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A FRAMEWORK FOR THE IMPLEMENTATION OF ERP TO IMPROVE BUSINESS PERFORMANCE: A CASE STUDY
Almahdi .M. S. Ibrahim, Management and Management Research Institute, Salford Business School, Salford University, Greater Manchester, UK John. M. Sharp, Management and Management Research Institute, Salford Business School, Salford University, Greater Manchester, UK email@example.com Aris. A. Syntetos, Management and Management Research Institute, Salford Business School, Salford University, Greater Manchester, UK
Abstract This paper presents a theoretical framework that has been developed which portrays the “soft” critical success factors in the process of implementing an ERP system. It was developed through a critical synthesis of the relevant literature. The results of the implementation framework, being tested in a case study Libyan Oil company, are presented and some conclusions drawn. Keywords Enterprise Resource Planning, Implementation, Framework, Soft issues.
1 INTRODUCTION Enterprise Resource Planning (ERP) system solutions are currently in high demand by both manufacturing and service organisations, because they provide a tightly integrated solution to an organisation’s information system needs. ERP allows employees to manage their company with one system that integrates the entire business process and creates an enterprise-wide view of significant corporate information. Today organisations face a new challenge of increasing competition, expanding markets and enhancement in customer expectations (Umble et al., 2003) and thus ERP systems have been developed to provide a total business system (Huang, et al, 2001) in order to improve business performance. ERP software is a set of applications that links systems such as manufacturing, financial, human resources, data warehousing, sales force, document management, and after-sales service together, and helps organisations handle jobs such as order processing and production scheduling. O’Kane, (2004) points out that the attention of researchers in implementing ERP solutions should shift from the “hard” 1 elements to the “soft” 2 issues related to such an implementation, i.e. address human-related and organisational culture problems, when trying to explain the reasons for ERP implementation failures. Moreover, an effective ERP implementation requires appropriate managerial interventions as part of the implementation process. In this regard, our study considers soft ERP related requirements in the process of introducing such a system. 2 HIGH PERFORMANCE IN ORGANISATIONS Castka, et al (2001, p124) cite that according to Stott and Walker, performance, in general, can be determined by three factors:
The use of word “hard” implies issues of a technical nature. The use of word “soft” implies issues related to strategy and people’s nature.
Almahdi .M. S. Ibrahim
A FRAMEWORK FOR THE IMPLEMENTATION OF ERP TO IMPROVE BUSINESS PERFORMANCE: A CASE STUDY
and that according to Ford (see Uden. have been linked to high quality service delivery and employees ‘going out of their way’ or ‘beyond the call of duty’. for example pride. “which is based on the idea that certain types of behaviour will lead to certain types of results”. that this can be expressed by the equation: Performance = ability x motivation x environment Uden (2005) demonstrated that there are nine identified areas which contribute to influencing an organisation’s ability to achieve high performance. According to Gollan. Uden (2005) has identified that many authors say that the characteristics of a learning organisation lead to high performance. Areas affecting performance Leadership People Policy and Strategy Partnerships and Resources Processes People Results Customer Results Society Results Key Performance Results Table 1. overall. Arnett et al (2002. 2001). Ibrahim 2 A FRAMEWORK FOR THE IMPLEMENTATION OF ERP TO IMPROVE BUSINESS PERFORMANCE: A CASE STUDY . decision making. p90) say that emotions. 2005) According to Colenso (see Castka et al. thus improving morale and commitment. so it is necessary that the working environment is right and that people are managed in a way that ‘brings out their best’ (Mintzberg (2004.European and Mediterranean Conference on Information Systems 2008 (EMCIS2008) May 25-26 2008. the sustainability of high performance work systems is predicated on organisations recognising the needs of employees and implementing sustainable policies and practices to reinforce its values and principles through greater employee involvement and participation and also. the preconditions to high performance are such things as purpose. creativity and managing the external environment. teams and the enterprise itself are continually learning”. (2005. and that it is people who are the main factors. support and objectives. shown in Table 1. while encouraging them to manage the organisation’s processes in a way that will increase the level of performance and achievement. p12). by acknowledging the importance of Almahdi . Al Bustan Rotana Hotel. “a learning enterprise is one where individuals. Dubai ability motivation working environment and further. S. 2005). empowerment. with characteristics being things such as interpersonal skills. Areas affecting Organisational high performance (Source: Uden.M. participation. p26).
