Human resources management aspects of Enterprise Resource Planning (ERP) Systems Projects

by Helena Tadinen

Masters Thesis in Advanced Financial Information Systems Swedish School of Economics and Business Administration

2005

Abstract
HANKEN - Swedish School of Economics and Business Administration Department: Accounting Author: Helena Tadinen 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 Type of Work: Master of Science Thesis Date: 04.02.2005

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Table of Contents
ABSTRACT ....................................................................................................................II LIST OF ABBREVIATIONS ..................................................................................... VI 1 INTRODUCTION ....................................................................................................1 1.1 1.2 1.3 1.4 2 2.1 2.2 2.3 2.4
2.4.1 2.4.2

RESEARCH BACKGROUND ..................................................................................1 THE RESEARCH OBJECTIVE .................................................................................2 EMPIRICAL METHOD ...........................................................................................2 STRUCTURE OF THE THESIS ................................................................................3 WHAT IS ERP? ...................................................................................................5 REASONS FOR THE MNC TO GO ERP .................................................................6 BENEFITS OF ERP ..............................................................................................7 ERP IMPLEMENTATION PROCESS........................................................................9
ERP implementation phases.............................................................................................. 9 ERP implementation approaches.................................................................................... 10

ERP SYSTEMS IMPLEMENTATIONS ...............................................................5

2.5 3 3.1 3.2 3.3 3.4

3.4.1 3.4.2 3.4.3

CHAPTER SUMMARY.........................................................................................12 ERP IMPLEMENTATION CHALLENGES ..............................................................14 ERP AS A CHANGE PROCESS .............................................................................16 ERP IMPLEMENTATION FAILURE ......................................................................18 CRITICAL SUCCESS FACTORS ...........................................................................20
A taxonomy of players and activities across the ERP project life cycle....................... 22 A case study of interrelations between critical success factors..................................... 27 A model of ERP project implementation ....................................................................... 31

ERP IMPLEMENTATION SUCCESS AND FAILURE FACTORS ...............13

3.5

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

4 MANAGING HUMAN RESOURCES IN THE ERP IMPLEMENTATION PROCESS ......................................................................................................................40 4.1 4.2 4.3 4.4 4.5 5 5.1 5.2 5.3 5.4
5.4.1 5.4.2

KEY STAKEHOLDERS INVOLVED IN AN ERP IMPLEMENTATION PROJECT ..........40 HUMAN RESOURCES REQUIREMENTS FOR A SUCCESSFUL PROJECT ...................45 WHY IT PAYS TO PAY ATTENTION TO PEOPLE ...................................................49 FACTORS INFLUENCING THE PROJECT SUCCESS: THE IMPACT OF HRM.............52 CHAPTER SUMMARY.........................................................................................56 HYPOTHESES DEVELOPMENT ............................................................................60 THE PROPOSED RESEARCH MODEL ....................................................................62 HYPOTHESES TESTING ......................................................................................63 RESEARCH METHODOLOGY ..............................................................................65
Research method .............................................................................................................. 65 Data and sample selection................................................................................................ 66

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

5.5 5.6
5.6.1 5.6.2 5.6.3 5.6.4 2.1.1

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

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

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2.1.2

Findings on testing Hypothesis 3..................................................................................... 91

5.7 5.8 6 6.1 6.2

LIMITATIONS ....................................................................................................92 CHAPTER SUMMARY ........................................................................................93 CONCLUSIONS ..................................................................................................94 FURTHER RESEARCH SUGGESTIONS ..................................................................95

CONCLUSIONS.....................................................................................................94

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 IMPLEMENTATIONRATING 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 PERFORMANCE 86 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

List of Abbreviations
BPR CFO CIO CSF ERP HR IT IS PPM SAP Y2K Business Process Reengineering Chief Financial Officer Chief Information Officer Critical Success Factors Enterprise Resource Planning Human resources Information Technology Information Systems Project Phase Model Systems, Applications and Products in Data Processing Year 2000

HRM Human resources management

MNC Multinational Corporation

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1
1.1

Introduction
Research background

Enterprise Resource Planning systems have been considered as the most important development in the corporate use of information technology in the 1990s (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

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.

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 projects 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

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.

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 (OLeary, 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 5

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

- 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 firms 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 Replace legacy systems Simplify and standardize systems Improve interactions with suppliers and customers Gain strategic advantage Link global activities Solve the Y2K problem Pressure to keep up with competitors Ease of upgrading systems Restructure organization

United States 4,06 3,85 3,55 3,46 3,17 3,08 2,99 2,91 2,58

Sweden 4,11 3,67 3,16 3,18 2,85 2,48 2,48 2,96 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 firms performance eliminates inefficient manual processes

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 corporations 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.

