Nice video by Dr. Daniel Denison, “The Impact of Culture”.
The impact of organizational culture on ERP organizational change is significant. Among many other organizational change influences, organizational culture impacts an organization’s readiness, organizational sharing and learning, and risk management/acceptance/mitigation.
Denison (1984) states that the primary and fundamental identity of an organization is based on its organizational culture: it’s set of values, beliefs, and behavior patterns. Organizational culture and organization-related influences are necessary to understand because, as described by Denison and colleagues (2003), organizational culture characteristics, which can be measured and monitored, may have a predictable impact on the effectiveness of organizational change.
Often, organizational culture is a quite undervalued influence in ERP organizational change. In fact, it is often not a topic of discussion or build into ERP organization change project plans.
Unless Denison and colleagues, and countless other sound, objective, and vendor-neutral research is wrong, your ERP organizational change project would greatly benefit to include tactical and practical actions in which to measure, support, and endorse a healthy culture that advocates for sustainable organizational change and performance.
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Authored by Dr. Jack G. Nestell & Michael G. Schwendeman
Organizational Culture is Much More Than a Buzzword
Organizational culture is much more than a buzzword and deserves much more than a casual agreement as to its importance. In his article “What leaders need to know about organization culture”, Warrick (2017) states three critical points in his abstract. First, “A major factor in the success of an organization is its culture.” Second, “Unfortunately, many leaders are either unaware of the significant impact culture can have, are aware but overwhelmed by the extensive and sometimes conflicting information available on culture, or are not well informed about how to build and sustain cultures effectively.” And third, “Developing organizational culture requires far more than talk about culture and emphasis on its importance.” These are all key points supported by both enterprise resource planning (ERP) as well as organizational culture research.
Portfolio Organizational Culture is a Key to Successful Risk Management
Research-based evidence suggests that no company should engage in a large scale multi-million-dollar ERP project without adequate organizational change assessment and readiness. A direct link exists between corporate culture, organizational performance, and de-risking large scale ERP organizational change. Research from Denison Consulting suggests that when analyzing top and bottom performing organizations for risk management and their corresponding culture scores that there is a positive correlation between culture and risk management. Dr. Denison is one of the pioneers in the field of organizational culture and assessment. Dr. Denison’s research was the foundation of the Denison Culture Model and the Organizational Culture Survey, out of which the practice of measuring and consulting on organizational culture has emerged with Denison Consulting beginning in 1998. Based on Denison research, corporate cultural indicators of Risk Management for successful organizational change scenarios include organization-wide consensus on how much risk to take, alignment on areas of business where risk-taking is acceptable, continuous monitoring of old and new risks, leadership support for appropriate risk-taking behaviors and awareness, and employees that are comfortable discussing risks. Since ERP organizational change can create many risk opportunities as well as be impacted by many risk factors, portfolio organizational culture is a key to successful risk management.
ERP Organizational Change: A Valuable But Risky Proposition
ERP systems are widely accepted as one of the best mechanisms for organizations to gain competitive advantage (Sekulić, Lolić, & Stefanović, 2018). ERP systems bring can bring value to organizations in a variety of ways such as improved accuracy, visibility, and timeliness of business information, increased process efficiencies, and improved integration of business units. However, the process of ERP organizational change and implementation can create significant business risks. Al-Shamlan and Al-Mudimigh (2011), as well as Al-Fawaz, Al-Salti and Eldabi (2008), describe ERP implementation failure rates between 60-90%, which demonstrates ERP organizational change failures is a problem. While the definition of failure can be defined differently and certainly can be subjective, the risks are real. In fact, culture-based and culture-induced risks can become large-scale incidents and result in a significant amount of wasted time, money, effort, and even organizational reputation. The risk to the organization’s ERP assimilation goal if success is not achieved could also lead to a loss in production, a decrease of product quality, loss of customers, decrease in profits, loss of sales, plant closure, bankruptcy (Scott, 1999), and potentially even lawsuits (Grossman & Walsh, 2004). 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.