The factors that affect these problems are of interest to this research and are collated in the next section. Aladwani. Aladwani. Reimers. 1998.. 1998. Gupta 2000. S. cited in the literature.. 2002. and Ferrario and Montagna. Al-Mashari et al. 1999. Trimmer et al. have been classified into three major groupings of strategy. Holland and Light 1999. Aladwani. 2002. Chen 2001.... 2002. 1999. Davenport. 1999.. Al-Mashari. Rao. 2001. 2002. Mabert et al. 1999. (Holland and Light. 2003 and James... People and Organisational and are discussed in detail by Ibrahim (2007) and summarised in Table 2. Dong 2001. often referred to as critical success factors (CSF) are as Rockhart (1979) explained are “areas of activity that should receive constant and careful attention from management”.. Krammergaard and Rose 2002. 2000. Huang and Palvia. Al-Mashari et al. Sumner. 2000. Sarker and Lee. 2002. Zhang et al. Sumner. 1999. and James. Dubai employee satisfaction and commitment through the development of integrated employee consultation. 2002. Umble et al.. Type Soft Factors (Strategy) Factors Top management commitment Key Authors (Bingi et al. Soliman et al.. 2003. 2001.. These factors. 2001. 2002. 2003. work and life policies. 2003). AlMashari. 1999. (Davenport. 2000. 2000. 2001.European and Mediterranean Conference on Information Systems 2008 (EMCIS2008) May 25-26 2008. 2003. Umble et al. 2001. 2003. organisational change. Holland and Light. workplace institutions and comprehensive career development programs. Bingi et al.. regarding ERP implementation. 2002. Ferrario and Montagna. 2003. focus and scope Legacy systems management Soft Factors (People) Training and education Employees attitude Almahdi .. Zhang et al. (Davenport. 2003. Huang. Nah et al. 2001. and Umble et al.. Al-Mashari et al.M. Rao. Voordijk et al. 2004). 2001. Voordijk et al. 2004.. 2001. et al. Al-Mashari 2002.2001. Ibrahim A FRAMEWORK FOR THE IMPLEMENTATION OF ERP TO IMPROVE BUSINESS PERFORMANCE: A CASE STUDY . and Umble et al.. 2000. Sarker and Lee 2002.1999. 2003.. Nah et al.. 2001. 3 ERP strategy Clear goals. Mandal and Gunasekaran. (Bingi et al.. Soft Factors of ERP Implementation There are numerous soft factors. and Ferrario and Montagna. 2003). Marble 2003. 2003. Mandal and Gunasekaran. 2004). Kuruppuarachchi et al. Gyampah and Salam.. 2003. 2003. Muscatelloet et al. (2001) pointed out that ERP systems have been developed to provide a total business system in order to improve business performance whilst Markus et al (2000) pointed out that companies experience problems at all phases of the ERP system life cycle. (Holland and Light 1999. Al Bustan Rotana Hotel. Kuruppuarachchi et al. Al-Mashari et al.. Markus et al (2000). Kuruppuarachchi et al. Al-Mashari.. 2003. 2003.. Rao. Nah et al. Gupta. 2000.. 2004). 2004).
. Al-Mashari and Zairi. Remers.. Mabert strategy et al. 2001. and satisfaction 2003. 2003. 2001. Gupta.. 2004). 2003. Al-Mashari and management Zairi. 2003. Change (Holland and Light.. 2001.. 2004) in order to provide guidelines for a successful implementation. 1999. 2004). 1999. Nah et al.. Mandal and Gunasekaran. User involvement (Markus et al (2000). 1998. 2000. AlMashari.. Computer culture (Markus et al (2000). 2003. Al-Mashari et al. 2003). and James. Al. Effective (Holland and Light 1999. Huang and Palvia. AlMashari et al. 2002. 1999. 2002.. Soft Factors of ERP Implementation Empowerment 3 THE PROPOSED THEORETICAL FRAMEWORK The implementation of an ERP system in an organisation is very complex such that many researchers have proposed stage models of ERP implementation (Bancroft et al. Sumner. 2001. 2000. 2004. 2003. 2003. 1999. 2003. O’Kane. Nah et al. Marble. Sarker and Lee. 2001. . Mandal and Gunasekaran. Sumner. Nah et al. Project team (Bingi et al. Rao. Nah et al. Markus et al (2000). 2000. and James. described. Al-Mashari and Zairi. 2003. al) Al-Mashari et al. 2004). Huang and Palvia. 2000. 2001. Nah et al.. 2003. Langenwalter.. Zhang et al. 2001. IT maturity (Markus et al (2000).Huang and Palvia. 