2.4 2.4.1

ERP implementation process 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 companys 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 (OLeary, 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, 9

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 (OLeary, 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 firms 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.

ERP implementation success and failure factors

On one hand, ERP systems promise to improve organisations 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

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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 todays 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 companys 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

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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 todays 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 systems 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 (OLeary, 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

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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 companys 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

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enhancement possibilities and fast access to customer data increases the individuals insight into companys 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 Sutcliffes (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 OLeary (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, competitors position in the market, cost and benefit judgements, cost and time overruns, problems with customers and suppliers, drop in companys 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 organizations 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 21

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 organisations 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 Top management Project champion Steering committee Implementation consultants Project team Vendor-customer partnerships Vendors tools Vendor support Key activities User training and education Management of expectations Careful selection of the appropriate package Project management Customization Data analysis and conversion Business process reengineering 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 managements 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 teams 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 teams 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. Vendors 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 Steering committee Top management support Clear goals and objectives User training Unique to ERP systems Interdepartmental control and communication Change management BPR Vendor support Use of vendor tools and consultants

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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 postimplementation 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.

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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 Nelsons 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 teams competence on IT implementation success. Interdepartmental co-operation was again linked high on executives list and low in Somers and Nelsons 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 dont 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

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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 Explorecos, 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.

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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 didnt receive much signification in both cases.

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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 Oilcos experience. In Explorecos 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 Explorecos 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

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unsuccessful project was exploited at the ERP implementation in Exploreco case. The project was piloted from the Oilcos 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 inhouse 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 Oilcos case was much larger than in Explorecos 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, Oilcos 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 35

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 firms 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

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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 dont 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 37

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.

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Authors CSF list (22 factors): Key players: top management, project champion, steering committee, implementation consultants, project team, vendor-customer partnerships, vendor tools and vendor support. Key activities: user training and education, management of expectations, careful software package selection, project management, customisation, data analysis and conversion, BPR, defining the architecture, dedicating resources, change management, clear goals and objectives, education of new BP, interdepartmental communication and collaboration.

Aim

Main points

Findings The importance of these CSF does change in each stage of the implementation process. Some of these are crucial almost or throughout the project. Any IT project related: steering committee, top management support, clear goals and objectives, and user training. Unique to ERP systems: interdepartmental control and communication, change management, BPR, vendor support, use of vendor tools and consultants.

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

Somers & Nelson (2001)

To identify which are the key players and activities in an ERP implementation process and at which stage of ERP life cycle their effect is most critical.

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Akkermans To study whether the list Top 10 CSF ranking list rated by top management level & Helden provided by Somers and managers: (2002) Nelson is useful to explain the 1. Top management support root causes of success or 2. Project team competence failure of ERP implementation 3. Interdepartmental co-operation and whether these CSF are 4. Clear goals and objectives interrelated with each other. 5. Project management 6. Interdepartmental communication 7. Management of expectations 8. Project champion 9. Vendor support 10. Careful package selection

The list provided by Somers and Nelson is sufficient to explain the root causes of success or failure. Individual CSF are interrelated with each other and, moreover, all CSF influence each other to the same direction. Interdepartmental co-operation and communication are the core of the ERP implementation process. The presence and attitudes of key stakeholders such as top management, project team, project management, project champion, software vendor and consultants determine the implementation success. It was proven that paying attention to CSF increases the success rate for ERP implementations. Large projects are of a high risk and Vanilla implementations should be preferred. In contrast with other studies, no significant post-implementation phases were recognised.

Parr& Shanks (2000)

To determine which CSF are Project Phase Model (PPM) consisting of three phases: necessary within each phase of planning, project, and enhancement. ERP implementation by Interviews were conducted with several stakeholders such comparing an unsuccessful and as system managers, project managers, project team a successful implementation. members, business analysts, consultants and system users. Similarities and differences based on two cases: successful one and unsuccessful one.

Managing human resources in the ERP implementation process

The improvement of enterprises 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

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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 companys 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

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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 companys employees. It has been also felt that the power and influence is too great and that they dont provide solutions for companys 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 didnt understand, their documentation of the project process didnt 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. 42

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 dont 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.

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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 postimplementation 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.

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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

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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

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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

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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

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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.

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The viewpoint of the authors, which was supported by previous studies, was that reengineering 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 firms 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 individuals 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

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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

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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 projects 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 Belouts and Gauvreaus paper was to retest Pintos and Prescotts 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.

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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.

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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

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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 departments 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 55

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

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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 didnt 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.

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Authors Four key stakeholders involved in ERP projects: management, users, developers and consultants.

Aim

Main points

Findings Retention of skilful staff is essential for the success of the project especially at the post-implementation stage and is a major concern of managers. The major conflict identified was the use of external consultants and developers. Other main difficulties were encountered with change management. The employee attitudes were found to be more difficult to manage than technical difficulties. The project necessary know-how and the means of enhancing it, project teams profiles and roles has a direct impact on the output of the project. Successful projects need to have not only the existence of two types of know-how but also the co-operation of these two types of experts. The optimal solution is achieved when the same person covers the both roles and can smoothly run between operation and engineering environments. Leadership is the most important skill. Then follow administrative skills such as planning and controlling. Technical skills are necessary to their significance has dropped. Interpersonal and communication skills are more importance as the trend in project management is towards people management It is easier to specify reasons for re-engineering projects than to gain acceptance and implement the desired changes. Attention to basic change management issues increases the ease of implementation. Sponsors of the re-engineering projects need to address the fears that jobs might be eliminated. Most of the projects fail because job losses create long-term problems. To minimise problems there must be participation in project definition and planning by the members of affected organisations. The personnel factor does not have a significant impact on the project success. The relationship between CSF and project success is affected by the project life cycle stages. Project structure and activity sectors have a moderating effect on the relationship between CSF and project success.

Skok & Legge (2002)

To identify which stakeholders are the key forces driving the ERP change process and study their power to influence the outcome of ERP project. Improvement of an enterprise relies on the success of software re-engineering projects, which respectively depends on human resources. Humans as a critical factor in enterprise improvement projects. 2 types of know- how required: engineering and operation. A ranked list of skills required by the project managers derived from the earlier researches done on the topic.

Table 4-1 Summary table of the articles

Hawa, Otritz, Lario & Ros (2002)

To analyse some of the human aspects related to software engineering projects and focusing on know-how, profiles and roles.

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A large number of failures are caused by management paying too little attention to human factors. A framework to avoid implementation caused human problems: 1) conduct an identity audit 2) establish ground rules 3) define a framework for participation Contradicting the commonly accepted view and claiming that human resources factor does not have a significant impact on the project success. 4 hypothesis to retest the validity of an earlier research

Waterridge (1997)

To investigate the key skills that project managers need to possess to manage projects successfully

May & Kettelhut (1996)

To illustrate the implementation of software projects in the context of change and provide a list of recommendations that have to be taken into account with human factors to increase the probability of success.

Belout and Gauvreau (2004)

To investigate the effect of personnel factor on project success.

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

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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 Top management (H) Project champion (H) Steering committee (H) Implementation consultants (H) Project team (S) Vendor-customer partnerships (H) Vendors tools (H) Vendor support (H)

Key activities User training and education (S) Management of expectations (S) Careful selection of the appropriate package (H) Project management (H) Customization (H) Data analysis and conversion (H) Business process reengineering (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, Im 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

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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 Management of expectations needs and skills (HR requirements for the project) Educating, training, developing Termination of work places, task changes (resistance) Communication Reward system (recognition, compensation, benefits)

Soft factors Project team competence User training and education Education on new business processes Change management Interdepartmental communication Interdepartmental cooperation 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. 61

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 ERP project life cycle

Project team competence User training and education Education on new business processes Interdepartmental communication Interdepartmental cooperation Management of expectations Stakeholders - management - developers - consultants - users ERP implementation project success - cost - time - performance

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 63

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, Im 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 5.4.1

Research methodology 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, farreaching 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 henkilstpllikk/johatja. The Chief Information Officer (CIO) tietohallintopllikk/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 openended 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 67

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 5.6.1

Analysis of the research results The response rate

Altogether, the questionnaire was distributed manly to Chief Information Officers (CIOs) 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 CIOs. 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 CIOs 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 CIOs but rather of CFOs (Chief Financial Officers). In addition, HR area is not really the CIOs area of responsibility either. Therefore, respondents might not have been familiar with the research field. 5) The questionnaire was distributed to CIOs 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) SAP IN-HOUSE Inreo Dealflow MFG/Pro Oracle Financials PRMS Sentera Enterprise Solagem enterprise TietoEnator Efekto Unknown Wintime Economa Industry sector (n=15) Energy Wholesale Food Manufacturing Factory Pulp Retail Media Stainless steel Transportation Time of starting using the new ERP system (n=15) In the last year 1 to 3 years ago 3 to 5 years ago 5 to 7 years ago More than 7 years ago

