Private Equity Portfolio Acquisition: The Value of Proper IT & ERP Due Diligence

Private Equity Portfolio Acquisition: The Value of Proper IT & ERP Due Diligence

Authored By Dr. Jack G. Nestell with contribution from John M. Bielecki

The Value of Proper IT & ERP Due DiligenceWhy do Private Equity Firms Invest in Portfolio Companies?

In order to understand the significant value of proper IT and ERP due diligence, it helps to understand the primary objectives of private equity. A high-level definition of private equity would be: to build healthy and vibrant organizations with organizational cultures oriented towards teamwork, organizational learning, innovation, and creativity while providing customers with exceptional value through quality products and service. This definition is quite consistent among most PE firms.  In order to accomplish this objective, it requires great people, efficient and effective processes, and appropriate technology. Sure, private equity firms invest in organizations (their portfolio companies) in an effort to improve the top and bottom lines. But, we are certain that all PE firms will tell you that this positive and sustained desired financial performance outcome only occurs when organizational culture is developed and supported by people, processes, and technology that is well-aligned in mission, vision, and value. It is true that some acquisitions struggle, or even fail, as some PE firms invest in highly distressed organizations hoping to improve organizational performance and to turn the organization around. But the goal remains the same: to develop a purpose-driven culture adequately supported by effective and efficient processes. This goal requires that IT and ERP be aligned with the organization.

IT and ERP Driven Business Intelligence: A significant Competitive Advantage  

Second, to an organization’s people, there is nothing more important than data. Reliable and immediate access to accurate data become information that becomes business intelligence. That is Accurate Data + Timely Data = Good Reporting. Good reporting leads to sound Business Intelligence. And therefore, trusted Business Intelligence creates a high confidence level in strategic business decisions and management.  Business Intelligence is a significant influence that allows companies to react appropriately to ever-changing market conditions. Moreover, sound business intelligence is a significant competitive business advantage in a competitive global market. This is precisely why pre-acquisition IT and ERP due diligence is so crucial. The primary intent of a successful IT and ERP due diligence is to provide Private Equity firms and their investors’ confidence in that their portfolio can provide reliable and trusted business intelligence without incurring or creating and significant business risks. And, if current state IT and/or ERP does not provide the proper business intelligence, then any investment required to address significant gaps requires an accurate and professional assessment as to the time, costs, and effort required to address any significant business intelligence gaps.

IT and ERP Due Diligence Objective

The primary objective of an IT and ERP due diligence should be to review the current state ERP solutions and the Information Technology (IT) department’s operations to inform the PE firm on the effectiveness and gaps. The due diligence needs to include a thorough assessment of IT infrastructure, IT process, IT team, and ERP alignment with the organization and business requirements. The assessment should also consider IT’s ability to support organizational growth and include recommendations for IT and ERP continuous improvement opportunities. A primary objective is to also understand current ERP and Information Technology ownership and process. IT due diligence should examine key areas such as IT stability, IT security, IT performance, IT support process, regulatory and organizational compliance, budget requirements, and appropriate level of IT resources. The critical objective is to confirm that no significant IT and/or ERP risks or major IT and/or ERP financial exposures exist that could substantially impact on-going business operations. This due diligence process should also examine risks that should be considered as a part of the pre-transaction agreement language.

The due diligence goal is to provide vendor-neutral, unbiased, and objective information to contribute to an informed investment decision and eliminate acquisition risks. In general, the due diligence is intended to highlight key points that should be considered from a private equity investment perspective in an effort to increase the likelihood of  IT/ERP success and reduce investment risk. Ultimately, the goal is to provide an examination that contributes to protecting and ensuring the investment. 

IT and ERP Due Diligence Approach

The approach should be one that effectively provides accurate gap and risk analysis determines if any significant operational risks exist due to IT and/or ERP, and then provide sound options for addressing gaps and risks. Several documents should be requested and reviewed, conduct portfolio employee interviews with appropriate personnel, and then complete follow up calls and analyses. The approach should maintain a neutral, unbiased, non-political, and objective interview process followed by cross-referencing interview feedback against provided documentation.  The IT and ERP due diligence must maintain a structured and deliberate methodology that ensures adequate and appropriate due diligence of the three main components of any organizational IT department: team, process, technology, and its infrastructure. In addition, the ERP and IT due diligence must focus on a holistic view of ensuring the alignment of ERP and IT operations and its support of the business operations.

