Rajendra

Human resources management aspects of Enterprise Resource

Planning (ERP) Systems Projects

by Helena Tadinen

Master’s Thesis in Advanced Financial Information Systems

Swedish School of Economics and Business Administration

2005

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Abstract

HANKEN - Swedish School of Economics and Business Administration Department: Accounting Type of Work:

Master of Science Thesis

Author: Helena Tadinen Date: 04.02.2005

Title of Thesis:

HUMAN RESOURCES MANGEMNT ASPECTS OF ENTERPRISE

RESOURCE PLANNING (ERP) SYSTEMS PROJECTS

Abstract:

The purpose of this research paper has been to investigate the importance of human

resources (HR) aspects in ERP systems implementation projects and study their

variance in the case of successful and unsuccessful implementations. In addition, the

research has intended to examine when HR practices are the most prevalent across

ERP life cycle.

The theoretical part of the thesis has aimed to gain information about human

resources and their implications in ERP implementation process. Large part of the

academic literature suggests that people are the key factors for successful

implementation of ERP projects. Others have questioned their significance.

The subject of the empirical research has been to examine the validity of the

comments in the ERP literature regarding successful implementation of ERP projects

and human resource management practices in the case of Finnish corporations. The

study was conducted in a form of an on-line survey, which was targeted toward

personnel/IT managers in organizations that had already implemented an ERP project.

The analysis of the research results showed that HR practices differ in the case of the

successful and unsuccessful ERP implementations and their significance changes

across the project life cycle stages.

Keywords: human resources, HRM, ERP, critical success factors, people issues,

human factors, stakeholders, soft factors, ERP success

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Table of Contents

ABSTRACT....................................................................................................................II

LIST OF ABBREVIATIONS ..................................................................................... VI

1 INTRODUCTION ....................................................................................................1 1.1 RESEARCH BACKGROUND ..................................................................................1 1.2 THE RESEARCH OBJECTIVE .................................................................................2 1.3 EMPIRICAL METHOD...........................................................................................2 1.4 STRUCTURE OF THE THESIS ................................................................................3

2 ERP SYSTEMS IMPLEMENTATIONS...............................................................5 2.1 WHAT IS ERP?...................................................................................................5 2.2 REASONS FOR THE MNC TO GO ERP .................................................................6 2.3 BENEFITS OF ERP ..............................................................................................7 2.4 ERP IMPLEMENTATION PROCESS........................................................................9

2.4.1 ERP implementation phases .............................................................................................. 9 2.4.2 ERP implementation approaches.................................................................................... 10

2.5 CHAPTER SUMMARY.........................................................................................12

3 ERP IMPLEMENTATION SUCCESS AND FAILURE FACTORS ...............13 3.1 ERP IMPLEMENTATION CHALLENGES ..............................................................14 3.2 ERP AS A CHANGE PROCESS.............................................................................16 3.3 ERP IMPLEMENTATION FAILURE......................................................................18 3.4 CRITICAL SUCCESS FACTORS ...........................................................................20

3.4.1 A taxonomy of players and activities across the ERP project life cycle....................... 22 3.4.2 A case study of interrelations between critical success factors..................................... 27 3.4.3 A model of ERP project implementation ....................................................................... 31

3.5 CHAPTER SUMMARY.........................................................................................36

4 MANAGING HUMAN RESOURCES IN THE ERP IMPLEMENTATION PROCESS ......................................................................................................................40

4.1 KEY STAKEHOLDERS INVOLVED IN AN ERP IMPLEMENTATION PROJECT..........40 4.2 HUMAN RESOURCES REQUIREMENTS FOR A SUCCESSFUL PROJECT ...................45 4.3 WHY IT PAYS TO PAY ATTENTION TO PEOPLE ...................................................49 4.4 FACTORS INFLUENCING THE PROJECT SUCCESS: THE IMPACT OF HRM.............52 4.5 CHAPTER SUMMARY.........................................................................................56

5 EMPIRICAL PART, A SURVEY ........................................................................59

5.1 HYPOTHESES DEVELOPMENT............................................................................60 5.2 THE PROPOSED RESEARCH MODEL....................................................................62 5.3 HYPOTHESES TESTING......................................................................................63 5.4 RESEARCH METHODOLOGY ..............................................................................65

5.4.1 Research method .............................................................................................................. 65 5.4.2 Data and sample selection................................................................................................ 66

5.5 QUESTIONNAIRE CREATION..............................................................................66 5.6 ANALYSIS OF THE RESEARCH RESULTS.............................................................69

5.6.1 The response rate.............................................................................................................. 69 5.6.2 Sample description ........................................................................................................... 70 5.6.3 Overall success and critical success factors.................................................................... 71 5.6.4 Soft factors ........................................................................................................................ 73 2.1.1 Findings on testing Hypotheses 1 and 2.......................................................................... 79

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2.1.2 Findings on testing Hypothesis 3..................................................................................... 91 5.7 LIMITATIONS....................................................................................................92 5.8 CHAPTER SUMMARY ........................................................................................93

6 CONCLUSIONS.....................................................................................................94 6.1 CONCLUSIONS ..................................................................................................94 6.2 FURTHER RESEARCH SUGGESTIONS ..................................................................95

REFERENCES..............................................................................................................96

APPENDICES ...............................................................................................................99 APPENDIX A.................................................................................................................99 APPENDIX B ...............................................................................................................102 APPENDIX C ...............................................................................................................104

List of Tables and Figures Tables TABLE 2-1: REASONS FOR IMPLEMENTING ERP – RATING 1 (NOT IMPORTANT) TO 5 (VERY IMPORTANT) ... 7 TABLE 3-1: FACTORS IN ERP IMPLEMENTATION FAILURE .......................................................................... 19 TABLE 3-2: THE LIST OF CSFS BY SOMERS AND NELSON (2004) - KEY PLAYERS AND ACTIVITIES ............. 23 TABLE 3-3: CSF OF SOMERS AND NELSON (2004) REMAINING IMPORTANT THROUGHOUT THE

IMPLEMENTATION PROJECT ................................................................................................................. 26 TABLE 3-4: THE SUMMARY TABLE OF ARTICLES ON CSFS .......................................................................... 39 TABLE 4-1 SUMMARY TABLE OF THE ARTICLES .......................................................................................... 58 TABLE 5-1: SOFT (S) AND HARD (H) FACTORS IN SOMERS AND NELSON CSF LIST (2004) ......................... 60 TABLE 5-2: SOFT FACTORS UNDER THE HR RELATED HEADINGS................................................................ 61 TABLE 5-3: SAMPLE DESCRIPTION (PERCENTAGE OF RESPONDENTS) .......................................................... 70 TABLE 5-4: THE SUMMARY TABLE OF THE OVERALL SUCCESS OF ERP IMPLEMENTATIONS........................ 72 TABLE 5-5: THE IMPORTANCE OF CRITICAL SUCCESS FACTORS IN ERP IMPLEMENTATIONS – RATING FROM

1 (EXTREMELY LOW) TO 5 (EXTREMELY HIGH) ................................................................................... 72 TABLE 5-6: THE IMPORTANCE OF THE HR REQUIREMENTS FACTORS IN ERP IMPLEMENTATION – RATING

FROM 1 (EXTREMELY LOW) TO 5 (EXTREMELY HIGH) ......................................................................... 73 TABLE 5-7: THE KEY PEOPLE IN THE PROJECT IMPLEMENTATION TEAM (PERCENTAGE OF RESPONDENTS).. 74 TABLE 5-8: THE KEY SKILLS THESE KEY PEOPLE HAVE TO EMPLOY IN ERP IMPLEMENTATION PROJECT

(PERCENTAGE OF RESPONDENTS) ........................................................................................................ 75 TABLE 5-9: THE IMPORTANCE OF TRAINING IN ERP IMPLEMENTATION – RATING FROM 1(EXTREMELY LOW)

TO 5 (EXTREMELY HIGH) ..................................................................................................................... 77 TABLE 5-10: THE IMPORTANCE OF THE CHANGE MANAGEMENT STRATEGY IN ERP IMPLEMENTATION-

RATING FROM 1 (EXTREMELY LOW) TO 5 (EXTREMELY HIGH) ............................................................ 78 TABLE 5-11: THE IMPORTANCE OF EACH COMMUNICATION FACTOR IN ERP IMPLEMENTATION................. 78 TABLE 5-12: THE IMPORTANCE OF THE EACH REWARD SYSTEM FACTOR .................................................... 79 TABLE 5-13: TIME SELECTION CRITERIA (N=13) ......................................................................................... 82 TABLE 5-14: T-TEST RESULTS FOR PROJECT TEAM COMPETENCE FACTOR BASED ON TIME ......................... 82 TABLE 5-15: T-TEST RESULTS FOR TRAINING AND EDUCATING FACTOR BASED ON TIME ............................ 82 TABLE 5-16: T-TEST RESULTS FOR CHANGE MANAGEMENT FACTOR BASED ON TIME.................................. 82 TABLE 5-17: T-TEST RESULTS FOR COMMUNICATION FACTOR BASED ON TIME........................................... 83 TABLE 5-18: T-TEST RESULTS FOR MANAGEMENT BY EXPECTATIONS FACTOR BASED ON TIME .................. 83 TABLE 5-19: COST SELECTION CRITERIA (N=15)......................................................................................... 84 TABLE 5-20: T-TEST RESULTS FOR PROJECT TEAM COMPETENCE FACTOR BASED ON COST ......................... 84 TABLE 5-21: T-TEST RESULTS FOR TRAINING AND EDUCATING FACTOR BASED ON COST............................ 84 TABLE 5-22: T-TEST RESULTS FOR CHANGE MANAGEMENT FACTOR BASED ON COST ................................. 85 TABLE 5-23: T-TEST RESULTS FOR COMMUNICATION FACTOR BASED ON COST........................................... 85

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TABLE 5-24: T-TEST RESULTS FOR MANAGEMENT BY EXPECTATIONS FACTOR BASED ON COST.................. 85 TABLE 5-25: SYSTEM PERFORMANCE SELECTION CRITERIA (N=16) ............................................................ 86 TABLE 5-26: T-TEST RESULTS FOR PROJECT TEAM COMPETENCE FACTOR BASED ON SYSTEM PERFORMANCE

............................................................................................................................................................ 86 TABLE 5-27: T-TEST RESULTS FOR TRAINING AND EDUCATING FACTOR BASED ON SYSTEM PERFORMANCE86 TABLE 5-28: T-TEST RESULTS FOR CHANGE MANAGEMENT FACTOR BASED ON SYSTEM PERFORMANCE..... 87 TABLE 5-29: T-TEST RESULTS FOR COMMUNICATION FACTOR BASED ON SYSTEM PERFORMANCE.............. 87 TABLE 5-30: T-TEST RESULTS FOR MANAGEMENT BY EXPECTATIONS FACTOR BASED ON SYSTEM

PERFORMANCE .................................................................................................................................... 87 TABLE 5-31: THE SUMMARY TABLE OF THE P VALUES OF THE T-TEST STATISTICS FOR ALL FACTORS......... 88 TABLE 5-32: THE SUMMARY TABLE OF THE MEAN VALUES FOR ALL FACTORS – RATING 1 (EXTREMELY

LOW) TO 5 (EXTREMELY HIGH) ........................................................................................................... 89 TABLE 5-33: THE IMPORTANCE OF THE SOFT FACTORS ACROSS THE PROJECT LIFE CYCLE STAGES (N=18) . 91

Figures FIGURE 3-1: PROJECT SUCCESS CRITERIA BY KUMAR ET AL (2001) ............................................................ 21 FIGURE 3-2: THE RANKED LIST OF CSF BY AKKERMANS AND HELDEN (2002)........................................... 28 FIGURE 3-3: THE IMPORTANCE EACH CSF IN PPM PHASES, CASE STUDY FINDINGS ................................... 33 FIGURE 4-1: THE HUMAN ACTIVITY SYSTEM DIAGRAM ............................................................................... 41 FIGURE 4-2: A SUMMARY TABLE OF SKILLS REQUIRED BY THE PROJECT MANAGER.................................... 48 FIGURE 4-3: THE PROPOSED MODEL OF A. BELOUT AND C. GAUVREAU (2004) ......................................... 54 FIGURE 5-1: THE PROPOSED RESEARCH MODEL .......................................................................................... 63 FIGURE 5-2: MEAN VALUES FOR ALL SOFT FACTORS– RATING 1 (EXTREMELY LOW) TO 5 (EXTREMELY

HIGH) .................................................................................................................................................. 89

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List of Abbreviations BPR Business Process Reengineering

CFO Chief Financial Officer

CIO Chief Information Officer

CSF Critical Success Factors

ERP Enterprise Resource Planning

HR Human resources

HRM Human resources management

IT Information Technology

IS Information Systems

MNC Multinational Corporation

PPM Project Phase Model

SAP Systems, Applications and Products in Data Processing

Y2K Year 2000

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1 Introduction

1.1 Research background

Enterprise Resource Planning systems have been considered as the most important

development in the corporate use of information technology in the 1990’s (Davenport,

1998). Nowadays, ERP systems have become very important in modern business

operations and ERP market is expected to recover from the sharp downturn in 2000 and

2001 and grow to $9.5 billion by 2006 according to a study by the ARC Advisory

Group (Clouther, 2002).

Major business drivers behind ERP implementations have been the various technical,

financial, operational and strategic benefits these systems promise. As summarised by

Olson (2004), expected benefits of ERP systems include, for instance, quicker

information response time, increased interaction across the enterprise, improved order

management cycle, reduced financial and operating costs, improved interaction with

customers and suppliers, improved on-time delivery and cash-management, and so

forth.

However, these benefits are often difficult to meet. Implementing an ERP system is

usually an extensive and costly process involving substantial amount of human and

other resources, integrating different interest groups, managing the time pressure and

facing other challenges. In fact, ERP implementation failure rate is high. A large

amount research has been done on factors that affect the implementation process to

identify the critical success factors that are necessary for successful ERP

implementation. These factors usually include top management support, project

champions, vendor relations, user training, use of consultants, interdepartmental

collaboration and communication and the like.

Many researchers have listed people factors in their critical success factors list and have

agreed that managing human resources in an appropriate manner is a key for a success

in ERP implementation projects. Also, launching an ERP project results an inevitable

change process, which accordingly brings in many behavioural and managerial

challenges such as user resistance, management resistance, employees lack of

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motivation, high turnover of key personnel, lack of expertise, insufficient human assets,

lack of training and so forth. These people challenges are considered to be more

difficult to manage than the technical difficulties encountered. Likewise, many

academics suggest that the reason why large number of software implementation

projects fail is because management is paying too little attention to human factors. In

brief, in order to succeed in an ERP implementation project human needs and concerns

have to be addressed.

Today, human resources management is being renewed in organisations and becoming

one of the fundamental functions of the project management. HRM has changed from

an inactive and problem-solving role to a strategic, focusing on the retention and

development of the best human resources (Clemmons and Simon, 2001). Traditional

HR practices consisted of activities such as payroll, hiring activities, records

management, reporting and termination activities and similar. Nowadays, HRM takes

more of a full service role providing employee support beyond pension planning and

career development. With the arrival of ERP systems, HR functions became fully

integrated with the operations side of the business. However, the research on HRM in

the context of ERP is relatively new and not many studies have been done on the topic.

1.2 The research objective

The aim of this paper is to investigate the importance of human resources (HR) aspects

in Enterprise Resource Planning (ERP) Systems implementations projects and study

whether their significance varies in the case of successful and unsuccessful

implementations.

1.3 Empirical method

´The empirical method of this study is on-line survey, which is targeted toward

personnel managers in Finnish corporations that have already implemented an ERP

project. The scope of the empirical research is to examine the validity of the comments

in ERP literature regarding successfulness of the ERP implementations and the

importance of the HR aspects in such projects.

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1.4 Structure of the thesis

This thesis contains 6 chapters. Chapter 1 introduces the research area background,

defines the research objective, and describes the research method and the structure of

the thesis.

Chapter 2 starts by giving the overall picture what is ERP, identifies its major vendors

and characteristics, discusses what are the driving forces for the multinational

companies to implement an ERP system and shortly introduces the ERP implementation

process. All ERP implementations go through a sequence of stages and in spite of their

different naming and focus extend throughout the beginning of the project until going

live. Furthermore, according to the range of characteristics projects possess, these can

be placed in one of the categories that represent the project’s undertaking from the most

ambitious to the least risky one.

Chapter 3 explains that implementing an ERP system is costly, time consuming and

complex process with relatively high risk of failure. Deciding on going ERP launches

an inevitable change process, which accordingly, brings in behavioral and managerial

challenges such as user resistance, turnover of key personnel, resistance to change and

so forth. However, the future benefits seem to overweight the threats as companies are

in favor of those computer based systems designed to process their transactions in

integrated and real time manner. This chapter also compares the success against the

failure and summarizes the factors, which have been the foremost reasons for project

failures. A particular emphasis is made on the factors that are critical for ERP success

and various list and models proposed in the literature are covered.

Chapter 4 takes a closer look on managing human resources in the ERP implementation

process. Understanding of various interest groups such as management, users, software

vendors and consultants is also regarded as a key factor since different people view

success differently. Therefore, a variety of stakeholder groups and their issues of

concerns are discussed closer. In addition, this chapter covers the subject of HR

requirements for successful project focusing on the skills required to assure the

victorious outcome of the ERP implementation. Large body of the academic literature

brings out the importance of the human resources; however, some academics have

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belied this major viewpoint and confirmed that HR factor has a marginal effect on the

project success. This chapter illustrates both of these judgments.

Chapter 5 contains the empirical part of the thesis and includes the development of the

hypotheses, the proposed research model, hypotheses testing, a survey creation, research

methodology, analysis of the research results and limitations of the study. The research

methodology part introduces research method, and data and sample selection criteria.

The selected research method is on-line survey and the key focus group of the research

is the CIOs in Finnish corporations that have already implemented an ERP system. The

intention of this chapter is to investigate the validity observations reviewed in the

theoretical part of the thesis regarding the successful implementation of ERP projects

and the impact of HR practices in such projects. After reasoning the choice of the

hypothesis to be tested, the questionnaire structure is described in detail. Next, research

results are analyzed using t-test and descriptive statistics. The chapter concludes with

the limitations of the current research section.

Chapter 6 summarises the key points of the research results and makes suggestions for

further research studies.

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2 ERP systems implementations

Enterprise resource planning (ERP) systems have become increasingly popular in

modern business operations over the last decade. These software systems have been a

matter of interest for various organisations and researchers reasons being the benefits

promised and problems encountered in achieving those. This chapter provides a brief

introduction to what ERP is, its major vendors and characteristics, reviews reasons for

implementing an ERP system, discusses the advantages of ERP and shortly reviews the

ERP implementation process.

• What is ERP? Major vendors, characteristics

• Reasons for the companies to go ERP

• Benefits of ERP

• ERP implementation process (stages, approaches)

2.1 What is ERP?

Enterprise Resource Planning (ERP) is a computer-based system designed to place

companies’ major activity areas: planning, production and customer service under an

umbrella. ERP system is a software package of different modules such as fixed assets

management, controlling, financial accounting, manufacturing, human resources,

planning and development and so forth. Each module is business process specific.

Generally companies choose one ready-made package available for their industry but it

is also common to select the modules that best meet their needs. There are hundreds of

ERP vendors available on the market; however, this field is mainly dominated by J.D.

Edwards, Baan, PeopleSoft, SAP and Oracle (O’Leary, 2000).

The major characteristics of ERP systems are: a packaged software system designed for

the client environment, the integration between the modules and across entire

organisation, access to data in real time, data storing and retrieving processes in an

enterprise-wide database, and management and analysis functionalities. Moreover, ERP

systems are expected to have additional characteristics such as support for multiple

currencies and languages, which is critical for multinational companies, and support for

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specific industries, for instance, oil, gas, banking, health care and chemicals industries

(O’Leary, 2000).

2.2 Reasons for the MNC to go ERP

Initially, in the mid- and late- 1990s, Y2K compliance has been a major concern for

many companies as well as the wish to replace the existing and poor quality systems.

However, the major reasons driving companies to choose ERP are related to improve

firms performance and decision making, to reduce labor costs, bureaucracy and errors.

Other reasons are: pressure from the side of the competitors, business partner

requirements wishing to receive faster service, integration between units, organizational

standardization across different locations and globalization of businesses. Acquisitions

and mergers between the units are forcing companies to change and function as a one

system. However, for each company the motivations for implementing ERP are

different as well as their priority order depends from the nature of the projects.