% 39 7 6 6 6 6 6 6 6 6 6 % 19 19 13 13 6 6 6 6 6 6 % 7 26 27 20 20

No of companies 6 1 1 1 1 1 1 1 1 1 1 No of companies 3 3 2 2 1 1 1 1 1 1 No of companies 1 4 4 3 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 70

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 ERP project has been completed within the budget At present, ERP system is successfully used Required functionality of the ERP system was fulfilled The planned business case was fully realized

% 50 53,3 93,8 75 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 Heldens 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) Top management support (H) User involvement (S) The effective project management (H) Interdepartmental cooperation (S) Project team competence (S) User training and education (S) Interdepartmental communication (S) Business Process Reengineering (H) Change management (S)

Mean 4,25 4,25 4,19 4,19 4,13 4,06 4,06 3,96 3,50

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Education on new business processes (S) Management of expectations (S) Fit between ERP software and hardware (H)
(H) hard factor, (S) soft factor

3,44 3,38 3,19

5.6.4 Soft factors Project team competence 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 Skilful and competent project team members Availability of sufficient HR for the project Availability of expertise Composition of project teams

Mean
3,94 3,69 3,50 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 IT personnel Top management Consultants Vendor IT consultants Other

% 66,7 55,6 44,4 44,4 27,8 11,1 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 Leadership skills Communication skills Controlling skills Interpersonal skills IT management skills Planning skills ERP experience Technical skills End-users Communication skills Interpersonal skills Planning skills Technical skills ERP experience Controlling skills Leadership skills IT management skills IT consultants IT management skills Technical skills Communication skills Planning skills Interpersonal skills ERP experience Leadership skills Controlling skills IT personnel Communication skills IT management skills Planning skills Technical skills ERP experience Controlling skills Interpersonal skills Leadership skills

% 55,6 44,4 27,8 16,7 11,1 5,6 5,6 0,0 % 61,1 55,6 33,3 27,8 27,8 16,7 0,0 0,0 % 22,2 16,7 11,1 5,6 5,6 5,6 0,0 0,0 % 72,2 72,2 61,1 61,1 50,0 38,9 38,9 27,8

Management Communication skills Controlling skills Leadership skills Planning skills Interpersonal skills IT management skills ERP experience Technical skills Consultants ERP experience Planning skills Communication skills Technical skills Interpersonal skills IT management skills Leadership skills Controlling skills ERP vendor Technical skills ERP experience Communication skills Technical skills Planning skills Controlling skills Interpersonal skills Leadership skills

% 77,8 55,6 50,0 50,0 50,0 27,8 22,2 0,0 % 44,4 38,9 38,9 33,3 27,8 22,2 11,1 11,1 % 33,3 27,8 22,2 22,2 16,7 11,1 5,6 0,0

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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 dont 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 companys 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 highlevel 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 76

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 Learning the new system and job functions Accepting the new processes and procedures Preparing employees for change Having qualified trainers Identifying the type of training needed Providing the support for training Documenting the training process Having sufficient budget Measuring training performance

Mean 4,47 4,27 4,20 4,00 3,87 3,80 3,47 3,33 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 Showing leadership commitment Empowering employees Understanding the strategic vision of ERP Developing new business performance and control measures Paying attention to employee concerns Identifying sources of resistance Identifying who are resisting the change Building user acceptance

Mean 4,21 3,93 3,86 3,71 3,64 3,57 3,50 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 Open communication between the key parties Cooperation and involvement of the key parties Communicating ERP benefits Regular communication practices Communicating ERP change vision Establishing communication guidelines

Mean 4,53 4,20 4,13 3,93 3,87 3,33

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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 Building employee commitment Creating a pleasant working environment Rewarding on the basis of performance Celebrating success Awarding the team Recognition through intangible rewards Awarding the individual Providing bonuses and other financial benefits Clarifying the future career opportunities

Mean 3,93 3,87 3,80 3,67 3,40 3,27 3,20 3,20 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. 79

With these two hypotheses, Im 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, Im using three sub measurements such as: Time (On time vs. Late) Cost (Within budget vs. Over budget) System performance (Achieved vs. Not achieved)

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Thus, Im 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, Im using only the two far ends on the time scale and excluding the middle group. Also, Im leaving out the companies where too much data is missing.

