The impact of introducing an ERP system on organisational processes and individual employees within an Italian regional government organization 1

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1 The impact of introducing an ERP system on organisational processes and individual employees within an Italian regional government organization 1 Alessandro Spano*, Daniela Carta**, Pietro Mascia***2 Abstract The purpose of this article is to advance understanding of the impacts produced by an ERP system implementation on organizational processes and individuals in a public sector organization. Specifically, the paper aims at answering the following questions: 1. What are the impacts of ERP system implementation on organizational processes? 2. What was the impact on individual employees of implementing ERP? The article contributes to the already existing literature available by providing empirical evidence concerning the impact on organizational processes and on individuals caused by the introduction of an ERP system in a public sector organization 3. Key words: Enterprise Resource Planning, Public Sector, Human Resources 1 This paper is an extended abstract of an article accepted for publication on Public Management Review. 2 University of Cagliari, Faculty of Economics; **University of Cagliari, Industrial Relation Master Graduated; ***Sardinia Regional Council Internal Control Service. 3 Acknowledgements: we wish to thank Enrico Rinaldi, Graziano Boi and Simone Deplano from the Sardinia Regional Council Internal Control Service, for their help in drafting the questionnaire, administering the survey and for the precious data provided.

2 2 1. Introduction This paper aims at investigating the impact of ERP systems on organizational processes and on individual employees in public sector organizations by analysing a case study of an Italian region that has introduced such a system. This article will address the following research questions: 1. What are the impacts of ERP system implementation on organizational processes? 2. What was the impact on individual employees of implementing ERP? This paper reports the results of an exploratory survey which is a part of a larger research project that will be followed by a confirmatory survey, according to the full research cycle proposed by Mackenzie and House (1979). As suggested by Sedera et al. (2003) the aim of the exploratory survey is to identify and validate constructs and sub-constructs that are relevant to the study context. The Sardinia Regional Council case study was selected because it is believed to be of particular interest as an example of a public sector organization which has made a significant investment within a clear political vision to overcome problems with its IS. The previous IS was not capable of supporting policy implementation by producing accurate and timely data and information to both policy-makers and public managers. For this reason, it was decided to make a complete change by getting rid of the previous IS and buying an ERP system. It is also an example of how a public sector organization, starting from a lagging position, was capable of becoming one of the most advanced realities among similar organizations, taking advantage of other people s experience and avoiding their pitfalls (Roque, 2008). In this phase the survey aimed at pointing out the impacts deriving from the ERP system implementation on two broad categories, organizational processes and individuals. The research study is based on a questionnaire survey submitted via in October 2008, with a reminder issued in November. The questionnaire was sent to all 164 Sardinia Regional Council s managers, and we received 68 responses (41.46% response rate). The questionnaire (see Annex) consisted of a first section with eight questions about personal data (age, sex, marital status, educational qualifications, role) and the Department where the respondent worked (number of employees and their qualifications); and a second section with 30 questions in Likert-scale format, ranging from 1 (do not agree) to 5 (strongly agree). The second section was divided into two parts, the first one aimed at exploring the impact on organizational processes, the second one aimed at investigating the impact on individuals of the introduction of the new ERP system. The questionnaire also had a section for spontaneous suggestions and other remarks. We received responses from 11 out of the 12 Regional Departments, including 5 questionnaires that did not indicate the Department s name. The questionnaire was preceded by some semi-structured interviews with key people involved in the SIBAR project, from both a special task force of the Sar-