The IT and ERP due diligence is best provided by a vendor-neutral third party. Else, you get into deliberate and undeliberate biases impacting your due diligence. Moreover, you want objective facts and recommended solutions, not opportunities for product sales events from vendors or their value-added partners. Opportunities for any needed product sales events comes later if/as needed through proper product review and being “smart consumers”.

Remember to use care and being professional and proper in your approach. During the process, it is about listening, observing, and examining. While on-site during the observation process, for instance, it is not necessary to provide your opinion or to criticize in any way. Moreover, if due diligence results are shared with the portfolio in an effort to address issues pre-or post-acquisition, it has to be shared and discussed in a way that is proper and professional. On occasion, an internal IT or ERP implementation team member  may want to provide a “rebuttal” to any productive and professional observations in the formal report. This is fine. Not all employees will heed the feedback especially if the due diligence is providing constructive suggestions within their area of responsibility. Although sharing one’s experience requires some subjectivity, as best as possible, maintain an objective, vendor-neutral, and “call it as you see it” approach. After all, that is why the Private Equity firm is paying you.  Your job in providing due diligence is to provide objective feedback as possible based on years of experience and expertise. Even if others have different perspectives, opinions, and perceptions, a sound approach to due diligence provides investment and organizational benefit.

Summary of The General Process 
  • Make sure you clearly understand the business and PE goals prior to beginning the assessment.

Ask the right questions at the onset. These questions will help guide IT and ERP due diligence. When it comes to providing final recommendations and IT and ERP strategy roadmap, these strategic suggestions need to be aligned with organizational goals. The objective is to ensure proper support for potential investment objectives and goals.

  • Request appropriate IT and ERP documentation and information.

There is a vast amount of documentation in terms of IT team/resources, IT infrastructure (networks, systems, applications), IT procedures, and ERP related documents that must be thoroughly reviewed. (More to come on specific documentation in upcoming posts).

  • Conduct Operational tour

The IT and/or ERP due diligence results need to be informed by cross-referencing provided documentation, team member interviews, and evidence confirmation with what is visually observed during an operational tour. Cross-checking multiple sources allows for confidence in ownership and process evidence. What you see may not always be consistent with what you hear.

  • Conduct interviews

The IT and/or ERP due diligence results need to be informed by cross-referencing provided documentation, observation, and direct evidence confirmation with what you hear during interviews. Cross-checking multiple sources allows for confidence in ownership and process evidence. What you hear may not always be consistent with what you see.

  • Assess appropriate IT and ERP documentation and information
    • Review the IT/ERP team, processes, and infrastructure to ensure alignment with organizational strategy. The point is to assess if IT and ERP properly support business operations.
    • Assess the strategy and alignment of all IT components (IT team, process, and infrastructure) to current and future business needs.
    • IT infrastructure: Security, server room, data center, network (voice and data), hardware, fault tolerance and redundancy, backup and restore, performance availability, change management, end-user support, storage systems, and application review. Are the solutions themselves adequate?
    • IT Team: Assess any resource needs or constraints
    • IT Process: Thorough review of IT practice and operating procedures.
    • Clearly examine and consider holistically the observations, interviews, and data.

Did any pre-acquisition considerations, concerns, or risks emerge? Utilize effective qualitative research techniques in order to reach an objective, vendor-neutral, and non-bias report. Utilize evidence such as appropriate interview data, observations of business process and documentation, and direct verification and validation.

  • Provide a formal report

The formal report should include an executive summary, the scope of work, approach and methodology, further details and observations that support the due diligence results, and a list of recommendations.

The Objective of the Final Report:

The goal with the final report is to provide the PE executive team with clear, well-articled, and objective discoveries of immediate business operational concerns that could impact the business upon acquisition. The report should also identify the less critical but urgent items that should be addressed upon acquisition.  While every organization has its IT and ERP “flat spots”, the goal is not to focus on regularly and fairly routine IT operational improvement opportunities. Rather, describe issues that may have a significant impact on business and investment risks that may create significant time, financial, effort, or even legal risks post-transaction.

