Benefit Realisation – Critical Success Factors

4.1 IntroductionThe alignment between ERP and organisation’s strategy, structure and business processes reduces the risk of ERP implementation from strategic perspective. However, risk during implementation process and corresponding change management issues can be underestimated. In fact, 65% percent of executives believe that ERP system have at least a moderate chance of hurting their businesses because of the potential for implementation problems (Cliffe, 1999). Umble and Umble (2002) identified 10 categories of ERP failures. 8 of them are related to implement process and change management issues. Numerous authors have identified a variety of factors that can be considered to be critical to the success of an ERP implementation. The popularity of Critical Success Factors (CSF) approach in ERP literature may due to its successfully application in IT-related projects. In this chapter, the classifications of CSFs will be reviewed and then the CSFs identified in literature will be summarised. 4.2 Classification of CSFs Researchers devote the efforts to classify CSFs in order to answer the question: what are the key critical factors for ERP implementation success? (Nah et al., 2001). Originated from Slevin and Pinto’s (1987) CSF approach for general project management, Holland and Light (1999) propose a CSF model of ERP implementation (Figure 3) based on grouping the CSFs into strategic and tactical factors. Strategic factors are most important at beginning of the project (planning phase). Tactical factors gain in importance as project progresses (action phase). Figure 3: A CSF Model of Implementation (Holland and Light, 1999) In their integrative framework for ERP implementation, Al-Mudimign et al. (2001) expand the meaning of “strategic” and “tactical” in the context of ERP implementation and include an additional group – operation level CSFs. They also hypothesised 6 dominant CSFs that will shape the overall project culture, and subsequently the organisational culture. Strategic level factors significantly change the manner in which business is being done. Tactical level factors concern the medium-term planning of ERP specific organisational issues. Operation level factors refer to individual activities in implementation process (See Figure 4). Figure 4: A CSF Model of Implementation (Al-Mudimign, 2001) Esteves and Pastor (2000) propose a Unified Critical Success Factors Model (see Figure 5). The matrix model classifies the CSFs into four perspectives: Strategic and Tactical; Organisational and Technological. The organisational perspective is related with concerns such as organisational structure, culture and business processes. The technological perspective focuses on aspects related to a particular ERP product in consideration and on other related technical aspects. The strategic perspective is related with core competencies accomplishing the organisation’s mission and long-term goals, while the tactical perspective affects the business activities with short-term objectives. However, CSFs are not, in themselves, directly manageable. It is the implementation processes that can be owned, defined, measured and managed (Esteves and Pastor, 2001). Several researchers seek to analyse the relevance of CSFs along ERP implementation phases to provide an overall view of the importance of each CSF in ERP implementation (Esteves and Pastor, 2001;Nah et al., 2001). Figure 5: Unified CSF Model (Esteves and Pastor, 2000) 4.3 Strategic Factors Researchers classify the CSFs to understand their impact on implementation process. A comprehensive review of identified CSFs provides a starting point to identify the key elements of benefit realisation approach. Among 166 articles reviewed, we identified 6 articles (Esteves and Pastor, 2000; Nah et al., 2001; Umble and Umble, 2002; Umble et al., 2003; Al-Mashari et al., 2003; Mabert et al., 2003) that systematically analyse CSFs in ERP implementation. In this dissertation, we adopt Al-Mudimign et al.’s classification (2001) and summarise the CSFs into strategic factors (section 4.3), tactical factors (section 4.4) and operational factors (section 4.5). Strategic factors are the foundation of a successful ERP implementation as their influences are strategic and at planning stage (or initial stages) of the project. Companies need to understand why they implement ERP systems and be committed from top to bottom of the organisations. • Strong leadership and commitment provided by an executive management planning committee. (Umble et al., 2003; Al-Mashari et al., 2003) • Clear understanding of strategic goal. (Umble et al., 2003) • Clear understanding of project vision, objective and implementation strategy. (Al-Mudimigh et al., 2001; Al-Mashari et al., 2003) • The implementation is viewed as an on-going process. (Umble and Umble, 2002) • Implementation teams are composed of the company’s best workers representing all functions. (Umble and Umble, 2002) • Mid-level management is totally involved in the implementation. (Umble and Umble, 2002) • A strong business case considers project objectives, needs and benefits. (Al-Mudimigh et al., 2001) • Select a compatible ERP system. (Umble and Umble, 2002; Al-Mashari et al., 2003) 4.4 Tactical Factors Tactical factors refer to implementation approaches adopted by organisations. Individually each factor contributes to the success of ERP implementation. To ensure consistent results, however, an integrated approach must be adopted. One of the objectives of this dissertation is to identify key elements in relation to delivery of ERP benefits. • Comprehensive business process reengineering (Esteves and Pastor, 2000; Al-Mashari et al., 2003) and business process modelling (Al-Mudimigh et al., 2001) • Identify internal and external best practices through benchmarking. (Al-Mudimigh et al., 2001) • Excellent project management techniques are used. (Umble and Umble, 2002; Weston, 2001; Al-Mashari et al., 2003) • Effective communication inwards and outwards. (Esteves and Pastor, 2000; Nah et al., 2001; Al-Mashari et al., 2003) • The old systems, including all informal systems, are eliminated. (Umble and Umble, 2002; Al-Mashari et al., 2003) • Focused measurements are implemented and closely monitored. (Umble and Umble, 2002; Al-Mashari et al., 2003) • An aggressive but achievable implementation schedule is established. (Umble and Umble, 2002) • Successful change management techniques are applied. (Umble and Umble, 2002) • Planned transformation for culture and structural changes. (Al-Mashari et al., 2003) • ERP committee able to make key decisions. (Mabert et al., 2003) 4.5 Operational Factors Operational factors refer to individual activity in implementation process. There is no doubt that these activities must be carried out correctly and adequately. However, their impact on ERP success is relatively lower than strategic and tactic factors. • Extensive education and training is provided. (Umble and Umble, 2002; McAlary, 1999; Al-Mashari et al., 2003) • Data accuracy. (Umble et al., 2003) • The system integration within ERP modules and with other enterprise systems. (Al-Mashari et al., 2003) • Adequate and planned testing. (Al-Mashari et al., 2003) • Keep supplier and customers informed about changes. (Mabert et al., 2003) • Communicate progress regularly. (Mabert et al., 2003) 4.6 Conclusion In this chapter, we conducted a comprehensive review of critical success factors in ERP implementation. However, the objective of this dissertation is not to prioritise the importance of each CSF. The review of CSFs forms basis of benefit realisation approach to be discussed in next chapter. And the list of CSFs provides inputs to many questions in primary research. The CSF approach helps implementation partners (top management, users, project team members) to understand the impact of each CSF whether is strategic, tactical or operational, on implementation process. With better understanding of the issues involved in ERP implementation, project team will be able to make critical decision and allocation resources that are required to make ERP implementation a success. Many researchers have recognised that ERP implementation is not just a technological challenge and identified critical issues in the areas of implementation strategy, business process reengineering, change management and performance measurement. However, the CSF approach is still based on traditional IT project life cycle. This approach assumes that a well-planned and structured ERP implementation will lead to a success. But it ignores the dynamic and evolutionary nature of ERP implementation (Cliffe, 1999). In order to achieve greater benefit from ERP implementation, we need a fundamental change to IT-oriented implementation approach.

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