O’Leary (2000) has grouped the reasons into four types of categories: technology,

business practices, strategic and competitive. Holland et al (1999) have recognized three

main dimensions: technical, operational and strategic. Some studies narrow the reasons

down even to broader groups: technological and business performance. Based on the

literature, the foremost reasons that have caused a fast growth in the use of ERP systems

can be summarized as follows:

• Technical

- a need for a common platform and replacement of an existing IT

infrastructure

- an incompatibility of several information systems

• Operational

- process improvement

- data visibility

- operating cost reduction

• Strategic

- Y2K compliance

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- globalisation of business

- the growth of an enterprise and a focus on standardisation of processes

- the consideration of an enterprise to reengineer its business processes

- improve customer responsiveness

- need for efficiencies and integration between the units and processes

- enhance firm’s performance and decision making

Olson (2004) summarizes two recent studies, which have examined the motivations for

ERP adoption. One research was done on the U.S. manufacturing organizations and

another on Swedish firms. Both of the studies ranked replacing legacy systems and

simplification and standardization of systems as their primary reasons. Other rationales

that received high ranking were improving interactions with suppliers and customers,

gaining strategic advantage, supply-chain aspects and linking to global activities.

Pressure to keep up with the competitors, ease of upgrading systems and restructuring

organization received low ranking from both of the studies.

Table 2-1: Reasons for implementing ERP – Rating 1 (not important) to 5 (very important)

Reason United States

Sweden

Replace legacy systems 4,06 4,11 Simplify and standardize systems 3,85 3,67 Improve interactions with suppliers and customers 3,55 3,16 Gain strategic advantage 3,46 3,18 Link global activities 3,17 2,85 Solve the Y2K problem 3,08 2,48 Pressure to keep up with competitors 2,99 2,48 Ease of upgrading systems 2,91 2,96 Restructure organization 2,58 2,70

Source: Olson D. L. (2004): Managerial Issues on Enterprise resource Planning Systems, Preface, p. v

2.3 Benefits of ERP

According to the literature, ERP systems implementations create the following benefits

for the companies:

• improves the firm’s performance

• eliminates inefficient manual processes

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• provides integrated, enterprise wide common tools and processes

• reduces the costs by improving the enterprise efficiency through computerisation

• includes improvements in logistics, production scheduling, customer service and

customer responsiveness

• provides enterprise-wide data visibility, reporting and decision support

• contains the ability to manage the extended enterprise of suppliers, alliances and

customers as an integrated wholes

The main advantage of these systems from the technological angle is that they provide a

common integrated software platform for business processes. These systems have two

important features: firstly, they facilitate a causal connection between a visual model of

business processes and the software implementation of those processes, and secondly

they ensure a level of integration, data integrity and security, which is not easily

achievable with multiple software platforms.

From the business and strategic perspective implementing ERP is seen as way to

improve corporation’s effectiveness and efficiency, reduce their operating, personnel,

inventory and IT costs, and improve their productivity, business growth, production

scheduling, delivery time, customer service, and overall quality. Additionally, data

visibility and timely information is important to make better business decisions (Ross,

1999).

ERP systems also enhance inter-organization communication and collaboration between

different functions and locations. Standardization of the processes across the units

works in favour of collaboration as it reduces the number of conflicts between the

processes. The single database system encourages communication across locations and

functional units through sharing the information. With ERP systems companies are

using the same database, which can be accessed on-line, in real-time and simultaneously

by many users. Since, virtually all users have access to the same information it

improves companies planning and control practices.

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2.4 ERP implementation process

2.4.1 ERP implementation phases

Implementing an ERP system is generally an extensive challenge, with a typical ERP

implementation taking anywhere from one to five years (Poston and Grabski 2001). On

top, the performance of the firm will get worse before it gets better and firms are

expected to encounter the resistance throughout the stages of ERP implementation

(Ross, 1999). Several researchers have developed different models for ERP

implementations. For instance, Parr and Shanks (2004) introduced a model of three

phases: planning, project and enhancement. Markus and Tanis (1999) have a four-phase

model consisting of: chartering, project shakedown, and onwards and upwards. The

study by Ross (1999) illustrates the path of an ERP implementation consisting of five

stages: design, implementation, stabilization, continuous improvement and

transformation. In summary, in spite of different naming, definitions and particular

focus on some stages of implementation process all the implementation models extend

from the beginning of the project to going live.

The implementation model of Ross (1999) is described in more detail below:

• Design

In the design stage, companies face the question whether to change their business

processes or ERP software. Usually, ERP software comes in a ready-made package and

no software is likely to meet all the company’s needs. Therefore, many companies have

used this aspect as a chance to change their business processes and reengineer the entire

organization. Still, some firms have chosen to customize the software to fit their

processes (O’Leary, 2000). The way or another, process change is inevitable with an

ERP because of the process standardization procedures.

• Implementation

This is the stage of going live requiring continuity and commitment to a new way of

doing business. Training is needed to understand how ERP will change business

processes. Performance dip is apparent to customers. A fundamental decision which

implementation strategy: step-by-step and big bang being the most common ones, will

be used to implement ERP systems is based on the aspects such as organisation size,

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complexity and structure, resources, attitude toward change and distance between the

various production facilities (Welti, 1999).

• Stabilization

After going live there is the period that typically takes up to 12 months to get back to

where they started. During the stabilization period, the processes that were planned are

now in use. People need to adjust to the new environment, data has to be cleaned up,

implementation teams needs to remain to support the users and close collaboration with

vendors and consultants is necessary to resolve software bugs. Firms need to evaluate

the success of the implementation. Benefits are analysed either based on cost-benefit

duration analysis or on original ERP choice rationales (O’Leary, 2000).

• Continuous improvement

This stage is a time when major operating benefits are created. Functionality of the of

the ERP system is increased by adding new modules and other improvements such as

electronic data interchange, sales automation, warehousing and transportation

capabilities, sales forecasting and similar. This is also time for redesigning processes,

structures and roles to leverage the system (Ross, 1999).

• Transformation

ERP offers companies an opportunity to transform themselves. By changing

organisational boundaries, redefining organizational decision-making processes,

becoming more customer and process oriented and being increasingly connected to their

suppliers, partners and customers companies progress continuous improvement and

transformation that lead to a constant change, new organisational environment and

management, and toward the long-term vision of the ERP implementation (Ross, 1999).

Not many companies have reported achieving that state.

2.4.2 ERP implementation approaches

According to taxonomy, developed by research conducted by Parr and Shanks (2000)

there are several implementation categories and characteristics. Combinations of the

characteristics serve to place the implementation within one of the categories.

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Taxonomy is used by management to plan projects and allocate resources. It is useful to

compare projects and investigate what characterizes successful ERP implementations.

Implementation characteristics

Each approach is characterised by:

• Physical scope

- the number of implementation sites and countries involved, the number of

end-users

• Business process reengineering (BPR) scope

- from no BPR at all to extensive analysis of best practice and restructuring of

own business processes

- minimize BPR as much as possible

• Technical scope

- the extent the ERP software is modified

• Module implementation strategy

- selection of modules

- extent of functionality, module-by-module or all at once

• Resource allocation

- costs and duration of projects

Implementation categories

The range of combinations of these characteristics places an implementation within one

of these categories:

• Comprehensive

This category represents the most ambitious implementation approach. Typically, these

are large and expensive projects often implemented by a multi-national company

involving multiple sites across national boundaries. It is an implementation of the full

functionality of the ERP, which may involve industry specific modules. The scope and

level of BPR required is high trying to optimise business processes locally or work out

harmonized centralized processes. This approach implies large resource allocation,

challenging project management and excessive risk management but discloses the full

advantage of the ERP package.

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• Middle-road

These tend to be 3 years projects implemented at the single site or at few similar sites.

Major decision is to implement only a selection of core ERP modules. BPR is required

but not as extensive as for a comprehensive approach. Depending on BPR results, small

or major modifications to system are needed. The projects involve some technical and

organizational risks, have no typical implementation strategy and require average

resource allocation.

• Vanilla

This approach is the least ambitious and least risky one involving small projects and

typically they may be implemented in less than a year. Usually, it is implemented at one

particular site with no coordination with other sites. The decision is to mobilize the core

ERP functionality only and do little if any BPR. These projects are least complicated,

contain no substantial technical or organizational risks and are least costly.

2.5 Chapter summary

ERP is a computer-based system that places companies major activity areas under an

umbrella. ERP system is a software package of different modules whereas each module

is business process specific. This chapter gave a short description to ERP definition,

characteristics and mentioned major vendors on the market. Companies choose to go

ERP for many reasons. From the technical perspective, a need for a common platform

and integrating several information systems or simply a replacement of an existing IT

infrastructure is attractive as it enhances single-data entry and information consistency

across the system. From an organisational perspective, ERP is attractive as it promises a

cut down in operating costs, better data visibility and process improvement. From the

strategic perspective, it is appealing because of cost reductions gained through more

efficient systems, improvements in productivity, decision-making, overall quality and

support in business growth.

Implementing an ERP is a serious undertaking, which requires an extensive use of

resources, have high costs and take anywhere from one to five years to implement. On

the top, before starting to reap the benefits of the system the firm’s performance will get

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worse. There are number of implementation models developed by the researchers and

practitioners, which in spite of different naming, definitions and focus on some stages in

the implementation process, all extend from the beginning of the project to going live.

The taxonomy of ERP implementation approaches serves as a guideline to place ERP

implementations in one of the categories such as comprehensive, middle-road and

vanilla according to the range of characteristics the projects possess.

Understanding the basics of ERP systems, implementations strategies as well as what

are the driving forces for a corporation to go ERP are essential before moving to the

next chapter, which covers the success and failure of ERP implementations.

3 ERP implementation success and failure factors

On one hand, ERP systems promise to improve organisation’s key performance

indicators such as proficiency, efficiency, profitability, customer satisfaction and other

measures of value. On the other hand, ERP systems are highly complex information

systems and the implementation of these systems is a difficult and costly process

placing tremendous demands on corporate time and resources. Business Process

Reengineering (BPR) is a often a major component in ERP installations and this

requires companies to change the way business has been done, which, in accordance,

affects the employees work lives and can create a resistance. This chapter will give a

short overview to implementation challenges and the change process that employees

need to go through. The chapter also discusses failure against success in ERP

implementation and examines success factors found to be critical in such projects.

• ERP implementation challenges

• ERP as a change process

• ERP implementation failure

• Features of successful implementation

• Critical success factors

14

3.1 ERP implementation challenges

A typical implementation of ERP project is costly, time-consuming and complex

undertaking. In fact, many companies have described their ERP implementation being a

nightmare. A recent study has indicated that 40 % of all the ERP installations manage

only partial implementation and 20 % totally fail (Chen, 2001). Depending on how

someone is defining failure, the percentage can be even higher.

• Complexity

The complexity of the system implementation arises from the fact that companies have

to integrate ERP software with hardware, operating systems, database management

systems and so on. Further, it initiates the changes throughout the entire organization.

As ERP software comes in a ready-made package companies are required to adjust their

businesses to fit the system requirements. The reasons being that even with the today’s

art of technology ERP systems do not fit all the requirements of a company. Moreover,

changes in one component might cause the collapse of the whole system, which is

designed as an integration of separate modules.

• Costs and benefits

The total implementation costs of ERP include software, hardware, consulting and

internal personnel costs, which usually sum to 2-3 % percent of the company’s revenues

(Chen, 2001). The huge investment has to be weighted against the future economic and

strategic benefits that the system should eventually provide. However, the benefits

might be difficult to quantify. Non-financial benefits such as improved customer

response, strengthened supplier relationships through information sharing and real-time

access to operating and financial data can be vital for the growth of many companies but

are hard to convert to monetary profits in the cash flow statements. Moreover, it might

take years for the companies to take the advantage of the all capabilities ERP systems

provide.

In addition, success depends from the point of view from which you measure it. It can

be viewed from many dimensions: in technical terms, in economic, financial or strategic

business terms, in terms of smooth running of business operations, from the point of

view of managers and employees or from the point of view of customers, suppliers and

15

investors (Markus et al, 2000). For instance, business executives might look at the

success from the angle of achieving tangible business results but the end-user user

values more the easiness and usability of the system.

• Time

On time and within the budget is another success criteria, which in practice is no easy to

achieve. Meeting deadlines is a primary concern of the ERP project management as any

delay costs the company additional money. The amount of time needed for project is

often underestimated. In length, the whole implementation process can take up from

three to five years. Besides, considering today’s business dynamics companies cannot

afford spending too much time on the technology implementation in spite of all the

benefits as competitors might have enough time to overtake them. Moreover, lengthy

implementations can increase the risk of project failure, reduce both the management

and staff commitment, decline productivity and delivery performance and cause the loss

of the customers.

• Training

Training and change management are matters that affect all the phases of the ERP

implementation project. Not surprisingly, there are many challenges related to training

as each user group has different needs, preferences and learning potential. For instance,

the steering committee members need to have a good project overview and general idea

about the functionality of the system. Project leaders instead require in-depth

knowledge about system’s functionality and project management. Users have to learn

only those functions that are related to their tasks in addition to the understanding the

new processes and procedures (Welti, 1999).

Moreover, training is expensive and underestimating the needs and the requirements are

the reasons for exceeding the budget. Skilled employees tend to switch their jobs and

training of new employees will remain a continuous effort. However, the importance of

training cannot be neglected and it is not something that should be conducted only

before or after the implementation but rather it has to be present in each part of the ERP

life cycle (O’Leary, 2000).

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Other issues to take into account with training include:

• identifying what kind of training is needed

• different types of training for workers and supervisors

• measuring training performance and effectiveness

• providing the support for training

• documenting the training process

• preparing employees for change

• using different training methods

Moreover, ERP training has been identified as a critical requirement in ERP

implementation and this has lead to creation of an entire industry providing ERP

training.

3.2 ERP as a change process

The implementation of ERP system has a major impact on the company and its

employees. The sources and types of resistance to change are many. In general, after the

implementation of the ERP system the performance of the company gets worse before it

gets better in the stabilization process. It is hard for the people to change from the old

way of doing things, which they were good at into new ways.

As stated by Mital (1997): “The aim of implementing a computer integrated software

system is not to limit the human influence on the project even though it is argued that

humans cause the major problems but to increase the efficiency and effectiveness of an

enterprise through the integration and exploitation of available technology. It is natural,

that this requires changes in management thinking and organisational structure”.

• Change perceived as negative

The people who perceive change as negative wish to hold on to the old way of doing

things. Employees can claim to be computer illiterate, say that they did an excellent job

before ERP system, feel uncomfortable to trust the computers, be afraid of failure and

have a common belief that their jobs are threatened by the new automated system (Welti

1999;Sumner 2000; Ross 1999). Determining who are resisting change, individuals or

17

groups, employees’ needs, values and interest may help to understand the employees’

resistance to the ERP system (Aldawani, 2001).

Management might resist the process changes ERP requires. They are ready to change

their technological platform but not the organizational processes. However,

implementing ERP means changing your business processes to fit the software not

another way around. Middle level managers feel uncomfortable with the change because

their job postings can be eliminated as decisions making is pushed down to operational

level (Ross, 1999).

Other sources for resistance are:

• not being aware of all the aspects of the change process as they have not been

involved from the beginning

• unclear strategic vision

• extensive project schedules

• modest financial return

• even higher costs exceeding the budgeted amount

• no value added to the company’s performance

• the pressure from the stakeholders’ side to provide tangible results

In order for the ERP implementation to be successful, top management must analyse

these sources of resistance and develop a strategy to overcome them. Building a user

acceptance the new system and new way of doing things is a major challenge for the

companies. A commonly used strategy to increase user acceptance is training the users

through in-house programs and courses. ERP skills are in shortage as there are a small

number of people who have a good understanding of business and ERP systems.

Organizations have to conduct training for project teams, implementers and users. Some

organizations develop key users that accordingly assist other users and so forth.

• Change perceived as positive

On other hand, there are people who are looking forward to the new system. They

perceive change as positive. The wider use of data throughout the company, access to

the data across different departments and locations, easier contacts with colleagues, task

18

enhancement possibilities and fast access to customer data increases the individual’s

insight into company’s operations and brings in satisfaction based on new opportunities

the system offers (Welti, 1999).

3.3 ERP implementation failure

In spite all the benefits implementing ERP is a risky undertaking. The truth is that due

to the behavioural and management related challenges in the implementation process

many ERP projects have been terminated. The reasons being: end-user not being ready,

resistance to change, lack of user education and training, high turnover of key

personnel, lack of communication and support documentation, the layer of consultants

in addition to pure technological problems such as software bugs and configuration

difficulties (Kumar et al 2003; Sumner 2000). In summary, several studies agree that the

biggest obstacles are people, organisational issues and change management (Chen 2001;

Gulla and Brasethvik 2000; Kumar et al 2003; Markus et al 2000). Moreover, people

challenges are considered to be more difficult to manage than the technical problems

(Kumar et al 2003; Skok and Legge 2001; Aladwani 2001).

In addition, ERP implementation usually requires an extensive level of BPR, which

means redesigning existing business processes in way that they are the best supported

by the system. The change BPR requires produces resistance from the employees side

as they see it as a threat to their job security. Many researchers (Evans 1994; Zucchi &

Edwards 1999: Marjanovic 2002) state that the major reason for failure of BPR is the

lack of attention towards the human issues. Olson (2004) lists the foremost reasons of

BPR failure from Sutcliffe’s (1999) study:

• Employee resistance to change

• Inadequate attention to employee concerns

• Inadequate and appropriate staffing

• Inadequate developer and user tools

• Mismatch of strategies used and goals

• Lack of oversight

• Failure of leadership commitment

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According to O’Leary (2000) all the risks throughout the ERP implementation cycle can

be categorised into three main groups:

• Technical

Technical risks arise largely from the information processing, for instance, problems

with software modifications, system integration, data errors, operating systems, network

capabilities et cetera.

• Business

Business risks derive from the models, artefacts and processes that are chosen for the

ERP implementation such as insufficient resources, competitor’s position in the market,

cost and benefit judgements, cost and time overruns, problems with customers and

suppliers, drop in company’s key performance indicators and similar.

• Organisational

Organisational risks occur from the people, organisational structure and environment in

which the system is implemented, for example, lack of end user and personnel training,

turnover of key personnel, cultural issues, choosing the right consultant, business

process reengineering and so forth.

Technical risks are largely related to the information processing technology and are

usually handled by the company professionals and vendors. Business and organisational

risks are the most critical and difficult ones to manage.

Olson summarised the results of the study done by Willcocks and Sykes (2000), which

analysed the sources of ERP implementation failure. The authors concluded that the

failure is driven by the need for major changes in human, cultural and organisational

relationships. The table below displays the three factors related to ERP implementation

failure.

Table 3-1: Factors in ERP implementation failure

Scenario CIO/IT Focus Typical Outcome Technological determinism Technical Failure to gain business benefits Supplier/consultant driven Disregarded Cost overruns Outdated relationships and capabilities Insufficient talent Chaos

Source: Olson D. L. (2004): Managerial Issues on Enterprise resource Planning Systems, Chapter 7, p. 113

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Technological determinism is often a scenario when the CIO is too technically focused

and IT group is developed around technical skills. ERP system is seen as a packaged

solution to organization’s all technical and business problems. This implementation

approach often results high level of resistance and rates of failure. The IT group handles

the implementation process and focuses mostly to be on time and within the budget

instead of gaining business benefits.

The supplier/consultant driven situation occurs when senior business executives direct

ERP implementation without any consultation with the CIO and IT group. Reasons

being that top management sees ERP as a strategic tool or because it lacks in trust in IT

group abilities. In this case, the project is outsourced either to ERP vendors and

consultants or application service providers. The outcome of this kind of approach is

usually considerable cost overruns.

Outdated relationships and capabilities setting arises when the CIO and IT group are not

capable to cope with the challenges of the new technologies. For instance, they lack the

technical skills but are still responsible for the ERP system. Into the bargain, external

specialists are hired to fill the caps, relationships with business users are not developed,

focus is towards minimizing the costs rather than on strategic benefits and organization

fails to utilize ERP tools. This type of scenario is the most common even in the case of

the successful ERP implementations.

3.4 Critical Success Factors

Success is multidimensional and relative to both time and objectives. Rapid

implementations, tangible business benefits and fast paybacks seem to be the rationales

to evaluate success. The study of Hong and Kim (2002) has defined the success in terms

of achievement of predetermined goals regarding cost overrun, schedule overrun,

system performance deficit and failure to achieve expected benefits. Likewise, the study

of Kumar et al (2001) had concluded that the most popularly used success criteria were

on time and within or under budget (Figure 3-1). Project success was also linked with

the realization of the key performance indicators.