The Report Should Include:

  • The current State of ERP and IT Summary
  • Executive Summary: High-level review with a focus on immediate potential investment risks as it relates to IT and/or ERP.
    • Advise of any language that needs to be included in the sale agreement or a Transition Services Agreement (TSA).
    • Identify immediate ERP/IT risks that may have an immediate impact on potential acquisition
    • Clearly document IT/ERP gaps that are not acquisition impactful but have a significant impact on operational efficiencies.
    • The executive summary needs to be clear on any identified budget or financial implications.
    • Visual Scorecard Indicating High-Level Status of Current ERP and IT Components/functions.
  • Review of IT Due Diligence Scope of Work
  • Review of Primary Objective of Due Diligence
  • Description of Approach
  • Provide an appropriate level of detail and observation evidence needed to support the executive summary.
    • IT/ERP Infrastructure review: Is the solution appropriate for today and future growth
    • IT/ERP Process and SOP concern: Is the actual technical IT solution properly managed. Is the ERP properly aligned with the business processes and requirements
    • IT/ERP Organizational concerns: Any resource gaps or constraints in terms of personal to manage and support IT and ERP systems.
  • Recommendations: Provide any immediate, mid-term, and long terms options required to address any team, process, or technology gaps. Include time and cost guidelines. Provide suggested recommended actions to be considered immediately upon post-acquisition. These are the areas believed to have the biggest impact on improving performance and minimizing risks. Recommendations also need to include any potential considerations or language for the pre-transaction agreement.

Private Equity and Portfolio Benefit

The organizational benefit of proper IT and ERP due diligence for private equity firms is objective, vendor-neutral, third-party, and unbiased review of the portfolio that the firm is considering as a potential investment. As a third-party due diligence provider, it is critical to leverage your professional experience, subject matter expertise, and then “call it as you see it” using an objective as a possible approach. The due diligence is intended to provide and offer insight to help ensure that the post-acquisition process is as smooth and productive as possible. The goal is to provide sound feedback and recommendations to minimize short and long-term acquisition risk. If the due diligence is done well and thoroughly, the portfolio will benefit from reflection of the feedback, insight, and/or executing the recommendations.

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De-risk Your Portfolio ERP Project:  Organizational Culture

De-risk Your Portfolio ERP Project: Organizational Culture

De-Risk your Portfolio ERP Project

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.

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Stakeholder Group Diversity and Relationships

Stakeholder Group Diversity and Relationships

Stakeholder Relationships“ERP-implementations challenge vested interests and lead to opposing views from various players. Implementation includes multi-level activities, which are not the exclusive area of a single project manager. Outcomes of decisions are not always products of rational considerations but shaped by the interests and commitments of individuals and groups, forces, and momentum.” Boonstra (2006), “Interpreting an ERP-implementation project from a stakeholder perspective.”

The Stakeholder Group Challenge

Stakeholder group diversity as well as stakeholder group relationships often have a profound and significant impact on ERP organizational change. Furthermore, being unaware of and mismanaging stakeholder group diversities can manifest itself into a level of political turmoil. Multiple stakeholder groups often exist in any large-scale ERP project that has varying degrees of influence on the organizational change effort. The relationships and roles of each level are important to understand because it helps explain and sheds insight on how to best manage the challenges of organizational change. As Lewis (2011) states, the challenge is that goals are likely to be held differently by different stakeholder groups and that goals within stakeholder groups are dynamic and can change over time. Boonstra (2006) supports this notion by adding “ERP-implementation is a dynamic process, which means that views, which are held by stakeholders at one point in time, may change during the project. This may depend on various reasons, including cognitive, political, and opportunistic ones”. This provides a challenge in organizational change because stakeholders are essentially able to rewrite history and also persuade themselves, and others, that the real goals (the current goals) existed from the onset of the project (Lewis, 2011). Lewis (2007) also notes that interactions, good or bad, among stakeholders, are influenced by assessments of each other and stakeholders’ concerns about change. Significant diversity among stakeholders groups can contribute to significant misunderstandings and misalignment. A key point is that within any given organizational change effort, stakeholder interactions deserve careful understanding and consideration in an effort to provide corrections and effective communication that is in the best interest of all the stakeholders.

