Why is Middle Management in Conflict with ERP

Popular Enterprise Resource Planning (ERP) system implementation methods focus on process requirements, system transition, user interface, help desk, and training issues. This research suggests that unless high-level management places equal emphasis on "people oriented" factors (especially at the middle management level) many ERP implementation projects are in jeopardy. Without the commitment of middle management and a proactive change management function, project planning and milestone development can easily become bogged down by political trivialities, which can stall the implementation cycle of a project. The research focuses on two ERP implementations. In both cases middle manage­ ment served as the unit of analysis. INTRODUCTION In order to remain competitive, many organizations are redesigning their business model within the context of a process-oriented enterprise architecture. The aim of top-level managers is to make business processes more... • Efficient by devising new strategies for executing the processes, • Manage able by devising new organizational structures to support the processes, and • Understandable by thoroughly documenting process flows, information flows, policies, procedures and regulations. In so doing they often turn to Enterprise Resource Planning software to streamline and reduce the cost of their process re-engineering and information system alignment requirements (Scheer, 1992,1994). This strategy represents a relatively radical business concept that has only gained wide spread acceptance in the US since the mid-1990's. With Enterprise Resource Plan­ ning' software tin organization purchases pre-configured and integrated business processes that are already aligned with a well-defined information system architecture (Keller and Meinhardt, ' ERP software is also known in Europe and Asia as Standard Packaged Business software. 19 1 Sommer: Why is Middle Management in Conflict with ERP? Published by CSUSB ScholarWorks, 2002 Journa^££InternationalTecfmoIo^\^ Volume II, Number! 1994). Companies such as SAP, Oracle, Peoplesoft, Baan, and others offer their customers a wide variety of business applications (i.e., Financials, Production Planning, Material Manage­ ment, etc.) that are integrated within a cross-functional business process design. Since the mid-1990's many companies have opted for a pre-packaged ERP solution in lieu of a proprietary system development effort. Although the ERP software may not exactly sup­ port all complex business processes, many organizations are willing to trade off domain specific and complex functionality in order to realize the benefit of packaged integration along with the cost savings incurred from not developing a proprietary in-house system (Gulledge et al, 1995). The commercial package also offers benefits in the out years because many additional savings will come from a vendor supported upgrade path versus costly legacy maintenance expendi­ tures. In the US the number of ERP system implementations has risen rapidly in recent years. Most of the US Fortune 1000 companies have opted in favor of pre-packaged business software over traditional development cycles. Many companies have gained a tremendous competitive advantage form integrating their organizational processes around an off-the-shelf ERP software package (Buck-Emden and Galimow, 1996). However many others have failed in their imple­ mentations. The trade, industry and academic literature is filled with research about well-publi­ cized ERP implementations that run out of control and eventually fail. Although many welldocumented ERP implementation failures can be attributable to overzealous implementation cycles, lack of top-management support, traditional scope creep, inadequate requirements defi­ nition and a host of other factors, the focus of this research paper will deal with the importance of middle management in ERP implementation success. Specifically the research tries to iden­ tify the factors that drive middle managers to support, or in certain instances, to undermine an ERP vision and thus adjust their priorities accordingly. Data for this research was collected from two ERP system implementations. The first implementation was deployed in a mid-sized manufacturing company, while the second was deployed in a large public sector organization. In both cases the data was collected through onsite interviews and observation, while the work on each implementation covered a period of several months. THE TRADITIONAL ORGANIZATIONAL PROCESS MODEL: To appreciate the value of cross-functional process integration as implemented by ERP one only needs to look at a traditional organizational model (Figure 1). The figure shows a function-oriented organizational structure that has existed in much of the world since the indus­ trial revolution. Each department operates as an autonomous unit and thus executes business functions in a relatively isolated state. In the U.S. analysts lovingly refer to these function do­ mains as "stovepipe" organizations because information is allowed to flow freely within the stovepipe, but it is very difficult to make information flow horizontally between the stovepipes (Gulledge et al, 1999). From a customer's point of view the lack of information flow between the stovepipes can have very negative consequences. If for example a customer calls the sales department and wants to know the status of an order the sales representative can only provide 20 2 Journal of International Information Management, Vol. 11 [2002], Iss. 2, Art. 3 http://scholarworks.lib.csusb.edu/jiim/vol11/iss2/3 Journal of International Technology & Information Management immediate feedback if the sales order still resides in the sales department's sphere of influence. However if the sales order has already been converted to a production order (Production De­ partment) or a stocking unit (Distribution Department) then the sales representative will often have to track down the status of the order by making inter-departmental calls or by querying several stand-alone information systems. This information "search" takes time and customer service suffers in the process. Figure 1. The Traditional Organization The Traditional Organization Modem functional "stovepipe" units are the result of a competitive organizational culture. In the traditiontil business culture it is the individual business units that must compete for, and constantly justify the resources that they expend. To meet those demands and in order to remain competitive agtiinst other units, functional managers will put in place many artificial barriers designed to limit personal interaction and information flow between the units. The barriers can take many forms. The most common of which is the proliferation and eventual institutionalization of domain oriented regulatory and policy constraints (Sommer and Gulledge, 1999). Top-level functional managers will often implement local de-facto policies and regulations that are de­ signed to constrain the interaction of employees with other units. The constraints manifest them­ selves in decreased cross-functional transparency. 21 3 Sommer: Why is Middle Management in Conflict with ERP? Published by CSUSB ScholarWorks, 2002 Jounialo£Intern^onalTechnolo^y^ Volume 11, Number 2 THE MDODLE MANAGEMENT "CHECK STATION": In addition to the regulatory and policy constraints, top-level functional managers will often put in place information system and personnel management models that are designed to keep cross-functional information flow to a minimum. System constraints are usually implemented as "standalone" information architectures that are not compatible with those of other business units, thus creating an "island of automation" within the corporate landscape. To further restrict cross-functional interaction many mid-level management positions are created to act as information brokers with other departments or business units. These mid-level managerial "check-stations" exist solely for the purpose of managing the information flow dictates of topmanagement (Sommer, 1998) (Figure 2). Figure 2 The Traditional Organization w/ Check Stations Since the functional stovepipe is mostly autonomous in its personnel and system imple­ mentation practices the "island of automation" and "check-station" model have been very suc­ cessful in helping top-management keep total control of their respective domains. The practice of functional management was very successful up until the 1990's and continues to be very effective in many public sector organizations. However, during the mid-1990's many public and private sector organizations were faced with increasing pressure to become more efficient and streamlined. Increasing competitive pressures from abroad and decreasing revenues have forced many organizations to reevaluate their business models. The traditional concept of competitive 22 4 Journal of International Information Management, Vol. 11 [2002], Iss. 2, Art. 3 http://scholarworks.lib.csusb.edu/jiim/vol11/iss2/3 Middle Manaeement Journal of International Technology & Information Management advantage was re-examined and refocused on customer service and business process stream­ lining. Within this context traditional competitive advantage was heavily dependent on a combi­ nation of one or imore measurable factors such as: