Organizational Change Management: The #1 Key to Digital Transformation Success

Organizational Change Management: The #1 Key to Digital Transformation Success

Over the last few weeks, I have met in person with about a dozen CIOs in different parts of the world. During my discussions with each of them, I conducted an informal survey to find out what was keeping them up at night.

The number one response? By far, it was organizational change management.

Some are troubled by their organization’s lack of understanding of the term (see our related article about what is organizational change management?). Others are aware of the challenges associated with a large digital transformation. Still others have heard the horror stories about ERP failures related to lack of organizational change management.

Whatever the reasons, executives are becoming more aware of the importance of organizational change management. In fact, even some attorneys involved in ERP lawsuits are becoming more educated about the merits of organizational change management. For example, I was just recently retained to be an SAP organizational change management expert witness – a first in my 25+ expert witness cases over the last decade.

Your digital transformation will fail without strong organizational change management

It is safe to assume that your digital transformation will fail without strong organizational change management guidance and support. Of all the failures we have helped recover and expert witness cases we have been involved with over the years, they all shared one commonality: they didn’t address the human component well. The inverse is true for the successes we have been involved with.

You are responsible for addressing organizational change

Your software vendor may provide you with great software. Your system integrator may provide strong functional and technical implementation support. But only you can ensure that organizational changes are properly managed throughout your digital transformation. Companies too often assume that someone else will address this critical success factor for them by default. It’s simply not true.

Your ERP system integrator probably doesn’t have strong organizational change management skills

Even if you want to completely outsource the human component (which you shouldn’t), your system integrator isn’t likely to handle it well. Big system integrators such as Deloitte, Capgemini, and Accenture may be world-class technical implementors, but they typically don’t handle organizational change very well. What little change support they provide typically very tactical in nature. I have found that these system integrators often overlook the more strategic and critical organizational change workstreams.

This video provides a case study of an organization that is in the process of building an organizational change management strategy as part of the implementation readiness stage of their Microsoft Dynamics 365 implementation:

The key components of digital transformation organizational change management

So, what are the things that these system integrators and digital transformation project teams are typically missing? They typically address the obvious ones, such as basic system training and employee newsletters, but that just scratches the surface of what is required for success.

Here are a few things the big system integrators and resellers commonly miss:

  • Clearly defined and documented future-state business processes
  • Organizational design to support those new processes (for example, how are people’s jobs going to look in the future?)
  • Assessing and communicating change impacts to individual work groups and individuals
  • Defining a measurable benefits realization plan for your digital transformation initiative
  • Building an internal center of excellence within your IT department
  • Training your internal team to be more self-sufficient after the consultants leave

What next?

The good news is that – although they are rare – there are good organizational change management consultants out there. I started my career as an organizational change management consultant, so we have built a very strong change competency here at Third Stage Consulting.

Email me at eric@thirdstage-consulting.com or call me at +1-720-837-3604 to pick my brain about how you can better incorporate change into your digital transformation. I’m happy to help!

Common Organizational Change Management Myths

Common Organizational Change Management Myths

Last post I talked about what is Organizational Change Management. It’s a well-known term, yet still greatly misunderstood, and the lack of it is the root cause of many transformation failures. Let me debunk a few common myths associated with change management:

Myth #1- Technology Equals Transformation

First, technology implementation does not result in transformational change. Yes, if done correctly, it does provide new tools. But, by itself, it doesn’t change how work gets done or how decisions get made. In fact, research has shown that, in hindsight, leaders of technology implementations that were supposed to result in transformation wished that they had done more work around change management. This is especially true for organizational change on global digital transformations. They won’t make this same mistake twice – learn from them!

Myth #2 – Change Management is Just Good Communication and Training

Second, effective change management is more than communications and training. Yes, both of these disciplines are needed, but they should be thought of only as components of change management – they don’t equate to it. Change management is both an art and a science, with many strategic and tactical facets required to achieve success. All need to be part of your ERP organizational change management plan.

Myth #3 – Consultants will manage the Change

Third, change management is not something that consultants can just “do” for clients. (Isn’t this a shocking statement for a career consultant to make?) Consultants can do things like help establish change strategy, develop role descriptions, build communications and develop training, but the most effective change management teams are those that are comprised of both clients and consultants. Client team members, including executives, are crucial to the change team. They know how to get things done throughout the organization and how to communicate with stakeholders, and they have the ability to remove obstacles.

Organizational Ownership

So, how can an organization adopt change management? Develop what I call “organizational ownership” of the change. Recognize that few (if any!) technology initiatives are only about technology. They affect people and the way they work. Change often creates angst throughout an organization, and this angst is magnified when users feel like “IT is doing this ‘to’ me (as opposed to ‘with’ me)” or “IT is doing this and they don’t have enough understanding about the way I work.”

My concept of “organizational ownership” is just what it sounds like – getting the whole organization to demonstrate a collective sense of ownership of the change. While OCM is often thought of as a combination of communications and training, creating “organizational ownership” proves to be a much more effective way of driving widespread adoption of the new ways of working (aka, the change). For example, when a change initiative results in new job roles, it is important that HR participate in their definition and help establish the roles’ objectives.