ERP Organizational Change: The Value of Organizational Culture is Clear
ERP assimilation risk is a significant problem directly related to many complex and dynamic factors. As proposed “successful” ERP implementation factor research has evolved, research is, and has, also considered the non-technical side of ERP organizational change in an effort to understand how leadership, organizational culture, team performance and measurement, and diversity might be important. Research clearly demonstrates the value and criticality of corporate culture. Corporate culture is an elaborate system of norms and values that evolve over time and is the collective binding that governs the values, ideals, and beliefs shared within the organization (Ke & Wei, 2008). Organizational culture and organization-related influences are necessary to understand because as described by Denison, Haaland, and Goelzer (2003), organizational culture characteristics, which can be measured and monitored, may have a predictable impact on the effectiveness of organizational change. Therefore, organizational culture can be impactful in determining perceptions and behaviors and it is a key concept to note in terms of how organizational culture can impact change and success.
Ke and Wei (2008) described that when there exist varying and mixed cultures of leadership within organizations, employees will have different ideals, perceptions, and understandings of ERP organizational change efforts, which has a direct impact on change acceptance from the employees. Annamalai and Ramayah (2013) established that organizational culture regulates the relationship between success factors and assimilation success of the ERP projects. Annamalai and Ramayah (2013) further state that organizational culture must highlight the value of common goals. Phenomena at individual, group, organization and society levels determine the use of ERP systems, and utilizing a context-aware perspective has to begin with the awareness and notion that an ERP is not just a physical artifact but also an artifact of an organization’s culture (Howcroft, Newell, & Wagner, 2004). Furthermore, Ifinedo (2017, p. 38) states that “On the organizational cultural front, firms planning to adopt and those that have already adopted ERP must ensure that collaborative, cooperative, and, supportive attitudes are promoted in the organization. Our data analysis revealed that ERP success may be enhanced when such cultural attributes are rated highly.” Denison research has also demonstrated a clear link between organizational culture and business metrics and can clearly demonstrate the ROI of culture change efforts (Denison, 1984; Denison & Mishra). The significant value of healthy organizational culture as a key factor to ERP assimilation success cannot be denied.
De-Risking ERP: Measuring Organizational Culture
Denison (1984) states that the primary and fundamental identity of an organization is based on its organizational culture: the set of values, beliefs, and behavior patterns. One way to mitigate risks is to therefore understand and measure your organizational culture “temperature”. There are organizational change influences that culture impacts and that also increases the likelihood of ERP organizational change success. Research has demonstrated that culture can be measured and be of significant organizational value. The Denison Model was built to explain the cultural factors leading to financial performance and organizational effectiveness (Denison, 1990). For the success of the organization, there are specific cultural conditions influencing the organization that should be measured and then appropriately acted upon. 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 as possible before investing your resources? Measuring how employees perceive the organization’s culture can help surface departments or teams that are aligned and working effectively – and others that are not – so cultural best practices can be shared across the organization. If the culture isn’t aligned with the change effort and there is not widespread buy-in to it, it simply won’t work. As Dr. Brown (Nestell & Associates Strategic Advisor) says, “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 impact?”
ERP Organizational Change Practical Tip: Objectively Measure Your Organizational Culture
Recently “culture” appears to have become even more and more of a buzzword when it comes to digital transformations or ERP organizational change. But, Private Equity portfolios can drastically de-risk their ERP organizational change by building into the project plan deliberate, intentional, and concrete activity in which to measure, promote, build, and encourage organizational teamwork just for an ERP project. As long as there are organizations, ERP organizational change will include people/culture, processes, and technology. As long as ERP solutions are being used by human beings and business cultures, the criticality of the dynamic interplay between the people/culture, processes, technology triad is not going anywhere and will always play a significant role in successful ERP organizational change.
