Did you know that there are many different leadership styles? Did you know that leadership styles can be identified and measured? Did you know that ERP organizational change literature suggests that executive teams and leaders that tend to have real (not perceived, assumed, or desired) transformational leadership qualities may have the benefit of a known ERP organizational change critical success factor?
These are important questions as leadership styles (individual and as teams) come in many forms. As ERP organizational change agents, it is important to understand, assess, and be honest about leadership styles and their strengths and weaknesses. ERP organizational change efforts often consist of a significant iterative process of improvement, may require business process re-engineering, usually requires increased demands on internal time and effort, consists of much diversity in terms of experience/perspectives/opinions/knowledge, may encounter resistance to change (which could be dues to many reasons), and many other change variables. In other words, ERP organizational change can be quite disruptive (to the norm) as well as require significant organizational resources (time, money, effort). And, also often requires significant alignment.
Although resistance to change can be a very useful tool, at some point, an organization is either committed to the project or they are not. But, for the effort to work, this takes leadership that is strategic, effectively listens to the workforce, and ultimately creates a culture of teamwork and commitment towards the goal. Northouse, author of “Leadership: Theory and Practice”, describes transformational leader attributes as an idealized influence, inspirational motivation, and individualized consideration. Moreover, transformational leaders raise the level of value about reaching goals and help the team transcend their own self-interest. They manage emotion, inspire motivation, are creative and innovative, and create a supportive climate for discussing differences in opinions. ERP organizational change leadership style needs to allow a managed risk-taking orientation that drives creativity and innovation as well as organizational learning. Emphasize on transformational leadership as being a project “catch-all” is certainly an ERP organizational change critical success factor.
There is some great literature that suggests and demonstrates the value of transformational leadership. Shao, Feng, and Liu (2012) found that their empirical results emphasized transformational leadership as a critical factor in obtaining the desired organizational culture as well as to improve knowledge sharing on ERP success. Burns, Kotrba, and Dension (2013) further describe that transformational leaders possess predicted organizational cultural characteristics such as strategic vision, celebrating success, employee support, innovation, goal setting, and organizational culture orientations and identification that exceeds beyond some of the cultural orientations of transactional leadership (Georgada & Xenikou, 2007). Burns, Kotrba, and Dension (2013) also forward the suggested notion that in times of crisis and significant organizational challenge, transformational leaders may be best oriented to provide, promote, and develop a more adaptive organizational culture (Uhl-Bien, Marion, & McKelvey, 2007). Bass and Avolio (1990) suggest that transformational leaders are able to stay in tune with the desires of employees but also maintain alignment of realities and expectations (that would be required for a successful ERP organizational change).
(In upcoming posts we will discuss more specific ERP organizational studies regarding transformational leadership).
Transformational leadership begets transformational culture.
What your leadership style? How do you know that?
“These situations can be emotionally draining. When a sales manager is in your face, adamant that your decision is going to ensure that she does not hit her annual quota, it is intimidating, even if you know it is not true. Keep in mind that your organization did not invent business. In addition to all of the tangible advantages ERP brings to the table, create an additional success out of knowledge that your ERP package represents the norm for business practices, and you have the opportunity to quietly correct some bad business habits.”
“ERP and Legacy Business Processes: Is Change Inevitable?” Posted on 25/05/12 by Tom Stephensonhttp://www.erpfocus.com/erp-and-legacy-business-processes-is-change-inevitable-934.html
“If case studies are any indication of the outcomes in ERP investment, insights already suggest that many attempts have not delivered the expected benefits, have failed completely, or will have high probability of failure.” (Bajwa, Garcia, Mooney, 2016)
There are some incredible numbers that represent Enterprise Resource Planning (ERP) organizational change digital transformations. ERP success is a big deal for businesses. ERP vendors are spending millions of dollars on product improvement and ease of use and methodology improvements. And, there is a great deal of research and doctorate dissertations trying to contribute to ERP success models.