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Figure 3-1: Project success criteria by Kumar et al (2001)

Source: Kumar et al (2003): An investigation of critical management issues in ERP implementation: empirical evidence from Canadian organizations. Technovation, Vol. 23, Iss. 10, p. 800

However, the implementation success depends on many other factors like people

management, organisational issues, change management, process reengineering and

training. Many researchers have studied the critical success factors in ERP

implementations both based on literature and field surveys aiming to provide guidelines

for ERP implementation practice.

For example, the recent study of Umble et al (2003) has categorised the key factors

under 10 main points:

1. Clear understanding of strategic goals

2. Commitment by top management

3. Excellent implementation project management

4. Great implementation team

5. Successful coping with technical issues

6. Organisational commitment to change

7. Extensive education and training

8. Data accuracy

9. Focused performance measures

10. Multisite issues resolved

Also, various studies (Somers and Nelson 2004; Akkermans and Helden 2002; Umble et

al 2003) make a distinction between factors, which are critical for any IS project and

which are more relevant to any ERP project. Factors that can be applied to any IS are,

for instance, clear goals and objectives, top management support and user training.

Factors that are unique to ERP projects include interdepartmental control and

communication, change management, BPR and use of vendors and consultants. In

22

addition, some researchers go beyond the traditional listing of the critical factors. For

example, Somers and Nelson (2004) have investigated the temporal importance of CSF

over the ERP project life cycle and Akkermans and Helden (2002) examined whether

these factors are interrelated with each other. The study by Parr and Shanks (2000)

examined the two types of ERP implementations, unsuccessful and successful one, to

identify which CSF are necessary in each phase of ERP implementation project. These

studies are described in more detail below.

3.4.1 A taxonomy of players and activities across the ERP project life cycle

The research paper by Somers and Nelson (2004) investigated the importance of the key

players and activities in enterprise system implementations, and when their effect is

most critical across the ERP system life cycle. Authors argue that the current literature

on enterprise systems neglects several key variables. Even though the critical success

factors of ERP implementations are well covered, the temporal importance of key

players and activities is less understood.

The study explored the following two main questions:

1. Which key players and activities are playing the important role in an

organisation’s experience with ERP implementation?

2. At which stage of the implementation process it is critical for an organisation to

introduce a key player or activity in order to achieve major benefits?

Based on the previous research literature, both academic and non-academic, Somers and

Nelson classified a number of critical success factors using Markus and Tanis (2000)

framework into key players and activities. The six- stage IT implementation model

consisting of initiation, adoption, adaptation, acceptance, routinization and infusion was

used to determine the importance of each player and activity in the implementation

process for a particular time. The literature-based importance of each player and activity

was compared to survey results of 111 organisations. Altogether, 22 players and

activities were considered to be critical for ERP implementations.

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Table 3-2: The list of CSFs by Somers and Nelson (2004) - key players and activities

Key players Key activities Top management User training and education Project champion Management of expectations Steering committee Careful selection of the appropriate package Implementation consultants Project management Project team Customization Vendor-customer partnerships Data analysis and conversion Vendor’s tools Business process reengineering Vendor support Defining the architecture Dedicating resources Change management Establishing clear goals and objectives Education of new business processes Interdepartmental communication Interdepartmental cooperation

The importance of the key players and activities across life cycle stages in the ERP

implementation process according to the academic literature is as follows:

Key players

• Top management

Sustained management support and management’s active involvement in monitoring the

progress of the project and providing directions to project teams are essential

throughout the implementation project.

• Project champion

Project champion plays a critical role in acceptance of the technology by the users and

less during its use and incorporation into the organisation.

• Steering committee

The steering committee consisting of senior management from different corporate

functions, senior project managers and system end users ensures their active

involvement and is critical for the success of the project. Their impact is highest at the

initiation, adoption, adaptation and acceptance stages a at the project life cycle.

• Implementation consultants

Companies rely on outside expertise for set-up, installation and customisation of their

software systems. However, consultants’ role declines in the last stages of the

implementation when the system becomes operational.

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• Project team

The project team’s business and technological competence determines either the success

or failure of the project. Their expertise needs to compensate the team members’ lack of

knowledge. Project team’s role is more important during the earlier stages of the

implementation and less important after post-installation.

• Vendor - customer partnerships

A close relationship between the software buyer and vendor has a positive impact on the

success of ERP project and is critical at the earlier stages of the implementation.

• Vendor’s tools

Rapid implementation technologies and programs such as business process modeling

tools, industry specific solutions, bundling server hardware with ERP software, support

services and the like can substantially reduce the cost and time of ERP implementation.

These tools provided by the vendors have a central role during adoption and adaptation

stages.

• Vendor support

Implementing an ERP system is a life-long commitment and requires continuous

investments in adding new modules and upgrading the system. Thus, vendor support,

for instance, technical assistance, emergency maintenance, updates, user training and

the similar is essential through post-implementation stages.

Key activities

• User training and education

The role of training is well covered in the management of the information systems

literature. Lacks of user training and understanding how software system is changing

the business processes have been the foremost reasons for ERP implementation failure.

Due to ERP system complexity training is essential at the acceptance stage and at the

latter stages of the life cycle.

• Management of expectations

Managing user expectations successfully is closely related to the successful

implementation of the project. Exaggerated promises of ERP systems fail to meet

employees’ expectations regardless of the positive contribution to the organisation.

Therefore, management of expectations is highly important from the initiation to

adaptation stage.

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• Careful selection of the appropriate package

Right ERP package selection determines the overall success of the project and therefore,

it should be emphasized at the initiation and adoption phases.

• Project management

Project management activities spread out throughout the project life cycle. However,

effective project management including project planning and control activities,

organisational, political and human issues and many more is critical from the initiation

to acceptance stage but less significant during routinization and infusion.

• Customisation

The amount of customisation needed to the software has to be handled at the early

stages of the implementation process. Minimal customisation brings usually better

results as it means less costs, shorter implementation time, less dependence on vendor

services such as system maintenance and upgrades, and et cetera.

• Data analysis and conversion

Timely and accurate data in a single consistent format is a fundamental requirement for

the effectiveness of ERP systems and data issues are especially critical from the

initiation to adaptation stages and less important during the system acceptance and use.

• Business process reengineering

As ERP software comes in a ready made package organisations need to adjust their

business processes to the software. Business process reengineering plays a crucial role

at the early stages of the implementation but its importance starts to decline from the

acceptance stage.

• Defining the architecture

Architectural choices and planning must be in place at initiation and adoption stage.

• Dedicating resources

Having sufficient resource available for the project is crucial to guarantee success.

Resource requirements have to be set up early in the process.

• Change management

ERP systems initiate change that causes organisational and employee resistance and

confusion. Without proper change management ERP implementations fail to

accomplish the benefits. Change management activities must be there already from the

early stages of the implementation process and continue throughout adaptation and

acceptance stages.

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• Establishing clear goals and objectives

Well-established business vision and clear goals make a foundation for effective project

implementation and are important throughout all the stages of the project life cycle.

• Education of new business processes

Business process reengineering requires managers to educate and communicate their

goals long-term perspective and general direction of the project to all the members of

organisation affected by change in order to win their support. This activity should go in

parallel with BPR and is particularly important during adoption, adaptation and

acceptance stages.

• Interdepartmental communication

Communication across departments an appropriate network and ensures that all the key

players in the project are well informed and aware of the system impact on their

responsibilities. Communication helps to reduce user resistance and has a high impact

from initiation to system acceptance.

• Interdepartmental cooperation

As ERP systems integrate various functions and business units across different locations

cooperation and involvement of all the people involved is highly advisable. Like

interdepartmental communication it is important throughout initiation to acceptance

stages.

The results of the data analysis of ERP implementations in 111 organisations showed

that the importance of players and activities in each stage of the implementation process

changes. More than 50 % of the respondents considered each player and activity to be

very important at the adoption phase. Patterns are similar for the initiation and

adaptation phase. However, the number of factors that were considered important

diminished significantly at the last stages of the project life cycle.

Table 3-3: CSF of Somers and Nelson (2004) remaining important throughout the implementation project

Any IT project Unique to ERP systems Steering committee Interdepartmental control and communication Top management support Change management Clear goals and objectives BPR User training Vendor support Use of vendor tools and consultants

27

As a conclusion, the research results suggested that the temporal importance of the

critical success factors is less understood than their overall importance. Some players

and activities that were crucial during any IT implementation could also be applied in

ERP implementations. As results, key activities and players that remained crucial

throughout the project or throughout the first four to five stages of the implementation

were steering committee, top management support, clear goals and objectives and user

training. Surprisingly, user training turned out to be vital even at the post-

implementation stages of the project in order to maximize the utility of the system.

Other key players and activities were unique to ERP systems. The most important

factors over here were interdepartmental control and communication, change

management, BPR, vendor support and use of vendor tools and consultants. Change

management and BPR had a much greater importance than expected especially during

the initiation stage. The importance of consultants did not decline after the first three

stages but their presence was also necessary at the latter stages of the implementation.

The contribution of the study was the advancement of the theory and providing a

guideline of the ERP implementation practice. The temporal perspective on the critical

success factors in ERP implementations was not only focusing on listing the critical

actors and players but investigated when their effect was most common across

implementation stages.

3.4.2 A case study of interrelations between critical success factors

The article of Akkermans and Helden (2002) had taken the list of critical success factors

of Somers and Nelson previous research (2001), ranked them by senior level managers

and applied the top ten CSF to a specific ERP implementation case study. The research

proved that the list of Somers and Nelson is helpful and appropriate in analysing and

explaining the root causes of success and failure of ERP implementation process. In

addition, the authors investigated how these CSF are interrelated in a sense that changes

in one of them influenced all the others either directly or indirectly.

28

As a research methodology the list of Somers and Nelson was used because of the

sound literature the study was underlying. Plus, the list provided an interesting mixture

of “hard” implementation aspects such as clear goals and objectives, and strong project

management, and “soft” aspects such as team competence, and interdepartmental

communication and collaboration. This list was then rated by 52 managers at the top

management level. The table below shows the ranking list.

Figure 3-2: The ranked list of CSF by Akkermans and Helden (2002)

Source: Akkermans H., Helden van K. (2002): Vicious and virtuous cycles in ERP implementation: a case study of interrelations between critical success factors. European Journal of Information Systems, Vol. 11, p. 36

Most of the success factors listed here hold for any IT implementation project but some

are more relevant to ERP implementation projects. The top ten CSF of the executives

list are summarised as follows:

• Top management support is essential for backing up ERP implementations,

especially at the early stages of such projects; otherwise, the there is little hope for it.

Middle management and other staff are as equally important but they have different

roles. However, it top management delegates all the responsibilities to technical experts,

the project failure rate is high.

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• Project team competence was not ranked high on Somers and Nelson’s list;

however, the executives who filled out the survey marked it very important. As a matter

of fact, not much research has been done about the impact of project team’s competence

on IT implementation success.

• Interdepartmental co-operation was again linked high on executives list and

low in Somers and Nelson’s original list. The explanation for such variation is that the

former one is based on the assessments by management and the latter, on literature

review. As ERP systems are to integrate various business functions, close co-operation

between these business functions are a required.

• Clear goals and objectives have long been the common knowledge that any IT

project starts with clearly defined goals and ways to achieve these, however, which with

ERP projects can be problematic to determine. Therefore, there have been suggestions

to manage ERP projects as new business ventures rather than IT projects or to employ a

path based approach to ERP implementation process. On a methodological level, this

viewpoint supports the concept of IS development.

• Project management is recommended as one approach to overcome the

complexity of hardware, software and organisational issues in ERP implementation

projects. This advice is mostly found in IT literature. However, as organisations and

projects evolve over the time, so do the project management priorities. Therefore, ERP

project managers’ skills should include some level of improvisation.

• Interdepartmental communication and its importance is also well known in

the IT literature. Similar to interdepartmental co-operation as mentioned above

interdepartmental communication across functional boundaries is particularly important

in ERP context because the main aim of ERP systems is to integrate the business

processes.

• Management of expectations stays important throughout all the stages of ERP

life cycle and it has been long known as one of the success factors on IT

implementations in general.

• Project champion has often been linked to the success of technological

innovations as that person performs the crucial functions of transformational leadership,

facilitation and marketing the project to end-users. Usually, he or she is from the senior

management level, either CEO, CIO or like, thus, that person possesses the authority to

make substantial organisational changes happen.

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• Vendor support, on one side, cannot be delegated to an outside party as a

strong reliance on an outside consultant or vendor has a negative impact on project

success. On the other hand, when the company lacks the required technical and

transformational skills in-house, it is not wise to manage such undertaking on its own.

Therefore, the project success is positively correlated with the fir of IT vendors

employed.

• Careful package selection has to be made at the early stage of ERP

implementation; otherwise, a company faces either a misfit between software package,

business processes and strategy, or a need for major modifications. An organisation is to

fit to a system not another way around.

The aim of the article was not only to test the Somers and Nelsons CSF list but also to

extend it to a richer framework that would describe the interrelations between individual

CSF. For this purpose, a cases study research was employed.

The two following research questions were formed:

1. Can the Somers and Nelsons list be helpful to understand the root causes of ERP

implementation success and failure?

2. If so, in what way can the Somers and Nelsons CSF be interrelated causally?

The case analysis demonstrated that the list of Somers and Nelson is sufficient for

explaining the root causes for ERP implementation success and failure. It also showed

that all the CSF were interrelated with each other either directly or indirectly and,

moreover, all CFS influenced each other in the same direction leading to a cycle of good

or poor performance.

As the goal of ERP systems is to integrate different business functions, the authors of

the current article concluded that the interdepartmental co-operation and communication

between the project team members is the core of the ERP implementation process.

These two CSF don’t only go hand in hand but also reinforce each other to the same

direction.

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The results also contained some additional exploratory thoughts of the authors:

1) Authors speculated that intensive communication between the representatives of

various user groups is directly linked to the success of the implementation

project.

2) Additionally, the authors proposed that the presence and attitudes of key

stakeholders such as (a) top management, (b) project team, (c) project

management, (d) project champion and (e) software vendor determine the

implementation success. Even the highly competent project team with superior

communication and collaboration practices will not perform at its best whether

there is a lack in presence, in attitude, or in both of these key stakeholders.

3) The use of (d) consultants, however, is doubtful. Earlier researches have

concluded that the extensive use of outside consultants is negatively correlated

with the implementation success and that the changes required for the successful

implementation are too important to delegate to a third party. This also explains

why this factor is lined very low in Somers and Nelsons list.

3) The authors claimed that it is possible to reverse the under-performance of an

ERP implementation to a successful one by simultaneous and reinforcing

changes in presence or attitudes in these stakeholders.

The contribution of the research was that it went beyond testing the existing CSF list of

Somers and Nelson and studied the interrelations between the individual CSFs.

Furthermore, the study contained supplementary thoughts and propositions concerning

the key stakeholders involved in ERP implementation projects.

3.4.3 A model of ERP project implementation

The research paper by Parr and Shanks (2000) presented the analysis of two types of

ERP implementations within the same organisation, unsuccessful and later a successful

one, with the aim to determine which CSF are necessary within each phase of ERP

32

implementation. The study highlighted the differences and similarities between these

two cases, and also provided explanations to these differences with a particular

emphasis on the successful case.

Project phase model (PPM) of ERP implementation was created consisting of three

phases such as planning, project, and enhancement. In addition, the project phase was

divided into five sub phases: set-up, re-engineering, design, configuration and testing,

and installation. PPM differed from previous models with centre of attention being on

the individual phases of the implementation project rather than on the project as a phase

in the implementation process. The CSF identified by the same author in earlier

research (Parr, 1999) were used to supplement this model. The aim was to investigate

the relationship between PPM and CSF.

The following research questions were formed:

1. Which CSF is necessary in which phase?

2. What are the differences in relationship between the phases of PPM and CSF

when comparing a successful case with an unsuccessful one?

3. How are these differences explained?

PPM provided a research framework for interview questions. Interviews were

conducted with various stakeholders such as system managers, project managers,

project team members, business analysts, consultants and system users in order to cover

the possible viewpoints of many key players. The use of multiple sources of data and

multiple viewpoints as well as the cases of unsuccessful and successful implementations

were selected to in order to illustrate the transition from failure to success.

Both cases were considered to have brought considerable business benefits to the

organisation, while one, Oilco, was a complete failure and another, Exploreco, a

successful one in a project sense. However, these two cases differed in three important

aspects. Firstly, Oilco case is much larger in scope than Exploreco’s, secondly, Oilco

case included an earlier version of ERP system, and thirdly, even though these

companies were at different geographical locations, the implementation project of

Exploreco was driven from the Oilco head office.

33

Case findings- similarities and differences

Figure 3-3: The importance each CSF in PPM phases, case study findings

Source: Parr A., Shanks G. (2000): A model of ERP project implementation. Journal of Information

Technology, Vol. 15, p. 299

Similarities

• Planning phase was viewed as the most important phase by the both companies.

The CSF during this phase were: management support, project champion,

commitment to change and vanilla ERP implementation approach.

• Also, the installation phase was very similar in both cases and important factors

here were: management support, balanced team, commitment to change and

having the best people available for the project.

• The enhancement phase, which included system repair, continuous improvement

and organisation transformation didn’t receive much signification in both cases.

34

Differences

• For the unsuccessful company, Oilco, only the management support was

important throughout the phases of PPM. On the contrary, for the successful

company, Exploreco, seven CSF were considered to be essential. These were:

management support, champion, commitment to change, vanilla ERP,

empowered decision makers, best people full-time, deliverable dates and clear

definition of scope and goals.

• Overall, CSF in successful case were considered to be more important than in

unsuccessful case.

• The strategic differences were also present as Exploreco had the advantage of

learning from Oilco’s experience.

• In Exploreco’s case, the selected project champion was allocated to the project

full time and for the life of the project, and was a member of the board of the

company. Whereas, in Oilco this person was not officially recognised and his or

her role kept changing over time.

• Although in both cases in the set up phase balanced team and definition of scope

and goals were recognised, Exploreco had a strong focus on additional factors

such as implementing vanilla ERP and setting clear delivery dates.

• Re-engineering and configuration and testing phase differed the most. For

Exploreco, all CSF placed an equal weight on each stage of the project. On the

contrary, Oilco placed little effort on these. Additionally, in Exploreco’s case

management spent remarkable time on communicating the benefits, changes and

status reports to employees. Whereas, in Oilco management activity was more

remote and included travelling around and making presentations.

• The consistency and presence of CSF throughout all phases of the project in

both companies were dissimilar. Oilco’ s commitment to project was slow,

which can be explained by the fact that it was lengthy project. Exploreco had

many advantages over Oilco as it was smaller, self-contained project, which was

to replace the existing unpopular system.

Authors provided explanations to these similarities and differences between the

successful and unsuccessful cases. Mostly, these are related to organisational learning

and the scope and complexity of each project. The organisational learning of the

35

unsuccessful project was exploited at the ERP implementation in Exploreco case. The

project was piloted from the Oilco’s head office, required minimal customisation,

established solid deadlines and appointed a senior broad member as a project champion.

Moreover, learning from the past experience, system training was provided by the in-

house experts who were committed to the new ERP system rather than by the external

consultants or senior managers. In addition, the CSF were identified and their use was

ensured at each phase of the implementation.

The scope and complexity in Oilco’s case was much larger than in Exploreco’s case. In

an earlier research authors (Parr et al 2000) had categorised ERP implementations to

three main categories: comprehensive, middle level and vanilla in accordance with their

characteristics. In this scheme, Oilco was a comprehensive implementation, which is

large and complex in scope and contains a high level of risk and probability of failure.

On the contrary, Exploreco was a vanilla implementation, which are slighter in scope

and involve less risk and smaller projects. In addition, Oilco’s implementation also

involved an earlier version of the ERP software.

The results of the study showed that:

1) The large implementation projects are of high risk and are challenging to

implement within time and on budget. Instead, ERP implementations should be

divided into smaller, simpler projects identified as vanilla implementations.

2) In contrast with the previous studies of Ross (1999) and Markus and Tanis

(1999), no significant post-implementation phases were recognized. The

enhancement phase was not considered to be important neither in the

unsuccessful nor in the successful ERP implementation.

3) An experienced project champion with clearly defined roles and responsibilities

is essential for successful project.

4) The PPM together with CSF provides a guideline for the ERP implementation

projects for practitioners and a foundation for further empirical research for

academic scholars.

The contribution of the study was that it focused on the implementation project itself

and linked it to CSF. The research findings emphasise that ERP implementations should

focus more on the planning phase and ensure the utilisation of all CSF across all the

36

phases of ERP implementations. Authors also developed a model of successful ERP

project implementation.

3.5 Chapter summary

Major business drivers behind ERP implementations are the hope that they will improve

the firm’s performance and productivity, provide competitive advantage and satisfy

customer demands. However, these implementations are usually large, complex

projects, involving considerable amount of human and other resources, integrating

different interest groups, managing the time pressure and facing other challenges. In

addition, the firms adopting and ERP go through an initial period when they realise only

few benefits. Also, deciding on going ERP launches an inevitable change process,

which accordingly brings in behavioural and managerial challenges such as user

resistance, turnover of key personnel, resistance to change, lack of training and so forth.

Training of user personnel is critical in making ERP systems work.

Success is measured in different forms. On time and within the budget seem to be the

rationales to evaluate success. However, the fact is that the failure rate for ERP

implementations remains high. Reasons being from pure technical problems to business

and operational risks, which are the most critical and difficult ones to manage. Many

researches have investigated the key factors in ERP implementations in order to provide

the guidelines for ERP implementation practice and increase the probability of success.

A number of scholars have gone beyond just listing the CSF but have studied their

significance at different stages in the ERP project life cycle, the interrelation between

these CSF, the importance of CSF in successful and unsuccessful implementations and

so forth.

Somers and Nelson (2004) identified 22 CSF divided into key players and activities that

are important in an ERP implementation process, and studied their temporal importance

across ERP implementation life cycle. The research findings proved that the importance

of each CSF does change within the implementation process and some them remain

crucial throughout or almost throughout the implementation process. Similarly, Parr and

Shanks (2000) observed the importance CSF in each stage of ERP implementation

37

project according to a different model and notified the similarities and differences

between the successful and unsuccessful implementations. The results of the study

showed that in the successful project CSF were found to be important and their use was

ensured throughout the project whereas, in the unsuccessful project CSF were

considered to be less important. Additionally, authors concluded that vanilla

implementations tend to have higher success rate.

Akkermans and Helden (2002) proved that the CSF list of Somers and Nelson was

sufficient to explain the root causes of ERP success or failure. The theoretical list of

Somers and Nelson was then ranked by the high-level managers who had been involved

in such projects and the results showed that these differed. According to authors, the

ranked list of executives provides an interesting mixture of hard implementation aspects

such as clear goals and objectives and strong project management, and soft aspects like

team competence and interdepartmental collaboration and communication. Akkermans

and Helden also Somers and Nelson agreed that most of the CSF would hold for any IT

project whereas some are more important to ERP systems in particular. The ones that

can be related to any IT project are: steering committee, top management support, clear

goals and objectives and user training. The ones unique to ERP systems are:

interdepartmental control and communication, change management, BPR, vendor

support, use of vendor tools and consultants.

In addition, Akkermans and Helden demonstrated that these CSF don’t stand alone but

are interrelated with each other, directly or indirectly, leading to a cycle of good or bad

performance. The article concluded that the core of ERP implementation process is

interdepartmental communication and co-operation between the project team members.

Authors speculate that the intensive communication between the representatives of

different departments is directly linked to the success of the project. Furthermore, the

authors proposed supplementary thoughts that superior collaboration and

communication are not enough for the project to be successful but it depends also from

the presence and attitudes of the key stakeholders such as top management, project

team, project management, project champion, software vendor and consultants. The use

consultants, however, was ranked very low both in the managers rated list and in the

Somers and Nelson list. Authors claim that it is possible to save the “sinking” ERP

project and reverse the under-performing ERP project to a successful one by

38

simultaneous and reinforcing changes in the presence and attitudes of these

stakeholders. The perception of various interest groups is discussed in more detail in

next chapter.

39

Table 3-4: The summary table of articles on CSFs

Find

ings

The

impo

rtanc

e of

thes

e C

SF d

oes c

hang

e in

eac

h st

age

of th

e im

plem

enta

tion

proc

ess.

Som

e of

thes

e ar

e cr

ucia

l alm

ost o

r thr

ough

out t

he p

roje

ct.

Any

IT p

roje

ct re

late

d: st

eerin

g co

mm

ittee

, top

m

anag

emen

t sup

port,

cle

ar g

oals

and

obj

ectiv

es, a

nd

user

trai

ning

. U

niqu

e to

ERP

syst

ems:

inte

rdep

artm

enta

l con

trol

and

com

mun

icat

ion,

cha

nge

man

agem

ent,

BPR

, ve

ndor

supp

ort,

use

of v

endo

r too

ls a

nd c

onsu

ltant

s.

The

list p

rovi

ded

by S

omer

s and

Nel

son

is su

ffic

ient

to

exp

lain

the

root

cau

ses o

f suc

cess

or f

ailu

re.

Indi

vidu

al C

SF a

re in

terr

elat

ed w

ith e

ach

othe

r and

, m

oreo

ver,

all C

SF in

fluen

ce e

ach

othe

r to

the

sam

e di

rect

ion.

Inte

rdep

artm

enta

l co-

oper

atio

n an

d co

mm

unic

atio

n ar

e th

e co

re o

f the

ER

P im

plem

enta

tion

proc

ess.

Th

e pr

esen

ce a

nd a

ttitu

des o

f key

stak

ehol

ders

such

as

top

man

agem

ent,

proj

ect t

eam

, pro

ject

m

anag

emen

t, pr

ojec

t cha

mpi

on, s

oftw

are

vend

or a

nd

cons

ulta

nts d

eter

min

e th

e im

plem

enta

tion

succ

ess.

It w

as p

rove

n th

at p

ayin

g at

tent

ion

to C

SF in

crea

ses

the

succ

ess r

ate

for E

RP

impl

emen

tatio

ns. L

arge

pr

ojec

ts a

re o

f a h

igh

risk

and

Van

illa

impl

emen

tatio

ns sh

ould

be

pref

erre

d. In

con

trast

with

ot

her s

tudi

es, n

o si

gnifi

cant

pos

t-im

plem

enta

tion

phas

es w

ere

reco

gnis

ed.

Mai

n po

ints

CSF

list

(22

fact

ors)

: K

ey p

laye

rs: t

op m

anag

emen

t, pr

ojec

t cha

mpi

on, s

teer

ing

com

mitt

ee, i

mpl

emen

tatio

n co

nsul

tant

s, pr

ojec

t tea

m,

vend

or-c

usto

mer

par

tner

ship

s, ve

ndor

tool

s and

ven

dor

supp

ort.

Key

act

iviti

es: u

ser t

rain

ing

and

educ

atio

n, m

anag

emen

t of

expe

ctat

ions

, car

eful

softw

are

pack

age

sele

ctio

n, p

roje

ct

man

agem

ent,

cust

omis

atio

n, d

ata

anal

ysis

and

con

vers

ion,

B

PR, d

efin

ing

the

arch

itect

ure,

ded

icat

ing

reso

urce

s, ch

ange

man

agem

ent,

clea

r goa

ls a

nd o

bjec

tives

, edu

catio

n of

new

BP,

inte

rdep

artm

enta

l com

mun

icat

ion

and

colla

bora

tion.

Top

10 C

SF ra

nkin

g lis

t rat

ed b

y to

p m

anag

emen

t lev

el

man

ager

s:

1.

Top

man

agem

ent s

uppo

rt 2.

Pr

ojec

t tea

m c

ompe

tenc

e 3.

In

terd

epar

tmen

tal c

o-op

erat

ion

4.

Cle

ar g

oals

and

obj

ectiv

es

5.

Proj

ect m

anag

emen

t 6.

In

terd

epar

tmen

tal c

omm

unic

atio

n 7.

M

anag

emen

t of e

xpec

tatio

ns

8.

Proj

ect c

ham

pion

9.

V

endo

r sup

port

10.

Car

eful

pac

kage

sele

ctio

n

Proj

ect P

hase

Mod

el (P

PM) c

onsi

stin

g of

thre

e ph

ases

: pl

anni

ng, p

roje

ct, a

nd e

nhan

cem

ent.

In

terv

iew

s wer

e co

nduc

ted

with

seve

ral s

take

hold

ers s

uch

as sy

stem

man

ager

s, pr

ojec

t man

ager

s, pr

ojec

t tea

m

mem

bers

, bus

ines

s ana

lyst

s, co

nsul

tant

s and

syst

em u

sers

. Si

mila

ritie

s and

diff

eren

ces b

ased

on

two

case

s: su

cces

sful

on

e an

d un

succ

essf

ul o

ne.

Aim

To id

entif

y w

hich

are

the

key

play

ers a

nd a

ctiv

ities

in a

n ER

P im

plem

enta

tion

proc

ess

and

at w

hich

stag

e of

ER

P lif

e cy

cle

thei

r eff

ect i

s mos

t cr

itica

l.

To st

udy

whe

ther

the

list

prov

ided

by

Som

ers a

nd

Nel

son

is u

sefu

l to

expl

ain

the

root

cau

ses o

f suc

cess

or

failu

re o

f ER

P im

plem

enta

tion

and

whe

ther

thes

e C

SF a

re

inte

rrel

ated

with

eac

h ot

her.

To d

eter

min

e w

hich

CSF

are

ne

cess

ary

with

in e

ach

phas

e of

ER

P im

plem

enta

tion

by

com

parin

g an

uns

ucce

ssfu

l and

a

succ

essf

ul im

plem

enta

tion.

Aut

hors

Som

ers &

N

elso

n (2

001)

Akk

erm

ans

& H

elde

n (2

002)

Parr

&

Shan

ks

(200

0)

40

4 Managing human resources in the ERP implementation process

The improvement of enterprise’s performance relies on the success of the implemented

reengineering and integration projects. Usually, these projects are complex in nature and

using human resources in appropriate manner is a key for a success in such projects

(Hawa et al 2002; May and Kettelhut 1996). Many other researchers (Sumner 2000;

Welti 1999; Holland et al 1999) have listed people issues in their critical success factors

recommendations when dealing with ERP projects. Therefore, it is important to

understand the different parties involved in such projects. The human activity issues and

problems that companies are encountering should be looked from the different sides of

the staff, internal and external experts, system professionals, management, vendors,

users and other people involved in such projects. Also the skills people posses influence

the outcome of the project. Counterattacking the major opinion, some studies have

shown that the human resources factor does not have a significant impact on the project

success. These rather unexpected results have been largely criticized by the scholars.

This chapter elaborates the issue of the key stakeholders, analyses their role and main

issues of concerns in ERP implementation projects, examines the HR requirements for

successful projects and discusses the importance of HR from two different angles

whether HR factors have a significant impact on the project success or not.

• The role of key stakeholders/parties

• HR requirements for a successful project

• Why it pays to pay attention to human issues

• HR factors have a moderate impact on the project success

4.1 Key stakeholders involved in an ERP implementation project

The study by Skok and Legge (2002) dealt with the issue of the key stakeholders and

identified four main parties involved in ERP implementation projects: management,

users, developers and consultants. Differently from others this research derived its

results by using the stakeholder analysis to tackle the CSF. The research framework of

the study was based on the human activity system diagram, which illustrated these four

41

key stakeholders involved in any ERP project and examined the interrelations between

them. Areas of conflicts were studies as possible sources of project failure.

Additionally, the study investigated the key stakeholders power to influence the

outcome of ERP project and their strategies to gain support for the project.

Figure 4-1: The human activity system diagram

Source: Skok W., Legge M. (2002): Evaluating enterprise resource planning systems using an interpretive approach. Knowledge and Process Management, Vol. 9, No. 2, p.74

The results of the study are summarised as follows:

• Management

Incentives

Management is concerned retaining the key people with broad range of skills and

specific knowledge. The retaining of employees is closely related to the company’s

compensation policy through both, monetary and non-monetary awards such as bonuses

and salary increases, recognition and career development.

Top management and stakeholders

The involvement of top management from the start and support from the other key

players such as stakeholders can reduce the major challenges towards the change. The

42

role of the top management is to convey a message that ERP is not another technology

but a business project.

Customers

The study shows that customers need to be informed on the upcoming changes ERP

brings to give them confidence in the implementation plans and to avoid the

unpredictable and unfavourable behaviour from their side.

• Consultants

Consultants have a very important role of influencing ERP implementations, however, a

close monitoring and control of their involvement is required. Conflicts with consultants

occurred with the following matters.

Knowledge transfer

Consultants may be reluctant to transfer their knowledge to client company’s

employees. It has been also felt that the power and influence is too great and that they

don’t provide solutions for company’s problems.

Motivation

Consultants are involved almost throughout the project life cycle and their role is to

help to achieve the business benefits. Monetary incentives, for example, bonuses

facilitate keeping up their motivation.

Communication

Communication problems with consultants mainly took place because consultants used

a different language, which companies’ management and staff didn’t understand, their

documentation of the project process didn’t match companies needs and some of the

consultants were not able to communicate with the people at lower levels.

Agenda differences

Another conflict point with consultants that came out was that they wanted to get rid of

their current project as quickly as possible and to move on to the next client. Thus,

resulting the low commitment. In addition, many consultants seemed to lack the

required business and technical skills.

Influence of consultants

The power and influence of consultants may grow too big not only because of their ERP

knowledge and expertise but also because the management of the company is too busy

to come up with new ideas. Consequently, consultants generate the ideas and take

control over the project.

43

Contracts

It is important to have the contractual agreements with consultants in order when the

problems occur. For instance, inexperienced experts are not being tolerated, consultants

are made responsible for the promised results and companies are demanding more value

for their money.

• Developers

Developers are the staff, either out-sourced or in-house, designing the configurations of

the system.

Performance

They are people with specific technical skills who have no realistic understanding of a

marketplace, economics and competition.

Skills shortage

It is difficult to acquire people with these skills and to retain them because they

generally don’t have any loyalty to the company but are more interested in their

personal career development.

Communication

They might not have the same values or ways of operating as the business managers

mainly because they tend to be younger people. However, as the ERP packages are

technically complex the company needs the staff with these skills. In addition, these

young people are more accustomed to work within the rapidly changing environment.

• Users

As implementing ERP system means new way of doing things and cutting down job

positions. Users experience a huge range of emotions such as anger, fear and denial as

resistance to change. People want to know what will happen specifically to their jobs

not about the long-term vision of the company.

International dimension

Cultural differences are present with ERP implementations as people in deferent

countries have different ways of working.

Sharing culture

Employees of one department might be unwilling to share their knowledge and

information with another department.

44

Training

Training the users while providing support for the job changes help the staff to

overcome their attitudes toward the corporate and cultural changes due to ERP

implementation.

Super users

The key benefit of training super users among the employees is that they accordingly

train other end users, which helps to improve the communication and reduces resistance

to change.

The results expose that people with the right business and IT skills are essential to the

success of the project. However, the fact is that companies are losing more key staff

than expected at the end of the project. Therefore, substantial bonuses and other

incentives are essential to retain the talent in the organisation during the post-

implementation stage. The major conflict identified was the use of the external

consultants and developers. Companies tend to rely too much on external help during

the implementations whereas the competence and motivation of the consultants and

developers is questionable. Despite of the problems associated with the use of

consultants their knowledge and skills are still needed for the companies but it is critical

to have the strategies and agreements in place to manage them. Other main difficulties

with the ERP implementations are encountered with the change management. Cultural

and process changes have a destructive impact on employee attitudes and these

behavioural problems are more challenging to manage than the technical difficulties that

they come across with.

This study by Skok and Legge provided some insights into the different perspectives of

the four important stakeholders involved in an ERP project. The contribution of the

study was that the key parties involved in the project were used to tackle the list of CSF

by Bancroft (1998). The particular emphasis was made in the areas of staff retention,

conflicts in ERP projects, managing consultants, and cultural and business process

changes.

45

4.2 Human resources requirements for a successful project

Several studies have showed that it is essential to have people with right set of business

and IT skills to assure the success of a project (Skok and Legge 2002; Wateridge 1997).

Hawa et al (2002) pointed out that the improvement of an enterprise relies on the

success of software engineering projects, which respectively depends on the human

resources. The paper analysed the basic human requirements for the successful project

concentrating on the know-how, profiles and roles of the project team members, and the

ways of improving those. Focusing on the human competences has a direct impact on

the outcome of the project.

Authors emphasised that enterprise wide projects require the coordination,

comprehension and mutual acceptance of the multidisciplinary teams, which contain

management, technical personnel, end-users, consultants, vendors and others. This

posed the human factor as a key point in any enterprise improvement projects.

Hawa et al identified three groups of people involved in enterprise re-engineering

projects:

• Promoters are those who make the proposal for the improvement and set up

resources to do so.

• Inhabitants are those who know what they need and where the improvements

have to be made.

• Architects are those with the skills needed for the improvements and who can

consult inhabitants and promoters about each improvement.

Traditionally, the usual approaches in the enterprise are that:

1. the promoters are management, inhabitants are staff and architects are external

consultants.

2. the promoters are management, inhabitants are staff and architects are technical

staff of the enterprise.

None of these approaches fulfils all the expectations of re-engineering projects. The use

of external consultants creates a dependency toward them, as when the project is

finished and consultants have left, it is difficult to maintain and upgrade the outputs as

required expertise is missing. The use of in-house technical personnel brings limited

46

results as well because they might be experts in their field but they have no idea in the

development of such projects.

When talking about the human competences required to the project, the study states that

there have to be two types of different and elementary know-how such as operation and

engineering ones.

• Engineering know-how deals with the issues of methodology and architecture

of the development project.

• Operation know-how contains the issues related with the enterprise.

Only the existence of these two types of know-how is not sufficient condition for the

success of the project but these experts have to co-operate closely with each other. The

ideal solution is achieved when the same person has the both types of knowledge and

can smoothly run between the operation and engineering environments. However, in

reality it is difficult to achieve.

As a result, the study concluded that humans are a critical factor in enterprise daily life

and thus, have an important role in enterprise improving projects. The analysis of

project-necessary know-how, project teams’ profiles and roles has led to the definition

of guidelines that is to contribute to the improvement of the EEI projects. For further

research, the emphasis of the project team structure should not only be made in terms of

know-how, profiles and roles but also in terms of human competences and skills. In

addition, knowledge management issue should be addressed within an EEI project.

Welti (1999) considers the following HR requirements to be important for a successful

project:

• Availability

It is essential to have sufficient human resources available for the project. Engaging

full-time project members guarantees continuity and progress.

• Expertise

In the case if there is a lack of expertise in-house, companies can employ new

people or delegate the workload to external consultants. Recruiting new people

brings a valuable input for the company as they look differently at the processes and

47

procedures companies have, plus, contribute new ideas and ways of working. Hiring

consultants is an expensive solution but their expertise can accelerate ongoing of the

project. The major drawback is that they hardly transfer any of their knowledge to

employees. At the same time, without internal know-how companies are dependent

of the external help.

• Quality

The success of the project depends largely on the quality of the project members and

therefore, the best human resources must be made available for the project. The

project management team members have to be skilled individuals, capable, qualified

and with high learning potentials because of the complexity and high standard of the

project. The project management has to have authority and control over all the

aspects of the project, to be able to act quickly, effectively and independently on

project problems without constraints from the organisation side. The project leaders

have to have effective leadership skills such as clarity of vision, credible

communication and interpersonal skills, sincerity, self-mastery and high levels of

motivation and physical energy (Stewart et al, 2000). The stronger it is the faster

and more successful is the implementation of the project. In addition, the

improvement of the quality and co-operation of the teams can be improved through

education and training.

• Composition of teams

The composition of project teams with competent and skilful project team members

and external consultants influences directly the output of the project. Welti (1999)

recommends structuring the project team including a project leader, project

members and consultants.

• Trust

The relationship of trust has to be established among the project team members,

steering committee and consulting company to ensure success of the project. The

projects were more difficult to implement when distrust existed among the project

team members. Close personal communication among the team members, regular

meetings, honest and open information policy, good coaching and support by the

48

project leader and project manager, allocation of responsibility to project members

and giving incentives are the measures that help to build up trust.

The study of Wateridge (1997) indicated that project managers play a key role in

developing and implementing successful IS/IT project and by acquiring and applying

certain skills they can make these projects successful. This paper investigated the key

skills that project managers need to possess to manage the projects successfully and

which skills are more important than others.

Many researches have been done regarding the skills required by the project manager.

Wateridge had made an extensive review on them and summarised the results in the

following table.