Measuring Organizational Culture: The Tool (Founded in Sound Research and Principle)
The de-risk solution lies in an effective and proven tool. During ERP organization change, organizations face risks daily and need a system in place to deal with them. The risks of the modern work environment are plentiful: increasing industry regulations, stakeholder pressure to grow and reach new levels of profitability, and the rapid advancement of technology, not to mention increasingly volatile international trade relationships and markets. These factors underscore the need for a systematic approach to risk management that considers the underlying culture of the organization, a leading driver of risk management. The Denison Risk Management Content module measures the effectiveness of risk management practices in an organization and is designed to complement the Denison Organizational Culture Survey (DOCS) by specifically capturing employee perceptions of various aspects of risk management. In addition, Denison’s core culture model includes assessments like Engagement, Commitment, Innovation, and Diversity & Inclusion, which are considered employee outcomes that are impacted by organizational culture and have a significant influence upon ERP organizational change. At its core, risk management is about how organizations detect and respond to risks and change. Risks are forces or conditions that threaten to inhibit the success of organizational change. Effective risk management involves several core capabilities and a specific mindset. Organizations with effective risk management practices are hyper-vigilant – they continually look out for and monitor risks. In these organizations, employees speak up about risks and leaders listen to concerns and encourage honest discussions around them. Also, employees are clear about the appropriate level of risk to take and how to handle risks when they arise. Private equity portfolios can use a scientifically based and proven method to de-risk ERP organizational change.
Risk Management Practices, Procedures, Acceptance, & Policies Need to be Successfully Implemented
Preliminary research from Denison Consulting reveals that risk management is most related to the organizational characteristics of empowerment, agreement, coordination & integration, and core values. These are all significant factors in ERP organizational change success. Specifically, to achieve successful change via effective risk management, it is important to establish a consistent and predictable approach to business (and ERP organizational change) that is widely agreed upon across different levels and business areas of the organization. Decision-making must be delegated to the level where the best information is available, and that information must be widely shared. And, there must be a clear set of values communicated and practiced by leaders within the organization. Organizational culture influences the deployment and effectiveness of risk management, as well as the amount of risk-taking that employees perceive, is acceptable. For successful ERP organizational change, risk management practices, procedures, and policies need to be successfully implemented.
Risk management needs to be integrated into an organization’s culture. Changing policies and practices without changing culture can lead to compliance without adoption, undermining risk management efforts. Failure to integrate risk management into the culture of an organization is one of the top barriers to managing risks effectively. Formal risk management control mechanisms dictate what the organization and its people should do, whereas culture dictates what people really do. Rules and regulations do help but it is not as simple as “the more the better.” A prominent feature in many incidents is that the system underlying risk management broke down, not because of the way risk was managed via policies and procedures, but because the organizational culture did not place an emphasis on managing risks and change. Organizational culture heavily influences employee behavior and attitudes and is considered a leading risk factor in companies’ organizational change success. As Hartl and Hess (2017) state in their article “The role of cultural values for digital transformation: Insights from a Delphi study.”, culture is often understood to be a valuable strategic asset with incredible potential to promote and sustain organizational change with the deployment of digital technologies, and organizational culture can also be a significant factor contributing to change prevention. “In research and practice alike, cultural change is perceived as essential for successful business transformation.” (Hartl & Hess, 2017).
Jack Nestell and Nestell & Associates would like to extend and emphasize acknowledgment to their friends, colleagues, and peers at Denison Consulting with a special Thank You to Michael G. Schwendeman. Michael is the Director of Research & Development for Denison Consulting and has provided significant contribution and insight to this article.
About Nestell & Associates: https://nestellassociates.com/about-us/
Learn more: https://www.denisonconsulting.com/
Al-Fawaz, K., Al-Salti, Z., & Eldabi, T. (2008, May 25–26). Critical success factors in ERP implementation: A review [Paper presentation] European and Mediterranean Conference on Information Systems. Dubai, United Arab Emirates
Al-Shamlan, H. M., & Al-Mudimigh, A. S. (2011). The Chang management strategies and processes for successful ERP implementation: A case study of MADAR. International Journal of Computer Science Issues, 8(2), 399.
Annamalai, C., & Ramayah, T. (2013). Does the organizational culture act as a moderator in Indian enterprise resource planning (ERP) projects? An empirical study. Journal of Manufacturing Technology Management, 24(4), 555–587. https://doi.org/10.1108/17410381311327404
Berić, Lolic, & Stefanovic (2018). “Evolution of ERP Systems in SMEs–Past Research, Present Findings and Future Directions.”