Leadership Awareness and Management of Stakeholder Group Diversity and Relationships

Effective stakeholder group reflection and management is an absolute key influence of organizational change. Therefore, understanding the value of, techniques, and mechanisms for managing stakeholder group diversity and relationships is crucial. Nordin (2013) states that leaders within organizations incur great pressure as a result of organizational change driven by competitive factors. These competitive factors can be external but also internally driven. Regardless of the organizational change model deployed, an organization needs to be mindful and reflective on the fact that understanding and then effectively managing stakeholder dynamics is a crucial part of any ERP organizational change plan.

Manage Stakeholder Diversities with an Organizational Change Model Founded in Principle

In order to minimize stakeholder group diversities and to improve and promote stakeholder group relationships, start with an organizational change model rooted in principle. Often, as Gilley, Gilley, and McMillian (2009) state, group, and individual acceptance rates of organizational change adaption vary. This is because the individual or group’s adoption of the change is contingent upon the perception of the degree of the change (Gilley, Gilley, & McMillian, 2009). Not only are there multiple and often diverse stakeholder groups, to complicate matters, each group often also has its own strata as describe by Gilley, Gilley, and McMillian which includes innovators, early adopters, early majority, late majority, and laggards. As a result, organizational stakeholder dynamics can be quite complex making effective organizational change a challenge in any environment. All legitimate models of organizational change are intended to assist leaders through an effective process (Gilley, Gilley, & McMillian, 2009). One such organizational change model is that of Kotter’s Eight-Step Model (see below link for more information). For starters, this model articulates and emphasizes some of the incredibly important influences behind successful organizational change such as communicating the vision, forming coalitions, creating short term wins, and creating a positive corporate culture. And I would layer in another key influence and emphasize the idea from Lewis (2007), to minimize negative politics that can often exist between each stakeholder group. Effective organizational change approaches and models bring awareness to and include tangible mechanisms that help address and advocate for positive stakeholder group relations (especially through effective communication). An effective organizational change model founded in principle offers organizations and practitioners guidance on the practical application of an effective process that addresses stakeholder group diversities and relationships.

Manage Stakeholder Diversities with Effective Communication

Due to the impact of stakeholder diversity and relationships upon organizational change, effective organizational communication is a critical tool. An effective communications strategy needs to effectively and specifically address stakeholders’ concerns, interactions, and ultimately outcomes for change (Lewis, 2007). In the ERP organizational change practice, stakeholder dynamics include disparate ideas of expectations, organizational change realities, and significant diversity in terms of knowledge, value, and motivation. Therefore, the interaction and management of communication between stakeholders are critical.  One actionable item as noted in  Olding (2013) is to be mindful that effective stakeholder communication is bottom-up, top-down, and middle out. That is, communication is not just something to be pushed down from the top. In particular, in communicating about organizational change it is important to reflect on two points; fear of the unknown and uncertainty and lack of choice (Denning, 2005). Effectively communicating how the change is intended to drive positive outcomes and results is key. Sharing a consistent message but tailoring that message delivery for each stakeholder group is effective. That is, speak the language of that group. Tell the group the value of change in terms of what matters to them.

Manage Stakeholder Diversities by Understanding What Drives the Diversity and Relationships

Effectively understanding stakeholder group diversity in its many forms and relationships is a concept that is of great importance. Many times, individuals in a group are simply following the lead of others in their group. Lewis (2005) explains that individual connections and influences have a profound influence on how an individual reacts to supporting a change effort. In other words, understanding stakeholder group dynamics among and throughout all stakeholder groups can help minimize the impact of individuals reacting to change more as a “monkey see monkey do” response instead of through a clear understanding of the vision, value, and purpose of the change. Lewis (2011) notes that it is important to recognize that belonging to a specific stakeholder’s group alone can influence an individual’s support for or against the change. What if that stakeholder group leader is simply a transactional mindset oriented leader?  Simply being more of a transformational leader would be more supportive of the organizational change endeavor. As supported by much great work, a transformational leadership mindset is a significant influence in ERP organizational change. Another point of Lewis (2011) that needs to be layered in when reflecting on stakeholder groups is the notion of salience by default (Lewis, 2011). For example, the introduction of a new computer system in a workplace might raise the salience of identities related to expertise or technological qualifications and lower the salience of that less technical savvy (Lewis, 2011).  Stakeholder group leader influence, sheer association with a stakeholder group, and salience by default are just three potential influences and important notions to be mindful of in terms of understanding stakeholder group diversities and relationships.

