Stakeholder dynamics in ERP organizational change.

Defining ERP Stakeholders: Who Are They?

Key Groups of ERP Stakeholders

“ERP stakeholders” refers to individuals or groups who have a vested interest or involvement in an Enterprise Resource Planning (ERP) system, and its implementation, within an organization. These stakeholders include:

  • Executive Team: Top-level decision-makers who guide the strategic direction of the ERP implementation.
  • Top Management: Senior managers responsible for aligning ERP strategy with business goals.
  • Employees: Users who will interact with the ERP system daily and whose input and adoption are critical for success.
  • IT Department: Technical staff involved in the ERP system’s setup, maintenance, and troubleshooting.
  • Customers and Suppliers: External parties who may interact with the ERP system or whose operations may be impacted by its implementation.

Roles and Expectations of ERP Stakeholders

Each group of stakeholders may have distinct expectations and concerns related to the ERP system:

  • Executive Team: Expects the ERP system to deliver on its ROI promises and align with broader business strategies.
  • Top Management: Looks for efficiency and effectiveness in the ERP system to support operational goals.
  • Employees: Need a user-friendly system that improves job performance without adding undue complexity.
  • IT Department: Requires robustness, scalability, and ease of integration with existing systems.
  • Customers and Suppliers: Expect seamless interactions and transactions, enhancing their business relationship with the company.

Effective communication and engagement with these parties are essential for successful ERP implementation and ongoing management.

Understanding the Stakeholder Dynamics of ERP Organizational Change

Participating in a 100% perfect portfolio ERP organizational change effort per unanimous consensus from all PE portfolio stakeholders is rare. The reality is that in the merger and acquisition business, often, you can encounter a portfolio where significant unknowns surface as processes are changed, turnover increases, and cultural shifts take place under the new leadership and ownership structures. Effectively communicating to all stakeholders how ERP organizational change is intended to drive positive outcomes and results is key.

Red pin highlighting the word 'Problem' in bold blue text, symbolizing the identification of issues in ERP organizational change.

Pinpointing Key Issues in Stakeholder Relationships.

Identifying the Underlying Factors of Failed ERP Organizational Change

Large-scale ERP organizational change doesn’t fail because of isolated technical issues like a hard drive failure, or because business requirements aren’t perfectly known before system selection, or even because your project management team doesn’t execute every aspect of “textbook project management” strategy. In fact, the influences that lead to failed ERP organizational change can be much more ingrained in the fabric of the organizational culture—elements that are abstract, intangible, and harder to observe and manage. Here are several cultural factors that can impact ERP success:

  • Resistance to Change: In many organizations, there might be a deep-rooted resistance to change. Employees accustomed to certain workflows or systems may resist transitioning to new processes, which can slow down or derail the adoption of new ERP systems.
  • Communication Styles: Cultural differences in communication can lead to misunderstandings and miscommunications during the ERP implementation process. For example, hierarchical cultures might inhibit junior staff from openly sharing their challenges and feedback.
  • Misalignment of Values: If the values promoted by the ERP system (e.g., increased transparency, data sharing) conflict with the prevailing organizational norms and practices (e.g., departmental silos, guarded information practices), it can create friction and hinder successful implementation.
  • Lack of Engagement: A culture that does not actively engage various stakeholders during the decision-making process may find that these stakeholders are less committed to the system’s success, as they do not feel ownership or see their input reflected in the outcomes.

What if stakeholder relationships and the cultural dynamics surrounding them were significant factors in your organization’s ERP success? Contemplating and reflecting on these aspects is not just beneficial but essential for navigating the complex landscape of ERP implementation and ensuring long-term success.

Managing Stakeholder Diversity for Successful ERP Organizational Change

Significant diversity amongst stakeholder groups can contribute to significant misunderstandings and misalignment. Here are a few examples of how these challenges might manifest:

  • Cultural Differences: In a multinational company, stakeholders from different regions may have varying expectations about process timelines and communication styles, leading to conflicts or delays in ERP implementation.
  • Differing Priorities: IT departments might prioritize system security and integration capabilities, whereas end users may be more concerned with usability and interface simplicity. These differing priorities can lead to choices that satisfy one group but frustrate another.
  • Knowledge Gaps: Stakeholders may not have the same level of understanding about the capabilities and limitations of the ERP system, which can lead to unrealistic expectations and dissatisfaction with the outcomes.

