Change Management Mistakes that Undermine ERP Implementation

Why do ERP projects fail? They’re hard. In this article, we’ll look at common change management mistakes that derail ERP implementations.

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    ERP failure rates are notoriously high. According to Gartner, over 75% fail. McKinsey is slightly more generous, estimating that around 70% of ERP implementations end in failure.

    Why do ERP projects fail so often? The short answer is, it’s because they’re hard. Though the truth is more complicated than that: ERP initiatives fail for all kinds of reasons. Fear, confusion, inadequate resources, poor planning. Or–more likely–a converging set of small oversights.

    In any case, failure often points back to change management, which Deloitte calls out as the “single biggest failure point” for ERP projects due to the critical “people-related challenges” leaders face at every stage of the implementation.

    In this article, we’ll look at six organizational change management mistakes that can derail ERP implementation.

    1. Poor Strategic Planning

    The first big change management mistake is often made before the process gets underway.
    ERP software implementation is a huge effort, largely because the ERP touches every part of the business. Which in turn means, it changes everything about how people perform day-to-day tasks and alters the mindset and skills needed to be successful.

    You need to make sure that all the teeny, tiny details are accounted for, while at the same time, never losing sight of the big picture plan.

    Common planning mistakes include:

    • Choosing technology over outcomes. Many organizations believe “everyone else is doing it” is a valid rationale for embracing new technologies. Before moving forward, answer this question: what are the goals of this ERP project? Goals should be informed by the real people’s needs and technology should be chosen based on its ability to achieve said goals.
    • Poor estimation. Orgs Organizations often underestimate what driving change actually entails. According to the Harvard Business Review, many senior leaders report that change was “harder than they expected.” Yet often, those expectations aren’t based on anything tangible–just gut feelings.
    • Doing too much at once. Here’s a throwback example: Hershey’s attempted to deploy three ERP solutions in under 30 months to prepare for the impending Y2K crisis. They cut corners with testing, training, and data migration. This resulted in a system failure that prevented the company from filling over $100M in orders and caused their stock price to drop by 8%. The lesson here is, you’ll want to start by addressing priority processes and departments first. Consider launching with an MVP you can build on and improve over time.
    • Planning for the short-term. It’s important to remember that ERP implementation never ends. For Revlon, failing to install process-level controls and develop a system for tracking and managing system performance long-term resulted in a class-action lawsuit. Once the system is in place, you’ll need to track its performance and maintain a culture that normalizes (and values) change. This gives you some “guard rails” for sustaining and improving gains over time.

    2. Keeping Employees in the Dark

    Failing to communicate with employees kills ERP implementation projects long before they get underway. Arguably, it’s the worst mistake you can make when it comes to change management.

    You’ve likely experienced the tension this creates first-hand. The scenario might look something like this: a consultant starts hanging around the office with no explanation. Then, because the boss is silent on the matter, rumors start to spread.

    In some cases, fears are warranted. Workers may be replaced by automation or laid off after an acquisition.

    But whether employees lose their jobs or not, keeping them in the dark gives them the sense that they’re on the chopping block. And–this bad for loyalty, culture, and productivity.

    When employees are confused, uninformed, or lack the contextual information they need to support the effort, it creates a sense of mistrust, fear, or apathy. Unsurprisingly, none of these feelings bode well for ERP success.

    You need to specify “the why” behind the change. According to Elise Olding, research VP at Gartner, people learn and respond better when they receive a coherent explanation for proposed changes—particularly when it’s presented as part of a narrative.

    Olding says your “change narrative” should describe specific behaviors you want employees to adopt. What behaviors need to change—and what will they look like when you arrive at your “next normal?”

    It’s not enough to inform employees that change is on the horizon.

    Per Deloitte, adequate sponsorship and leadership are critical when it comes to driving change. Change leaders–at all levels–keep teams focused around a common narrative and on-track with key milestones. They’re also responsible for removing roadblocks, fostering cross-team collaboration, and presenting project results. All of this (among other things) is crucial to ensuring that the project moves forward–in alignment with high-level goals and stakeholder objectives.

    3. Assuming Employees Just “Know What to Do”

    It doesn’t matter if you’re rolling out a cloud ERP, you’ve acquired a couple new portfolio companies, or you’re adopting IoT solutions to bridge the gap between digital and physical worlds.

    Employees often underestimate the effort involved in ERP implementation (and everything that comes next).

    For example, if you’re moving from an on-prem system to Dynamics 365, the new system looks and feels like the tools your team has been using for years.
    Even if the UI looks the same, the infrastructure changes the game.

    Employees must learn new business processes and adapt to new workflows, communication methods, and responsibilities.

    As you start mapping out your training program, consider the following :

    • What business units need to be trained?
    • What teams exist within those business units?
    • What roles exist within those teams?
    • Are there individual differences you need to consider (i.e. tailoring sales training programs to reps, managers, directors, etc., as well as different territories, markets, or product lines?)
    • What training modules will you need to develop?
    • What technology do you need to support those training goals?

    Workers will need to understand how their jobs will change. And often, they may not be thrilled about those changes.

    A strong change management strategy helps employees not only understand—but embrace–new ways of working.

