HR s role in implementing JTI s global ERP system

by Khalil Cotran, JT International and Ursula Buchmeiser, Jean-Luc Seguin and Bill Pelster, Deloitte HR s role in implementing JTI s global ERP system How HR s focus on change management was key to a successful ERP project In 1999, JT International was comprised of over 100 disparate companies. A global ERP system was vital to transform the company into a modern multinational. Find out how HR and the change management team focused on the people side of change to ensure the four-year project came in on time and on budget. JT INTERNATIONAL (JTI), IS part of the world s third largest manufacturer of tobacco products, Japan Tobacco. JTI is five years old and culturally diverse, with almost 12,000 employees from 90 different nationalities in 40 locations worldwide. Employees speak over 20 languages and work across more than a dozen time zones. Over the past four years, JTI has invested over US$200 million its largest ever project investment in a major Enterprise Resource Planning (ERP see sidebox, right) project. At its foundation were new global processes built on one of the most complex and geographically widespread SAP implementations to date, taking in 13 factories, 50 markets and almost 5,000 end-users. Allied to that were huge efforts in process redesign and change management. The project was rolled out to an aggressive timeline worldwide, in three geographical waves. Each went live smoothly and the project was completed on time and under budget. Senior resources and considerable effort were devoted to change management, training and communication. The change management effort is the focus of this article and we will attempt to share some of our lessons learned about what HR can contribute. Unifying disparate companies JTI began life in 1999 when Japan Tobacco acquired the international operations of the American tobacco giant, RJ Reynolds. At that point JTI was a group of disparate, inward-focused local companies. Its markets and factories, spread over 100 legal entities, had many different IT systems and individual business practices. The new company s business strategy was to position for growth by bringing all 40 locations together with common systems and processes, universal business practices and shared service centers. The global ERP system was to be a fundamental part of JTI s transformation into a modern multinational. HR s role as global change management team HR became involved in the ERP project in the role of global change management team when the pilot phase held in Turkey was coming to an end. The pilot began in January 2002 and successfully went live 10 months later. A global rollout was then planned in three waves, with an aggressive timetable: Wave Timeline Region 1 October 13, 2003 Europe (including Geneva HQ) and Russia 2 June 13, 2004 Eastern Europe, Africa, the Middle East, Greece and Asia 3 November 13, 2004 The Americas The change management team had five key areas of focus: 1. Managing the transition from old to new ways of working. 2. Defining the global organization s new structure. 3. Caring for the ERP project teams. 24 Volume 4 Issue 5 July/August 2005

4. Helping people in the business embrace the changes. 5. SAP knowledge transfer and training end-users on the new global system. The system configuration, logistics and project management were within others remit. A separate team was also established to manage communications. 1. Managing the change to a new way of working The first challenge was to define a structured approach and governance model to help us manage change on an extremely large and complex project. More than 700 people would work in the project teams over four years, peaking at 300 at any one time. Each wave was to roll out from a regional hub, a campus-style base for the regional teams. These teams were made up of people from the relevant factories and markets. The business was already stretched, but it was essential that the markets provide enough members to ensure the local business environment was well understood. The global change management team was built on a concept of key stewards, with clearly defined responsibilities. In each wave, a transformation steward led the change management activity, working alongside a training steward and a communications steward (see Figure 1, right). The training steward was supported by a number of trainers. The stewards brought not only business expertise but also valuable local knowledge and contacts, and each was a person of standing in the regional markets. Each transformation and training steward was brought on board during an initial two-day workshop. These workshops clearly defined the roles and responsibilities of all involved, the channels for communication within the change management structure, knowledge transfer and the feedback mechanism. The structure seen here was effective and remained the same for all three waves. The personnel in the global change management team remained in place throughout the project. Their role was to define the scope of the change management, set out a clear methodology, provide the tools to be used and guide the regional teams. 