Figure 4-2: A summary table of skills required by the project manager

Source: Wateridge J. (1997): Training for IS/IT project managers: a way forward. International Journal of Project Management, Vol. 15, No. 5, p. 284

Leadership appeared to be the most important skill identified by many researches. It has

been thought that technical skills are essential to possess but the summarised table

shows different results. Technical skills are necessary to have but their significance is

less important in project management as the technical expertise is not the primary

concern of the project managers unless they want to enhance their credibility in the eyes

of technical team members. Inter-personal and communication skills have higher

importance. Nowadays, the trend is toward people management, which involves

49

observation, listening, motivating teams towards project success, management of

conflict, delegation, understanding, empathy, patience and many other skills and

qualities. Administrative tasks such as planning and controlling are ranked high as well.

Furthermore, these skills are often mentioned in the critical success factors lists.

People have seen by many authors as key contributors to the success and failure of the

projects. Very often, projects managers need to lead, manage and communicate with the

large number of stakeholders, technicians, sponsors and users, and it is important to

satisfy all these interested parties and deliver benefits to the client and organisation

(Wateridge, 1997).

The article also brought out that the means to become better project manager is not only

learning through experience, instead, skills can be learned by reading, seminars,

schooling and workshops. Learning only through experience will take a long time.

Therefore, training is essential to accelerate the learning process. In addition,

professional development programs need to be in place and project managers must

develop their skills and competences throughout their career. Furthermore, the author

suggested that a great emphasis needs to be put on people management skills in winning

over users and other stakeholders.

The contribution of the study was reviewing the previous researches done on the topic

and recognising the trend sifting towards people management. The author also

suggested different methods in making an effective project manager even better.

4.3 Why it pays to pay attention to people

Experts estimate that only 30 –35% of the change and re-engineering projects initiated

are successful. The article by May and Kettelhut (1996) as many others suggested that

the reason why large number of re-engineering projects fail is because management is

paying to little attention to human factors. They illustrated the implementation issues in

the context of change with the help of a case study and finally, provided a list of

recommendations that have to be taken into account with human factors to increase the

probability of success in reengineering projects.

50

The viewpoint of the authors, which was supported by previous studies, was that re-

engineering projects do not offer positive incentives to most employees and employees

generally do not have the chance to influence the decisions that affect them. Moreover,

just the word re-engineering causes anxiety and leaves employees with concern about

their future. If management is not paying attention to employee issues, the project is

most likely to fail.

Identifying the human issues

According to the authors, successful implementation of the re-engineering projects

requires planning, allocation of resources, top management support and organisational

commitment. One research argues that the implementation has to address the employees

and re-engineering projects should be used to increase the desirability of firm’s products

or services not to eliminate jobs. This is one way to retain employee morale and loyalty.

The human issues that emerged from this case study and that are also covered in

academic literature were as follows:

• Employees lost their sense of identity

• Job functions changed

• The re-engineering project generated anger and frustration

• The employee skills had to be upgraded

• Jobs were eliminated

• Distribution of work has changed

• Changes led to a fear of criticism on individual’s performance

• Under pressure individuals may panic

Experts suggest that well planned re-engineering projects bring the major benefits to the

organisation. The authors proposed a number of steps that implementation caused

problems could be avoided.

1) Conduct an identity audit

Companies should investigate what are their employees believe to be central

about the company they work for before undertaking major reforms. Such as

identity audit, for instance in this case study, would have uncovered the

51

employees believes about their roles, the importance of their visibility in the

process and their assumptions about promotions.

2) Establish ground rules

According to author humans do not resist change as per se but the way they are

treated and the roles they play in the change effort. The resistance to change is

caused by the employees’ feelings of loss and ambiguity.

Change usually involves learning of new skills, knowledge and expertise.

Individuals need to feel competent and continuously develop their competences.

However, the re-engineering projects often place people in positions in which

they lack the skills needed.

Open communication and collaboration are essential as these to clarify

expectations and reduce ambiguity, and build acceptance and commitment.

The implementation process would be much smoother, it all the changes would

not be implemented simultaneously.

3) Define a framework for participation

There is extensive research done on the value of participation. When the

employees are involved already at the early stage of the major change process,

the quality of solutions is increased, the employees show greater commitment

and acceptance, conflicts are reduced and the likelihood of smooth

implementation is greater.

The number of conclusions drawn from this study were the following: it is easier to

specify reasons for re-engineering processes than to gain employees acceptance and to

implement desired changes, early involvement and participation will increase the

employees ownership of the new process, attention to the basic principles of change

management makes the implementation easier, employee fears that jobs will be

eliminated have to be addressed, and most of the projects fail because job losses create

long-term problems. To insure the success of the project and minimise problems there

52

has to be participation in the project definition and implementation by the people of

involved organisations.

To summarise, this article analysed the presence and the potential impact of the human

issues related to the major re-engineering projects. In one word, in order to success in

re-engineering or any MIS project, human needs have to be addressed. Still, most

published articles on re-engineering deal with the factors that focus on improving the

customer response time, reducing market entry time, improving organisational

processes and achieving the benefits.

4.4 Factors influencing the project success: the impact of HRM

The study by Belout and Gauvreau (2004) challenged the widely accepted opinion that

human resources determine the failure or success of the project. The authors claimed in

their research that although there is a clear link between the project success and the

human resources factor, this factor does not have a significant impact on the project’s

success. The results of the study also showed that the relationship between the critical

success factors and project success varies according to project life cycle changes.

However, many academics still agree that HRM is one of the most important element to

the project success. An early study by Pinto and Prescott (1988) contradicted this

viewpoint. They tested the changes in the importance of ten CSF across four stages of

the project life cycle and concluded that the human resources factor has minor impact to

project success. Not surprisingly, these results were severely criticised and further

researches on the matter were suggested. The aim of Belout’s and Gauvreau’s paper was

to retest Pinto’s and Prescott’s conclusions and to examine the issues of validity of the

measures used in their study. The objectives of the authors were twofold: first, to

address the lack of empirical data on CSF and second, to investigate the impact of life

cycle stages on the relationship between CSF and project success. Literature review on

the project management revealed that most models on the project success were based on

theory rather than on empirical findings.

53

The research framework included the ten independent variables, which presented CSFs

and three moderating variables such as project life cycle, project organisational structure

and project activity sector. In order to determine the importance of human resources in

the organisations and retest the impact of CSF on project success, the authors proposed

their first hypothesis:

H1: The personnel factor will have a significant impact on the project success.

The effect of different life cycle stages on CSF has long been investigated by numerous

academics and similarly, the second hypothesis tested the effect of CSF across project

life cycle changes:

H2: The relationship between the independent variables and project success in the

model will be affected by the four project life cycle stages.

In addition, authors decided to investigate the impact of two other variables such as

project structure and project activity sector, which they though to affect the relationship

between CSF and project success. The third hypothesis was therefore:

H3: Project structure has a moderating effect on the relationship between the

independent variables and project success.

The authors also proposed that the project activity sector, for instance, business area or

industrial sector, which has been identified in the literature as critical factor affects the

success of a project. One research notified that the environment has a significant impact

on the project and that there is a clear distinction between the projects that fail because

of external factors or management mistakes. Thus, the fourth hypothesis was as follows:

H4: Project activity sectors will have a moderating effect on the relationship between

the independent variables and project success.

54

Figure 4-3: The proposed model of A. Belout and C. Gauvreau (2004)

Source: Belout A., Gauvreau C. (2004): Factors influencing project success: the impact of human resource management. International Journal of Project Management, Vol. 22, p. 3

The results of the study show that even though there was a clear link between the

“personnel” factor and project success, this factor did not have a considerable effect on

the success of the project. Thus, the first hypothesis was rejected. This finding

contradicts the academic literature that suggests that people are key factor to

organisational success. Qualified and motivated personnel and effective people

management have a significant impact on the project result as most project failures are

related to human issues. Belout and Gauvreau justified that it is difficult to measure the

impacts of HRM on organisational success. Currently, numerous studies investigate the

measurement of the impact of the personnel management on the organisations and

projects effectiveness. However, because of the diffuse nature of HRM, ambiguity of

55

HR objectives and the difficulty in interpreting the results of an HR practice it is

difficult to measure the impact of HRM on organisational success. Moreover, it is hard

determine a clear link between an HR department’s actions and tangible results in terms

of their impact on a specific project.

The results confirmed that the relationships between the critical success factors and

project success vary according to the project life cycle stages. Surprisingly, the

personnel factor was not correlated with the project success in the planning phase

although most of the HR practices are carried out in this stage of the project. For

instance, allocating resources is in stage is crucial for making the project a success.

From this point of view, it raises a question about the importance of traditional HRM

practices in a project-based environment and how it should be measured. Three critical

factors in the planning stage were: project mission, top management support and client

acceptance.

Hypothesis three confirmed that project structure has a moderating effect on the

relationship between CSF and project success. Regardless of the organisational

structure, top management support and problem identification, project mission,

schedule, monitoring and control were significantly correlated with success. It was also

noted that a project team that operates in a project-based organisational structure must

possess all the necessary business and technical skills in order to complete the project

successfully.

The results of the study confirmed also the forth hypothesis, which referred that there is

a moderating effect between the independent variables and project success depending

on the activity sector. Overall, it was found that each project is unique, its

characteristics are directly linked to the project environment and all project impose

different requirements and challenges to their teams.

In conclusion, although many researchers agree that human resources are the most

crucial elements in organisational success, the authors presented surprisingly opposite

findings. The results showed, that the human resource factor has only a moderate impact

on the project success. Furthermore, authors proposed that research on HRM in project

management context remains undeveloped and future research on the topic are

56

recommended. In addition, future studies should also measure project success from

different viewpoints of various interest groups.

The contribution of the study was that it proposed that the human resource factor does

not have a significant impact on the project success, which is in contrast with the

previous studies. They also posed a fundamental question whether the HRM in the

context of project management differ from the traditional HRM.

4.5 Chapter summary

In addition to critical success factors, the perception of various interest groups such as

management, users, vendors and consultants involved in the ERP implementation

projects is also regarded as a key factor since different people view success in different

ways. Skok and Legge (2002) elaborated the issue of key stakeholders and identified

four main parties involved in ERP implementation projects: management, users,

developers and consultants. The human activity system diagram was used to illustrate

the interrelations between these various interest groups and the areas of conflicts were

brought out as possible sources of project failure. Similarly, the research by Akkermans

and Helden (2002) proposed that the presence and attitudes of key stakeholders such as

top management, project team, project management, project champion and software

vendor determine the implementation success. In summary, areas that these authors

considered to be important were management, developers and consultants. In addition,

Akkermans and Helden claimed that it is possible to save the “sinking” ERP project and

reverse the under-performing ERP project to a successful one by simultaneous and

reinforcing changes in the presence and attitudes of these stakeholders. Hawa et al

(2002) emphasised that enterprise wide projects such as re-engineering project require

the coordination of multidisciplinary teams, which contain management, technical

personnel, end-users, consultants, vendors and others. Wateridge (1997) added that

project managers need to possess the necessary skills to manage and satisfy the large

number of stakeholders involved in the project.

A large part of academic literature suggests that success cannot be achieved without

qualified and motivated personnel. The study by Hawa et al (2002) covered the human

57

competences required for the project and concluded that there have to be two types of

different and elementary know-how, engineering and operational ones, and that it is not

only enough to have them but these experts have to co-operate closely with each other.

The ideal solution is achieved when the same person has the both types of knowledge

and is able to run smoothly between different environments. Welti (1999) considered

the availability, expertise, quality, composition of project teams and trust being

important HR requirements for a successful project. Wateridge (1997) investigated the

importance of skills project managers need to possess to manage IS/IT project

successfully. On the top list were, leadership skills, administrative skills such as

planning and controlling, and interpersonal and communication skills. Surprisingly,

technical skills were ranked low by many researchers. Nowadays, the trend in project

management is towards people management.

The majority of the scholars share the though that people are the most important asset

we have and most projects fail because too little attention is paid to the human factors.

Therefore, many researchers have listed HR aspects in their critical success factors list.

May and Kettelhut (1996) analysed the presence and potential impact of human issues

within software re-engineering projects and showed that it pays to pay attention to

human factors. They also provided a framework of recommendations that have to be

taken into account with human factors in order to increase the probability of success of

re-engineering projects. Counterattacking the widely accepted view, Belout and

Gauvraeu (2004) pointed out that even though there is a clear link between the project

success and the personnel factor, this factor didn’t have a significant impact on the

project success. This study was retesting the conclusions of an earlier research, which

came to similar conclusions and was highly criticised on its validity. The authors also

drew attention to the fact that most models explaining the project success are based on

the academic literature rather than on empirical proof.

58

Table 4-1 Summary table of the articles

Find

ings

Ret

entio

n of

skilf

ul st

aff i

s ess

entia

l for

the

succ

ess o

f the

pro

ject

es

peci

ally

at t

he p

ost-i

mpl

emen

tatio

n st

age

and

is a

maj

or c

once

rn o

f m

anag

ers.

The

maj

or c

onfli

ct id

entif

ied

was

the

use

of e

xter

nal

cons

ulta

nts a

nd d

evel

oper

s. O

ther

mai

n di

ffic

ultie

s wer

e en

coun

tere

d w

ith c

hang

e m

anag

emen

t. Th

e em

ploy

ee a

ttitu

des w

ere

foun

d to

be

mor

e di

ffic

ult t

o m

anag

e th

an te

chni

cal d

iffic

ultie

s.

The

proj

ect n

eces

sary

kno

w-h

ow a

nd th

e m

eans

of e

nhan

cing

it,

proj

ect t

eam

s’ p

rofil

es a

nd ro

les h

as a

dire

ct im

pact

on

the

outp

ut o

f th

e pr

ojec

t.

Succ

essf

ul p

roje

cts n

eed

to h

ave

not o

nly

the

exis

tenc

e of

two

type

s of

kno

w-h

ow b

ut a

lso

the

co-o

pera

tion

of th

ese

two

type

s of e

xper

ts.

The

optim

al so

lutio

n is

ach

ieve

d w

hen

the

sam

e pe

rson

cov

ers t

he

both

role

s and

can

smoo

thly

run

betw

een

oper

atio

n an

d en

gine

erin

g en

viro

nmen

ts.

Lead

ersh

ip is

the

mos

t im

porta

nt sk

ill. T

hen

follo

w a

dmin

istra

tive

skill

s suc

h as

pla

nnin

g an

d co

ntro

lling

. Tec

hnic

al sk

ills a

re n

eces

sary

to

thei

r sig

nific

ance

has

dro

pped

. Int

erpe

rson

al a

nd c

omm

unic

atio

n sk

ills a

re m

ore

impo

rtanc

e as

the

trend

in p

roje

ct m

anag

emen

t is

tow

ards

peo

ple

man

agem

ent

It is

eas

ier t

o sp

ecify

reas

ons f

or re

-eng

inee

ring

proj

ects

than

to g

ain

acce

ptan

ce a

nd im

plem

ent t

he d

esire

d ch

ange

s. A

ttent

ion

to b

asic

ch

ange

man

agem

ent i

ssue

s inc

reas

es th

e ea

se o

f im

plem

enta

tion.

Sp

onso

rs o

f the

re-e

ngin

eerin

g pr

ojec

ts n

eed

to a

ddre

ss th

e fe

ars t

hat

jobs

mig

ht b

e el

imin

ated

. Mos

t of t

he p

roje

cts f

ail b

ecau

se jo

b lo

sses

cr

eate

long

-term

pro

blem

s. T

o m

inim

ise

prob

lem

s the

re m

ust b

e pa

rtici

patio

n in

pro

ject

def

initi

on a

nd p

lann

ing

by th

e m

embe

rs o

f af

fect

ed o

r gan

isat

ions

. Th

e pe

rson

nel f

acto

r doe

s not

hav

e a

sign

ifica

nt im

pact

on

the

proj

ect s

ucce

ss. T

he re

latio

nshi

p be

twee

n C

SF a

nd p

roje

ct su

cces

s is

affe

cted

by

the

proj

ect l

ife c

ycle

stag

es. P

roje

ct st

ruct

ure

and

activ

ity

sect

ors h

ave

a m

oder

atin

g ef

fect

on

the

rela

tions

hip

betw

een

CSF

an

d pr

ojec

t suc

cess

.

Mai

n po

ints

Four

key

stak

ehol

ders

invo

lved

in E

RP

proj

ects

: man

agem

ent,

user

s, de

velo

pers

an

d co

nsul

tant

s.

Impr

ovem

ent o

f an

ente

rpris

e re

lies o

n th

e su

cces

s of s

oftw

are

re-e

ngin

eerin

g pr

ojec

ts, w

hich

resp

ectiv

ely

depe

nds o

n hu

man

reso

urce

s. H

uman

s as a

crit

ical

fa

ctor

in e

nter

pris

e im

prov

emen

t pr

ojec

ts.

2 ty

pes o

f kno

w- h

ow re

quire

d:

engi

neer

ing

and

oper

atio

n.

A ra

nked

list

of s

kills

requ

ired

by th

e pr

ojec

t man

ager

s der

ived

from

the

earli

er re

sear

ches

don

e on

the

topi

c.

A la

rge

num

ber o

f fai

lure

s are

cau

sed

by

man

agem

ent p

ayin

g to

o lit

tle a

ttent

ion

to h

uman

fact

ors.

A fr

amew

ork

to a

void

im

plem

enta

tion

caus

ed h

uman

pr

oble

ms:

1)

con

duct

an

iden

tity

audi

t 2)

est

ablis

h gr

ound

rule

s 3 )

def

ine

a fr

amew

ork

for p

artic

ipat

ion

Con

tradi

ctin

g th

e co

mm

only

acc

epte

d vi

ew a

nd c

laim

ing

that

hum

an re

sour

ces

fact

or d

oes n

ot h

ave

a si

gnifi

cant

impa

ct

on th

e pr

ojec

t suc

cess

. 4 h

ypot

hesi

s to

rete

st th

e va

lidity

of a

n ea

rlier

rese

arch

Aim

To id

entif

y w

hich

st

akeh

olde

rs a

re th

e ke

y fo

rces

driv

ing

the

ERP

chan

ge

proc

ess a

nd st

udy

thei

r pow

er

to in

fluen

ce th

e ou

tcom

e of

ER

P pr

ojec

t.

To a

naly

se so

me

of th

e hu

man

as

pect

s rel

ated

to so

ftwar

e en

gine

erin

g pr

ojec

ts a

nd

focu

sing

on

know

-how

, pr

ofile

s and

role

s.

To in

vest

igat

e th

e ke

y sk

ills

that

pro

ject

man

ager

s nee

d to

po

sses

s to

man

age

proj

ects

su

cces

sful

ly

To il

lust

rate

the

impl

emen

tatio

n of

softw

are

proj

ects

in th

e co

ntex

t of

chan

ge a

nd p

rovi

de a

list

of

reco

mm

enda

tions

that

hav

e to

be

take

n in

to a

ccou

nt w

ith

hum

an fa

ctor

s to

incr

ease

the

prob

abili

ty o

f suc

cess

. To

inve

stig

ate

the

effe

ct o

f pe

rson

nel f

acto

r on

proj

ect

succ

ess.

Aut

hors

Skok

&

Legg

e (2

002)

H

awa,

O

tritz

, La

rio &

R

os (2

002)

Wat

errid

ge

(199

7)

May

&

Ket

telh

ut

(199

6)

Bel

out a

nd

Gau

vrea

u (2

004)

59

5 Empirical part, a survey

The reason for selecting the articles used in the previous chapters was to gain

information about human resources and their implications within the ERP

implementation process. As there was not much information available about HRM

within ERP literature, the human resources aspects have been summarised from the

related topics such as software re-engineering projects, BPR and CSF in ERP. Several

studies have listed human factors in their critical success factors list. Others have

questioned their significance.

The aim of the empirical research is to examine the validity of the comments in the ERP

literature regarding successful implementation of ERP projects and human resource

management. The intention being to study whether there is a difference in HR practices

between successful and unsuccessful ERP implementations. Added to this, to examine

when HR practices are the most prevalent across ERP life cycle and to investigate

whether the various stakeholder groups have a significant impact on the project success.

This chapter includes the reasoning for the choice of the hypotheses, describes the

research framework, hypothesis testing and questionnaire creation, introduces research

methodology including research method and sample selection criteria, analyses the

research findings and points out the research limitations.

• Hypotheses development

• Research framework

• Hypothesis testing

• Research methodology (research method, data and sample selection)

• Questionnaire creation

• Analysis of the research results

• Limitations

60

5.1 Hypotheses development

The research paper of Somers and Nelson (2004) identified 22 critical success factors,

which were divided into key players and activities that are important in an ERP

implementation process. These CSF were based on the extensive literature review on

the topic. The study of Akkermans and Helden (2002) proved that the CSF list of

Somers and Nelson used in previous study in 2001 is sufficient to explain the root cases

of ERP success or failure.

