Executive Summary

Successful ERP transformation projects must take many facets into consideration, in particular people, processes and technology. Most projects address the process and technology portions, but have little or no focus on the people portion. For a transformation to be successful, it is the people component that is the most critical piece in order for the transformation to be successful. In this paper are practical ways to apply current change management strategy models to thoroughly prepare for an ERP transition so that you can implement it successfully at the individual, team, and organizational levels.

Introduction: Change is Easy, Transition is Hard

"It isn't the changes that do you in, it's the transitions. Change is not the same as transition. Change is situational: the new site, the new boss, the new team roles, and the new policy. Transition is the psychological process people go through to come to terms with the new situation. Change is external, transition is internal."

William Bridges, Managing Transition Making the Most of Change

Change management is a structured approach to transitioning individuals, teams, and organizations from a current state to a desired future state. Much has been written about change management, yet it still seems difficult to define and implement successfully. Ask ten people what it means and you'll probably get ten different answers. Most of us understand that managing change is critical for successful projects, yet most project time and resources are spent on changing the technology and the processes. Plus, most change efforts fail to recognize that it is the people that are needed to bring the other two components to life. This is why change management is critical in making genuine, value-added business transformations. Addressing the people side is often an afterthought to a project, or just hoped that such changes will work out by themselves. Successful transformations must focus on all three vital aspects – people, processes, technology – to achieve business performance results.

SUCCESSFUL TRANSFORMATIONS MUST FOCUS ON ALL THREE VITAL ASPECTS – PEOPLE, PROCESSES, TECHNOLOGY – TO ACHIEVE BUSINESS PERFORMANCE RESULTS.

Effectively Managing Change: An Equation

Here is a simple analogy: managing change is like juggling three balls – you start the momentum by tossing one ball into the air, followed by the second, then the third. In order to maintain the effort you have to keep each ball moving. Lose track of one ball and it drops to the floor. The ability to effectively manage change may very well be the most important skill that executives, managers and employees need to master. We continue to face accelerated, unprecedented and dynamic transformations in our personal and professional lives. Our organizations are forced by fierce competition to "lead, follow, or go out of business." Global markets and technology seem to change daily, yet at the same time, and organizations are required to reduce costs, increase customer service and excel at performance. These requirements are at the heart of the necessity for and justification of ERP. An ERP system potentially touches multiple functions across offices, departments, geographic locations and job levels. Therefore, as organizations must accomplish their goals associated with such requirements, an ERP system must do its part in the same. And as it is critically important to proactively plan for changes and effectively manage change across all levels of the organization, it is equally important to proactively manage change across all organizational areas during an ERP project. Business transformations through ERP will not take place without effectively managing changes across the three key organizational areas; people, process, and technology. In many situations, the technology and process changes are relatively easy to manage. However, because people may often resist change, it is this area that must be a significant focus of your management effort. The ability to initiate or sustain change – and keep the three balls in the air – can be represented by the following equation: The momentum for change (C) must be greater than the momentum for the status quo (R) to get traction for the change effort.

Initiating/Sustaining Change

C>R | C=abd

C = Momentum for change R = Inherent resistance to change a = Shared need felt; clear reason why status quo is no longer viable b = Shared image of desired future state; clear sense of direction d = 2 - 3 accepted practical steps from here; clear about the next actions and ownership If a, b, or d ceases to exist (approaches zero), then the momentum for change (product) will lessen (approach zero) and resistance will stop the change effort. Initiating and sustaining change requires continuous conversations to explore and clarify why we are changing, where we are headed, and what next steps are planned. Now, let's take a deeper look at the actions required to achieve sustainable change.

THE MOMENTUM FOR CHANGE ( C ) MUST BE GREATER THAN THE MOMENTUM FOR THE STATUS QUO ( R ) TO GET TRACTION FOR THE CHANGE EFFORT.

Core Project Areas and Kotter's Eight-Stage Process

A pragmatic approach to ERP change management can be outlined by looking at three core areas: (A) the current state business environment; (B) the your education on industry best practices; and (C) the definition of the future state of the business environment and development of a detailed plan on how to achieve it. These core areas form the basis for effective business performance improvement. Additionally, we look at an adaptation of John Kotter's "Eight Stage Process of Creating Major Change," which integrates very well with these three core areas. Kotter's process provides a real-world view of the numerous steps that can and should be followed when changing and transforming any organization.

KOTTER'S PROCESS PROVIDES A REAL-WORLD VIEW OF THE NUMEROUS STEPS THAT CAN AND SHOULD BE FOLLOWED WHEN CHANGING AND TRANSFORMING ANY ORGANIZATION.

A Current State. Creating a climate for change. Analysis of the current state clarifies reality and creates the necessity for change. This covers the first three steps in Kotter's change model:

Establishing a sense of urgency
Forming a powerful guiding coalition
Creating a vision

B Educate. Engaging and enabling the whole organization. Education develops a communications and a results-oriented strategy to get all stakeholders involved by establishing leadership. This covers steps four through six of Kotter's change model:

Communicating the vision
Empowering others to act on the vision
Planning for and creating short term wins

C Future State. Implementing and sustaining the change. During the future state, changes are implemented into the way the company does business. This covers the final two steps of Kotter's change model:

Consolidating improvements and producing yet more change
Institutionalizing new approaches

While the process may look linear, the execution of these eight steps is rarely straightforward. Rather, the process is dynamic and may move in a non-sequential pattern. That is acceptable as long as all steps are included in the overall plan. Any of the steps may also be revisited during the course of a transformation. To assist in the completion of this potentially chaotic process, measurements and course adjustments are usually required throughout.