Denison, D. R. (1984). Bringing corporate culture to the bottom line. Organizational Dynamics, 13(2), 5–22. https://doi.org/10.1016/0090-2616(84)90015-9
Denison, D. R. (1990). Corporate culture and organizational effectiveness, John Wiley & Sons.
Denison, D. R., Haaland, S., & Goelzer, P. (2003). Corporate culture and organizational effectiveness: Is there a similar pattern around the world. Advances in Global Leadership, 3(2), 205–225. https://doi.org/10.1016/S1535-1203(02)03011-3
Denison, D. R. and A. K. Mishra (1995). “Toward a theory of organizational culture and effectiveness.” Organization science 6(2): 204-223.
Grossman, T. and J. Walsh (2004). “Avoiding the Pitfalls of Erp System Implementation.” Information Systems Management 21(2): 38-42.
Hartl, E. and T. Hess (2017). “The role of cultural values for digital transformation: Insights from a Delphi study.”
Howcroft, D., Newell, S., & Wagner, E. (2004). Understanding the contextual influences on enterprise system design, implementation, use and evaluation. The Journal of Strategic Information Systems, 13(4), 271–277. https://doi.org/10.1016/j.jsis.2004.11.010
Ifinedo, P., & Nahar, N. (2009). Interactions between contingency, organizational IT factors, and ERP success. Industrial Management & Data Systems, 109(1), 118–137. https://doi.org/10.1108/02635570910926627
Ke, W., & Wei, K. K. (2008). Organizational culture and leadership in ERP implementation. Decision Support Systems, 45(2), 208–218. https://doi.org/10.1016/j.dss.2007.02.002
Scott, J. (1999). The FoxMeyer Drugs bankruptcy: Was it a failure of ERP? AMCIS 1999 Proceedings, 80.
Warrick, D. D. (2017). “What leaders need to know about organizational culture.” Business Horizons 60(3): 395-404.
ERP and organizational change researchers have a passion to bring value to practitioners that are based on sound research and principle. The field and practice of ERP organizational change would benefit from the reflection and application of this insightful work. When it comes to ERP organizational change research, if you are an organization or an ERP practitioner, you should care about what this great current and past research are telling us.
What is ERP organizational change?
Sometimes remaining competitive and healthy requires significant organizational change. And one of those change agents is Enterprise Resource Planning, or ERP, systems that act as a tool to drive improvements and to create or maintain a competitive advantage. ERP organizational change is the act of leveraging ERP systems in an effort to realize improved business outcomes.
In order to fully realize the benefits and value that ERP systems have to offer, however, it often requires the right ERP solution, significant organizational resources, and tremendous effort and time. The process of aligning people, processes, and technology in an effective and efficient way in which to fully realize ERP success and assimilation is called ERP organizational change. However, ERP organizational change has inherent and potentially significant business challenges and risks.
What is ERP organizational change research?
ERP organizational change is often a tremendous organizational effort. ERP organizational change is often a time of high stress, significant stakeholder frustrations, numerous challenges, inherent risks, business interruptions, and even failure. But why is this the case? Does it have to be this way? How can we, as practitioners, positively impact and improve ERP organizational change? These are precisely the questions that researchers in the field of ERP organizational change seek to address. Being able to answer these questions and then applying the research insight will allow practitioners to bring the greatest value to organizations and to contribute to the ERP organizational change field.
ERP assimilation challenges and failures are a significant problem directly related to many complex and dynamic influences. ERP organizational change research considers all aspects of ERP organizational change influences including organizational, process, and technology-related factors. ERP organizational change research studies “success models” and “success factors” in order to offer up possible new perspectives and insight in which to continue to improve the value of ERP, understand how to better utilize ERP, and to better understand how to reduce the challenges and risks associated with large scale ERP implementations.
What is ERP organizational change research telling us?