Why do ERP digital transformations have such impressive numbers and statistics? Why are costs to implement so high, failure so prevalent (still over 50%), and risk of potential failure so significant?
There are many ERP digital transformation “success factors” (see upcoming posts for more details). We, researchers and practitioners, know these factors are all required, no doubts. But organizations may not be aware of all of the quite significant success factors nor be placing the right amount of emphasis on these success factors. Organizations may want to consider placing more emphasis on organizational culture and transformational leadership attributes as being the potential “catch-all” required for success. Our anecdotal experience, as well as objective research, suggests that organizational culture and leadership is the critical ERP success factor.
Of course, no one would argue, successful implementation all starts with a solid project plan and methodology. ERP implementations seldom fail due to technology (Ex. hard drive) failures or because business rules aren’t 100% understood and followed from the onset. It is quite possible, however, that they may fail because the organization is not “all in” from the top down officers to their mailroom. The realities and real expectations of such a significant ERP change endeavor may not be clearly understood (and accepted) among all the stakeholders.
Project success demands a sustained collaborative effort rarely carried out. Corporate culture, communication, and leadership successes are composed more of the effectiveness of soft-skills than the structural and strategic characteristics of an organization. This assertion is fundamentally opposed to the conventional understanding of functional-technical systems and project tasks because they tend to be more tangible, testable, and task-oriented, they are deemed more valuable. And, then again these tasks also tend to be easier to quantify and measure And notice.
During an ERP implementation, it is common that an organization may experience business interruptions and that ERP projects often do not meet their intended objectives (Hakkinen & Hilmola, 2008).
ERP organizational change is not just about accomplishing success or preventing a complete failure. Ensuring the greatest savings in terms of the time, money, and effort in order to realize that success is also critical. This is accomplished by having an ERP organizational change process and plan in which all potential success factors are understood and considered. In addition, the plan needs to be structured and disciplined.
The importance to the stakeholders to achieve this performance goal is the realization of the criticality of reliable, accurate, and timely business intelligence in a dynamic and competitive business environment. This importance is supported by the fact that the effective use of ERP systems has become a key competitive advantage for organizations. The risk to the organization’s goal if success is not achieved could lead to a loss in production, a decrease in product quality, loss of customers, and/or loss of sales. And, worse yet, bankruptcy or plant closure. All of these circumstances are documented in literature, case studies, and articles with evidence demonstrating that ERP failure is extremely costly to U.S. organizations (Grossman & Walsh, 2004). While key success factors (such as proper leadership, organizational diversity, and team performance) may affect every aspect of an organization, the importance of these factors within the context of a successful ERP organizational change is crucial.
Assessing Change Readiness with Culture Metrics
Matthew V. Brown, Ph. D.
I asked organizational culture expert, Dan Denison (leader and a true pioneer in organizational culture change) when he thinks a firm’s culture is best ready for certain types of significant changes (Ex. Implementing a new ERP system). He insisted that there are no one optimal “best ready status” measures for initiating such a large-scale change. However, there are culture measures that can be examined when an initiated change is being considered. “Every firm’s context or particular situation is unique, but one big consideration must be how well they understand the primary drivers of change affecting their specific business.”
This is what Nestell & Associates (N&A) knows well enough. In fact, we have a very unique organizational assessment and change readiness program that, for the success of the organization, helps companies design and implement their change plans customized to the unique culture and conditions influencing the organization.
Dan also told us that when they assess a firm’s culture in terms of change readiness, they first look at a few specific indexed culture measures (strategic intent, vision, empowerment, capability development, and organizational learning) and compare the scores that reveal what he called, “dynamic tensions”. These dynamic tensions can be combined with the more traditional business metrics influencing large-scale change readiness decisions: Expected ROI (1 yr. to 5 yrs.); P&L impacts; structure changes and scalability (ex. Horizontal – Go-to-market model as opposed to expanding verticals); switching costs and unique capability needs, etc. You can easily see how the change readiness decision matrix gets very complex quickly. This is where Nestell & Associates’ expertise adds value to a company’s digital maturity efforts.
