A CHANGE MANAGEMENT STRATEGY FOR YOUR ERP PROJECT

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1 A CHANGE MANAGEMENT STRATEGY FOR YOUR ERP PROJECT

2 Contents Executive Summary Introduction: Change is Easy, Transition is Hard Effectively Managing Change: An Equation Initiating/Sustaining Change Core Project Areas and Kotter s Eight-Stage Process Plan Do Study Act Integrating Kotter s Steps into Your Project Conclusion About Ultra Consultants, Inc Ultra Consultants main office: toll free:

3 Executive Summary Successful ERP transformation projects must take many facets into consideration, in particular people, processes and technology. Most projects address the process and technology portions, but have little or no focus on the people portion. For a transformation to be successful, it is the people component that is the most critical piece in order for the transformation to be successful. In this paper are practical ways to apply current change management strategy models to thoroughly prepare for an ERP transition so that you can implement it successfully at the individual, team, and organizational levels. Introduction: Change is Easy, Transition is Hard It isn t the changes that do you in, it s the transitions. Change is not the same as transition. Change is situational: the new site, the new boss, the new team roles, and the new policy. Transition is the psychological process people go through to come to terms with the new situation. Change is external, transition is internal. William Bridges, Managing Transition Making the Most of Change Change management is a structured approach to transitioning individuals, teams, and organizations from a current state to a desired future state. Much has been written about change management, yet it still seems difficult to define and implement successfully. Ask ten people what it means and you ll probably get ten different answers. Most of us understand that managing change is critical for successful projects, yet most project time and resources are spent on changing the technology and the processes. Plus, most change efforts fail to recognize that it is the people that are needed to bring the other two components to life. This is why change management is critical in making genuine, value-added business transformations. Addressing the people side is often an afterthought to a project, or just hoped that such changes will work out by themselves. Successful transformations must focus on all three vital aspects people, processes, technology to achieve business performance results. SUCCESSFUL TRANSFORMATIONS MUST FOCUS ON ALL THREE VITAL ASPECTS PEOPLE, PROCESSES, TECHNOLOGY TO ACHIEVE BUSINESS PERFORMANCE RESULTS Ultra Consultants main office: toll free:

4 Effectively Managing Change: An Equation Here is a simple analogy: managing change is like juggling three balls you start the momentum by tossing one ball into the air, followed by the second, then the third. In order to maintain the effort you have to keep each ball moving. Lose track of one ball and it drops to the floor. The ability to effectively manage change may very well be the most important skill that executives, managers and employees need to master. We continue to face accelerated, unprecedented and dynamic transformations in our personal and professional lives. Our organizations are forced by fierce competition to lead, follow, or go out of business. Global markets and technology seem to change daily, yet at the same time, and organizations are required to reduce costs, increase customer service and excel at performance. These requirements are at the heart of the necessity for and justification of ERP. An ERP system potentially touches multiple functions across offices, departments, geographic locations and job levels. Therefore, as organizations must accomplish their goals associated with such requirements, an ERP system must do its part in the same. And as it is critically important to proactively plan for changes and effectively manage change across all levels of the organization, it is equally important to proactively manage change across all organizational areas during an ERP project. Business transformations through ERP will not take place without effectively managing changes across the three key organizational areas; people, process, and technology. In many situations, the technology and process changes are relatively easy to manage. However, because people may often resist change, it is this area that must be a significant focus of your management effort. The ability to initiate or sustain change and keep the three balls in the air can be represented by the following equation: The momentum for change (C) must be greater than the momentum for the status quo (R) to get traction for the change effort. Initiating/Sustaining Change C>R C=a*b*d C = Momentum for change R = Inherent resistance to change a = Shared need felt; clear reason why status quo is no longer viable b = Shared image of desired future state; clear sense of direction d = 2-3 accepted practical steps from here; clear about the next actions and ownership If a, b, or d ceases to exist (approaches zero), then the momentum for change (product) will lessen (approach zero) and resistance will stop the change effort. Initiating and sustaining change requires continuous conversations to explore and clarify why we are changing, where we are headed, and what next steps are planned. Now, let s take a deeper look at the actions required to achieve sustainable change. THE MOMENTUM FOR CHANGE ( C ) MUST BE GREATER THAN THE MOMENTUM FOR THE STATUS QUO ( R ) TO GET TRACTION FOR THE CHANGE EFFORT Ultra Consultants main office: toll free:

