
Learning the new system and jobfunctions
Accepting the new processes andprocedures
Having sufficient budget
Trai
ning
and
edu
catin
g fa
ctor
Mean
On timeLateWithin budgetOver budgetAchievedNot achieved
100
Figure 3: The importance of the change management factor
0,00 1,00 2,00 3,00 4,00 5,00
Building user acceptance
Identifying sources of resistance
Identifying who are resisting the change
Empowering employees
Understanding the strategic vision of ERP
Paying attention to employee concerns
Showing leadership commitment
Developing new business performanceand control measures
Cha
nge
man
agem
ent f
acto
r
Mean
On timeLateWithin budgetOver budgetAchievedNot achieved
Figure 4: The importance of the communication factor
0,00 1,00 2,00 3,00 4,00 5,00
Communicating ERP change vision
Establishing communicationguidelines
Communicating ERP benefits
Regular communication practices
Open communication between thekey parties
Cooperation and involvement of thekey parties
Com
mun
icat
ion
fact
or
Mean
On timeLateWithin budgetOver budgetAchievedNot Achieved
101
Figure 5: The importance of the management of expectations factor
0,00 1,00 2,00 3,00 4,00 5,00
Building employee commitment
Awarding the team
Awarding the individual
Rewarding on the basis of performance
Providing bonuses and other financialbenefits
Recognition through intangible rewards
Clarifying the future career opportunities
Celebrating success
Creating a pleasant working environment
Man
agem
ent o
f exp
ecta
tions
fact
or
Mean
On timeLateWithin budgetOver budgetAchievedNot achieved
102
Appendix B
Hyvä (THE PERSONS NAME), Olemme maisteri- ja tohtoriopiskelijoita Svenska Handelshögskolanissa ja teemme tutkimusta taloushallinnon tietojärjestelmien käyttöönotosta. Pyytäisimme teitä osallistumaan tutkimukseemme täyttämällä sähköisen kysymyslomakkeen, johon pääsette alla olevan linkin kautta. (Linkki) Kysymyslomakkeen tarkoitus on tutkia taloushallinnon tietojärjestelmien (Enterprise Resource Planning – ERP) toteuttamisen menestyksekkyyttä suomalaisissa yrityksissä ja henkilöstöhallinnon merkitystä ERP-hankkeissa. Taloushallinnon tietojärjestelmillä tarkoitamme järjestelmiä, jotka integroivat kaikki yrityksen tärkeimmät toiminta-alueet yli eri paikkakuntarajojen. Kysymyslomake rakentuu 20 kysymyksestä: puolet näistä ovat avoimia kysymyksiä ja lopuissa pyydämme teitä arvioimaan annettujen väittämien tärkeyden asteikolla 1-5. Kysymyslomake on englanninkielinen. Haastattelukysymykset liittyvät nykyiseen järjestelmään, sen kustannuslaskelmien, aikataulussa pysymisen ja järjestelmän suorituskyvyn kartoittamiseen, ratkaiseviin menestykseen johtaviin tekijöihin ja henkilöstöresurssien johtamiseen ERP-hankkeissa yrityksessänne. Henkilöstöhallintoon liittyvät kysymykset käsittelevät seuraavia osa-alueita: ammattitaidon edellytykset, koulutus ja valmennus, muutosjohtaminen, viestintä ja palkitsemistavat. On myöskin mahdollista jättää kohta tyhjäksi avoimissa kysymyksissä tai valita ”N/A”, jos kysymys ei koske teitä. Kaikki vastaukset tullaan kuitenkin käsittelemään luottamuksellisesti ja analysoidaan kokonaispisteiden perusteella. Aineistoa tullaan käyttämään maisteritutkinnon lopputyössä ja tohtoritutkinnossa. Jos haluatte meidän lähettävän teille kopion loppuraportistamme, pyydämme teitä ottamaan meihin yhteyttä. Saimme yhteystietonne Sinisen Kirjan tietokannasta. Mikäli koette olevanne väärä henkilö tähän tutkimukseen, pyydämme, että voisitte välittää tämän sähköpostin eteenpäin näistä asioista yrityksessänne vastaavalle henkilölle. Ystävällisin terveisin, Helena Tadinen S-posti: [email protected] GSM: 040 523 9826 Oana Velcu, KTM S-posti: [email protected] tai [email protected] GSM: 050 538 7404 Puh: (09) 431 33 481
103