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Table 5-13: Time selection criteria (n=13)

ERP implementation based on time (percentage of respondents) on time (50 %) moderately late (28,6 %) very late (21,4 %)

No of companies 7 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 3,958333 0,460417 6 0 6 3,564655 0,00593 1,943181 0,01186 2,446914 Over time 2,875 0,03125 2

Mean Variance Observations Hypothesized Mean Difference df t Stat P(T<=t) one-tail t Critical one-tail P(T<=t) two-tail t Critical two-tail

Table 5-15: T-test results for training and educating factor based on time On time 3,777779 0,329217 7 0 7 -3,19186 0,007619 1,894578 0,015237 2,364623 Over time 4,555555 0,024693 2

Mean Variance Observations Hypothesized Mean Difference df t Stat P(T<=t) one-tail t Critical one-tail P(T<=t) two-tail t Critical two-tail

Table 5-16: T-test results for change management factor based on time On time 3,928571 0,415923 7 0 2 Over time 3,75 0,28125 2

Mean Variance Observations Hypothesized Mean Difference df

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t Stat P(T<=t) one-tail t Critical one-tail P(T<=t) two-tail t Critical two-tail

0,399255 0,364152 2,919987 0,728304 4,302656

Table 5-17: T-test results for communication factor based on time On time 4,119046 0,775134 7 0 5 0,486232 0,323682 2,015049 0,647364 2,570578 Over time 3,91667 0,125 2

Mean Variance Observations Hypothesized Mean Difference df t Stat P(T<=t) one-tail t Critical one-tail P(T<=t) two-tail t Critical two-tail

Table 5-18: T-test results for management by expectations factor based on time On time 3,523809 0,595531 7 0 2 0,04113 0,485464 2,919987 0,970929 4,302656 Over time 3,5 0,5 2

Mean Variance Observations Hypothesized Mean Difference df t Stat P(T<=t) one-tail t Critical one-tail P(T<=t) two-tail t Critical two-tail

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

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budget. Similarly, as explained in time section Im 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) within budget (53,3 %) indifferent (6,7 %) over budget (40%)

No of companies 8 1 6

After performing the t-test statistics, I got the following findings:

Table 5-20: T-test results for project team competence factor based on cost Within budget 3,642857143 0,49702381 7 0 7 0,951143752 0,186604291 1,894577508 0,373208582 2,36462256 Over budget 3,15 0,9875 5

Mean Variance Observations Hypothesized Mean Difference df t Stat P(T<=t) one-tail t Critical one-tail P(T<=t) two-tail t Critical two-tail

Table 5-21: T-test results for training and educating factor based on cost Within budget 3,833332125 0,342149959 8 0 6 0,229905776 0,412901251 1,943180905 0,825802503 2,446913641 Over budget 3,7333328 0,73209799 5

Mean Variance Observations Hypothesized Mean Difference df t Stat P(T<=t) one-tail t Critical one-tail P(T<=t) two-tail t Critical two-tail

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Table 5-22: T-test results for change management factor based on cost Within budget 3,984375 0,345703125 8 0 6 0,944496797 0,190689311 1,943180905 0,381378622 2,446913641 Over budget 3,625 0,40625 4

Mean Variance Observations Hypothesized Mean Difference df t Stat P(T<=t) one-tail t Critical one-tail P(T<=t) two-tail t Critical two-tail

Table 5-23: T-test results for communication factor based on cost Within budget 3,97917 0,598717302 8 0 11 0,449215279 0,330999081 1,795883691 0,661998161 2,200986273 Over budget 3,833334 0,152777222 5

Mean Variance Observations Hypothesized Mean Difference df t Stat P(T<=t) one-tail t Critical one-tail P(T<=t) two-tail t Critical two-tail

Table 5-24: T-test results for management by expectations factor based on cost Within budget 3,48611 0,571207443 8 0 11 0,988160517 0,172155969 1,795883691 0,344311939 2,200986273 Over budget 3,133334 0,280250086 5

Mean Variance Observations Hypothesized Mean Difference df t Stat P(T<=t) one-tail t Critical one-tail P(T<=t) two-tail t Critical two-tail

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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, Im 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) not achieved (50 %) achieved (31,3 %) fully achieved (18,8 %)

No of companies 8 5 3

After performing the t-test statistics, I got the following findings:

Table 5-26: T-test results for project team competence factor based on system performance Achieved 3,375 1,0714286 8 0 9 1,1397718 0,1419029 1,8331139 0,2838058 2,2621589 Not Achieved 3,833333333 0,083333333 3

Mean Variance Observations Hypothesized Mean Difference df t Stat P(T<=t) one-tail t Critical one-tail P(T<=t) two-tail t Critical two-tail

Table 5-27: T-test results for training and educating factor based on system performance Achieved 3,7499989 0,6022912 8 Not Achieved 3,925923333 0,670777737 3

Mean Variance Observations

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Hypothesized Mean Difference df t Stat P(T<=t) one-tail t Critical one-tail P(T<=t) two-tail t Critical two-tail