Plan – Do – Study – Act

A method to measure the success of each step or entire effort is the Plan – Do – Study - Act cycle. This

T

is a systematic series of steps for learning and gaining

C

A

valuable knowledge for the continual improvement of the

P L A N

change process. Also known as the "Deming Wheel," or "Deming Cycle," the concept and application was first introduced to Dr. Deming by his mentor, Walter Shewhart, of the famous Bell Laboratories in New York.

The 'Plan' Step: This involves identifying a goal or purpose, formulating a theory, defining success

D

metrics and putting a plan into action.

U

T

S

Y D O

The 'Do' Step: In this step the components of the plan are implemented.
The 'Study' Step: Here, outcomes are monitored to test the validity of the plan for signs of progress and success, or problems and areas for improvement.
The 'Act' Step: This step closes the cycle and integrates the learning generated by the entire process, which can be used to adjust the goal and/or change methods.

These four steps are repeated over and over as part of a never-ending cycle of continual improvement. This provides a feedback loop to assess the effectiveness of the change activities and overall progress throughout Kotter's Eight Stage Process.

THIS IS A SYSTEMATIC SERIES OF STEPS FOR LEARNING AND GAINING VALUABLE KNOWLEDGE FOR THE CONTINUAL IMPROVEMENT OF THE CHANGE PROCESS.

Integrating Kotter's Steps into Your Project

The following table illustrates the Eight Stage Process of Creating Major Change and provides details and action steps for a successful transformation.

Current State – Creating a Climate for Change

Establishing a Sense of Leaders must convey a sense
Clarify the gaps between Urgency of urgency about the change Current State organizational to increase visibility, energy and performance and Future motivation. State desired organizational performance To accomplish this compliancy,
Identify the sources of fear and anger must be reduced organizational compliancy throughout the organization. (we've always done it this way or it work fine just the way it is)
Identify the roles and responsibilities of leaders and managers in the implementation of the change initiative
Forming a Powerful Guiding Mobilize a team of respected
Engage the right people Coalition leaders with enough power
Set clear team goals and (formal or informal) to lead the responsibilities change.
Develop a climate of trust • Have a deep understanding and communication within of the reasons for the the team change • Model the right (Future State) behaviors • Hold both themselves and others accountable and responsible for the desired results
Creating a Vision Create a vision to help direct the
Clarify why a vision is change effort necessary
Develop the vision Establish a clear, inspiring and
Analyze and get feedback achievable picture of the future. about the vision Describe 2-4 critical behaviors
Clarify the role of the team in (Don't try to change everything developing the vision at once) that are required in the Future State. Define key performance metrics to support the Future State and encourage the new behaviors. Education – Engaging and Enabling the Whole Organization
Communicating the Vision The change team must deliver
Initially communicate the concise, honest and meaningful vision messages to create trust, support
Engage in continuous dialog and commitment to help people with stakeholders visualize the Future State vision.
Make sure all leaders and stakeholders are able to speak to the vision in their own words
Enroll stakeholders in the change effort
Empower Others to Act on Leaders must remove barriers
Remove barriers that block the Vision that slow the progress towards people from carrying out the the vision. vision
Encourage people to take Identify and remove ineffective risks and be innovative processes.
Explicitly define new Develop and design new behaviors and attitudes programs and processes the requires to succeed in the support the required behaviors. new environment
Planning for and Creating Recognize and reward people
Plan for visible improvements Short Term Wins involved in the improvements. in performance
Execute the plan Reenergize the organization's
Communicate the wins sense of urgency. visibly and convincingly Demonstrate that progress and
Embed the learnings in the forward momentum is occurring. go forward plan Future State – Implementing and Sustaining the Change
Consolidating Improvements The guiding team is persisting,
Initially communicate the and Producing Still More monitoring and measuring vision Change progress.
Engage in continuous dialog with stakeholders Not declaring victory
Make sure all leaders and prematurely, ensuring that the stakeholders are able to change really happened. speak to the vision in their Reviewing new systems, own words structure and policies to ensure
Enroll stakeholders in the the support the new vision. change effort Reinvigorate the process with new projects and team members. Future State – Implementing and Sustaining the Change
Institutionalizing New Leaders recognize, reward and
Achieve tangible results as Approaches model the new behavior. quickly as possible
Show how the change is Communicate how the new working and why the old behaviors support business ways won't work success.
Measure and support Embed the behaviors in the sustained performance fabric of the organization.
Ensure leadership will support and model the new Look for the next behaviors behaviors to change in the cycle of
Initiate necessary turnover continuous improvement.

Conclusion

Ensuring a successful ERP business transformation project is dependent on much more than revamping specific processes or the ERP software product you choose. Success requires change management planning from the very beginning through to the crafting of your business case for change. It is dependent on the strength of your team, your knowledge of the ERP market, and your willingness to accept and implement long-term change. Establishing methods, processes and implementing good technology is relatively easy for many organizations, like juggling two balls. However, introducing people (the third ball) creates some difficulty. Enabling people with effective and efficient processes to utilize ERP functional technology will yield the results that your business is seeking: a profitable company, reduced costs, and productive employees.

About Ultra Consultants, Inc.

Ultra Consultants is an independent consulting firm serving the manufacturing and distribution industries. Organizations turn to the Ultra team for ROI-driven ERP technology expertise and business process management that improves revenue and customer satisfaction, enhances financial management and real-time decision making, improves productivity and reduces time to market. The world's middle market companies make up the Ultra Consulting client roster including aerospace and defense; automotive; chemical; consumer goods; electronics; food and beverage; industrial equipment; medical device; metal fabrication and plastics manufacturers. Ultra Consultants offer deep experience in manufacturing process optimization. The team averages over 20 years manufacturing and process experience with professional certifications in APICS, Lean manufacturing, Six Sigma Green and Black Belt, and Project Management.

A Change Management Strategy for Your ERP Project