According to authors this list provides an interesting mix of hard (H) and soft factors

(S). They also indicate that most of them would hold for any IT project whereas some

are more important to ERP systems in particular.

Table 5-1: Soft (S) and hard (H) factors in Somers and Nelson CSF list (2004)

Key players Key activities Top management (H) User training and education (S) Project champion (H) Management of expectations (S) Steering committee (H) Careful selection of the appropriate package

(H) Implementation consultants (H) Project management (H) Project team (S) Customization (H) Vendor-customer partnerships (H)

Data analysis and conversion (H)

Vendor’s tools (H) Business process reengineering (H) Vendor support (H) Defining the architecture (H) Dedicating resources (H) Change management (S) Establishing clear goals and objectives (H) Education of new business processes (S) Interdepartmental communication (S) Interdepartmental cooperation (S)

Most of the hard factors (H) such as top management support, clear goals and

objectives, project management, project champion and many more have been widely

discussed in the academic literature and mentioned in various CSF lists. Instead, I’m

interested in the soft factors (S) marked in italic in the table above: project team, user

training and education, management of expectations, change management, education of

new business processes, and interdepartmental communication and cooperation. The

61

intention is to analyse how these factors are managed in organisations that have

implemented an ERP project and how important these are to success of the project.

I will focus on these soft factors under the number of HR related headings (Table 5-2),

which have been mentioned by Olson (2004) and which have also been covered in the

literature review part of this thesis.

Table 5-2: Soft factors under the HR related headings

HR related headings Soft factors Management of expectations needs and skills (HR requirements for the project)

Project team competence

Educating, training, developing

User training and education Education on new business processes

Termination of work places, task changes (resistance)

Change management

Communication Interdepartmental communication Interdepartmental cooperation

Reward system (recognition, compensation, benefits)

Management of expectations

As the target is to investigate the importance of the HR aspects in successfulness of the

ERP systems implementations projects, my first proposal is as follows:

Hypothesis 1: Soft factors have a significant impact on the project success.

The aim of this paper is also to study whether the significance of HR aspects varies in

the cases of successful and unsuccessful ERP systems implementations projects, the

next suggestion is therefore:

Hypothesis 2: There is a difference between managing the HR aspects in the case of

successful and unsuccessful implementations.

The studies of Somers and Nelson (2004), Parr and Shanks (2000) and Belout and

Gavreau (2004), which also have been explained in depth in previous chapters, have

proved that the significance of CSF changes according to the project life cycle stages.

Therefore, I will use the model introduced by Ross (1999), which is discussed in more

detail in Chapter 2 under the implementation phases’ part. Ross identified 5 important

stages in the ERP implementation process: design, implementation, stabilisation,

continuous improvement and transformation.

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Hypothesis 3: The importance of soft factors changes across the project life cycle

stages.

The perception of various stakeholders such as top management, project champion,

project team, software vendors, consultants and similar is also considered as key factor

since different people view success in different ways (Belout and Gavreau, 2004). In

addition, Hawa et al (2002) emphasised that ERP implementation projects require

coordination of multidisciplinary teams, which contain experts from various areas.

Wateridge (1997) suggested that especially managers need to possess the necessary

skills to manage and satisfy all the key parties involved like technicians, sponsors and

users. Akkerman and Helden (2002) proposed additional thoughts that the presence and

attitudes of key stakeholders influence the outcome of the project. I will elaborate this

proposal in this context and suggest that:

Hypothesis 4: Various stakeholders such as managers, developers, consultants and

users affect the relationship between soft factors and project success.

I chose to use these interest groups identified by Skok and Legge (2002), as these have

been included in most of the stakeholders lists mentioned by other researchers. Also,

these stakeholders have been covered in more detail in Chapter 4 of this thesis.

5.2 The proposed research model

The proposed model includes 6 independent variables, which are the soft CSF from

Somers and Nelson list (project team competence, user training and education,

education on new business processes, interdepartmental communication,

interdepartmental cooperation and management of expectations), one dependent

variable (project success) and one moderating variable (ERP project life cycle).

The first hypothesis aims to test the impact of the independent variables on the

dependent variable in the model. The second hypothesis seeks to investigate this impact

proposed by hypothesis one in the case of successful and unsuccessful ERP

implementations. The effect of the project life cycle stages on the CSF has long been

studied by many researchers. Thus, the third hypothesis targets to test the effect of the

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ERP life cycle stages on the independent variables. In this research, I also wanted to

take into consideration the perception of the various stakeholders (management,

developers, users and consultants) and the fourth hypothesis suggests that stakeholders

have an effect on the relationship between the independent and dependent variables.

The research model is illustrated in Figure 5-1.

Figure 5-1: The proposed research model

5.3 Hypotheses testing

To test the first hypothesis suggesting that soft factors have a significant impact on the

project success, research questions can be formulated under the five HR related

headings (Table 5-2): 1) skills requirements; 2) educating, training and developing; 3)

termination of work places and task changes; 4) communication; 5) and reward system.

These HR topics deal with seven soft CSF from Somers and Nelson list: project team


User training and education

Education on new business processes

Interdepartmental communication

Interdepartmental cooperation

Management of expectations

ERP implementation

project success - cost - time - performance

ERP project life cycle

Stakeholders - management - developers - consultants - users

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competence, user training and education, education on new business processes, change

management, interdepartmental communication and cooperation, and management of

expectations.

To test the second hypothesis, which is to compare the HR practices in the case of

successful and unsuccessful ERP implementations, a division of the companies into

these two categories needs to be made. Hong and Kim (2002) have applied in their

study a success metrics that defines the ERP implementation project success in terms of

achievement of predetermined goals regarding cost, time, system performance and

benefits. Likewise, an earlier study by Kumar et al (2001) concluded that the most

popularly used success criteria were on time, within or under budget and realizing key

performance measures. These studies are described in more detail in Critical Success

Factors part of this thesis. Based on these research papers, I use the success criteria for

evaluating project success in terms of cost, time and system performance. In this way,

I’m able to combine my study with the concurrent doctorial research of Oana Velcu at

the Accounting Department at Hanken. The purpose of her research is to collect

information regarding the successfulness of ERP implementations in Finnish

organizations.

The third hypothesis aims to investigate the importance of the soft factors across the

ERP life cycle stages according to the model developed by Ross (1999). The stages

identified in this model were: design, implementation, stabilisation, continuous

improvement and transformation. To test the hypothesis, first, these ERP

implementation stages are clarified for the focus group, next, they are asked to identify

in which stage(s) each soft factor is important.

To test of the fourth hypothesis, which suggests that the perception of the various

stakeholders identified in the literature such as management, developers, users and

consultants significantly affects the success of the project, is problematic. The similar

research of Skok and Legge (2002), which studied these stakeholders power to affect

the ERP project and different types of influence strategies, concluded that the best

research method in this case was in-depth case studies. A large timescale would be

needed to conduct multiple interviews at number of organisations with managers, users,

developers and consultants. In contrast, I plan to target only a particular user group from

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the top management level. Also in this case, questions would have to be asked in respect

of each interest group that would extend the research significantly. Furthermore, as

some companies are also unwilling to reveal sensitive information to outsiders, it would

have been wiser to concentrate on in-depth case studies. Therefore, I choose to reject the

hypothesis four from this study and suggest investigating it as entirely separate research

on its own or as part of some other study.

As a result, in this paper I selected to test the first three hypotheses:

H1: Soft factors have a significant impact on the project success.

H2: There is a difference between managing the HR aspects in the case of successful

and unsuccessful implementations.

H3: The importance of soft factors changes across project life cycle stages.

In summary, the aim of the empirical part remains to study the importance of the soft

factors on the project success, the differences managing these factors between

successful and unsuccessful ERP implementations and the significance of the soft

factors across the project life cycle stages.

5.4 Research methodology

5.4.1 Research method

The data for this research is to be collected by means of on-line survey, as the response

rate is considered to be the highest and fastest in this case. To be it more effective, it is

focused toward a particular focus group. In addition, this approach allows having a large

sample size and if the response rate stays too low, a follow-up reminder can be sent.

Other approaches considered and then rejected included delivering the survey by post

mail and conducting interviews in person. The former option would have had high costs

and been timelier. The latter option would have been the most time consuming, far-

reaching and the nature of the questions would have needed to be different.

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5.4.2 Data and sample selection

The target is to study large- and medium-sized Finnish organizations that have already

implemented an ERP project. Thus, only the companies with number of the employees

from 50 upwards will be taken into consideration. These organizations can be selected

from Voitto database available at the Accounting Department at Hanken, from ERP

systems providers web pages and respective journals. The key focus group of the survey

is primarily the personnel managers “henkilöstöpäällikkö/johatja”. The Chief

Information Officer (CIO) “tietohallintopäällikkö/johtaja” or another key individual

from the top management are considered as a secondary option. However, one person

per firm is gotten in touch with. The contact information of these people can be derived

from Blue Book company database available at Hanken library services. The link to the

on-line survey is distributed to them via e-mail with accompanying letters in Finnish,

Swedish and English (See Appendix B) stating the purpose of the research, defining

what is meant by ERP systems and ensuring confidentiality. Provided the contacted

manager is not the right person to answer these types of questions, he or she is asked to

forward the questionnaire to the person responsible for this area.

5.5 Questionnaire creation

The empirical research is done in cooperation with the Ph.D. student Oana Velcu as her

research aims to investigate the successfulness of the ERP implementation projects in

Finnish corporations and mine the importance of the HR factors in such undertakings.

Therefore, two questionnaires are combined in this survey (See Appendix C). The first

part investigates the ERP implementation success and the second; the importance of the

human resources factors in such projects. However, there is no clear line between these

two parts as some of the questions are integrated and some changed to keep the same

style format.

The questionnaire is in English and consists altogether of 20 questions: half are open-

ended questions and half close-ended with multiple-choice options. The questions cover

the topics such as defining the ERP implementation success, indicating the importance

of critical success factors and managing people issues in ERP implementations.

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The implementation success related questions (q1-q10) are associated with the incurred

costs, staying within the time schedule and realizing the system performance, which are

our chosen success criteria. Questions (q1-q8) are open-ended and the questionnaire

starts (q1-q3) by asking the respondents to identify the systems they are using now, used

before and for how long the systems has been in use in their organization. The target of

the study is to investigate the organizations that have already have implemented an ERP

system and these questions also verify that a system is in use. Time related questions

(q4-q5) aim to specify whether the implementation process stayed within the time

schedule. Questions dealing with the costs (q6-q8) ask respondents to state how many

modules were implemented, to estimate the original budget and the actual costs incurred

during their ERP implementation project.

In the next question (q9), respondents are required to indicate their extent of agreement

with three statements on a five-point Likert scale (from 1=fully disagree to 5=fully

agree). For each statement it is also possible to select not applicable (6=N/A) meaning

that the statement is not relevant to evaluative situation and also giving a respondent a

possibility to leave the question unanswered. The first statement is a control question

asking respondents to state their level of agreement that the ERP implementation project

has been completed within the budget. The following two statements deal with system

performance measures requesting respondents to indicate their level of agreement that

the current ERP system is used successfully and that the required functionality of the

ERP project was fulfilled. In addition, in the next question (q10) respondents are asked

to rate to what degree (from 1=extremely low to 5=extremely high, 6=N/A) the business

case was fully realized.

The following question (q11) enquires respondents to indicate the degree of importance

each critical success factor in their ERP implementations using a five-point Likert scale

(from 1= extremely low to 5=extremely high, 6=N/A). These CSF list includes 4 hard

and 8 soft factors. These soft factors will be investigated in more detail further on in the

questionnaire.

To state in which part of the ERP life cycle the effect of the soft factors is the most

prevalent respondents are asked to specify (q12) the stages in which they consider each

soft factor to be important. At first, to avoid misinterpretation the five stages of Ross

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implementation model (design, implementation, stabilization, continuous improvement

and transformation) are described.

In the skills section (q13-q15), respondents are asked to identify the degree of

importance of each HR requirement in their ERP implementation (five-point Likert

scale: 1=extremely low to 5=extremely high, 6=N/A). The next questions aim to specify

who are the key people in the ERP implementation projects and what are the key skills

that these people have to employ. The list of the skills covers the areas of project

management, people management, administration, and ERP and IT specific know-how.

In the subsequent two sections of the questionnaire (q16 and q18), some soft factors will

be merged into one factor, for instance, user training and education, and education on

new business processes will be merged into training and education. Similarly,

interdepartmental communication and interdepartmental cooperation will be merged

into interdepartmental communication and cooperation. To pinpoint the importance of

the training in ERP implementation (q16) respondents are asked to identify the degree

of importance of each training factor in their ERP implementation in a similar five-point

Likert scale. These training factors represent the training related challenges pointed out

in ERP literature. Likewise, respondents are asked to name the degree of importance of

each change management (q17), and communication and cooperation practices (q18) in

their ERP implementation. These factors represent the critical requirements recognized

by various researchers and the issues of concerns of people involved in ERP

implementation projects.

The last part of the questionnaire (q19) deals with the HR related issues regarding the

reward system. Once again, respondents are asked to identify the degree of importance

of each reward system factor in their ERP implementation. The reward system factors

include the personal and team performance, tangible and intangible rewards, personal

career development and pleasant working environment aspects.

To finalize, the last question (q20) asks respondents to specify the industry in which

their company is operating.

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5.6 Analysis of the research results

5.6.1 The response rate

Altogether, the questionnaire was distributed manly to Chief Information Officers

(CIO’s) or other IT management level person in 375 companies with follow-up letters

and 18 responses were received, giving a response rate of 4,8 %. However, some of the

respondents had left too many questions unanswered, which dropped the sample size to

16. Initially, the survey was targeted toward 126 HR managers, however, only 1 answer

returned. Thus, I concluded that HR managers was a wrong target group and changed

my focus to CIO’s. This approach brought better results, even though the response rate

remained low. One can speculate many reasons for this:

1) Managers in such high positions were too busy, as some of them noted with their

replies, that they did not have the time to fill in the questionnaire.

2) Even now ERP remains a novelty area to many and some of the CIO’s were not

familiar with this field. In addition, not all the companies contacted had an ERP

system in use.

3) Questionnaire was only in English not translated to Finnish or Swedish, which

might have resulted some respondents not answering it. However, one can argue

that people in these positions should possess high-level English skills.

4) In the questionnaire two surveys were combined and in order to determine the

success rate respondents were asked to specify the details of the costs occurred,

which was not exactly the area of CIO’s but rather of CFO’s (Chief Financial

Officers). In addition, HR area is not really the CIO’s area of responsibility

either. Therefore, respondents might not have been familiar with the research

field.

5) The questionnaire was distributed to CIO’s in electronic format not in a paper

version. There still exists mistrust toward Internet and electronic applications,

and on the contrary paper version seems to be more secure and serious

undertaking.

6) Most likely most of the e-mails did not go through firewalls and were deleted as

spam.

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Reasons can be more, nevertheless, I will run the tests and decide further on whether the

data of the 16 companies is enough to make any significant conclusions or research

would need to be carried out with a different research method to bring better results.

Descriptive and t-test statistics are used to analyze the data.

5.6.2 Sample description

Table below (Table 5-3) presents the sample description.

Table 5-3: Sample description (percentage of respondents)

The current ERP system in use (n=16) % No of

companiesSAP 39 6 IN-HOUSE 7 1 Inreo Dealflow 6 1 MFG/Pro 6 1 Oracle Financials 6 1 PRMS 6 1 Sentera Enterprise 6 1 Solagem enterprise 6 1 TietoEnator Efekto 6 1 Unknown 6 1 Wintime Economa 6 1

Industry sector (n=15) % No of

companiesEnergy 19 3 Wholesale 19 3 Food 13 2 Manufacturing 13 2 Factory 6 1 Pulp 6 1 Retail 6 1 Media 6 1 Stainless steel 6 1 Transportation 6 1

Time of starting using the new ERP system (n=15) % No of

companiesIn the last year 7 1 1 to 3 years ago 26 4 3 to 5 years ago 27 4 5 to 7 years ago 20 3 More than 7 years ago 20 3

The most common system that had been implemented among the responding companies

was SAP, 6 out of 16, all the other systems were mentioned only once. Energy and

wholesale, also food and manufacturing were the biggest sectors that the responding

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companies represented. The current ERP system in use had mostly been implemented

within the time period of 1 to 5 years ago, that is, between 2003 and 1999. The number

of modules implemented varied from 2 to 10 with the most frequently occurring number

of modules being 4. The actual implementation of the projects lasted from 3 months to 2

years. Therefore, according to the range of characteristics of the responding companies,

the small number of modules implemented and short implementation time, their

implementations can be placed to Vanilla and Middle-road categories (Parr and Shanks

2000).

5.6.3 Overall success and critical success factors

Overall success

In general (Table 5-4), when viewing the differences between the planned and actual

ERP implementations time schedules, the results showed that 50 % of the respondents’

ERP projects were completed on time. When examining the degree of agreement with

the following statements, 53,3 % of the respondents agreed that the implementation

project stayed within the budget, 93,8 % agreed that at the present moment, the ERP

system is successfully used, 75 % agreed that the required functionality of ERP system

was fulfilled and 73,3 % of the respondents agreed that the planned business case was

fully realized. Based on these figures, we can presume that most of the ERP

implementation cases were completed successfully. The success here has been viewed

in financial terms, and from the point of view of the managers. Meeting deadlines is the

primary concern of the ERP project management as any delay in the project costs

company additional money. Therefore, companies are in favor of Vanilla

implementations as short implementations reduce the risk of project failure (Welti,

1999). Total ERP implementation costs usually sum up to 2-3 % of companies

revenues, and these are easy to quantify. However, non-financial benefits, such as

achieving full system performance, are difficult to convert to monetary profits. Hong

and Kim (2002) and Kumar et al (2001) have proved that the most common rationales

to evaluate success are on time, within or under budget and realizing key performance

measures. However, the implementation success depends from many other factors apart

from rapid implementations, tangible business benefits and fast paybacks. Critical

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success factors aim to provide guidelines for ERP implementation practice and increase

the probability of success.

Table 5-4: The summary table of the overall success of ERP implementations

Measurements of success (n=16) % ERP project was completed within the time schedule 50 ERP project has been completed within the budget 53,3 At present, ERP system is successfully used 93,8 Required functionality of the ERP system was fulfilled 75 The planned business case was fully realized 73,3

The percentage of respondents who ranked the factor high or extremely high.

Critical success factors

From a given list of CSF that included 4 hard (H) and 8 soft factors (S) respondents

were asked to rank the importance of the each factor in their ERP implementations from

extremely low to extremely high. Many studies (Akkermans and Helden 2002; Somers

and Nelson 2001) have stressed the importance of the hard factors such as top

management support and effective project management on their critical success factors

list and as we can see from the table below (Table 5-5), these were also ranked high by

the responding companies. From the soft factors user involvement, interdepartmental

cooperation, project team competence, user training and education, and

interdepartmental communication received high and extremely high importance. These

findings are similar to the CSF list of Akkermans and Helden (2002) ranked by 52 top

managers. Only, management of expectations was ranked high on the Akkermans’ and

Helden’s list but low by the respondents in this case.

Table 5-5: The importance of critical success factors in ERP implementations – Rating from 1 (extremely low) to 5 (extremely high)

Critical success factors (n=16) Mean Top management support (H) 4,25 User involvement (S) 4,25 The effective project management (H) 4,19 Interdepartmental cooperation (S) 4,19 Project team competence (S) 4,13 User training and education (S) 4,06 Interdepartmental communication (S) 4,06 Business Process Reengineering (H) 3,96 Change management (S) 3,50

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Education on new business processes (S) 3,44 Management of expectations (S) 3,38 Fit between ERP software and hardware (H) 3,19

(H) hard factor, (S) soft factor

5.6.4 Soft factors


In this section respondents were asked to indicate the degree of importance of each HR

requirement factor in their ERP implementations. The results showed (Table 5-6), that

the respondents viewed skilful and competent project team members to be the most

important requirement, which is in line with the large part of the academic literature that

suggests that success cannot be achieved without qualified and motivated personnel.

Next important were availability of sufficient human resources for the project and

availability of expertise. Composition of project teams was not considered as important

as Welti (1999) suggested. According to Welti the availability, expertise, quality and

composition of project teams were the most important HR requirements for success.

Table 5-6: The importance of the HR requirements factors in ERP implementation – Rating from 1 (extremely low) to 5 (extremely high)

HR requirements MeanSkilful and competent project team members 3,94 Availability of sufficient HR for the project 3,69 Availability of expertise 3,50 Composition of project teams 3,31

Additionally, he suggested that the composition of project teams with skilful and

competent project team members will directly influence the output of the project.