2002. Zhang et al. Mabert et al..M. and Mandal and Gunasekaran. Markus et al (2000). AlMashari et al. Markus et al (2000). 2003. and elaborated network of Almahdi . Mabert et al. 2003. 2001). 2003. 2001.Mandal and Gunasekaran. 2000. and James. 2003. 2003. management 2000. Kuruppuarachchi et al. It is a logically developed. Mandal and Gunasekaran.European and Mediterranean Conference on Information Systems 2008 (EMCIS2008) May 25-26 2008.. Marble. 2004. 2004). 2001) Effective project (Holland and Light. 1999. 2002. 2004). 2002. 2001).. 1999. 2003. Marble. 2000.1998. Aladwani. Markus et al (2000). and Ferrario and Montagna. Davenport. 2003. Krammergaard and Rose. 1999.. Ferrario and Montagna. Nah et al.. 2003. Al-Mashari. 2003. Aladwani.. Soft Factors Organisational (Davenport. and Aladwani. 2003. 2001... Sumner. 1999. Reimers. Zhang et al. Table 2. Mandal and Gunasekaran. Mashari and communication Zairi. and Ferrario and Montagna. 2003. Zhang et al. 2004). Al-Mashari. 2001. Umble et al. 2001. 2001. Umble et al.. 2001. Summner. 2003. Process (Bingi et al. Collis and Hussey (2000) stated that a theoretical framework is a collection of theories and models from the literature... Zhang et al. Al Bustan Rotana Hotel. Marble. Dubai (Sarker and Lee. Sarker and Lee. and Ferrario and Montagna. Huang and (Organisation culture Palvia.. 2000. Umble et al. management 2000. Ibrahim 4 A FRAMEWORK FOR THE IMPLEMENTATION OF ERP TO IMPROVE BUSINESS PERFORMANCE: A CASE STUDY . S.. 2000. and Gupta et al. 2003. 2003.
and literature survey (Sekaran.M. namely strategy related factors (top management commitment. organisational culture.European and Mediterranean Conference on Information Systems 2008 (EMCIS2008) May 25-26 2008. The Theoretical Framework 4 RESEARCH METHODOLOGY The empirical data collected for the purposes of this research comes from one case study conducted in a Libyan oil company. People Factors Organisational Factors Strategy Factors Feasibility studies Planning stage Selecting stage Preimplementation Implementation stage Postimplementation Successful Implementation of ERP Project Figure 1. and communication). The theoretical framework (Figure 1) is represented by three main sets of factors. users involvement. Qualitative data collection methods (mainly semistructured interviews) were utilised along with observations and collection of supporting documentation. and ERP strategy). A theoretical implementation process was identified by Ibrahim (2007) such that it is suggested that there is an explicit linkage between factors and ERP implementation stages. This framework was used to structure the interview sessions in order to highlight important soft issues that affect the implementation of Almahdi . Dubai associations between the variables deemed relevant to the problem situation. clear goals focus and scope. It comprises strategy. S. process management. The interviews processes relate to the Trust-Confidence-Distrust (TCD) framework of Gans et al (2003) which was developed to model relationships between different groups in an organisation/social network. empowerment. 2000). observations. people related factors (training and education. legacy systems. The theoretical framework to be used for the purposes of this research has been developed based on an extensive review of the literature. change management strategy. Ibrahim 5 A FRAMEWORK FOR THE IMPLEMENTATION OF ERP TO IMPROVE BUSINESS PERFORMANCE: A CASE STUDY . computer culture. Al Bustan Rotana Hotel. people and organisational critical success factors and attempts to relate them to various implementation stages as those identified in Table 2. and which have been identified through such processes as interviews. IT maturity. No attempts have been made in the academic literature to link any soft critical success factors to the various ERP implementation related stages. employee’s attitude and project team) and organisational related factors (effective project management. Figure 1 shows the proposed theoretical framework for ERP implementation.
