Organizational change management is the #1 determinant of ERP implementation success vs. failure, yet most organizations misunderstand or underestimate the importance of change management. Too often, organizations and project teams fail to have a cohesive or complete change management strategy when deploying a digital transformation or ERP implementation.
An effective change management strategy is critical to success whether you are implementing SAP S/4HANA, Oracle ERP Cloud, Microsoft D365, or any other ERP, HCM, CRM system, or any other enterprise technologies. ERP vendors may sell you on the merits of their technologies, but that does not make change any easier for people. If anything, recent advances in enterprise technology has made change management even more critical than normal.
Also, popular change management toolsets such as PROSCI’s ADKAR model can be good starting points, but transformation success also requires a very tangible and actionable change management strategy that aligns with technology, your operations, and your overall business strategy. That is what an effective digital transformation change management strategy should address.
There are five key steps that will help you get started on your digital transformation or ERP change management journey. This video outlines the five steps, followed by a description of each step below:
1. Conduct an organizational assessment
The first – and arguably most important – step is to conduct an organizational assessment. This helps determine the organizational lay of the land and the “temperature” of the organization, which helps identify pockets of resistance. It also helps differentiate the root causes and severity of resistance across different departments, business units, and locations – each of which has their own politics, organizational dynamics, cultures, and organizational drivers.
At first glance, organizational assessments may seem broad and somewhat unrelated to an ERP implementation. On the surface, organizations may think they don’t need to assess readiness for change because employees are tired of the old, broken systems. But as the graphic below shows, intentional resistance on the surface is only one type of resistance. Other sources of resistance are less intentional, and without effective change management, they will manifest themselves more severely throughout the transformation.
- Lack of communication between departments
- Distrust of peers and/or management
- Silos and other misalignment within the organization
- Misalignment at the executive level
- Lack of clarity around organizational strategy, vision, and overall direction
- Broken and ineffective business processes
- Highly tenured workforces with well-established business processes (though not necessarily effective business processes)
By effectively anticipating these and other sources of resistance, we can create a more effective change management strategy.
2. Ensure and facilitate internal alignment
The second step is to ensure that your internal team is aligned. In addition, we need to make sure that the transformation has clear direction and is aligned with the overall company strategy and objectives. Too often, organizations suffer from their own internal misalignment, which creates a backdrop that is nearly impossible to succeed within. (For more on this, read the article: Misalignment is the Secret Killer of Digital Transformation Initiatives).
For example, we are working with a multi-national organization that is about to implement SAP S/4HANA. They have dozens of locations throughout the world – many of which were acquired from other companies. They have different operational models, which the client would like to align as part of the ERP transformation. The intent is to create a common operating model across these different locations.
It would be easy to just start designing, building, and rolling out software. In fact, it’s what SAP and their system integrators would like to do since it benefits them. But instead, we are helping the client first define their organizational blueprint and roadmap so they can all be on the same page prior to starting the meter running on the army of systems integrator consultants. The time and effort invested in this alignment will save tremendous time, money, and risk throughout the transformation.
3. Conduct a change impact assessment
Once the team is aligned and we have a clear roadmap for what the transformation will look like, we need to identify how specific departments, workgroups, and locations will be impacted by the change. This is something that typically starts during and runs in parallel with the software design phase.
Word of warning: don’t count on your systems integrator to do this work for you. They are focused on what they need to design and build the software – not what is required to change the people within the organization (see the related article: Why Your ERP Systems Integrator Isn’t a Silver Bullet). This should be conducted by an independent and separate team, but one that is also well-integrated into the overall project team and project plan.
4. Identify and mobilize your change team
Once we understand the magnitude of change via steps #1 through #3, we can start to mobilize the change management team. This should include a core change team responsible for providing central change support, as well as consistency and coordination among various change initiatives.
Some of the key change management roles that need to be filled include:
- Change lead, which is often a senior person within your HR department
- Change agents, which represent different departments, workgroups, and locations
- Stakeholders, who are important to communicate with through the transformation
- Trainers, which will ultimately conduct the end-user training later in the transformation
- Outside consultants, who provide the frameworks, tools, and methodologies to support the overall transformation (consultants such as our team at Third Stage can help with this)
Depending on the size and complexity of your transformation, these roles could be separated into separate individuals, or the change team may wear multiple hats and fill multiple roles. I have yet to meet a project team that regrets investing too much in their change management activities after the fact, so be sure to err on the side of overinvesting in change activities and resources.
5. Create a change strategy, plan, and toolset based on input from steps #1 to #4
The first four steps will provide the inputs required to create the best change organizational strategy and plan for your SAP, Oracle, D365, or ERP implementation. Your overall strategy and plan should address major workstreams such as:
- Ongoing organizational and change impact assessments to identify and mitigate organizational risks as they evolve throughout the transformation
- Organizational design, with a focus on identifying how roles and responsibilities will change as a result of the transformation
- Executive and stakeholder assessment and alignment
- Communications plan
- End-user training plan
- Benefits realization plan
Once you have an effective plan that is tailored for your organizational realities, you are on the path to a more successful digital transformation.
Bottom line: ask for help
I began my career as an ERP organizational change management consultant, so I have many battle scars from the people side of digital transformation and ERP implementations. Even today, I find this to be the most difficult part of transformations we help clients with. So it is important to ask for outside help from experts who specialize in change management – not systems integrators that treat change management as an afterthought.
I am happy to be a sounding board for any change management ideas you might be considering for your ERP implementation or digital transformation, so please feel free to contact me to arrange a time for a video or phone conference. I am happy to bounce around ideas on how to make your change iniatives and overall project more successful!