0 3 0,3217944 0,3843635 2,353363 0,7687269 3,1824493

Table 5-28: T-test results for change management factor based on system performance Achieved 3,703125 0,3479353 8 0 1 0,7787279 0,2893951 6,3137486 0,5787902 12,70615 Not Achieved 4,125 0,5 2

Mean Variance Observations Hypothesized Mean Difference df t Stat P(T<=t) one-tail t Critical one-tail P(T<=t) two-tail t Critical two-tail

Table 5-29: T-test results for communication factor based on system performance Achieved 3,812505 0,5114182 8 0 4 0,6733774 0,2688059 2,1318465 0,5376119 2,7764509 Not Achieved 4,11111 0,398145185 3

Mean Variance Observations Hypothesized Mean Difference df t Stat P(T<=t) one-tail t Critical one-tail P(T<=t) two-tail t Critical two-tail

Table 5-30: T-test results for management by expectations factor based on system performance Mean Variance Observations Hypothesized Mean Difference df Achieved 3,23611 0,5764999 8 0 5 Not Achieved 3,703703333 0,374484033 3

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t Stat P(T<=t) one-tail t Critical one-tail P(T<=t) two-tail t Critical two-tail

1,0537945 0,170107 2,0150492 0,340214 2,5705776

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

Soft factors 1) Project team competence 2) Training and educating 3) Change management 4) Communication 5) Management of expectations

On time Late 0,00593 0,00761 0,36415 0,32368 0,48546 Reject Ho Reject Ho Accept Ho Accept Ho Accept Ho

Within budget Over budget Accept 0,186604 Ho Accept 0,412901 Ho Accept 0,190689 Ho Accept 0,343100 Ho Accept 0,172156 Ho

Syst. perf. achieved Syst. Perf. not achieved Accept 0,141903 Ho Accept 0,384363 Ho Accept 0,289395 Ho Accept 0,268805 Ho Accept 0,170106 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.

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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 1) Project team competence 2) Training and educating 3) Change management 4) Communication 5) Management of expectations

On time 3,39 3,78 3,93 4,12 3,52

Late 2,88 4,56 3,75 3,92 3,5

Within budget 3,19 3,83 3,98 3,98 3,49

Over budget 3,15 3,73 2,9 3,83 3,13

Achieved 3,83 3,75 3,7 3,81 3,24

Not achieved 3,83 3,93 2,75 4,11 3,70

Figure 5-2: Mean values for all soft factors Rating 1 (extremely low) to 5 (extremely high)

Management of expectations On time Communication Late Within budget Change management Training and educating Project team competence 0 1 2 3 4 5 Over budget Achieved Not achieved

Soft factors

Mean

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.

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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.

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2.1.2

Findings on testing Hypothesis 3

H3: The importance of soft factors changes across project life cycle stages. With the third hypothesis Im 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 Project team competence Interdepartmental communication Education on new business processes Change management User training and education Stabilization Project team competence User training and education Change management Interdepartmental communication Education on new business processes Transformation Change management Education on new business processes Project team competence User training and education Interdepartmental communication

% 55,6 50,0 33,3 11,1 5,6 % 66,7 66,7 61,1 44,4 38,9 % 38,9 33,3 33,3 27,8 27,8

Implementation Project team competence Change management User training and education Interdepartmental communication Education on new business processes Continuous improvement Interdepartmental communication Education on new business processes User training and education Change management Project team competence

% 66,7 55,6 38,9 38,9 22,2 % 55,6 50,0 38,9 33,3 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

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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 systems 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 (OLeary 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.

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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 couldnt 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.

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The selected research method used was on-line survey as it was considered to give the highest and fastest response rate, however, it didnt 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
6.1

Conclusions
Conclusions

Many academics have agreed that managing human resources appropriately is one of the most crucial elements to organisations 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

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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, indepth 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.