3 3 dinia regional council and the firm that was awarded the technical implementation of the system. The aim of these interviews was to identify some relevant issues to be investigated further with the questionnaire. Based on a review of the literature and on what emerged from the interviews, we set out to explore some ideas through the questionnaire. We thought that the introduction of ERP systems in a public sector organization has a strong impact on both the organizational processes and individuals. The first issue concerns the way the organization shapes the work processes introducing changes in the way work is carried out. The second issue (impact on individuals) regards the impact of the introduction of a new ERP system at individual level. In this paper we report the preliminary research results, with the caveat that further analysis is needed. 2. The SIBAR Project SIBAR is the Italian acronym of Regional Government Basic Information System (Sistema Informativo di Base dell Amministrazione Regionale). It is the name given to the project for the introduction of an ERP system within the Sardinia Regional Council in Italy. The project was launched in February 2006 and was completed in February Its total cost was over 12 million euro. The platform chosen was SAP. The SIBAR project is a part of a larger project for the introduction of a new planning and control system. Before the introduction of SIBAR, the Sardinia Regional Council did not have an integrated system for accounting, human resources management, financial management and asset management. The previous IS, wasn t a system, but was made up of a number of different software applications, each one working for its own purpose. This caused inefficiencies, as the different modules were not integrated among them (Regione Autonoma della Sardegna, 2009). The information flow was particularly difficult and a clear view of the main processes was lacking. SIBAR is as system composed of several sub-systems. Each sub-system builds on specific software modules. An ERP project does not necessarily need to implement all available modules, and the desired modules can be introduced step by step. For example, a local government might decide to initially implement some of the accounting modules, in order to allow the integration between cash-based and accrual accounting, and then extend the system to the other modules, such as management accounting and human resource. In the SIBAR case study there are three main integrated sub-systems, based on the enterprise-wide information system SAP R/3. The three sub-systems are: 1. SB (Basic System): Document and work flow management;

4 4 2. SCI (Integrated Accounting System): Accounting and controlling (Sap modules: FM=Fund Management, FI= Financial, CO= Controlling, MM=Material Management, AA=Asset Accounting, PS=Project System). 3. HR (Human Resources) (Sap modules PY=payroll, PT=Personnel Time Management; MSS= Manager Self Services; ESS=Employee Self Service). The SB sub-system allowed the introduction of the electronic protocol, the electronic signature, the certified mail and work flow automation with the reengineering of the key organizational processes. The SCI sub-system replaced the old accounting system (cash-based) and it allowed the implementation of the integrated accounting system, unifying data production, gathering and analysis processes. It also introduced the concept of single point of entry according to which it is the data producer who is asked to feed the IS. As a result, the system allowed a decentralization of the accounting process. With the SCI module, the full integration between cash-based and accrual-based accounting was achieved; commitments and encumbrances are automatically converted into accounting entries. Another important feature of SCI is the management accounting, cost accounting and performance measurement. HR is the sub-system for human resources management. It also includes the Employee Self Service (ESS) portal. The portal is available for all the 4,073 Sardinia Regional Council employees. As far as the number of software licences is concerned, for the basic system 2,503 licenses are available and 629 licenses for the SCI and HR modules. With the SIBAR, the Sardinia Region Council has become one of the most advanced regions in Italy as regards the implementation of integrated ISs. 3. Conclusions and implications for future research The questionnaire survey highlighted interesting elements related to the introduction of an ERP system to a public sector organization. This paper contributes to the existing literature on ERP systems within public sector organizations by providing some preliminary results of a survey conducted in the Sardinia Regional Council in Italy. In particular, the study analysed some of the relevant impacts on organizational processes and individuals. As far as the first issue is concerned, the implementation of an ERP system within the regional government studied had an impact on internal decision-making processes, but it did not have a significant impact on production processes. This contradicts one of the most common aspects related to ERP system implementation. One of the possible reasons is that the ERP project was designed and tailored to the existing processes. However, respondents also stated that, as a consequence to the ERP implementation, they experienced an increase in work quality and efficiency. As far as the impact on individuals is concerned, the new system has been accepted and we did not find evidence of any passive resistance, even though the new system is perceived to be rigid and com-