The general review of literature and research suggests that understanding and awareness of this work and success factors is an important organizational process. Al-Mashari (2003) described the need for an urgent research agenda that addresses the issues and challenges inherent in ERP adoption. The ERP organizational change literature presents a common theme in which research suggests that organizations that become aware of, implement, and put the appropriate emphasize on the vast array of critical success factors will be better prepared and positioned with the organizational skills needed to increase the likelihood of ERP assimilation and meeting the desired organizational goals (Sawah, Tharwat, & Ramsy, 2013; Moon, 2007; Jafari, Osman, Yusuf, & Tang, 2006). Research notes that there is a lack of routine and quality reflection in practice (Ferry & Ross-Gordon, 1998; Rodgers, 2002). ERP research continues in 2020 simply because the need for this research continues. The need for this research is actually driven by demand.
The evolution of ERP research continues to look at the problem from many different fields of study, models, and perspectives (Basoglu, Daim, & Kerimoglu 2007). The collective benefits, knowledge, and awareness of this work could lead to improved organizational ERP performance and success. Scholars and practitioners continue the search to find common denominators in considering all possible influences upon ERP organizational change success.
Why should anyone care about ERP organizational change research?
Because ERP organizational change research seeks to do one primary and fundamental thing: make a tactical difference in the success of your ERP organizational change effort.
Successful ERP assimilation matters because the evidence demonstrates that ERP failure is extremely costly to U.S. organizations (Wailgum, 2009; Osterlind, 2000; Shao, Feng, & Hu, 2017; Jyh-Fu & Nicolas, 2013; Ike & Madsen, 2005). The risk to the organization’s ERP assimilation goal if success is not achieved could lead to a loss in production, a decrease of product quality, loss of customers, loss of sales, and/or significant waste in resources, time, money, and effort. And, worst yet, plant closure, bankruptcy (Scott, 1999) and lawsuits (Grossman, 2004). 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).
ERP implementations are abandoned all together as well as incur significant time and cost overruns incurring millions of dollars in lost investment (Basoglu, Daim, & Kerimoglu, 2007). It is not only the costs of an ERP failure, but it’s also the loss of the ROI and benefits that a successful ERP can bring to an organization.
The goal of ERP organizational change research
Much great work exists in the field of ERP organizational change specifically (and organizational change in general) in which the goal is to provide additional objective data and insight that is founded in principle. This additional insight may be helpful to organizations toward meeting the goal of successful ERP assimilation via improved ERP organizational change performance. Even though many of the challenges are known, failure rates are not improving and ERP implementations remain problematic (Scott, 2018). The primary goal and value of ERP organizational change research is research based ERP practice .
Friend and colleague Dr. Justin Lee Goldston is an ERP Organizational Change Expert, Professor, Author, and TEDx Speaker. His book is a recommended read: “” https://www.amazon.com/Critical-Enterprise-Resource-Implementation-Manufacturing/dp/1948149095
* * We genuinely hope for the best for all during this challenging time. We hope you and your loved ones remain healthy and that you navigate through the economic challenges sustainably. *
Experienced practitioners and change agents in the field know anecdotally and subjectively that the organizational culture impact on ERP organizational change is significant. As ERP researchers, we too objectively know this to be the case through sound research. As one of many examples, Shou and Ying (2005) study ERP success and suggest that significant success factors are related to organizational culture such as hostile company culture, unsuitable reporting structure, political pressures, vested interests, and management commitment. Practitioners and researchers know that ERP assimilation has significant shortcomings and challenges in the people and culture part of the technology, process, people/culture success triad.
Therefore, as practitioners, let’s work to better address the problem and let’s give more consideration to the potential impact of corporate culture. Too many organizations assume too much about their culture. Or, when it comes to ERP organizational change, organizational culture is given little to no real formal and actionable consideration. For starters, let’s assess and measure the corporate culture temperature. And then, take an appropriate response in terms of tangible and concrete action. ERP organizational change is far from just an exercise in technology deployment, business process re-engineering, or project management standards. As practitioners, we need to reflect and approach our trade slightly differently. Please stay tuned for more……..