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13. Markus M. L., Axline S., Petrie D., Tanis C. (2000): Learning from the adapters experiences with ERP: problems encountered and success achieved. Journal of Information Technology, Vol. 15, pp. 245-265 14. Markus M. L., Tanis C. (1999): The Enterprise System Experience- From Adaption to Success (Claremont Graduate University, California) 15. May D., Kettelhut M. C. (1996): Managing human issues in re-engineering projects: a case review of implementation issues. Journal of Systems Management, Vol. 47, no. 1, pp. 5-11 16. Mital A. (1997): What role for humans in computer integrated manufacturing? International Journal of Computer Integrated Manufacturing, Vol. 10, No.1-4, pp. 190-198 17. OLeary D. E. (2000): Enterprise recourse planning systems: systems, life cycle, electronic commerce and risk. Cambridge University Press 18. Olson D. L. (2004): Managerial Issues of Enterprise Resource Planning Systems. McGraw-Hill/Irwin 19. Parr A., Shanks G. (2000): A model of ERP project implementation. Journal of Information Technology, Vol. 15, pp. 289-303 20. Poston R., Grabski S. (2001): Financial impacts on enterprise resource planning implementations. International Journal of Accounting Information Systems, Vol. 2, pp. 271-294 21. Ross J. W. (1999): Surprising facts about implementing ERP. IT Pro, July/August 22. Skok W., Legge M. (2002): Evaluating enterprise resource planning systems using an interpretive approach. Knowledge and Process Management, Vol. 9, No. 2, pp. 72-82 23. Somers T. M., Nelson K. G. (2001): The impact of the critical success factors across the stages of enterprise resource planning implementations. Proceedings of the 34th Hawaii International Conference on Systems Sciences, January 3-6, Maui, Hawaii 24. Somers T. M., Nelson K. G. (2004): A taxonomy of players and activities across the ERP project life cycle. Information and Management, Vol. 41, pp. 257-278 25. Stewart G., Milford M., Jewels T., Hunter T., Hunter B. (2000): Organisational readiness for ERP implementation. Information Systems Management Research Centre, Queensland University of Technology, Americas Conference in Information Systems (AMCIS) 26. Sumner M. (2000): Risk factors in enterprise wide/ERP projects. Journal of Information Technology, Vol. 15, pp. 317-327

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Appendices
Appendix A Figure 1: The importance of the project team competence factor

Project team competence factor

Composition of project teams

On time
Skilful and competent project team members Availability of expertise Availability of sufficient HR for the project 0,00 1,00 2,00 3,00 4,00 5,00

Late Within budget Over budget Achieved Not achieved

Mean

Figure 2: The importance of the training and educating factor

Having sufficient budget Accepting the new processes and procedures Training and educating factor Learning the new system and job functions

On time
Preparing employees for change Documenting the training process Measuring training performance Having qualified trainers Providing the support for training Identifying the type of training needed 0,00 1,00 2,00 3,00 4,00 5,00 6,00 Mean

Late Within budget Over budget Achieved Not achieved

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Figure 3: The importance of the change management factor

Developing new business performance and control measures Showing leadership commitment Change management factor

Paying attention to employee concerns On time Understanding the strategic vision of ERP Late Within budget Over budget Empowering employees Achieved Not achieved Identifying who are resisting the change

Identifying sources of resistance

Building user acceptance 0,00 1,00 2,00 3,00 4,00 5,00

Mean

Figure 4: The importance of the communication factor

Cooperation and involvement of the key parties Open communication between the key parties Communication factor On time Regular communication practices Late Within budget Over budget Communicating ERP benefits Achieved Not Achieved Establishing communication guidelines

Communicating ERP change vision

0,00

1,00

2,00

3,00

4,00

5,00

Mean

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Figure 5: The importance of the management of expectations factor

Creating a pleasant working environment

Celebrating success Management of expectations factor

Clarifying the future career opportunities On time Late Providing bonuses and other financial benefits Rewarding on the basis of performance Within budget Over budget Achieved Not achieved