2. Defining the global organization s new structure Early in the project, the business raised the question of what the changes would be. It was our role to define! KE WHAT IS AN ERP? Enterprise resource planning is a term derived from material resource planning. ERP systems typically handle the manufacturing, logistics, distribution, inventory, shipping, invoicing and accounting for a company. ERP software can aid in the control of many business activities like sales, delivery, billing, production, inventory management and human resources management. ERPs are often called back-office systems indicating that customers and the general public are not directly involved. ERPs are cross-functional and enterprise wide. All functional departments that are involved in operations or production are integrated in one system. In addition to manufacturing, warehousing and shipping, this would include accounting, HR, marketing and strategic management. Figure 1. JTI s change governance model precisely the areas of change. The starting point for this was a master list of new processes, drawn up by process experts working with functional experts. We were able to consolidate the enormous amount of information and extract 20 key change areas including the introduction of a Professional Purchasing Organization (PPO); introduction of a global chart of accounts; and a new way of processing sales and delivery. The next step was to enable the markets and factories to understand and prepare for these changes. We developed a spreadsheet-based impact assessment tool which allowed each location to analyze how the changes would affect their operations and organization. Each market/factory/function was asked to review the key changes and determine whether they would apply to t Khalil Cotran joined JTI s HR function in 1992. He is currently based in Geneva, Switzerland and leads the HR function for WorldWide Duty Free. Ursula Buchmeiser has 10 years consulting experience, focusing on change management, communication and strategic HR support for business transformation, cost-reduction and process-improvement initiatives. Jean-Luc Seguin is a senior manager in the human capital practice of Deloitte Belgium, where he leads the change leadership and learning service line. Bill Pelster is a partner in Deloitte s human capital practice, specializing in HR business transformation, learning systems and ERP technology adoption. He has over 12 years experience leading technology adoption projects. Volume 4 Issue 5 July/August 2005 25

Figure 2. The performance dip at JTI t their local entity. If yes, then they needed to determine the impact of these changes in terms of operations and organization (structure, roles and responsibilities, span of control, decision making, reporting lines). Through the template teams were required to document changes in terms of: How the targeted activities are currently processed. How they will be processed in future, what are the expected benefits, what actions are required to ensure the implementation of the new way of working, by when and who is in charge. Mapping SAP roles to existing jobs At the same time, we identified 195 new global SAP roles. The challenge was to fit these roles to jobs in the business and then to people. Our goal was to ensure that JTI would have the right people in the right place at the right time. We embarked on intensive workshops to map the SAP roles to jobs in the local organization. The workshops brought together functional and business experts, HR, process owners and system security experts in order to ensure the new roles were correctly mapped to jobs in the business. These workshops were held during each wave and lasted between two and three weeks. They were a major communication event and an important step in bringing the project to the business. As a later step, local HR, working with the transformation stewards, matched employees to jobs. 3. Caring for the project teams The regional teams needed to be highly effective. They were given support in two areas: the information and the skills to act in the right way; and the personal and emotional support to work effectively. It was vital to meet their personal needs in terms of employment conditions, motivation, career management and the emotional disruption of being away from home and family. Personal and career needs People from different countries assigned to the project had differing employment conditions. Guidelines were drawn up to ensure each person s financial situation was protected, with their net income remaining the same as if they were working in their home location. Career management was also an issue. What jobs would people go back to after the project was completed? Regional team members were assigned for, on average, eight months. Many, but not all, had jobs to go back to. This was not true of most of the global team members, who served around two-and-a-half years on the project and had matured professionally. The challenge was finding them new roles. Once the project closed, all team members, bar those who wished to further their careers elsewhere, were re-integrated to the business. The lessons we learned about re-integrating people are that the process needs to start early, and that it can only be done with strong executive management support and a proactive HR effort. Emotional needs and work-life balance Project team members worked from a regional hub, of which there were two for each wave. Most of them were away from their home and family for long periods, putting them under great social and emotional pressure. The project work with its long hours and complexity was often more demanding than the jobs they had come from. And they were isolated from former colleagues and home locations. We were able to care for these needs to some degree. Anyone assigned to a hub away from his/her home country was, on a three-weeks-on, one-week-off schedule, allowed to invite his/her partner to join them during the three weeks on, rather than the project team member returning home for a visit. 4. Helping people in the business embrace change As well as caring for the project teams, we needed to ensure that people in the business were open to change, a role we shared with the communication team. Our belief was that people don t fear change, but uncertainty. Communication was paramount in helping employees deal with the emotional and organizational change. JTI put such importance on communication that it was embodied in the governance model, as detailed in Figure 1. Thanks to the huge and complex communication effort, the project gained a very strong identity and expectations were well managed. As a further step, we drew up a set of guiding principles for local HR functions to assist them in helping affected employees to deal with change. It was important to give employees emotional support, allowing them to mourn the passing of the old ways. Principles included: Managing legal and contractual issues (e.g., through a Works Council). Timely communication of the project impact (e.g., department or position changes) to staff. 26 Volume 4 Issue 5 July/August 2005