Bästa (THE PERSONS NAME), Vi är magister- och doktorsstuderande på Svenska handelshögskolan och forskar i företagens ibruktagande av ERP (Enterprise Resource Planning) system. ERP system är de IT system som sammanbinder aktivitetsområden på olika platser. Syftet med denna undersökning är att studera framgången i genomförandet av ERP projekt i företag och att undersöka betydelsen av HR faktorer i dessa projekt. Använd vänligen bifogade anknytning för att ta del av enkäten: (THE LINK) Enkäten består av 20 frågor varav hälften är öppna frågor och resten är påståenden vars riktighet Ni kan bedöma på en skala från 1 till 5. Ställning bör tas till följande saker, definition av ert system, uppskattning av dess kostnad, tidsåtgång och funktion, ställningstagande till de kritiska framgångsfaktorerna och personalrelaterade faktorer i genomförandet av ert ERP projekt. HR relaterade frågorna berör områden om kunnande och skolning, kommunikation och belöningssystem. Vi erhöll Er kontaktinformation från företagsdatabasen som upprätthålls av den Blåa boken. Om Ni inte är den rätta personen att besvara frågorna angående företagets ERP projekt, ber vi Er att vänligen skicka detta brev vidare till den rätta personen. De allmänna frågorna kan lämnas obesvarade och om påståendena inte är relevanta i ert fall så vänligen ange ”N/A”. Alla svar kommer att behandlas konfidentiellt och analyseras endast på helhetsnivå för våra pro gradu- och doktorsavhandlingar. Vänligen ange om Ni önskar erhålla resultaten av undersökningen så skickar vi gärna dem till Er senare. Med vänlig hälsning, Helena Tadinen E-mail: [email protected] GSM: 040 523 9826 Oana Velcu, ekon.mag. E-mail: [email protected] eller [email protected] GSM: 050 538 7404 Tel: (09) 431 33 481
104
Appendix C
Questionnaire (19.10.2004) GENERAL QUESTIONS 1. What is the Financial Information System (ERP) that your company is using now? 2. What system did you use before that? 3. When did you start using the new ERP system? 4. How many months was the ERP implementation planned to take? 5. How many months did the implementation actually last? 6. How many ERP modules were implemented? 7. Would you please make an estimate of the original budget established for the ERP project? 8. Would you please make an estimate of the following cost categories actually incurred in your ERP implementation? Software licence Hardware Implementation Consultants Training Other costs, which 9. Please rate the degree of your agreement with the following statements:
1=fully disagree 2 3 4 5=fully
agree 6=N/A
The ERP implementation project has been completed within budget
□ □ □ □ □ □
At the present moment, the ERP system is successfully used
□ □ □ □ □ □
105
The required functionality of the ERP project was fulfilled
□ □ □ □ □ □
10. Kindly specify to what degree the planned business case was fully realized
1=Extre- mely low 2 3 4 5=Extre-
mely high 6=N/A
□ □ □ □ □ □
11. What was the degree of importance of each factor in your ERP implementation?
1=Extre- mely low 2 3 4 5=Extre-
mely high 6=N/A
Top management support □ □ □ □ □ □
The effective project management □ □ □ □ □ □
Business Process Reengineering □ □ □ □ □ □
Fit between ERP software and hardware □ □ □ □ □ □
User involvement □ □ □ □ □ □
Project team competence □ □ □ □ □ □
User training and education □ □ □ □ □ □
Education on new business processes □ □ □ □ □ □
Change management □ □ □ □ □ □
Interdepartmental communication □ □ □ □ □ □
Interdepartmental cooperation □ □ □ □ □ □
Management of expectations □ □ □ □ □ □
Please read the descriptions of the five ERP implementation stages before answering to Question 12. Design Choosing the ERP software and modules to implement.
106
Implementation Choosing the implementation strategy and going live. Stabilization Using the new system and planned processes. Continuous improvement Achieving the benefits and adding new modules. Transformation Focusing on continuous improvement and transformation. 12. In which stage(s) of your ERP project was each factor important?