As a side note: Check out this great video on culture by Jason Bingham author of “Cultureship: The ACBs of Business Leadership”. https://youtu.be/kzf3MmTFwnw
Learn more about Nestell & Associates at https://nestellassociates.com/about-us/
Practice vs Research vs Applied Research
by Jack Nestell
“Not only is each and every organization different, but each specific organizational context also changes all the time and is very dynamic. The people, culture, technology, processes, issues, challenges, and solutions depend upon context and vary with time. But, what does not really change is a theory based on general principle, this is one reason why research is so relevant, practical, powerful, useful, and valuable in the “real world”.”
One of the goals of ERP organizational change practitioners should be to bridge the gap between practice and the application of all the great ERP organizational change research.
Research can be from any combination of collaboration from practitioners, academic researchers, or ERP vendors. First, and clearly, there is a lot to learn from in terms of one’s own, as well as other’s experiences, as long as that experience is reflected upon and in context. Second, a case study (informal or formal academic research-based) can help provide significant insight. Third, organizational learning and evaluation programs also provide significant insight and opportunity for reflection. Fourth, informal and formal surveys (quantitative and/or qualitative) and other evaluation methods provide insight as well (Note that some surveys may be grounded by research, theory, and principles and some…well, not so much so…but still may provide some value). Fifth is academically approached and scientific-based research that I will discuss more below. All of these methods and resources provide opportunities for organizations, and individual practitioners, for self-reflection and for contributing to our field: ERP organizational change success.
As mentioned in a previous post, ERP practitioners, ERP vendors, and ERP scholars (with private and University funding) don’t spend significant time, money, and effort on a problem that doesn’t exist. But, if any level of good research and evaluative learning is to bring real value to your organization then it first needs to be successfully applied across contexts (i.e. to your context). The idea and point here are simply that if as practitioners, we are going to successfully be able to apply sound academic research, then the study should be approached from a high objective standard that allows practitioners to 1) gain accurate insight in a way that allows practitioners to 2) consider the application of research results within other contexts. And trust me, there is lots of great research that meets these criteria. Even if research is based on a specific context, it can prove to be very valuable and applicable to other contexts. This holds true especially if research results are supported by fundamental theory and principle.
When I speak of “ERP organizational change”, I am primarily speaking of both the field of ERP research as well as the field of organizational culture and change research. But, the field of “ERP organizational change” considers (or should) many fields and disciplines. (Practitioners understand, and research demonstrates, that successful ERP organizational change requires not just technology, business process, and project management methods, but also organizational culture as well as education and learning principles). This high-quality ERP organizational change research that I speak of is based on an objective, vendor-neutral, non-bias approach to study and its application. Moreover, this research is often supported by proven theory and solid principles, hence making the findings or results applicable across contexts. These are theories and principles that ought to support the latest practitioner fads, practitioner approaches, and practitioner and ERP vendor “selling points”. If not, what are these practitioner fads, approaches, and “selling points” really based on? And will they be effective?
From shared experiences and based on research, it is pretty safe to say that ERP organizational change agents would benefit from this sound research founded in principle.
Perhaps, generally speaking, organizational stakeholders know very little about “ERP organizational change” research. And perhaps, they shouldn’t care or have to spend time, money, and effort to know and learn about ERP organizational change. However, for ERP organizational change practitioners (i.e. change agents), it is our job to take advantage of this great ERP research that provides opportunities for insight and reflection (that is founded in non-bias, vendor-neutral, and fundamental principles.) Why? Because we owe it to the organizational stakeholders.
Not only is each and every organization different, but each specific organizational context also changes all the time and is very dynamic. The people, culture, technology, processes, issues, challenges, and solutions depend upon context and vary with time. But, what does not really change is a theory based on general principle, this is why research is so relevant, practical, powerful, useful, and valuable in the “real world”.
For practitioners, this research can be very powerful knowledge. And, I personally think that this is where many organizations and practitioners “miss the boat”. Point is, there is some great ERP and organizational research that as ERP practitioners, is a significant tool and source of information.