Manage Stakeholder Diversities by Understanding the Basic Principles of Stakeholder Theory

This is an idea mentioned in previous posts but worth repeating. If one is to truly understand and support stakeholder group diversity and relationships and therefore improve organizational change, then stakeholder theory is critical to understand. Stakeholder theory attempts to explain how organizations understand stakeholder groups and then strategically determine action most effective at managing the relationships between those stakeholder groups (Lewis, 2011). In understanding how best to improve organization change success, it is also important to layer in some ideas as discussed in Lewis (2011). These ideas are; understanding existing relationships with stakeholders, understating how organizational actions shape stakeholder relationships, and understanding obligations of managers to various stakeholders. Stakeholders are constantly accessing the degree to which their interests are competitive or complementary with other stakeholders (Lewis, 2011).  Organizational leadership would benefit to act as mediators, or “spanners” as noted by Lewis (2011), between stakeholder groups and encourage and help relationships between stakeholder groups…this is the premise of stakeholder theory.

Manage Stakeholder Diversities by Understanding and Making Visible that Which is Often Not

Stakeholder group diversity and relationship management is an often forgotten influence in many ERP organizational change efforts despite its significance. Furthermore, stakeholder group diversity and relationships are often the more abstract and intangible influence of ERP organizational change. But, the key lies in making that which is more subjective, intangible, and informal into something that is more formal, visible,  and open for discussion and reflection. Boonstra says it well, “The case history clearly illustrates that different stakeholders can interpret ERP-systems in different ways, given their own histories, interests, self-images, prospects, and views. Some groups perceive the system as a means to realize certain new company-wide objectives, while others see the system as a way to regain lost power or as a threat to legitimate local interests. The case study shows how these different interpretations may easily lead to differences in priorities and ways of implementation. These differences are not all clear at the start and are not all expressed and discussed during formal meetings” (Boonstra, 2006). Understanding and reflecting upon the notion of stakeholder group diversities and relationships and then addressing in a meaningful, productive, and concrete way is a valuable ERP organizational change practice.

Learn More and References:

Boonstra, A. (2006). “Interpreting an ERP-implementation project from a stakeholder perspective.” International Journal of Project Management 24(1): 38-52.

Denning, S. (2005). The leader’s guide to storytelling: Mastering the art and discipline of business narrative (Vol. 269). San Francisco, CA: Jossey-Bass.

Gilley, A., Gilley, J. W., & McMillan, H. S. (2009). Organizational change: Motivation, communication, and leadership effectiveness. Performance Improvement Quarterly, 21(4), 75-94.

Kotter’s Eight-Step Model:

Lewis, L. K. (2011). Organizational change: Creating change through strategic communication (Vol. 4). Hoboken, NJ: John Wiley & Sons.

Nordin, E. J. (2013). Exploring effective communication for organizational change (Unpublished doctoral dissertation). Walden University, Minneapolis, MN.

Olding (2013) (“Communicating for Effective Organizational Change” from the Gartner Symposium in Spain)

Ravanfar, M. M. (2015). Analyzing organizational structure based on 7s model of McKinsey. International Journal of Academic Research in Business and Social Sciences, 5(5), 43-55.

Wheeler, D. S., Maria (1998). “Including the Stakeholders The Business Case.”

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What is the value of ERP?

What is the value of ERP?

the value of ERPERP value is driven by significant business demands

Demands for business success can be significant. This demand drives ERP value. There are tough conversations that occur in boardrooms all across the country. ERP Practitioners, business owners, executives, stakeholders, and employees often experience significant organizational challenges due to business growth, business correction, or challenging and changing business environments that place great strain on organizations.