M. involved in defining the company information system needs and requirements and the company collected end user ideas regarding the ERP project. Therefore.European and Mediterranean Conference on Information Systems 2008 (EMCIS2008) May 25-26 2008. The legacy system at the company was not complex. The results confirmed the validity of the proposed framework and enabled insight to be gained into other issues of particular importance to the process of implementing an ERP system. Attitudes changed when top management gave more explanation about ERP and when employees started to have training about the ERP system. because the company has common business processes and a simple technical architecture. leadership for ERP implementation. from the early stages of the ERP project. 5 THE CASE STUDY COMPANY The case study was in an oil company in Libya which has adopted several ERP modules in several functions. The company has broken down ERP packages in modules that handle several functional departments including accounting. People in project management were given responsibility and the implementation plan was clearly defined. The business processes were analysed to identify the potential Almahdi . There was executive sponsorship available to give users who did not have the right skills useful feedback about the ERP project. The implementation team was mixed of internal staff and consultants. The interviewees were general managers. the implementation approach was step-by-step. The empirical data from the case study was collated to see how the three factors of strategy. middle managers. the majority of employees were well trained. clear directions of the project. human resource and material management and they left the rest of the functions to be installed in future. The Case Study Findings • Strategy Factors Top management provided all human and financial resources for successful implementation of ERP. without their involvement and support. Employees received. The business processes were clearly reengineered before ERP project started. There was resistance to change from employees in the early stage of the ERP implementation because of the lack of awareness of the ERP system through employees’ lack of understanding of the strategic purposes of ERP project. and the configuration process was created to allow the company to save time and money. They provided the necessary resources. There was a strategy for ERP implementation and clear goals. the company would not implement the ERP system. different kinds of training in the company as well and training tools were provided in hard copies for individual training. this kind of training was about how the system would work and how it would change the different business processes. the amount of technical and organisational changes was low. organisational and people affect the implementation stages of the framework. Ibrahim 6 A FRAMEWORK FOR THE IMPLEMENTATION OF ERP TO IMPROVE BUSINESS PERFORMANCE: A CASE STUDY . The ERP system was involved in reengineering the existing business processes. S. Dubai the ERP modules in this case study. IT technicians and end users from the different departments within the company under concern. • People Factors The end users were involved in the ERP project by participating in the system development and implementation processes in the early stages. Training and education regarding the ERP system started at the beginning of the project for some selected employees. training and their role extend to the post implementation stage. • Organisational Factors A project management unit was established and a project manager was selected from the better employees. finance. Al Bustan Rotana Hotel.
the most important factors for consideration in similar ERP implementations would be incentives to encourage employee involvement. Many of the interviewees felt that the soft factors were adversely affecting the ERP implementation and thus performance of the company. The Company’s Unique Soft ERP Implementation Factors It became evident from the interviewees that they reported that the company provides no incentives to encourage the employees to increase their proficiency and to push them to introduce modern techniques. regulations and laws which organise oil companies. the role of the national organisation that controls all activities related to oil companies and experience of working with similar software and selecting ERP software and vendor. getting employee involvement and training and education. IT maturity and computer culture were perceived to be at the required level. however it has only been tested in a single case study developed therefore can only be generalised to the theory and not to the population (Collis and Hussey. Moreover. References Almahdi .M. This factor is the National Organisation that controls all the activities related to the oil companies and has a direct connection to the development of systems. Al Bustan Rotana Hotel. The relevant qualifications and experience of the employees were also adequate. Regarding the link between soft factors and ERP implementation stags. and vendor. The interviewees also mentioned that such regulations and laws had not changed or undergone development for many years. S. The results show that the theoretical framework identified soft issues. the main method for informing employees regarding the ERP project was carried out through personal communication by the manager. They reported that there also a very important and impressive factor which is directly related to the introduction of ERP system to the oil company. To follow the new system the main business processes were redesigned and developed to support a variety of organisational structures. From the experience gained by the authors. The interviewees also stated that experience of working with similar software and selecting an ERP software system. These results are discussed in more detail in Ibrahim (2007). are very important factors for successful implementation of an ERP system.European and Mediterranean Conference on Information Systems 2008 (EMCIS2008) May 25-26 2008. From the responses of all interviewees. A culture for introducing the new system was created by empowering employees. 2000). so that both the IT maturity and computer culture were helpful for the necessary levels for ERP implementation success. into their company. Clearly more investigations need to be carried out to ensure that the soft issues identified in this paper are considered for ERP implementations in developing countries such as Libya. Ibrahim 7 A FRAMEWORK FOR THE IMPLEMENTATION OF ERP TO IMPROVE BUSINESS PERFORMANCE: A CASE STUDY . however several unique soft implementation factors were also identified (described in the previous section). such as the ERP system. Dubai chances of re-engineering. 6 CONCLUSIONS Soft ERP implementation factors were identified in the case study company which supported the key elements of the theoretical framework. from the case study. It also supports Huang et at (2001) that the ERP implementation affects the business performance. This agrees with the findings of Markus et al (2000) who stated that companies implementing ERP should “pay particular attention to the early identification and correction of problems”. all respondents identified that all soft factors should start from the early stages to the end of the ERP project. it was important to note that strategy factors and people factors were also highlighted as important factors in the feasibility stage.
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