A key point is that within any given organizational change effort, stakeholder interactions deserve careful understanding and consideration in an effort to provide communication (and change) corrections that are in the best interest of all the stakeholders and therefore the organizational change effort. Strategies to address these issues include:

  • Structured Feedback Loops: Implement regular and structured communication channels where stakeholders can voice concerns and provide feedback throughout the ERP implementation process.
  • Educational Sessions: Conduct training sessions and workshops not only about how to use the ERP system but also about its impact on various business processes, helping to align expectations and knowledge.
  • Stakeholder Inclusion in Planning: Involve representatives from all key stakeholder groups in the planning stages of the ERP project to ensure that diverse perspectives are considered and integrated into the decision-making process.

Leveraging Stakeholder Theory for Effective Communication Strategies

If one could redesign and optimize stakeholder communication in order to have the greatest effect on change, what leadership team would not consider that?

Building Effective Stakeholder Communication

Many levels of stakeholders exist in the context of private equity-owned portfolio companies. Often, the realities, expectations, priorities, and organizational diversity (in its many forms which include knowledge, value, and motivation) can be quite disparate. There are diverse stakeholders both within and outside the portfolio. Organizations have independent relationships amongst the recognized stakeholder groups. This is important to understand especially for political relationships. Organizational structure is one major factor that can impact current communications and relationships among stakeholders.

Often, some of these stakeholders (as groups or individuals) may be thought of as less relevant or important in the objective, purpose, and assessment of the change initiative. This perspective and approach create communication gaps and may create further disconnects in terms of the value, knowledge, motivational diversity gap. Influence upon and among these different strata of stakeholders comes in many ways but consistent formal and informal bi-directional communication is crucial.

Embracing Stakeholder Theory for Enhanced Organizational Communication

One last note, if you reflect on this point and agree to the significance and value of stakeholder group relationships, then you are already considering and addressing “Stakeholder Theory” whether you realize it or not.

Improving Stakeholder Relationships

If one is to truly improve organizational communication 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 and manage relationships between those stakeholder groups (Lewis, 2011). Relationships within PE portfolio companies are very dependent upon each other. Understanding existing relationships with stakeholders, understanding how organizational actions shape stakeholder relationships, and understanding the obligations of managers to various stakeholders is crucial (Lewis, 2011). Incorporating this notion in your organization’s ERP organizational change effort is of utmost importance because of the dynamics within and between stakeholder groups. That is, stakeholders are constantly accessing the degree to which their interests are competitive or complementary with other stakeholders (Lewis, 2011). Organizational leadership would benefit from acting as mediators between stakeholder groups and encouraging and helping relationships between stakeholder groups.

As we have explored the multifaceted roles and significant influence of ERP stakeholders throughout this article, it becomes evident that understanding and managing these relationships is not just beneficial but essential for successful ERP implementation. Reflecting on stakeholder theory and embracing effective communication strategies can profoundly impact your organization’s ability to adapt and thrive during these changes. Moving forward, consider how your actions and strategies align with the needs and expectations of all stakeholders involved. By doing so, you ensure a more cohesive, supportive environment conducive to achieving your ERP goals.

Dr. Jack G. Nestell

Dr. Jack G. Nestell

Dr. Jack G. Nestell is a highly accomplished IT and ERP business advisor, author, and speaker with over 30 years of experience in leadership and implementation of ERP systems across various industries. He is the founding partner of Nestell & Associates, a management and strategy firm that specializes in organizational change, readiness, and ERP implementation. Dr. Nestell is also an accomplished academic researcher who has contributed to ERP research. With his practical expertise and academic knowledge, he provides innovative and proven solutions for his clients.

Explore How Nestell & Associates Can Transform Your ERP Strategy

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Article References

APA Citation: Lewis, L. K. (2011). Organizational Change: Creating Change Through Strategic Communication (Vol. 4). Hoboken, NJ: John Wiley & Sons.

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