There are no silver bullets. Driving change is hard. Making it “part of the fabric” (just the way work gets done) of operations is even harder. If you are struggling with change in our organization or are worried about an upcoming initiative, please hit me up, I would love to chat.

The Missing Pieces of Your ERP Organizational Change Management Plan

The Missing Pieces of Your ERP Organizational Change Management Plan

The term “organizational change management” has many meanings. Some understand it. Most don’t. And most ERP implementations fail because of it. Because of their failure to understand what is organizational change management, most digital transformation initiatives lack a solid ERP organizational change management plan.

We find that most project teams and systems integrators recognize the need for the basics. Employee training and basic communications are two of the most common activities. These two things unfortunately barely scratch the surface of what is required to effect real and lasting change. Much more is required to make digital transformations successful.

Here are five things that are probably missing from your organizational change management plan. They should be integrated into your transformation if you want it to be successful.

1. Skills assessment and organizational design

System integrators such as Deloitte, Capgemini, and Deloitte view organizational impact at the software / transactional level. However, there are broader changes to job descriptions and required skills that extend well beyond software workflows.

For example, customer service reps may not have access to much more customer history and predictive analytics. How should they be using this information to perform their jobs more effectively? What will they do with the time they save from not having to manually search for information? These questions need to be clearly defined so the organization is aligned with the implementation, and vice versa.

2. Implementing organizational changes prior to your ERP implementation

Contrary to popular belief, there is no need to wait until for new software to go-live before implementing some process and organizational changes. Chances are, some operating procedures can be effectively implemented even before the software. The benefits of this proactive approach are numerous. The primary advantage is that you are able to phase changes over time rather than overloading the organization with mass changes on the day of go-live.

3. Cultural transformation within your organizational change management plan

Most people don’t equate digital transformation to culture. But, the changes to your culture are a lot more significant than you think. We have written about how culture is the most overlooked component of organizational change strategies. This is especially true for global digital transformations.

Think about a retailer embarking on a digital transformation or ERP implementation. A recent client of mine decided to leverage technology to help them better compete with Amazon via an integrated omni-channel strategy. This required different ways of thinking and acting – not just a new way of using a back-office ERP system. It is important that your organizational change plan include dedicated strategies to help transform the culture of your company.

4. IT transformation and center of excellence

Digital transformations have significant impacts on your IT department. This is especially true for big SAP S4/HANA, Microsoft Dynamics 365, and Oracle Cloud Suite implementations. Your IT organization needs to develop new skills and competencies to support this new technology going forward.

This is where organizational change management can help. It is important to identify the skills required in the future, and in some cases, which jobs may need to be created to build the necessary competencies. In addition, effective organizational change management strategies will ensure that the IT group is part of a cross-functional center of excellence that supports ongoing improvements to the company’s operations going forward.

5. Benefits realization

Organizational change management is often viewed as a “soft” competency that isn’t really required. This is one of the biggest misconceptions of this critical domain.

Organizational change is one thing that has a material impact on tangible business results. Moreover, you can’t achieve what you don’t measure. The goal of your organizational change management plan should be to bridge the gap between the intangible side of human change and measurable business benefits. This is where a robust benefits realization plan can help keep your team focused on the highest-value improvements that will transform your business.

Conclusion

In many ways, organizational change management is the missing link in most digital transformation and ERP initiatives. My experience as an SAP expert witness and as a Microsoft Dynamics expert witness shows that organizational change is one of the most critical root causes of success and failure.

Contact me to discuss what your organizational change plan might look like for your organization. I’m happy to help.

What is ERP Organizational Change Management?

What is ERP Organizational Change Management?

What is ERP organizational change management? Unfortunately, it’s a question that many aren’t able to answer.

Multiple research studies have shown that the majority of major issues on transformation projects (67% – 75%, depending on the study) are due to people and change management issues, not software or technical problems. In another study, 90% of the respondents who included change management initiatives in their projects estimated the impact of change management on project success as “very high” or “high.”
By definition, Organizational Change Management (OCM) is a framework for managing the effect of new business processes, changes in organizational structure or cultural changes within an enterprise. Simply put, OCM addresses the people side of change management. It is anything that helps enable your employees and stakeholders in their migration from the current state to the future state.

Yet, change management is still treated by many project teams as a “nice to do” or overlooked entirely. It’s likely that these teams don’t really understand OCM or how to do it. Or, they think that OCM is simply a matter of sending out some project newsletters or training end users right before go-live. There is much more to it than this.

Most technology initiatives designed to create change across an organization fail when they are evaluated against their expected business benefit. While such projects are usually able to deliver their “product” (e.g., an ERP system), they often fail because they are unable to “change the operational DNA” of the environment. In fact, culture is one of the most overlooked aspects of organizational change and digital transformation initiatives.

This is especially true of multi-site and multi-national digital transformations. Diverse cultures, business operations, and political factors all underscore the importance of OCM. As a result, there are several important organizational change to-dos as part of a global digital transformation. They also require some distinct organizational change strategies for global digital transformations.