5 Core Project Areas and Kotter s Eight-Stage Process A pragmatic approach to ERP change management can be outlined by looking at three core areas: (A) the current state business environment; (B) the your education on industry best practices; and (C) the definition of the future state of the business environment and development of a detailed plan on how to achieve it. These core areas form the basis for effective business performance improvement. Additionally, we look at an adaptation of John Kotter s Eight Stage Process of Creating Major Change, which integrates very well with these three core areas. Kotter s process provides a real-world view of the numerous steps that can and should be followed when changing and transforming any organization. KOTTER S PROCESS PROVIDES A REAL-WORLD VIEW OF THE NUMEROUS STEPS THAT CAN AND SHOULD BE FOLLOWED WHEN CHANGING AND TRANSFORMING ANY ORGANIZATION. A B C Current State. Creating a climate for change. Analysis of the current state clarifies reality and creates the necessity for change. This covers the first three steps in Kotter s change model: 1. Establishing a sense of urgency 2. Forming a powerful guiding coalition 3. Creating a vision Educate. Engaging and enabling the whole organization. Education develops a communications and a results-oriented strategy to get all stakeholders involved by establishing leadership. This covers steps four through six of Kotter s change model: 4. Communicating the vision 5. Empowering others to act on the vision 6. Planning for and creating short term wins Future State. Implementing and sustaining the change. During the future state, changes are implemented into the way the company does business. This covers the final two steps of Kotter s change model: 7. Consolidating improvements and producing yet more change 8. Institutionalizing new approaches 2015 Ultra Consultants main office: toll free:

6 While the process may look linear, the execution of these eight steps is rarely straightforward. Rather, the process is dynamic and may move in a non-sequential pattern. That is acceptable as long as all steps are included in the overall plan. Any of the steps may also be revisited during the course of a transformation. To assist in the completion of this potentially chaotic process, measurements and course adjustments are usually required throughout. Plan Do Study Act A method to measure the success of each step or entire effort is the Plan Do Study - Act cycle. This is a systematic series of steps for learning and gaining valuable knowledge for the continual improvement of the change process. Also known as the Deming Wheel, or Deming Cycle, the concept and application was first introduced to Dr. Deming by his mentor, Walter Shewhart, of the famous Bell Laboratories in New York. 1. The Plan Step: This involves identifying a goal or purpose, formulating a theory, defining success metrics and putting a plan into action. 2. The Do Step: In this step the components of the plan are implemented. STUDY 3. The Study Step: Here, outcomes are monitored to test the validity of the plan for signs of progress and success, or problems and areas for improvement. 4. The Act Step: This step closes the cycle and integrates the learning generated by the entire process, which can be used to adjust the goal and/or change methods. These four steps are repeated over and over as part of a never-ending cycle of continual improvement. This provides a feedback loop to assess the effectiveness of the change activities and overall progress throughout Kotter s Eight Stage Process. ACT PLAN DO THIS IS A SYSTEMATIC SERIES OF STEPS FOR LEARNING AND GAINING VALUABLE KNOWLEDGE FOR THE CONTINUAL IMPROVEMENT OF THE CHANGE PROCESS Ultra Consultants main office: toll free:

7 Integrating Kotter s Steps into Your Project The following table illustrates the Eight Stage Process of Creating Major Change and provides details and action steps for a successful transformation. Current State Creating a Climate for Change Kotter s Steps Details Actions 1. Establishing a Sense of Urgency Leaders must convey a sense of urgency about the change to increase visibility, energy and motivation. To accomplish this compliancy, fear and anger must be reduced throughout the organization. 1. Clarify the gaps between Current State organizational performance and Future State desired organizational performance 2. Identify the sources of organizational compliancy (we ve always done it this way or it work fine just the way it is) 3. Identify the roles and responsibilities of leaders and managers in the implementation of the change initiative 2. Forming a Powerful Guiding Coalition Mobilize a team of respected leaders with enough power (formal or informal) to lead the change. Have a deep understanding of the reasons for the change Model the right (Future State) behaviors Hold both themselves and others accountable and responsible for the desired results 1. Engage the right people 2. Set clear team goals and responsibilities 3. Develop a climate of trust and communication within the team 3. Creating a Vision Create a vision to help direct the change effort Establish a clear, inspiring and achievable picture of the future. Describe 2-4 critical behaviors (Don t try to change everything at once) that are required in the Future State. Define key performance metrics to support the Future State and encourage the new behaviors. 1. Clarify why a vision is necessary 2. Develop the vision 3. Analyze and get feedback about the vision 4. Clarify the role of the team in developing the vision 2015 Ultra Consultants main office: toll free:

8 Education Engaging and Enabling the Whole Organization Kotter s Steps Details Actions 4. Communicating the Vision The change team must deliver concise, honest and meaningful messages to create trust, support and commitment to help people visualize the Future State vision. 5. Empower Others to Act on the Vision 3. Planning for and Creating Short Term Wins Leaders must remove barriers that slow the progress towards the vision. Identify and remove ineffective processes. Develop and design new programs and processes the support the required behaviors. Recognize and reward people involved in the improvements. Reenergize the organization s sense of urgency. Demonstrate that progress and forward momentum is occurring. Future State Implementing and Sustaining the Change 1. Initially communicate the vision 2. Engage in continuous dialog with stakeholders 3. Make sure all leaders and stakeholders are able to speak to the vision in their own words 4. Enroll stakeholders in the change effort 1. Remove barriers that block people from carrying out the vision 2. Encourage people to take risks and be innovative 3. Explicitly define new behaviors and attitudes requires to succeed in the new environment 1. Clarify why a vision is necessary 2. Develop the vision 3. Analyze and get feedback about the vision 4. Clarify the role of the team in developing the vision Kotter s Steps Details Actions 7. Consolidating Improvements and Producing Still More Change The guiding team is persisting, monitoring and measuring progress. Not declaring victory prematurely, ensuring that the change really happened. Reviewing new systems, structure and policies to ensure the support the new vision. Reinvigorate the process with new projects and team members. 1. Initially communicate the vision 2. Engage in continuous dialog with stakeholders 3. Make sure all leaders and stakeholders are able to speak to the vision in their own words 4. Enroll stakeholders in the change effort 2015 Ultra Consultants main office: toll free:

9 Future State Implementing and Sustaining the Change Kotter s Steps Details Actions 8. Institutionalizing New Approaches Conclusion Leaders recognize, reward and model the new behavior. Communicate how the new behaviors support business success. Embed the behaviors in the fabric of the organization. Look for the next behaviors to change in the cycle of continuous improvement. 1. Achieve tangible results as quickly as possible 2. Show how the change is working and why the old ways won t work 3. Measure and support sustained performance 4. Ensure leadership will support and model the new behaviors 5. Initiate necessary turnover Ensuring a successful ERP business transformation project is dependent on much more than revamping specific processes or the ERP software product you choose. Success requires change management planning from the very beginning through to the crafting of your business case for change. It is dependent on the strength of your team, your knowledge of the ERP market, and your willingness to accept and implement long-term change. Establishing methods, processes and implementing good technology is relatively easy for many organizations, like juggling two balls. However, introducing people (the third ball) creates some difficulty. Enabling people with effective and efficient processes to utilize ERP functional technology will yield the results that your business is seeking: a profitable company, reduced costs, and productive employees. About Ultra Consultants, Inc. Ultra Consultants is an independent consulting firm serving the manufacturing and distribution industries. Organizations turn to the Ultra team for ROI-driven ERP technology expertise and business process management that improves revenue and customer satisfaction, enhances financial management and real-time decision making, improves productivity and reduces time to market. The world s middle market companies make up the Ultra Consulting client roster including aerospace and defense; automotive; chemical; consumer goods; electronics; food and beverage; industrial equipment; medical device; metal fabrication and plastics manufacturers. Ultra Consultants offer deep experience in manufacturing process optimization. The team averages over 20 years manufacturing and process experience with professional certifications in APICS, Lean manufacturing, Six Sigma Green and Black Belt, and Project Management Ultra Consultants main office: toll free:

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