5 plex in use. Respondents do not perceive the new system as a control tool, even though it caused stress. The system is seen as contributing to co-operation with colleagues. Interestingly, for some of the items investigated, we found differences between users and non users. This means that, whether respondents make use of a specific module or not, they, nonetheless, have a clear perception of some of its elements. A possible explanation is that we interviewed managers who reported other employees perceptions. This is, certainly, an issue to be further investigated in order to understand which elements individuals' perceptions of the system or modules are based on. The main limitation of the study is that it relates to a single case and, as a consequence, the results cannot be generalized. Another limitation is that the respondents were only managers; it would be interesting to investigate possible differences with the other system users perception. We are conscious that these are just the preliminary results of an exploratory survey and that more in-depth analysis is required. In particular, we believe that understanding the mechanisms that determine the positive and the negative impacts, will help maximize the former and minimize the latter. This will increase the probability of success in ERP implementation. One way we would like to proceed is to improve our questionnaire so as to take into consideration some of the correlations we found to further investigate them and to extend our survey population to the SIBAR users. This will allow us to consider not only managers perception, but also users perception of the impact of SIBAR. 5

6 6 Annex Organizational Impact Variable Re- Mean CV MIN MAX spon- dents 1. SIBAS usage frequency 64 4,33 21,63 1,00 5,00 2. More efficiency 64 3,13 35,10 1,00 5,00 3. Better work quality 64 3,02 41,24 1,00 5,00 4. Increase in productivity 65 2,65 46,61 1,00 5,00 5. Rigidity 64 3,78 30,82 1,00 5,00 6. Decision-making process re-engineered 64 2,31 51,21 1,00 5,00 7. Employees task re-definition 62 2,23 51,30 1,00 5,00 8. Production process changed to fit in the new 64 2,80 45,22 1,00 5,00 IS 9. New professional skills required 60 2,02 57,61 1,00 5, Change in internal organization 64 2,44 44,04 1,00 5, More knowledge required 64 2,17 51,83 1,00 5, Increase in internal communication 65 3,51 32,46 1,00 5, Information easier and faster to get 65 3,46 35,86 1,00 5, Activity duplication avoided 61 2,75 44,91 1,00 5, SIBAR more complex than the previous system 62 3,37 38,51 1,00 5, SIBAR users chosen according to people 40 2,53 53,13 1,00 5,00 availability 16.2 SIBAR users appointed by superiors 49 3,80 30,56 1,00 5, SIBAR users chosen according to age 35 1,29 43,89 1,00 3, SIBAR users chosen on request 35 1,77 48,82 1,00 4, SIBAR users choice competence-based 53 3,98 28,24 1,00 5, SIBAR users chosen according to type of 43 3,79 30,40 1,00 5,00 activities undertaken 17. Sufficient training 65 2,45 37,28 1,00 5, Sharing of Information acquired 65 3,22 34,71 1,00 5, Adequate technical assistance 63 2,41 44,70 1,00 5, Overall satisfaction 65 3,05 32,79 1,00 5,00 Individual Impact Variable Re- Mean CV MIN MAX spon- dents 21. SIBAR Acceptance level 63 3,25 32,84 1,00 5, SIBAR acting as co-operation stimulus 65 3,15 37,82 1,00 5, SIBAR acting as a control tool 62 2,06 54,24 1,00 5, Change in processes causing stress 61 3,38 85,98 1,00 5, Employees resistance to change 63 2,25 54,75 1,00 5, Increase in work motivation 62 2,26 47,68 1,00 5, Improvement in managers-employees relationships 62 2,27 49,43 1,00 5, Restiveness in going to work 54 1,30 46,07 1,00 3, Increase in competition with colleagues 57 1,51 64,66 1,00 5, The new IS determined: Discomfort due to incapacity in using the new IS 62 2,61 50,21 1,00 5,00

7 30.1 a higher sense of responsibility 59 2,63 45,90 1,00 5, a decrease in mistakes 60 2,35 49,03 1,00 5, people are afraid of losing know-how 58 1,91 56,81 1,00 5,00 7

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