The business value of change management is this – companies often justify technology investments by developing business cases. There’s an implicit assumption in every business case that’s along the lines of, “our business community will use the new ways of working (the technology, the processes, the governance framework, etc.) as it’s designed.” You’ll probably never see this assumption written down, but it’s there.

Unfortunately, most IT professionals know this doesn’t turn out to be the case. While IT initiatives are often successful at getting the “system” up and running, we often don’t see it used as we thought it would be, and as a result, don’t achieve the expected business benefits.

My next blog will share some of the common myths that lead organizations to overlook OCM, as well as share the concept of Organizational Ownership.

Sweet Tea and ERP Implementations: How Culture Affects Your Project

Sweet Tea and ERP Implementations: How Culture Affects Your Project

Digital Transformations, or even enterprise technology initiatives are complex by nature. They generally touch nearly ever nerve in an organization, changing processes and altering the ways people have become accustomed to working. The concept of organizational change management (OCM) has grown in popularity over the past several years as organizations have come to realize that managing the people side of change is as important as, and often even more difficult than managing the technology changes.

The faults of typical organizational change management methodologies

Many of the change management techniques and methodologies recently have focused around managing individual or department level change. This is absolutely important as each individual in a group has their own, unique peculiarities and needs to be communicated, trained and managed in a way that will work for them as individuals.

But taking a step back, in any organization there are greater cultural effects that determine and drive how people work, how they react to situations and how business gets done. Look at your country, region or even neighborhood for example. I currently have family visiting for the Holidays from the Southern United States. While they are certainly very different characters in their own right, there are some strong commonalities driven by the culture of where they live. They all talk with a similar accent, they all like sweet tea and they are all accustomed to heat and strong humidity.

Influencing culture

While I could try to influence individual family members to prefer green tea or a cold environment, these cultural influences would be nearly impossible to change on a greater scale. If sweet tea sales were somehow banned as global health initiative for example, it would simply not go well. Even with advanced public communication and free trails of different unsweetened teas it would be an ugly situation. People would be angry and illegal brewhouses would pop up all over the place.

The same goes for any business or organization. There are cultural influences that need to be identified and accepted. You can possibly change, or at least manage individual differences to a certain degree, but you cannot change culture, especially during the course of an ERP implementation or digital transformation. To handle a change initiative effectively, first begin by adopting to the cultural assumptions, and then manage individual differences from there. Any timelines, communications, training and even technology platform will need to align with company culture.

Don’t expect users in a traditional top-down organization to openly share what they want in a new system, it’s not in their culture for users to drive decisions. You will certainly need to get this information to select and implement a new system, but find a more creative way and make sure that it is supported by senior management. If this is not done in accordance with the culture of the organization, process changes will not be adopted or supported, and the initiative will fail.

Culture reduces ERP implementation costs

To summarize, and for the controllers and CFOs who are still reading, here’s how this philosophy reduces overall cost of implementation: Simply put, it is more expensive to identify, manage and train individuals than it is a group. Starting by adopting to company culture, and then managing individual differences from there will save you $$$.

Learn more by downloading our eBook 20 Lessons from 1,000+ ERP Implementations.

Lowering ERP Total Cost of Ownership through Effective Change Management

Lowering ERP Total Cost of Ownership through Effective Change Management

The acceptance of change management has gotten significantly better over the past several years, and many organizations are even asking for it. However, when budgets become tight it is still one of the first things to go. It is time to change this course of action and give change management the spotlight it deserves.
Consider the possibility that increasing a change management budget may actually lower the total cost of an ERP implementation. I do like to mess with CFO’s heads, but this is not one of those times. By doubling down on an effective OCM program, your total project costs when all said and done will likely be lower. Here’s a few reasons why:

  • System training and adoption is one of the more difficult and expensive tasks during an implementation. If users are on-board from the start, they will pay more attention during training, which in turn reduces the amount of retraining and scheduling needed.
  • Resistance to change exists in every organization across the globe. If you think your company is different you are wrong. If areas of resistance are not identified and dealt with up front, they will slow down the project at critical milestones. Slowing momentum and changing project timelines is a major cause of budget overruns.
  • People don’t get it on the first round of communications. If you limit messaging regarding the project, goals and objectives to only a few messages, there will be significant population that simply did not get, overlooked or forgot the message that was sent. When communications are missed, it leads to confusion and resistance. Essentially back to square one.
  • If change impacts are not understood and documented, how in the world are people simply going to change what they do? Pursuing an ERP implementation without mapping process change to people’s jobs is like getting in car in a foreign county without navigation. You’ll go somewhere, but likely not where you want to. It with then cost more in time, nerves and gas to get to where you originally hoped to go.

Change needs to be respected. As much as people want to change, change is not easy. It can’t be forced or demanded and needs to be planned well in advance. When setting a budget for ERP, leadership should be challenged to include hefty OCM budgets from the start. In the end, while the upfront cost might be higher than some are comfortable with, the implementation will go smoothly and expensive errors will be avoided.

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