We look at some of the more global trait-level comparisons the Denison model indicates along the adaptive/stability and growth/quality measures that they refer to as dynamic tensions. This process describes in part using the “Denison Culture Model” for assessing organizational change readiness. Nestell & Associates is the ONLY ERP organizational change specific firm that utilizes such an approach. We don’t just talk about organizational culture, we carefully examine and combine before we act upon it and cater to it. And, the N&A is the only firm that uses the proven, reputable, and world-renowned Denison Model for organizational assessment.
One important question to consider is what kinds of culture measures might you need to consider to better assess your firm’s ERP change readiness? We know through extensive research that there are organizational cultures that succeed as they change quickly where others fail to initiate the same sort of digital transforming organizational changes. How does Nestell & Associates help firms strengthen their overall change readiness? Let’s take a quick look at what we do.
It is important to get a strong sense of where an organization’s culture is prior to any significant change effort takes shape. Why? If you agree that culture is important to your company’s success, would you not want to know as much about the culture [how we do things around here] as possible BEFORE investing your resources? It is not so important how well you measure up to other organizations when you launch as much as it is knowing where your specific cultural strengths and weaknesses lie. That is where N&A can be very valuable to your change efforts. We pay close attention to the culture metrics all the way through your ERP change project.
At N&A, we understand that different types of enterprises have more complex strategies and operational activities comprising them than others, yet with a cultural lens, we can see how well a company translates its mission and strategic intent into a measure of capability development at the operational level. How well does the culture translate ideas into action that has an impact. This is one simple example of how to use culture measures to discern change readiness. There are many others that I will discuss in later articles.
The conventional and functional way to think about how ready a firm is for significant ERP change is to try and measure how quickly (and efficiently) an organization translates strategy into its P&L performance. This is necessary to do largely to control costs, but it is NOT sufficient when executing large-scale change. It is kind of like assessing how well a person translates a thought into an action or behavior…but you keep them under inspection corralled in their office while you measure the translation. Some do this better and quicker than others, some organizations are better at managing their operating margins, risk, and expected ROI.
“I have been told by some executives that they were ready for such a big change initiative simply when they all decided they were indeed ready.” Unfortunately, this sort of arbitrary and vague declaration of change readiness yields little useful knowledge to others outside of that internal decision-making team. We have to do better than that by making change readiness something tangible and useful.
From the standpoint of consultants measuring an organization’s culture, we begin by describing to our client that we understand people’s skepticisms about measuring [indeed clearly defining] such things as a culture. The Denison Model is a culture performance model, not a descriptive [personality] model. The model helps us discern where an organization performs in terms of translating information into productive action.
Wherever the scores land in terms of initial culture measurement, the Denison Model assures us that it is a good place to start. A firm’s culture is simply where it is on the spectrum of measures. The aggregate measures become an operating map. The aggregated scores are the combined impressions of the organization’s members. There is no preferred place to be at the beginning, it is simply where you are in current time. A present snapshot. Where a firm’s culture measures land helps us at N&A determine where the change efforts can be best focused in terms of what we call, “change leverage”. This is a true Nestell & Associates differentiator in the ERP implementation industry, and we understand this process better than anyone.
For example, there are firms where everyone deeply understands the mission of the enterprise and are poised to demonstrate exactly how that mission is translated into their daily activities. They typically measure in the top quartile in the mission trait indexes (strategic intent, goals, vision). You can measure the collective understanding of these mission traits within a company by surveying its membership. This is where the Denison Model is most useful.
Can you have a high level of mission understanding that you can leverage when initiating a large-scale change? Yes. Could you also have great resistance and anxiety in the culture with the intended change? Absolutely. Can a company revise its vision or strategic intent so that it helps to positively influence the organization’s membership in the necessity or attractiveness of a certain type of change? Perhaps. Is it important to include the culture in such considerations?