    And better yet—it enables them to make the most of their new system—in ways that both benefit them and the bottom line.

    As an example, this Microsoft case study looks at what Toyota North America achieved by getting the entire team involved in driving process improvements.

    The team used low-code/no-code Microsoft Apps to build solution to a range of problems they encountered on the job. For example, SMEs built a solution for identifying & addressing quality issues dealership employees were discovering with new cars in the field.

    Additionally, this approach allowed the Toyota team to build a Center of Excellence to help colleagues find answers to their questions and solve problems faster. And—it allowed them to build solutions—and keep making incremental improvements.

    The point is, it’s worth considering how you might empower workers to “help themselves” during training—and solve real-world problems that impact profitability, productivity, and customer satisfaction.

    4. Not Retiring Legacy Apps

    Often, organizations try to recreate their on-prem system in the cloud.

    But, clinging to legacy apps, reports, and business processes is a mistake that can lead to ERP implementation failure.

    On the surface, this might seem like a tech-related mistake, not a change management issue. After all, decision-makers may not realize that new infrastructure demands a new approach–and a ton of mapping, converting, and complex configuring.

    The reality is, change management defines everything about how you deal with your legacy system.

    For starters, there’s a lot of cultural stuff at play. For example, if business leaders feel strongly about retaining old processes, that’s a sign of resistance or lack of commitment.

    Either there’s a fear of letting go of processes that served you well 5, 6 years ago or business leaders failed to learn about the new system and how it might better serve the business–right now.

    Moving from a legacy ERP to a cloud-based solution is a major upgrade with massive potential to drive growth, agility, and cost savings. It’s important that all staff stop using the legacy system and learn how to make the most of the new ERP.

    That means, you need to develop an effective change management plan that lays out how the rollout is going to go, how you’ll train employees, etc.–otherwise, it’s too easy for employees to backslide into old habits–and undermine the value of your investment.

    Finally, change management plans also help determine how you’ll decommission various apps, devices, and services throughout the implementation process. Otherwise, you’ll be dealing with a long list of problems down the line.

    5. Forgetting About Testing

    One of the most important aspects of a successful ERP implementation is getting up and running ASAP. That’s not to say you should rush the process.

    Instead, you’ll want to launch a test environment that allows users to master new ways of working long before the official launch — and perhaps more importantly, prepare for as many scenarios and conditions as possible.

    Insufficient testing is behind some of the most famous ERP fails in history.
    Among them, National Grid’s ERP project — which fell to Hurricane Sandy in 2012.

    In this instance, National Grid’s implementation team found the new ERP performed well under “normal” conditions, but they never bothered to test the system under emergency conditions.

    Unfortunately, the system went live just as the hurricane was making its way up the coast—and ultimately, revealed that it wasn’t prepared to handle the increased workload brought on by the storm.

    That oversight cost National Grid more than $585M and it took over two years to repair the damage Sandy left in its wake.

    6. Using Outdate Change Management Strategies to Drive Transformation

    Finally, it’s not just the apps and infrastructure that need a refresh, your change management strategy needs to evolve with the times, too.

    Part of why some folks resist change isn’t because they don’t support digital transformation, it’s because they’ve been burned before.

    Today’s organizations face tremendous pressure to move fast and adapt their strategies as circumstances change. While this is a familiar refrain within the context of transitions and transformations, “agility” and “adaptability” are often left out of the change management conversation.

    So, in that case, you end up with business leaders trying to embrace, say, predictive analytics or remote work but using best practices from 2002 to guide the transition.

    The change management plan needs to reflect the changes you’re trying to put in place. It doesn’t make sense to use best practices from 20 years ago because they don’t address the challenges we’re facing today.

    From a cultural standpoint, there’s more to consider. For instance, you may need to make an effort to show employees that you’re taking change seriously.

    Workforce veterans have seen what happens when leadership is stuck on best practices from 10, 20 years ago. And, as a result of past failures and abandoned projects, have little faith that this time, things will be different. Younger workers may feel that pushing decision-makers to modernize is a fruitless effort. Eventually, they may end up leaving to work for a company that prioritizes innovation.

    You’ll also need to rethink how you reinforce change long term. For example, how will you redefine rewards and incentives? Which behaviors should be celebrated?

    Alternatively, which behaviors will be abandoned and/or discouraged? As an example, if you’re trying to improve remote work, old productivity metrics like hours worked no longer make sense.

    In fact, it might harm workers trying to navigate new processes in the digital workplace. So there, you’re better off focusing on deliverables, deadlines, and quality.

    Final Thoughts

    Look, this list doesn’t cover every possible change management mistake capable of taking down an ERP project. But—it should give you an idea of which “main bases” you should cover as you put together a plan.

    Like any strategy, change management success starts with clearly-defined goals and an understanding of your business—and the people that run it.

    It’s a collaborative effort between the front lines, the C-suite, and everyone in-between—and/or connected to key processes. And—most importantly, it’s about building a sustainable culture around change.

    Velosio ERP consultants help clients optimize business processes, modernize & unify systems, and use data-driven insights to understand your company—and how to take action based on your big-picture goals.

    Contact an expert today to learn more about our services and how to get started.