Recognition through intangible rewards

Awarding the individual

Awarding the team

Building employee commitment 0,00 1,00 2,00 3,00 4,00 5,00

Mean

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Appendix B
Hyv (THE PERSONS NAME), Olemme maisteri- ja tohtoriopiskelijoita Svenska Handelshgskolanissa ja teemme tutkimusta taloushallinnon tietojrjestelmien kyttnotosta. Pyytisimme teit osallistumaan tutkimukseemme tyttmll shkisen kysymyslomakkeen, johon psette alla olevan linkin kautta. (Linkki) Kysymyslomakkeen tarkoitus on tutkia taloushallinnon tietojrjestelmien (Enterprise Resource Planning ERP) toteuttamisen menestyksekkyytt suomalaisissa yrityksiss ja henkilsthallinnon merkityst ERP-hankkeissa. Taloushallinnon tietojrjestelmill tarkoitamme jrjestelmi, jotka integroivat kaikki yrityksen trkeimmt toiminta-alueet yli eri paikkakuntarajojen. Kysymyslomake rakentuu 20 kysymyksest: puolet nist ovat avoimia kysymyksi ja lopuissa pyydmme teit arvioimaan annettujen vittmien trkeyden asteikolla 1-5. Kysymyslomake on englanninkielinen. Haastattelukysymykset liittyvt nykyiseen jrjestelmn, sen kustannuslaskelmien, aikataulussa pysymisen ja jrjestelmn suorituskyvyn kartoittamiseen, ratkaiseviin menestykseen johtaviin tekijihin ja henkilstresurssien johtamiseen ERPhankkeissa yrityksessnne. Henkilsthallintoon liittyvt kysymykset ksittelevt seuraavia osaalueita: ammattitaidon edellytykset, koulutus ja valmennus, muutosjohtaminen, viestint ja palkitsemistavat. On myskin mahdollista jtt kohta tyhjksi avoimissa kysymyksiss tai valita N/A, jos kysymys ei koske teit. Kaikki vastaukset tullaan kuitenkin ksittelemn luottamuksellisesti ja analysoidaan kokonaispisteiden perusteella. Aineistoa tullaan kyttmn maisteritutkinnon lopputyss ja tohtoritutkinnossa. Jos haluatte meidn lhettvn teille kopion loppuraportistamme, pyydmme teit ottamaan meihin yhteytt. Saimme yhteystietonne Sinisen Kirjan tietokannasta. Mikli koette olevanne vr henkil thn tutkimukseen, pyydmme, ett voisitte vlitt tmn shkpostin eteenpin nist asioista yrityksessnne vastaavalle henkillle. Ystvllisin terveisin, Helena Tadinen S-posti: helena.tadinen@hanken.fi GSM: 040 523 9826 Oana Velcu, KTM S-posti: oana.velcu@hanken.fi tai oana.g.velcu@hanken.fi GSM: 050 538 7404 Puh: (09) 431 33 481

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Bsta (THE PERSONS NAME), Vi r magister- och doktorsstuderande p Svenska handelshgskolan och forskar i fretagens ibruktagande av ERP (Enterprise Resource Planning) system. ERP system r de IT system som sammanbinder aktivitetsomrden p olika platser. Syftet med denna underskning r att studera framgngen i genomfrandet av ERP projekt i fretag och att underska betydelsen av HR faktorer i dessa projekt. Anvnd vnligen bifogade anknytning fr att ta del av enkten: (THE LINK) Enkten bestr av 20 frgor varav hlften r ppna frgor och resten r pstenden vars riktighet Ni kan bedma p en skala frn 1 till 5. Stllning br tas till fljande saker, definition av ert system, uppskattning av dess kostnad, tidstgng och funktion, stllningstagande till de kritiska framgngsfaktorerna och personalrelaterade faktorer i genomfrandet av ert ERP projekt. HR relaterade frgorna berr omrden om kunnande och skolning, kommunikation och belningssystem. Vi erhll Er kontaktinformation frn fretagsdatabasen som upprtthlls av den Bla boken. Om Ni inte r den rtta personen att besvara frgorna angende fretagets ERP projekt, ber vi Er att vnligen skicka detta brev vidare till den rtta personen. De allmnna frgorna kan lmnas obesvarade och om pstendena inte r relevanta i ert fall s vnligen ange N/A. Alla svar kommer att behandlas konfidentiellt och analyseras endast p helhetsniv fr vra pro gradu- och doktorsavhandlingar. Vnligen ange om Ni nskar erhlla resultaten av underskningen s skickar vi grna dem till Er senare. Med vnlig hlsning, Helena Tadinen E-mail: helena.tadinen@hanken.fi GSM: 040 523 9826 Oana Velcu, ekon.mag. E-mail: oana.velcu@hanken.fi eller oana.g.velcu@hanken.fi 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

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The required functionality of the ERP project was fulfilled

10. Kindly specify to what degree the planned business case was fully realized
1=Extremely low 2 3 4 5=Extremely high 6=N/A

11. What was the degree of importance of each factor in your ERP implementation?
1=Extremely low 2 3 4 5=Extremely 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. Choosing the ERP software and modules to implement. Design

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Implementation Stabilization Continuous improvement Transformation

Choosing the implementation strategy and going live. Using the new system and planned processes. Achieving the benefits and adding new modules. Focusing on continuous improvement and transformation.

12. In which stage(s) of your ERP project was each factor important?
Design Implementation Stabilisation Cont. improvement Transformation

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?
1=Extremely low 2 3 4 5=Extremely 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 Management IT Personnel Endusers 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?
1=Extremely low 2 3 4 5=Extremely high 6=N/A

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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?
1=Extremely low 2 3 4 5=Extremely 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?
1=Extremely low 2 3 4 5=Extremely 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?
1=Extremely low 2 3 4 5=Extremely 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.

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