Wateridge (1997) and Hawa et al (2002) investigated the human competences required

for the project and skills the project managers need to possess to manage IT project

successfully. I elaborated this to a larger context and investigated in more detail the

composition of the project teams in ERP implementation projects and the skills these

people need to employ in ERP projects.

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Table 5-7: The key people in the project implementation team (percentage of respondents)

Key people % Management 66,7 IT personnel 55,6 Top management 44,4 Consultants 44,4 Vendor 27,8 IT consultants 11,1 Other 11,1

The results showed (Table 5-7) that the key people in an ERP project were

management, IT personnel, top management and consultants. Few responding

companies had an ERP vendor, IT consultants or other people in the implementation

team. This composition of the project team is in line with Hawa et al (2002) who

identified three groups of people involved in enterprise re-engineering projects:

management, staff, external consultants or technical staff of the enterprise. Similarly,

Welti (1999) recommended structuring the project team including project leader, project

members and consultants. According to Hawa et al, these people need not only to

possess the elementary know-how but also have to co-operate closely with each other,

which emphases the importance of interpersonal and communication skills.

The table below (Table 5-8) presents the importance of skills these people need to

employ for each key group. The percentage figure indicates the percentage of

respondents who considered the skill to be important and they are ranked in descending

order of importance. As a result, most important for top management is to possess

leadership and communication skills. Top management support and its active

involvement in monitoring the progress of the project and providing directions to the

project team are essential throughout the implementation project in order to ensure the

success of the project (Somers and Nelson, 2004).

The skills required by the management were communication, controlling, leadership,

planning and interpersonal skills. Different from the Wateridge (1997) research, which

summarized the skills required by the project manager from previous researches and top

ranked leadership skills, communication skills were given higher emphasis by the

responding companies. Nowadays, as the trend is toward people management,

communication and interpersonal skills have higher importance than earlier.

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Administrative skills such as planning and controlling remain high as project

management activities spread out throughout the project life cycle and involve project

planning and controlling activities, monitoring organizational, political and human

issues and many more. Similar to Wateridge observations, technical skills are not

important at the management level.

Table 5-8: The key skills these key people have to employ in ERP implementation project (percentage of respondents)

Top management % Management % Leadership skills 55,6 Communication skills 77,8 Communication skills 44,4 Controlling skills 55,6 Controlling skills 27,8 Leadership skills 50,0 Interpersonal skills 16,7 Planning skills 50,0 IT management skills 11,1 Interpersonal skills 50,0 Planning skills 5,6 IT management skills 27,8 ERP experience 5,6 ERP experience 22,2 Technical skills 0,0 Technical skills 0,0

End-users % Consultants % Communication skills 61,1 ERP experience 44,4 Interpersonal skills 55,6 Planning skills 38,9 Planning skills 33,3 Communication skills 38,9 Technical skills 27,8 Technical skills 33,3 ERP experience 27,8 Interpersonal skills 27,8 Controlling skills 16,7 IT management skills 22,2 Leadership skills 0,0 Leadership skills 11,1 IT management skills 0,0 Controlling skills 11,1

IT consultants % ERP vendor % IT management skills 22,2 Technical skills 33,3 Technical skills 16,7 ERP experience 27,8 Communication skills 11,1 Communication skills 22,2 Planning skills 5,6 Technical skills 22,2 Interpersonal skills 5,6 Planning skills 16,7 ERP experience 5,6 Controlling skills 11,1 Leadership skills 0,0 Interpersonal skills 5,6 Controlling skills 0,0 Leadership skills 0,0

IT personnel % Communication skills 72,2 IT management skills 72,2 Planning skills 61,1 Technical skills 61,1 ERP experience 50,0 Controlling skills 38,9 Interpersonal skills 38,9 Leadership skills 27,8

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For end-users is necessary to have only the communication and interpersonal skills.

This can be explained by the reality that the planning and controlling is taken care by

the management. Also, they don’t need to have specific technical knowledge. Users

have to learn only those functions that are related to their tasks in addition to

understanding the new processes and procedures (Welti, 1999). For the consultants is

essential to have the ERP knowledge, and planning and communication skills. An

external consultant provides the project team with valuable expertise on project

supervising, planning, customising and training. Good consultants have the major

impact on the throughput time and quality of the project whereas incompetent

consultants area major challenge in implementations (Kumar et al, 2001).

Communication skills are important as consultants need to communicate their ideas to

companies’ management and transfer their knowledge to client company’s employees

(Skok and Legge, 2002). IT consultants, ERP vendors and IT personnel need to possess

the specific technical skills. Also, it is necessary for the IT personnel to have the high-

level communications skills. It is not enough to have the technical know-how but these

people need to co-operate closely with other team members (Hawa et al, 2002).

Educating training and developing

The importance of training has been widely covered in the academic literature. Lack of

user training and understanding how the new system is changing the business processes

have been the foremost reasons for ERP implementation failure (Somers and Nelson,

2004). Not surprisingly, when respondents were asked to indicate the degree of

importance of each training factor the responding companies gave the highest

importance (Table 5-9) for learning the new system and job functions, accepting the

new processes and procedures, and preparing employees for change. Having qualified

trainers, identifying the type of training needed and providing support for training were

also ranked high. These findings are similar to the research of Kumar et al (2001). Also

as Welti (1999) stated, it is hard to have qualified trainers, to train the people and then

to retain them. People with right ERP skills are in shortage because there are not enough

professionals who would have a good understanding of both business and ERP systems.

In addition, each user group has different needs, preferences and learning potential.

Having sufficient budget was given a moderate importance. Yet, one of the major

challenges that the study of Kumar et al (2001) has brought out was running out of the

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budget. Documenting the training process and measuring training performance were

also given a low importance.

Table 5-9: The importance of training in ERP implementation – Rating from 1(extremely low) to 5 (extremely high)

Training factors Mean Learning the new system and job functions 4,47 Accepting the new processes and procedures 4,27 Preparing employees for change 4,20 Having qualified trainers 4,00 Identifying the type of training needed 3,87 Providing the support for training 3,80 Documenting the training process 3,47 Having sufficient budget 3,33 Measuring training performance 3,20

Managing change

In this section, respondents were asked to identify the degree of importance of each

change management strategy. Showing leadership commitment received the highest

importance. This supports the literature that suggests that top management commitment

is critical for the success of the whole ERP implementation process (Aldawani 2001). In

addition, top management support is mentioned in many CSF lists. Other strategies that

received high ranking were empowering employees and understanding the strategic

vision of ERP. A common strategy to increase user acceptance is to empower

employees and communicate the ERP change vision and benefits to them. Next

important is developing new business performance and control measures. This reason is

logical as the system change brings in the new way of going about things. Identifying

sources of resistance and who are resisting the change were ranked low by the

respondents. However, the literature has suggested these guidelines as a good starting

point to assist top management to analyze the sources of resistance and develop a

strategy to overcome them (Welti 1999). Surprisingly, building user acceptance was

given the lowest importance. Many researchers (May and Kettelhut 1996; Aldawani

2001; Welti 1999) have stressed the importance of gaining employees acceptance as an

important strategy to manage the ERP change process. Scholars agree that it is easier to

specify the reasons for going ERP than to gain user acceptance and implement the

desired changes.

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Table 5-10: The importance of the change management strategy in ERP implementation- Rating from 1 (extremely low) to 5 (extremely high)

Change management strategy factors Mean Showing leadership commitment 4,21 Empowering employees 3,93 Understanding the strategic vision of ERP 3,86 Developing new business performance and control measures 3,71 Paying attention to employee concerns 3,64 Identifying sources of resistance 3,57 Identifying who are resisting the change 3,50 Building user acceptance 3,43

Communication

As the goal of ERP systems is to integrate various business functions across different

locations, interdepartmental cooperation and communication are the core of the ERP

implementation process (Akkermans and Helden, 2002). In the communication section,

respondents were asked to identify the importance of the each communication factor in

their ERP implementation. The highest importance received open communication

between the key parties, and cooperation and involvement of the key parties. This is in

line with the literature. Open communication and collaboration are essential as these are

to clarify expectations and reduce ambiguity, and to build user acceptance and

commitment (May and Kettelhut, 1997). Additionally, Akkermans and Helden (2002)

suggested that intensive communication between the key parties is directly linked to the

success of the project. Communicating ERP benefits and change vision are an integral

part of ERP change management process. Establishing communication guidelines was

given the lowest ranking and clearly it is not the first priority of the communication

practices.

Table 5-11: The importance of each communication factor in ERP implementation

Communication factors Mean Open communication between the key parties 4,53 Cooperation and involvement of the key parties 4,20 Communicating ERP benefits 4,13 Regular communication practices 3,93 Communicating ERP change vision 3,87 Establishing communication guidelines 3,33

79

Reward system

Managing user expectations successfully is closely related to the success of the

implementation project and stays important throughout all the stages of the ERP life

cycle (Somers and Nelson 2004; Akkermans and Helden 2002). The reward system is

based on managing user expectations and providing tangible and non-tangible

compensations. The highest importance was given here to building employee

commitment and creating an pleasant working environment. As it is difficult to find

people with the right set of ERP and business skills and training being expensive,

companies put all the efforts in retaining the employees. Celebrating success on the

basis of the performance was ranked higher than awarding the team. This can be

explained by the fact that we are not in a collectivistic culture and individual

achievements have higher value. Celebrating success was given a much higher

importance than recognition through intangible rewards and providing bonuses and

other financial benefits. Thus, money comes the last, fame second and having fun and

building up a team spirit first. Clarifying the future career opportunities was not

considered as important. The reason being that today, with flatter organization

structures promotions are less likely to happen but the trend is having cross-functional

career and moving across different projects and tasks.

Table 5-12: The importance of the each reward system factor Reward system factor Mean

Building employee commitment 3,93 Creating a pleasant working environment 3,87 Rewarding on the basis of performance 3,80 Celebrating success 3,67 Awarding the team 3,40 Recognition through intangible rewards 3,27 Awarding the individual 3,20 Providing bonuses and other financial benefits 3,20 Clarifying the future career opportunities 3,20

2.1.1 Findings on testing Hypotheses 1 and 2

H1: Soft factors have a significant impact on the project success.

H2: There is a difference between managing the HR aspects in the case of successful

and unsuccessful implementations.

80

With these two hypotheses, I’m aiming to test whether the soft factors have a significant

impact on the project success and whether managing these factors differs in the case of

successful and unsuccessful ERP implementations. Testing hypotheses with a small

sample size, I use the statistical technique called t-test. What I think is not true becomes

the Null Hypothesis (Ho) and my actual research question is the Alternative Hypothesis

(Ha). I set my alpha level to 0,05 and run the two-sample t-test statistics assuming the

unequal variances of the data.

Thus, the Null Hypothesis assumes that there is no difference between the means of the

soft factors of successful and unsuccessful implementations. The Alternative

Hypothesis states the opposite, that is, there is a difference between the means of these

groups.

ERP success rate and soft factors variables measures

As explained earlier, I have chosen the success criteria for evaluating ERP

implementation project success to be on time, within budget and realizing system

performance indicators. However, it is difficult to calculate the average value for the

success rate as the questions dealing with time (q4-q5), cost (q9 1st statement) and

system performance (q9 2nd and 3rd statements) use different measuring scales.

Questions dealing with time asked respondents to define how many months the

planned/actual implementation took place, as questions dealing with cost and system

performance were using Likert type scale measurement from 1 to 5. I decided to use

only these questions for defining success, as the replies to other questions in this section

did not contain enough data. Therefore, instead of having a single success rate, which

would divide ERP implementations to successful and unsuccessful ones, I’m using three

sub measurements such as:

• Time (On time vs. Late)

• Cost (Within budget vs. Over budget)

• System performance (Achieved vs. Not achieved)

81

Thus, I’m examining the soft factors with each of this sub category. These soft factors

covered in more detail in the literature review part of the thesis were: project team

competence, user training and education, education on new business processes, change

management, interdepartmental communication and interdepartmental cooperation, and

management of expectations. Because of the way the questionnaire has been structured,

some of these factors are now combined. Therefore, the soft factors, which I test with

chosen success parameters: time, cost and system performance are:

• Project team competence

• Training and educating

• Change management

• Communication

• Management of expectations

The arithmetic means to the soft factors are easy to compute as all of them follow the

same format using a five-point Likert scale from 1= extremely low to 5=extremely high.

These can be calculated according to the following formula:

X= ∑ X / N

where X = the mean

X = sum of the scores given for qualitative questions

N= number of measurements in the sample

Time (On time vs. Late) measurement

Analyzing the time parameter questions (q4-q5), first, I calculate the difference between

the actual and planned ERP implementations. Based on the difference, I segment the

companies into three groups: 1) assuming that the ERP implementation project was on

time when it was completed earlier or at the deadline, 2) slightly late when it was 0,5 to

3 months late, 3) and very late when it was more than 3 months late. As the sample size

is small and to observe any remarkable differences, I’m using only the two far ends on

the time scale and excluding the middle group. Also, I’m leaving out the companies

where too much data is missing.

82

Table 5-13: Time selection criteria (n=13) ERP implementation based on time (percentage of respondents)

No of companies

on time (50 %) 7 moderately late (28,6 %) 4 very late (21,4 %) 2

After performing the t-test statistics, I got the following findings:

Table 5-14: T-test results for project team competence factor based on time

On time Over time

Mean 3,958333 2,875Variance 0,460417 0,03125Observations 6 2Hypothesized Mean Difference 0 df 6 t Stat 3,564655 P(T<=t) one-tail 0,00593 t Critical one-tail 1,943181 P(T<=t) two-tail 0,01186 t Critical two-tail 2,446914

Table 5-15: T-test results for training and educating factor based on time

On time Over time

Mean 3,777779 4,555555Variance 0,329217 0,024693Observations 7 2Hypothesized Mean Difference 0 df 7 t Stat -3,19186 P(T<=t) one-tail 0,007619 t Critical one-tail 1,894578 P(T<=t) two-tail 0,015237 t Critical two-tail 2,364623

Table 5-16: T-test results for change management factor based on time

On time Over time

Mean 3,928571 3,75Variance 0,415923 0,28125Observations 7 2Hypothesized Mean Difference 0 df 2

83

t Stat 0,399255 P(T<=t) one-tail 0,364152 t Critical one-tail 2,919987 P(T<=t) two-tail 0,728304 t Critical two-tail 4,302656

Table 5-17: T-test results for communication factor based on time

On time Over time


Table 5-18: T-test results for management by expectations factor based on time

On time Over time


Cost (Within budget vs. Over budget) measurement

The cost associated question (q9 1st statement), uses the five-point Liket type scale from

1=fully disagree to 5=fully agree. Based on the agreement level with the statement, I

segment the companies into three groups: 1) assuming that if the mean value of the

statement is >3, the ERP implementation was fully within budget, 2) 3 equals to

indifferent, 3) and if the mean value of the statement is <3, the implementation was over

84

budget. Similarly, as explained in time section I’m using only the 1st and 3rd groups and

excluding the responses where data is missing.

Table 5-19: Cost selection criteria (n=15)

ERP implementation based on cost (percentage of respondents)

No of companies

within budget (53,3 %) 8 indifferent (6,7 %) 1 over budget (40%) 6


Table 5-20: T-test results for project team competence factor based on cost

Within budget

Over budget


Table 5-21: T-test results for training and educating factor based on cost

Within budget

Over budget


85

Table 5-22: T-test results for change management factor based on cost

Within budget

Over budget


Table 5-23: T-test results for communication factor based on cost

Within budget Over budget


Table 5-24: T-test results for management by expectations factor based on cost

Within budget Over budget


86

System performance (Achieved vs. Not Achieved) measurement

System performance questions (q9 2nd and 3rdst statements) use the similar five-point

Liket type scale from 1=fully disagree to 5=fully agree as the question associated with

the cost. Based on the mean value of agreement with the statement, I segment

companies into three groups: 1) assuming that if the mean value for the system

performance is >4, the system performance was for fully achieved, 2) if the mean value

remains 4, the system performance was achieved, 3) and if the mean value remains

≤3,5, the system performance was not achieved. The reason behind this division is to

have enough data in each group. Once again, I’m excluding the companies in the middle

and using only the 1st and the 3rd groups.

Table 5-25: System performance selection criteria (n=16)

ERP implementation based on system performance (percentage of respondents)

No of companies

not achieved (50 %) 8 achieved (31,3 %) 5 fully achieved (18,8 %) 3


Table 5-26: T-test results for project team competence factor based on system performance

Achieved Not

Achieved Mean 3,375 3,833333333Variance 1,0714286 0,083333333Observations 8 3Hypothesized Mean Difference 0 df 9

t Stat -

1,1397718 P(T<=t) one-tail 0,1419029 t Critical one-tail 1,8331139 P(T<=t) two-tail 0,2838058 t Critical two-tail 2,2621589

Table 5-27: T-test results for training and educating factor based on system performance

Achieved Not

Achieved Mean 3,7499989 3,925923333Variance 0,6022912 0,670777737Observations 8 3

87

Hypothesized Mean Difference 0 df 3

t Stat -


Table 5-28: T-test results for change management factor based on system performance

Achieved Not


t Stat -


Table 5-29: T-test results for communication factor based on system performance

Achieved Not


t Stat -


Table 5-30: T-test results for management by expectations factor based on system performance

Achieved Not Achieved Mean 3,23611 3,703703333Variance 0,5764999 0,374484033Observations 8 3Hypothesized Mean Difference 0 df 5

88

t Stat -


Summary of the results

The table below presents the P-values for each soft factor in one table based on time,

cost and system performance measurements.

Table 5-31: The summary table of the P values of the t-test statistics for all factors

On time Within budget Syst. perf. achieved Soft factors Late Over budget Syst. Perf. not achieved 1) Project team competence

0,00593 Reject Ho 0,186604 Accept

Ho 0,141903 Accept Ho

2) Training and educating

0,00761 Reject Ho 0,412901 Accept


3) Change management

0,36415 Accept Ho 0,190689 Accept


4) Communi-cation

0,32368 Accept Ho 0,343100 Accept


5) Management of expectations 0,48546 Accept

Ho 0,172156 Accept Ho 0,170106 Accept

Ho

According to the t-test results, P values are significant only for project team

competence, and training and educating factors based on time (P<0.05). Thus, for these

factors, there is enough evidence to reject Ho. However, the P values to most of the

factors are higher than alpha level (P > 0,05). As a result, there is not enough evidence

to reject Ho in favor Ha. However, before drawing any conclusions the sample size has

to be taken into account. There is no statistical support for making conclusions with 16

responses. In fact, as I classified companies into three groups based on time, cost and

system performance and used only the far end groups to indicate visible differences, it

dropped the sample size even lower. Therefore, I use the descriptive statistics to see

whether there exist any signs of differences for the soft factors between the groups: on

time vs. late, within budget vs. over budget and system performance achieved vs. not

achieved.

89

The table below (Table 5-23) presents the mean values for all soft factors based on time,

cost and system performance measurements and Figure 5-2 the graphical presentation of

the data.

Table 5-32: The summary table of the mean values for all factors – Rating 1 (extremely low) to 5 (extremely high)

Soft factors On time Late Within

budget Over

budget Achieved Not achieved

1) Project team competence 3,39 2,88 3,19 3,15 3,83 3,83 2) Training and educating 3,78 4,56 3,83 3,73 3,75 3,93 3) Change management 3,93 3,75 3,98 2,9 3,7 2,75 4) Communication 4,12 3,92 3,98 3,83 3,81 4,11 5) Management of expectations 3,52 3,5 3,49 3,13 3,24 3,70

Figure 5-2: Mean values for all soft factors– Rating 1 (extremely low) to 5 (extremely high)

Based on this, the following conclusions can be drawn:

• Project team competence factor differs clearly in terms of time and fairly in

terms of cost and does not differ in terms of system performance.

• Training and educating factor differs clearly in terms of time and system

performance and fairly in terms of cost.

0 1 2 3 4 5

Project teamcompetence

Training andeducating

Changemanagement

Communication

Management ofexpectations

Soft

fact

ors

Mean

On time

Late

Within budget

Over budget

Achieved

Not achieved

90

• Change management factor differs clearly in terms of cost and system

performance and fairly in terms of time.

• Communication factor differs clearly in terms of time, cost and system

performance.

• Management of expectations factor differs clearly in terms of cost and system

performance and fairly in terms of time.