Companies are constantly under great demand to be competitive (often with diminishing resources) in an effort to stay relevant and to maintain a healthy organization. In order to traverse these challenging conditions first requires transformational, innovative, and creative leadership. And then, for an organization to remain healthy, the transformational leadership needs to advocate a business environment that supports organizational learning and effective business intelligence. Organizationally supported business intelligence allows the organization to clearly understand their position through accurate and timely data.

ERP: A tool that drives continuous improvement

Accurate and timely information is one of the most important assets, next to their people, that allows businesses to react quickly and appropriately to ever-changing business conditions. 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.

The value of ERP

ERP solutions have totally transformed modern-day organizations. With an ERP system, data, information, and process are supported in one system and improve the availability or common operational information and practices throughout the organization. The primary purpose of ERP is to allow the sharing and dissemination of information in an efficient way within the organization. The benefits, and ROI, of ERP, are well documented. Effective use of ERP systems has become a key competitive advantage for organizations and their stakeholders (Blanchard,1998). Organizations implement ERP solutions in an effort to improve business process performance, enforce compliance, improve employee tasks, and to improve integration across company locations (Wamba, Kamdjoug, Akter, & Carillo, 2018).

Ultimately, ERP creates a seamless integration of business processes within the organization in order to improve workflow and accomplish real-time and accurate information availability (Wozniakowski, Jalowiecki, Zmarzlowski, Nowakowska, 2018). And, with this business intelligence the organization is better able to clearly understand and react to their current business conditions.

Learn More: 

Interesting article for more on ERP value, Berić, D., et al. (2018). “Evolution of ERP Systems in SMEs–Past Research, Present Findings, and Future Directions.”:

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ERP Organizational Change Success: It’s a Matter of Applied Principle

ERP Organizational Change Success: It’s a Matter of Applied Principle

ERP Organizational Change Success: It’s a Matter of Principle

When it comes to applying principle to practice I can’t help but to admire practices like that of West Executive, Inc  and THE CHRYSALIS CODE® (, Conner Partners® (, Denison Consulting (, and Kirkpatrick Partners ( for instance.  These folks are professional firms that practice leadership development, organizational change, strategy execution, organizational culture, and/or organizational training.  Frankly, their work is extremely relevant and insightful not only to Nestell & Associates but to the practice of ERP organizational change in general. If you were to study their work and success, I personally believe that in part you could distill it down to two words that are quite significant and powerful in practice, and that is “applied principle”.

Our team at Nestell & Associates is grateful that these firms are also friends, colleagues, and mentors and we believe in evaluative learning and sharing knowledge. Paying close attention to and studying their work, my personal thought is that they realize success due to a strong sense of founding their respective practices in scientific and research-based principle. Not only am I a huge fan and student of their work and a fellow practitioner, I admire their work simply because it is practice no doubt grounded in principle. And, they effectively act upon principle in a tactical and tangible way.

Nestell & Associates is very excited and honored that these folks will join us for our podcast series “The ERP Organizational Change Journal”. Among some other topics, we will discuss the value of principle and applied research in their practices and how it is useful and relevant to ERP organizational change field.

What is a principle?

So to borrow from, “A fundamental truth or proposition that serves as the foundation for a system of belief or behavior or for a chain of reasoning.” And, “A general scientific theorem or law that has numerous special applications across a wide field.” In other words, a principle is a general truth that is applicable across context.

Why do research based principles matter to ERP and/or organizational change?

From shared experiences and based on research, it is pretty safe to say that ERP organizational change agents would benefit from sound research and work founded in principle. As ERP organizational change practitioners (i.e. change agents), N&A believes that it is our job to also take advantage of and share this great work, research, and insight from others that provides opportunities for reflection (that is founded in non-bias, vendor-neutral, and fundamental principles.) Success comes not only by experience, opinion, or perspective alone. It comes with understanding sound research proven principles. Effectively and efficiently putting principles to practice is a key to ERP organizational change success, organizational learning, and organizational growth. 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 theory based on general principle, this is one reason why research founded principles are so relevant, practical, powerful, useful, and valuable in the “real world”.

Principles transcend context. And, principles are a great complement to evaluative learning and self-experience.