Design Imple-
mentation Stabili- sation
Cont. imp- rovement
Transfor- mation
Project team competence □ □ □ □ □ User training and education □ □ □ □ □ Education on new business processes □ □ □ □ □ Change management □ □ □ □ □ Interdepartmental communication □ □ □ □ □ Interdepartmental cooperation □ □ □ □ □ Management of expectations □ □ □ □ □
SKILLS QUESTIONS
13. What was the degree of importance of each HR requirements factor in your ERP implementation?
1=Extre- mely low 2 3 4 5=Extre-
mely high 6=N/A
Availability of sufficient HR for the project □ □ □ □ □ □
Availability of expertise □ □ □ □ □ □
Skilful and competent project team members □ □ □ □ □ □
Composition of project teams □ □ □ □ □ □
Relationship of trust among project team members □ □ □ □ □ □
107
14. Please identify the key people in your ERP project implementation team. Top management □ Management □ IT personnel □ End-users □ ERP consultants □ ERP vendor □ IT consultants □ Other □
15. Please indicate which of the following skills were important for these people to use in your ERP implementation? (referring to previous question)
Top mana- gement
Manage- ment
IT Personnel
End- users
ERP con- sultants
IT con- sultants
Vendor
Leadership skills □ □ □ □ □ □ □
Planning skills □ □ □ □ □ □ □
Controlling skills □ □ □ □ □ □ □
Inter-personal skills □ □ □ □ □ □ □
Communication skills □ □ □ □ □ □ □
Technical skills □ □ □ □ □ □ □
ERP experience □ □ □ □ □ □ □
IT management experience □ □ □ □ □ □ □
EDUCATING, TRAINING AND DEVELOPING
16. What was the degree of importance of each training factor in your ERP implementation?
1=Extre- mely low 2 3 4 5=Extre-
mely high 6=N/A
108
Identifying the type of training needed □ □ □ □ □ □
Providing the support for training □ □ □ □ □ □
Having qualified trainers □ □ □ □ □ □
Measuring training performance □ □ □ □ □ □
Documenting the training process □ □ □ □ □ □
Preparing employees for change □ □ □ □ □ □
Learning the new system and job functions □ □ □ □ □ □
Accepting the new processes and procedures □ □ □ □ □ □
Having sufficient budget □ □ □ □ □ □
MANAGING CHANGE 17. What was the degree of importance of each change management strategy factor in your ERP implementation?
1=Extre- mely low 2 3 4 5=Extre-
mely high 6=N/A
Building user acceptance □ □ □ □ □ □
Identifying sources of resistance □ □ □ □ □ □
Identifying who are resisting the change □ □ □ □ □ □
Empowering employees □ □ □ □ □ □
Understanding the strategic vision of ERP □ □ □ □ □ □
Paying attention to employee concerns □ □ □ □ □ □
Showing leadership commitment □ □ □ □ □ □
Developing new business performance and □ □ □ □ □ □
control measures COMMUNICATION
109
18. What was the degree of importance of each communication factor in your ERP implementation?
1=Extre- mely low 2 3 4 5=Extre-
mely high 6=N/A
Communicating ERP change vision □ □ □ □ □ □
Establishing communication guidelines □ □ □ □ □ □
Communicating ERP benefits □ □ □ □ □ □
Regular communication practices □ □ □ □ □ □
Open communication between the key parties □ □ □ □ □ □
Cooperation and involvement of the key parties □ □ □ □ □ □
REWARD SYSTEM 19. What was the degree of importance of each reward system factor in your ERP implementation?
1=Extre- mely low 2 3 4 5=Extre-
mely high 6=N/A
Building employee commitment □ □ □ □ □ □
Awarding the team □ □ □ □ □ □
Awarding the individual □ □ □ □ □ □
Rewarding on the basis of performance □ □ □ □ □ □
Providing bonuses and other financial benefits □ □ □ □ □ □
Recognition through intangible rewards □ □ □ □ □ □
Clarifying the future career opportunities □ □ □ □ □ □
Celebrating success □ □ □ □ □ □
Creating a pleasant working environment □ □ □ □ □ □
20. Please indicate the main industry in which your company is operating.