When possible, timely communication of new opportunities to impacted staff. Provide outsourcing support when needed. 5. Knowledge transfer and training for end-users Training was provided for almost 5,000 new end-users. We used the Train the Trainer concept, which is well known and proved effective for us at JTI. There were 200 trainers, selected for their business expertise. Each underwent a month-long program including soft skills and SAP training. Using this approach, JTI knowledge was kept in the company and continuous support was available to endusers. Trainers performed another vital role in adapting the training materials to local needs. SAP knowledge was passed on through informal channels as well as training courses. The project started out with 80 external consultants, but we planned to transfer knowledge to JTI via informal coaching. This was achieved and only 20 consultants remained by Wave 3. Fine-tuning the new organization Six months after rollout, every market and factory was asked to report on its progress to date. We asked them particularly whether there were any impediments to implementation, about outstanding activities and for their comments in general. We discovered that in Waves 1 and 2 there was a high degree of adoption of the new system and processes at this point. We are currently revisiting Wave 3. This fine-tuning helped identify the need for further training and process improvement. The final wave rolled out at 8 a.m. EST on November 13, 2004, but far from being the end of the ERP story, it was just the beginning. There are already many initiatives in place to extend the scope of SAP, improve processes and realize more benefits. For example, JTI s ERP Center of Excellence (CoE) is currently improving processes or adding new ones in response to business needs. This will be achieved by aligning to meet customer needs, providing stewardship and governance, leveraging knowledge, and acting globally, cross-functionally and seamlessly. The staff within the CoE are functional experts from the business as well as former ERP project team members. Conclusions The ERP project at JTI was a success and a major accomplishment. A dip in performance is inevitable after such a project. At JTI, the dip (see Figure 2, above left) became less disruptive as the project moved through its three waves. This was evidenced by the diminishing number of requests to the global helpdesk for support. We hope that, in part, this was due to the improving change management. The tangible and intangible benefits to date exceed expectations and the business objectives are being met. Benefits are being realized in numerous areas, many! KE JT INTERNATIONAL JT International (JTI) is an operating division of Japan Tobacco Inc., the world s third largest tobacco manufacturer. It handles the international production, marketing and sales of the group s cigarette brands. JTI employs 12,000 people around the world and sells 90 different cigarette brands in over 120 countries. tangible, others intangible. These benefits have generated significant cost savings. Some examples include the introduction of a Professional Purchasing Organization and effective negotiations, inventory reduction, reduced days of sales outstanding and major centralization of support services such as financial processing and systems support. A cultural change is also taking place as people grow in confidence, having successfully overcome the huge challenges of the ERP transformation. The numerous initiatives that followed it are beginning to instill a spirit of learning and a risk-taking culture at JTI. It s important to emphasize that this success was due to many factors: the efforts of everyone involved; the strong executive support and governance; and the positioning of the ERP project as vital to JTI s transformation into a modern multinational. Key learnings for the HR professional What perhaps set our ERP project apart from others is the senior resources and considerable effort devoted to change management, training and communication. We showed that, given the right conditions and support, HR can take the lead in change management in a complex, long-term and demanding ERP project. HR worked as a true business partner, contributing to the achievement of business objectives by adding value. We played a large part in defining the new organization and its roles and managed the change through governance, methodology and concrete support to the business. We ensured that almost 5,000 people were trained on the new global system, and helped facilitate the transfer of SAP knowledge to JTI. We also learned the value of having dedicated HR support for those working on a large project. The HR contact was able to take care of day-to-day and longterm concerns such as salary, insurance, taxes, performance measurement and career management after the project. Perhaps the most important lesson was that companies must plan for HR involvement in ERP projects from the beginning. It s essential for HR to be proactive and lead from the front with other senior management involved. HR has a responsibility to deliver its part of the transformation process and be passionate about what it can achieve., CONTACT Khalil Cotran E-mail: Khalil.Cotran@jt-int.com Volume 4 Issue 5 July/August 2005 27