Can a firm have a low-scoring mission measures and also be highly ready for significant change? Yes, it is possible, but a considerable initial effort might be focused on the leadership of the organization effectively communicating HOW readiness will enable the new strategy or vision and thereby moving the culture measure of mission…yet, ultimately EVERYONE will want to know the same thing, How will this change effort affect me and my work?
We [N&A] see that the Denison Model as merely a tool, a system lens that we use to collect inputs (data from members’ perceptions of culture) and when you organize the inputs into measures (culture indexes), they can tell us some very important things about the collective mindset, the enterprise’s meaning systems, and patterns of behavior. At N&A, we believe this is a critically important key to improving the success rate of your overall ERP change efforts.
It is not so simple to do. “It is a little like steering an ocean liner,” says Dan Denison. “In this sort of scenario, you think you need a few things like a strong hand on the rudder…but what ocean liners actually have on their rudders something innovative called a [trim tab] which is a segment of the rudder that moves one way to move the rudder another way which in turn moves the ship in your chosen direction…the trim tab is a lever that simply moves the rudder hence moving in the same direction as the ship itself steers. It takes a lot less energy and effort to move the rudder than the entire ship.” This is how culture change enables technology change.
Change readiness has as much to do with a mindset, as it does with how well an organization translates the meaning of its mission into action; how a company collectively learns and adapts to the changes in its external environment. No easy task. As the external environments become more dynamic and complex, organizations necessarily become more complex. ERP systems are supposed to simplify that complexity. It is like understanding our human immune systems. The more diverse the environment is, the more diverse the germs it produces, hence the more complex our immune systems must develop anti-germs to thwart possible disease. The necessity of utilizing ERP technology in an organization is similar to building an effective immune system. Yet the immune system of an organization is not the technology itself. It is a tool the organizational culture (patterns of symbolic interaction) employs to translate learning and operations into useful products and services.
“Although education is a corner-stone of ERP implementation, the user training is usually only emphasized and the courses are centered on computer/system operation rather than on understanding the ERP concept and spirit.” (Yu, C. S.,2013, Causes influencing the effectiveness of the post‐implementation ERP system).
Organizational ERP learning comes in many forms best supported through scaffolding. This scaffolding process moves employees to progressively better understanding of the conceptual, functional, and process support value of an ERP solution. A learning process in which employees move from the general to the more detailed understanding of ERP is critical. This learning should progress from organizational readiness and preparation understanding, ERP conceptual and general understanding, specific ERP functional training, “fingers to keyboard” labs and homework, conference room piloting (CRP), and user acceptance testing (UATs).
Some great resources demonstrate that proper training is a key success factor (and often a stumbling block) for organizations; including (Vincent, Soni, Venkat, 2018), (Noudoostbeni, Ismail, Jenatabadi, Yasin,2018), and (Momoh, Roy, Shehab, 2013) to name just a few. Successful ERP implementations require a structured and disciplined focus on organizational training and education. All too often organizations focus on the technology stack, business processes, and functional requirements (which are also important) but fail to give sufficient attention to end-user training. Even when they do give it consideration, organizations often don’t allow enough time for proper training. Organizations can expect too much too fast from the end-users’ as Implementing a new ERP solution often involves a significant learning curve.
It is one thing to participate in formal training, conference room pilots (CRPs), and User Acceptance Testing (UAT’s) in a formal setting in a training room. It is quite another thing when the organization pushes the “go-live” button and employees now have to utilize their new ERP solution in the “real world”. The more comfortable the end-users are with the new ERP, the smoother the go-live event and post-go-live transition. It is not good enough for users to simply be able to execute functional work instructions in a classroom setting. ERP users also need to understand the “upstream” and “downstream” consequences of the business process. That is to say, they need to understand where their data comes from and where it ends up and the impact of their processes on the rest of the organization. They also need to be able to understand issues and resolve them. What happens when you get an error, a transaction will not go through, or you are missing key data? ERP training needs to be built into muscle memory so that it is second nature by the time of go-live. Training is a tangible influence that can be measured. Training is also a fundamental building block in a successful ERP implementation. The ERP implementation process is as much about end-user education and training as anything else.