Even though the t-test statistics does not show any significant differences between the

means of the soft factors except for project team competence and training and educating

factors in terms of time, the graphical presentation of the mean values for all factors

shows that differences exist. The only exception is the project team competence factor

in terms of system performance, where the mean values are the same. When viewing the

more detailed data on each soft factor (Figures 1-5 in Appendix A), the differences in

the means of this factor can be detected.

As a result, based on the t-test and descriptive statistics, I can conclude the following:

• Managing soft factors differs in the case of on time and late ERP

implementations.

• Managing soft factors differs in the case of within budget and over budget ERP

implementations.

• Managing soft factors differs in a case of achieving and not achieving system

performance ERP implementations.

Therefore, it is logical to conclude that managing soft factors differs in the case of

successful and unsuccessful ERP implementations. Thus, the second hypothesis is

approved.

However, the reasoning in this section does not give enough evidence to indicate that

soft factors have a significant impact on the project success. Therefore, testing of the

first hypothesis requires conducting, for example, correlation analysis of the

independent variables (soft factors) and the dependent variable (project success), as was

done by the Belout and Gauvreau (2004), which would confirm or not confirm the link

between these variables.

91

2.1.2 Findings on testing Hypothesis 3

H3: The importance of soft factors changes across project life cycle stages.

With the third hypothesis I’m aiming to prove that the significance of the soft factors

changes according to the project life cycle stages. The table below shows the

importance of the five soft factors for each implementation stage (the implementation

model of Ross, 1999). The percentage figure indicates the percentage of respondents

who considered the factor to be important. The table shows the soft factors in

descending order of importance.

Table 5-33: The importance of the soft factors across the project life cycle stages (n=18)

Design % Implementation % Project team competence 55,6 Project team competence 66,7 Interdepartmental communication 50,0 Change management 55,6 Education on new business processes 33,3 User training and education 38,9

Change management 11,1 Interdepartmental communication 38,9

User training and education 5,6 Education on new business processes 22,2

Stabilization % Continuous improvement % Project team competence 66,7 Interdepartmental communication 55,6

User training and education 66,7 Education on new business processes 50,0

Change management 61,1 User training and education 38,9 Interdepartmental communication 44,4 Change management 33,3 Education on new business processes 38,9 Project team competence 27,8

Transformation % Change management 38,9 Education on new business processes 33,3 Project team competence 33,3 User training and education 27,8 Interdepartmental communication 27,8

The percentage of respondents who considered the factor to be important in an implementation stage.

The results of the data analysis of the responding companies showed that the importance

of soft factors changes across the ERP project life cycle stages. Project team

competence was top ranked in design, implementation and stabilization stages given

over 50 % of importance. However, its significance dropped down to 30 % for

continuous improvement and transformation stages. As the project progressed, the

92

factors that were considered important diminished considerably at the last stages of the

project life cycle. These findings are concurrent with the similar research of Somers and

Nelson (2004).

On the other hand, the factors that were ranked low in the beginning of the project

gained their significance when project was progressing. Change management was

ranked low at the first stage but its importance became the most prevalent in the

implementation, stabilization and transformation stages. Similar pattern can be noticed

with user training and education. Its importance arose significantly in the

implementation and stabilization stages. Education on new processes only became

important in the continuous improvement stage, at which company is achieving its

major benefits and increasing the system’s functionality by adding new modules (Ross

1999).

The soft factors under study received the highest ranking at the stabilization phase,

which is where a company is starting using the new system and planned processes. At

this stage it is important to have qualified and skilled people available because of the

complexity and high standard of the project (Welti 1999). People need to adjust to the

new environment, therefore, change management, user training and education, and close

collaboration and communication between the departments is necessary (O’Leary

2000).

In summary, these results confirm that the importance of the soft factors varies

according to the project life cycle stages. In addition, these results are in consonance

with the literature. Thus, the third hypothesis is confirmed.

5.7 Limitations

There were many limitations in this study. First, I focused on a limited number of

variables, which were soft factors from Somers and Nelson (2004) list. These soft

factors were representing the HR aspects I aimed to study.

93

The distinction had to be made how to classify the list of the companies under

successful and unsuccessful implementations. As the success criteria questions dealing

with time, cost and system performance used different measuring scales, it was difficult

to calculate the average value for the success rate. Therefore, instead of having a single

success rate, the soft factors were analysed in the cases of on time and late, within and

over budget, and achieved and not achieved system performance ERP implementations.

Also, as two questionnaires were combined in a survey it was complicated to find the

right target group. Success related questions were targeted toward CFOs and HR related

questions toward HR managers. Finally, the survey was sent to CIOs as they were

thought to have the required ERP knowledge. However, considering busyness and time

limitations of these people, the online survey had to be kept short with closed-ended

questions.

Furthermore, it was difficult to measure HR impact on the project success in form of an

online survey and the data available was insufficient to test some hypotheses. In

addition, one can argue whether it is possible to have any significant conclusions with

the relatively small sample size. The t-test results couldn’t show any significant results

with the sample size of 16 and the descriptive statistics had to be used to show the

differences between the variables.

5.8 Chapter Summary

The aim of this chapter was to examine the validity of the comments suggested by ERP

literature regarding the successfulness of ERP projects and the importance of human

resources aspects is such projects. Based on the articles covered in the previous

chapters, hypotheses and research model were developed. After reasoning the choice of

the hypothesis and their testing methods, the fourth hypothesis was dropped from the

study. Thus, the aim of the empirical part remained to study the importance of the soft

factors on the project success, the differences managing these factors between

successful and unsuccessful ERP implementations and the significance of the soft

factors across the project life cycle stages.

94

The selected research method used was on-line survey as it was considered to give the

highest and fastest response rate, however, it didn’t bring the expected number of

responses and the response rate remained low. The target of the study was medium and

large sized Finnish corporations that had already implemented an ERP project. The

empirical research was done in cooperation with a Doctorial student and therefore, two

questionnaires were combined in the survey. T-test and descriptive statistics were used

to analyse the data.

The results showed that the majority of the respondents considered their ERP

implementations successful. The success here had been measured in terms of staying

within the time schedule, within budget and realising the system performance. In

summary, analysing each soft factor based on the sections the questionnaire was formed

showed that the research findings were in line with ERP literature with few exceptions.

Testing the second hypothesis proved that there is a difference in managing HR aspects

in the case of successful and unsuccessful ERP implementations. These HR aspects

resented the soft factors and included project team competence, training and educating,

change management, communication and management of expectations. However, the

analysis performed was not enough to conclude that soft factors have a significant

impact on the project success. Therefore, testing first hypothesis would require applying

a different statistical method, for instance, correlation analysis. Testing of the third

hypothesis confirmed that the importance of the soft factors changes across the project

life cycle stages.

6 Conclusions

6.1 Conclusions

Many academics have agreed that managing human resources appropriately is one of

the most crucial elements to organisation’s success. Nowadays, the trend in project

management is toward people management. Today, HRM has taken a strategic role in

business. They teach you at business schools that people are the most important assets

that you have. Implementing an ERP project involves numerous individuals, internal

95

and external experts and integrates different interest groups across locations. Companies

agree that people challenges are more difficult to manage than any technical difficulties

they encounter.

The aim of this paper was to investigate the importance of the importance of the HR

aspects in the ERP systems implementation projects and study whether their

significance varies in the case of successful and unsuccessful implementations. The

results of the study showed that managing HR aspects differs in case of successful and

unsuccessful companies and that their importance changes across the project life cycle

stages. My findings were in consonance with the literature. On the other hand, because

of the diffuse nature of HRM and ambiguity how to measure HR impact on the tangible

results, it was difficult to determine whether HR factors have a significant impact on the

project success.

6.2 Further research suggestions

There are many suggestions for further research. First, the statistical methods used were

not enough to conclude that soft factors have a significant impact on the project success.

Thus, investigating this proposal requires a different research method, for example,

correlation analysis. Additionally, a totally different strategy how to measure HR impact

on the success can be proposed. Furthermore, analysing the similarities and differences

between successful and unsuccessful ERP implementations with a bigger sample size,

would provide more insight to the topic.

Also, I dropped the fourth hypothesis, which suggested that the perception of the

various stakeholders significantly affects the success of the project as testing it was

problematic. It would have required using a different research method, for instance, in-

depth case studies and can be studied as an entirely separate research project on its own.

In general, as mentioned earlier, the research on HRM in the context of ERP is

relatively new and not many studies have been done on the topic.

96

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Appendices

Appendix A

Figure 1: The importance of the project team competence factor

0,00 1,00 2,00 3,00 4,00 5,00

Availability ofsufficient HR for

the project

Availability ofexpertise

Skilful andcompetent project

team members

Composition ofproject teams

Proj

ect t

eam

com

pete

nce

fact

or

Mean

On timeLateWithin budgetOver budgetAchievedNot achieved

Figure 2: The importance of the training and educating factor

0,00 1,00 2,00 3,00 4,00 5,00 6,00

Identifying the type of training needed

Providing the support for training

Having qualified trainers

Measuring training performance

Documenting the training process

Preparing employees for change

Learning the new system and jobfunctions

Accepting the new processes andprocedures

Having sufficient budget

Trai

ning

and

edu

catin

g fa

ctor

Mean


100

Figure 3: The importance of the change management factor

0,00 1,00 2,00 3,00 4,00 5,00

Building user acceptance

Identifying sources of resistance

Identifying who are resisting the change

Empowering employees

Understanding the strategic vision of ERP

Paying attention to employee concerns

Showing leadership commitment

Developing new business performanceand control measures

Cha

nge

man

agem

ent f

acto

r

Mean


Figure 4: The importance of the communication factor

0,00 1,00 2,00 3,00 4,00 5,00

Communicating ERP change vision

Establishing communicationguidelines

Communicating ERP benefits

Regular communication practices

Open communication between thekey parties

Cooperation and involvement of thekey parties

Com

mun

icat

ion

fact

or

Mean

On timeLateWithin budgetOver budgetAchievedNot Achieved

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Figure 5: The importance of the management of expectations factor

0,00 1,00 2,00 3,00 4,00 5,00

Building employee commitment

Awarding the team

Awarding the individual

Rewarding on the basis of performance

Providing bonuses and other financialbenefits

Recognition through intangible rewards

Clarifying the future career opportunities

Celebrating success

Creating a pleasant working environment

Man

agem

ent o

f exp

ecta

tions

fact

or

Mean


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Appendix B

Hyvä (THE PERSONS NAME), Olemme maisteri- ja tohtoriopiskelijoita Svenska Handelshögskolanissa ja teemme tutkimusta taloushallinnon tietojärjestelmien käyttöönotosta. Pyytäisimme teitä osallistumaan tutkimukseemme täyttämällä sähköisen kysymyslomakkeen, johon pääsette alla olevan linkin kautta. (Linkki) Kysymyslomakkeen tarkoitus on tutkia taloushallinnon tietojärjestelmien (Enterprise Resource Planning – ERP) toteuttamisen menestyksekkyyttä suomalaisissa yrityksissä ja henkilöstöhallinnon merkitystä ERP-hankkeissa. Taloushallinnon tietojärjestelmillä tarkoitamme järjestelmiä, jotka integroivat kaikki yrityksen tärkeimmät toiminta-alueet yli eri paikkakuntarajojen. Kysymyslomake rakentuu 20 kysymyksestä: puolet näistä ovat avoimia kysymyksiä ja lopuissa pyydämme teitä arvioimaan annettujen väittämien tärkeyden asteikolla 1-5. Kysymyslomake on englanninkielinen. Haastattelukysymykset liittyvät nykyiseen järjestelmään, sen kustannuslaskelmien, aikataulussa pysymisen ja järjestelmän suorituskyvyn kartoittamiseen, ratkaiseviin menestykseen johtaviin tekijöihin ja henkilöstöresurssien johtamiseen ERP-hankkeissa yrityksessänne. Henkilöstöhallintoon liittyvät kysymykset käsittelevät seuraavia osa-alueita: ammattitaidon edellytykset, koulutus ja valmennus, muutosjohtaminen, viestintä ja palkitsemistavat. On myöskin mahdollista jättää kohta tyhjäksi avoimissa kysymyksissä tai valita ”N/A”, jos kysymys ei koske teitä. Kaikki vastaukset tullaan kuitenkin käsittelemään luottamuksellisesti ja analysoidaan kokonaispisteiden perusteella. Aineistoa tullaan käyttämään maisteritutkinnon lopputyössä ja tohtoritutkinnossa. Jos haluatte meidän lähettävän teille kopion loppuraportistamme, pyydämme teitä ottamaan meihin yhteyttä. Saimme yhteystietonne Sinisen Kirjan tietokannasta. Mikäli koette olevanne väärä henkilö tähän tutkimukseen, pyydämme, että voisitte välittää tämän sähköpostin eteenpäin näistä asioista yrityksessänne vastaavalle henkilölle. Ystävällisin terveisin, Helena Tadinen S-posti: [email protected] GSM: 040 523 9826 Oana Velcu, KTM S-posti: [email protected] tai [email protected] GSM: 050 538 7404 Puh: (09) 431 33 481

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Bästa (THE PERSONS NAME), Vi är magister- och doktorsstuderande på Svenska handelshögskolan och forskar i företagens ibruktagande av ERP (Enterprise Resource Planning) system. ERP system är de IT system som sammanbinder aktivitetsområden på olika platser. Syftet med denna undersökning är att studera framgången i genomförandet av ERP projekt i företag och att undersöka betydelsen av HR faktorer i dessa projekt. Använd vänligen bifogade anknytning för att ta del av enkäten: (THE LINK) Enkäten består av 20 frågor varav hälften är öppna frågor och resten är påståenden vars riktighet Ni kan bedöma på en skala från 1 till 5. Ställning bör tas till följande saker, definition av ert system, uppskattning av dess kostnad, tidsåtgång och funktion, ställningstagande till de kritiska framgångsfaktorerna och personalrelaterade faktorer i genomförandet av ert ERP projekt. HR relaterade frågorna berör områden om kunnande och skolning, kommunikation och belöningssystem. Vi erhöll Er kontaktinformation från företagsdatabasen som upprätthålls av den Blåa boken. Om Ni inte är den rätta personen att besvara frågorna angående företagets ERP projekt, ber vi Er att vänligen skicka detta brev vidare till den rätta personen. De allmänna frågorna kan lämnas obesvarade och om påståendena inte är relevanta i ert fall så vänligen ange ”N/A”. Alla svar kommer att behandlas konfidentiellt och analyseras endast på helhetsnivå för våra pro gradu- och doktorsavhandlingar. Vänligen ange om Ni önskar erhålla resultaten av undersökningen så skickar vi gärna dem till Er senare. Med vänlig hälsning, Helena Tadinen E-mail: [email protected] GSM: 040 523 9826 Oana Velcu, ekon.mag. E-mail: [email protected] eller [email protected] GSM: 050 538 7404 Tel: (09) 431 33 481

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Appendix C

Questionnaire (19.10.2004) GENERAL QUESTIONS 1. What is the Financial Information System (ERP) that your company is using now? 2. What system did you use before that? 3. When did you start using the new ERP system? 4. How many months was the ERP implementation planned to take? 5. How many months did the implementation actually last? 6. How many ERP modules were implemented? 7. Would you please make an estimate of the original budget established for the ERP project? 8. Would you please make an estimate of the following cost categories actually incurred in your ERP implementation? Software licence Hardware Implementation Consultants Training Other costs, which 9. Please rate the degree of your agreement with the following statements:

1=fully disagree 2 3 4 5=fully

agree 6=N/A

The ERP implementation project has been completed within budget

□ □ □ □ □ □

At the present moment, the ERP system is successfully used

□ □ □ □ □ □

105

The required functionality of the ERP project was fulfilled

□ □ □ □ □ □

10. Kindly specify to what degree the planned business case was fully realized

1=Extre- mely low 2 3 4 5=Extre-

mely high 6=N/A

□ □ □ □ □ □

11. What was the degree of importance of each factor in your ERP implementation?


mely high 6=N/A

Top management support □ □ □ □ □ □

The effective project management □ □ □ □ □ □

Business Process Reengineering □ □ □ □ □ □

Fit between ERP software and hardware □ □ □ □ □ □

User involvement □ □ □ □ □ □

Project team competence □ □ □ □ □ □

User training and education □ □ □ □ □ □

Education on new business processes □ □ □ □ □ □

Change management □ □ □ □ □ □

Interdepartmental communication □ □ □ □ □ □

Interdepartmental cooperation □ □ □ □ □ □

Management of expectations □ □ □ □ □ □

Please read the descriptions of the five ERP implementation stages before answering to Question 12. Design Choosing the ERP software and modules to implement.

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Implementation Choosing the implementation strategy and going live. Stabilization Using the new system and planned processes. Continuous improvement Achieving the benefits and adding new modules. Transformation Focusing on continuous improvement and transformation. 12. In which stage(s) of your ERP project was each factor important?

Design Imple-

mentation Stabili- sation

Cont. improvement

Transfor- mation

Project team competence □ □ □ □ □ User training and education □ □ □ □ □ Education on new business processes □ □ □ □ □ Change management □ □ □ □ □ Interdepartmental communication □ □ □ □ □ Interdepartmental cooperation □ □ □ □ □ Management of expectations □ □ □ □ □

SKILLS QUESTIONS

13. What was the degree of importance of each HR requirements factor in your ERP implementation?


mely high 6=N/A

Availability of sufficient HR for the project □ □ □ □ □ □

Availability of expertise □ □ □ □ □ □

Skilful and competent project team members □ □ □ □ □ □

Composition of project teams □ □ □ □ □ □

Relationship of trust among project team members □ □ □ □ □ □

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14. Please identify the key people in your ERP project implementation team. Top management □ Management □ IT personnel □ End-users □ ERP consultants □ ERP vendor □ IT consultants □ Other □

15. Please indicate which of the following skills were important for these people to use in your ERP implementation? (referring to previous question)

Top management

Manage- ment

IT Personnel

End- users

ERP consultants

IT consultants

Vendor

Leadership skills □ □ □ □ □ □ □

Planning skills □ □ □ □ □ □ □

Controlling skills □ □ □ □ □ □ □

Inter-personal skills □ □ □ □ □ □ □

Communication skills □ □ □ □ □ □ □

Technical skills □ □ □ □ □ □ □

ERP experience □ □ □ □ □ □ □

IT management experience □ □ □ □ □ □ □

EDUCATING, TRAINING AND DEVELOPING

16. What was the degree of importance of each training factor in your ERP implementation?


mely high 6=N/A

108

Identifying the type of training needed □ □ □ □ □ □

Providing the support for training □ □ □ □ □ □

Having qualified trainers □ □ □ □ □ □

Measuring training performance □ □ □ □ □ □

Documenting the training process □ □ □ □ □ □

Preparing employees for change □ □ □ □ □ □

Learning the new system and job functions □ □ □ □ □ □

Accepting the new processes and procedures □ □ □ □ □ □

Having sufficient budget □ □ □ □ □ □

MANAGING CHANGE 17. What was the degree of importance of each change management strategy factor in your ERP implementation?


mely high 6=N/A

Building user acceptance □ □ □ □ □ □

Identifying sources of resistance □ □ □ □ □ □

Identifying who are resisting the change □ □ □ □ □ □

Empowering employees □ □ □ □ □ □

Understanding the strategic vision of ERP □ □ □ □ □ □

Paying attention to employee concerns □ □ □ □ □ □

Showing leadership commitment □ □ □ □ □ □

Developing new business performance and □ □ □ □ □ □

control measures COMMUNICATION

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18. What was the degree of importance of each communication factor in your ERP implementation?


mely high 6=N/A

Communicating ERP change vision □ □ □ □ □ □

Establishing communication guidelines □ □ □ □ □ □

Communicating ERP benefits □ □ □ □ □ □

Regular communication practices □ □ □ □ □ □

Open communication between the key parties □ □ □ □ □ □

Cooperation and involvement of the key parties □ □ □ □ □ □

REWARD SYSTEM 19. What was the degree of importance of each reward system factor in your ERP implementation?


mely high 6=N/A

Building employee commitment □ □ □ □ □ □

Awarding the team □ □ □ □ □ □

Awarding the individual □ □ □ □ □ □

Rewarding on the basis of performance □ □ □ □ □ □

Providing bonuses and other financial benefits □ □ □ □ □ □

Recognition through intangible rewards □ □ □ □ □ □

Clarifying the future career opportunities □ □ □ □ □ □

Celebrating success □ □ □ □ □ □

Creating a pleasant working environment □ □ □ □ □ □

20. Please indicate the main industry in which your company is operating.

Rajendra

Documents

erp implementation project

erp implementation success

erp implementation process

erp literature

erp implementation failure

benefits of erp

erp implementation approaches

erp implementation challenges