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Introducing “The ERP Organizational Change Journal” Podcast Coming Soon…

Introducing “The ERP Organizational Change Journal” Podcast Coming Soon…

Nestell & Associates is pleased to introduce “The ERP Organizational Change Journal” podcast coming soon. We are incredibly excited and beyond honored and grateful to have friends, colleagues, and mentors join us for the launch of our new podcast. We have a great lineup of ERP and/or organizational change speakers, authors, professors, researchers and pioneers in the field, practitioners, PE partners, business executives, ERP vendors, and organizational stakeholders. Please see below for our initial lineup. Podcast order is subject to change and dates will be posted soon (as well as our new podcast website page).

Podcast Name:  The ERP Organizational Change Journal

Podcast Subtitle: A podcast dedicated to organizational stakeholders, practitioners, and researchers. A discussion on any, and all, things ERP and organizational change. Our podcast is a platform for those seeking to share, learn, and reflect on ERP organizational change success.

Podcast Description and Purpose:

We seek to promote, connect, and foster relationships in the ERP organizational change community.  The purpose of the podcast is to discuss, share, and reflect upon effective and efficient ways in which to realize ERP organizational change success. We will discuss the people, process, and technology components of ERP organizational change. This podcast is intended as a forum to study, share, and discuss ERP organizational change. It’s intended to be a collaboration tool and resource. We hope that others find this podcast useful as we share lessons learned, best practices, and the human element components of ERP organizational change. Our podcast will draw on knowledge from extensive research, collaborative learning, and practitioner expertise and experience of both project successes and failures. The general review and theme of ERP and organizational change practice, literature, and research suggests that understanding and awareness of tactical approaches founded in principle is fundamental to ERP organizational change success. Our podcast will discuss these tactics, approaches, and principles that may prove to be useful in addressing ERP organizational change challenges and risks.

Podcast order subject to change and dates will be posted soon:

  • Dr. Richard E. Clark, Professor of Educational Psychology and Technology, University of Southern California, 2002 recipient of the prestigious Thomas F. Gilbert Professional Achievement Award by the International Society for Performance Improvement. Among 150 other publications and articles, author of “Turning Research into Results: A Guide to Selecting the Right Performance Solutions”. Learn More:
  • Mr. Ron West, Founder & CEO, Keynote Speaker, Author of “Corporate Caterpillars”. Learn More:
  • Dr. Dan Denison, Chairman and Founding Partner of Denison Consulting, Professor of Management and Organization, pioneer in the field of organizational culture. Other positions held: Professor of Management and Organization at the International Institute for Management Development (IMD) in Lausanne, Switzerland. Associate Professor of Organizational Behavior and Human Resource Management at the University of Michigan Business School. Learn More:
  • Mr. Paul Magel, President, Application Solutions Group, BlueCherry ERP, Computer Generated Solutions Inc. Learn More:
  • Dr. Courtney L. Malloy, Professor of Clinical Education at USC Rossier School of Education. Learn More:
  • Dr. Justin Goldston, ERP Organizational Change Expert, Professor, Author, Researcher, TEDx Speaker. Learn More:
  • Mr. Gary Moskovciak, SVP-Americas, SML. Learn More:
  • Dr. David Olson, James & H.K. Stuart Professor Chancellor’s Distinguished Chair, University of Nebraska. Learn More:
  • Dr. Timo Sandritter, President, RippleWorx. Learn More:
  • Mr. Tim Van Mieghem, Partner, The ProAction Group. Learn More:
  • Dr. Eric A. Canny, Adjunct Professor, University of Southern California; Co-Founder and Producer, Gensis Films; Founding Director and Chief Innovation Officer, Global Risk Mitigation Foundation; Co-Founder and Owner, LAS VIRGINIAS ECGV
  • Dr. Matthew V. Brown, Project Director at Nestell & Associates, Assistant Professor of Strategic Management
  • Mr. Michael Parkhurst, RippleWorx, Inc., VP of US Sports. Professional MLS soccer player, 2005 MLS Rookie of the Year and 2007 MLS Defender of the Year Award, USA men’s national team, participated in the 2008 Summer Olympics. Will discuss teamwork, team culture, and leadership from a high level and unique perspective.
  • Mr. Michael Schwendeman, Director of Research & Development, Denison Consulting. Learn More:
  • Dr. Daniel O’Leary, Professor at USC Marshall School of Business/Levethal School of Accounting, One of the more cited ERP Books by Cambridge University Press “Enterprise Resource Planning Systems: Systems, Life Cycle. Electronic Commerce, and Risk”. ERP publications include “Enterprise resource planning (ERP) systems: an empirical analysis of benefits.”, “Enterprise ontologies: Review and an activity theory approach”, “Game playing behavior in requirements analysis, evaluation, and system choice for enterprise resource planning systems”, “Discussion of information system assurance for enterprise resource planning systems: unique risk considerations”. Learn More:
  • Mr. Dean Frew, SML Group, CTO/SVP RFID Solutions. Learn More:
  • Dr. Robert Rueda, Professor Emeritus, University of Southern California, elected a member of the National Academy of Education (NAEd). As an honorific society, the Academy consists of up to 200 U.S. members and up to 25 international associates who are elected on the basis of outstanding scholarship or outstanding contributions to education. His recent book Urban Education: A Model for Leadership and Policy, co-authored with Karen Symms Gallagher, Rodney Goodyear, and Dominic Brewer, was published by Routledge. Rueda earned his PhD in educational psychology with a specialization in educational psychology and special education from UCLA, his MSW in psychiatric social work from USC and his BA in psychology from UCLA. Author of “The 3 Dimensions of Improving Student Performance: Finding the right solutions to the Right Problems”. Learn More:
  • Mrs. Jill Sullivan, Certified Project Management Professional (PMP) and Six Sigma Black Belt, Project Strategist at Nestell & Associates, Founder of Jill Sullivan Consulting. Learn More:
  • Dr. Jim Kirkpatrick, Senior Consultant for Kirkpatrick Partners. He is a thought leader in training evaluation and the creator of the New World Kirkpatrick Model. Jim consults for Fortune 500 companies around the world including Harley-Davidson, Booz Allen Hamilton, L’Oreal, Clarian, Ingersoll Rand, Honda, the Royal Air Force, and GE Healthcare. Jim has co-written three books with his father, Don Kirkpatrick, the creator of the Kirkpatrick Four Levels. He has written three new books with his wife, Wendy: Kirkpatrick Then and Now (2009 Kirkpatrick Publishing), Training on Trial (2010 AMACOM Books) and The Brunei Window Washer: Bringing Business Partnership to Life (2012 Kirkpatrick Publishing). Learn More:
  • Mr. Daryl R. Conner, Chairman of Conner Partners®, an Atlanta-based consulting firm that specializes in strategy execution. He is an internationally recognized leader in organizational change and serves as an advisor and mentor to senior executives around the globe. Learn More:
  • Mr. Joe Choorapuzha, Incline Equity Partners Private Equity, Partner. Learn More:
  • Dr. Liz Bywater, Strategic Advisor, Author, Team Accelerator, Speaker, Nestell & Associates’ Strategic Advisor. Dr. Liz Bywater is a one-of-a-kind leadership expert who works at the intersection of business and psychology. Liz combines deep expertise in human behavior and organizational effectiveness, a pragmatic mindset, and an engaging personal style to help
    her clients excel in an increasingly complex world. Author of “Slow Down to Speed Up: Lead, Succeed and Thrive in a 24/7 World.” Learn More:
  • Mr. Brian D. Williamson, Strategic Portfolio, Program & Project Management, ITIL Expert, Author. Brian is an expert in the discipline of strategic portfolio, program, and project management focused on transforming organizational performance to create a new relationship between business, society, the environment, capital, and purpose. Brian was the recipient of the PMI Eric Jenett Project Management Award of Excellence, recognized by the Connecticut General Assembly and the Governor of the State of Connecticut (with a Special Citation for innovations in the field of Project Management), and has received numerous citations from the Association for Project Management (U.K.), where he holds the honored designation of Fellow.
  • Dr. Marianne Bradford, Professor at North Carolina State University Poole College of Management. Marianne Bradford is a Full Professor in the Department of Accounting, Poole College of Management, at North Carolina State University where she teaches ERP Systems and has written a textbook on ERP systems, “Modern ERP: Select, Implement, and Use Today’s Advanced Business Systems”. Learn More:


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