Striking a chord for change management in mid-market ERP: Q&A with Alexios KostilinisBy Sarah Morgan, Arbela Technologies
No one ever said change management was easy, but some people make it look easy and Alexios Kostilinis, Project Management Lead for Arbela is at the forefront. He comes to his discipline with ERP Implementation through the many years he spent as a classical pianist. He certainly strikes a chord in everything he does and today he talks with us about change management in the mid-market for ERP Implementation.
Sarah: Alexios, how did move from classical piano into technology?
Alexios: As I went through school, I earned my first degree and wanted to become a classical pianist and conductor. At some point I realized that wasn’t going to happen on the scale I wanted it to and I enrolled in university for computer science. I earned my Master’s at Carnegie Melon and was recruited by Deloitte & Touche to work on customer development projects, business strategy projects. After the market crashed in 2008, I found a role with a consulting firm who happened to focus on Dynamics AX. I was intrigued and remain intrigued by the capabilities.
Sarah: I know that change management is a key focus of yours. What is the definition of change management?
Alexios: Well it’s not change orders as people try to limit the topic. Change management has to do with preparing the client organization to manage and absorb the change that is happening to their organization through a large ERP implementation. For example, asking a company that has operated on a DOS system for the past 20 years to think in terms of a relational database and having a user interface. It is imperative to train a client how to use the system. But this is the easy part. The challenging part is the psychological aspect of the change.
Sarah: Talk about the psychological change.
Alexios: The first thing the users think about when they hear an ERP implementation is coming is if they are going to lose their job. This is a real concern, because their skills in the legacy system are about to become obsolete. This is a large deterrent that causes people to freeze up and not be able to function. The people who have been with the organization for 30 years know this one system. To have to leave, they will be in the marketplace a long time to find a job. So, they panic and are unable to function in their daily jobs – not to mention help us design the to-be processes – the future state.
Their first reaction is to resist, and they opt to not help us adequately with the new system. They are thinking, “If I don’t help the consultants, the system won’t work, and my job is safe.” In the future state, they will still know what they can do – they will be the person no one can do without.
Secondly, is that most of us are uncomfortable with change itself. People who have been with the same organization for 30 years have done so largely because they don’t like change. This has a lot to do with human resource management rather than IT systems. A company’s HR team also helps employees who are resistant to change and provide avenues to overcoming the resistance.
Sarah: At what point in the implementation do you have the honest conversation with the senior client sponsor about the risk of not incorporating change management?
Alexios: The conversation needs to start in the sales process because change management requires more hours from the consulting team and mostly, it requires dedication and sponsorship from their leadership team. Executive sponsorship is required. This is the least amount of effort but the most important one.
Without executive sponsorship, the project is in jeopardy of failing. 50% of all system implementations fail. We all know this number and one of the primary reasons is change management was never considered, or it was considered and rejected as out of scope. The point is systems must be operated by people. And when people fail, systems fail. You can prepare the system, but without preparing the users, you have done less than half the job.
Sarah: What does a change management plan look like?
Alexios: A change management plan looks like this:
- Executive sponsorship: The executive leadership is required to sponsor the project, and the accompanying change. It’s not just the decision to put a budget for change management, it’s constant sponsorship. We all want to follow our leaders and if our leaders don’t believe in change management, neither will we.
- Enable change: Making the users enable the change, not dictating it to them. They need to feel they have control over the change, that they are creating it. This means give them the understanding that they own the design of the future state. Therefore, they control how much change there will be.
- Cheer for change: Create prompts. Get people excited about what’s coming. Celebrate victories and milestones. Make them understand they are part of something bigger than just processing customer payments. This is a basic component of everything else in the consumer industry such as marketing and advertisement, movie trailers and TV series teasers, etc. They all accomplish the same thing which is create excitement for something new that is coming. If we think it’s important to do so for our new $900 smartphone product to the marketplace, why don’t we think it’s important for our new multi-million ERP system that we are basing our entire company’s future?
Most of our generation and past CEO’s did not believe in change management. It was a touchy-feely issue, not real business They also don’t want to pay the consulting hours to implement. But not incorporating change management into the implementation doubles the cost of the implementation. Change will happen, therefore resistance to adoption will happen, whether they believe in it or not. It’s just a matter of whether we want to prepare for it – and manage it – before go-live, rather than deal with it after go-live. If they deal with it before go-live, it will cost the client consulting hours. If they deal with it after go-live, it will have operational costs where orders will be missed, invoices not paid in time, manufacturing will slow down, and the customer will be lost. Which do you think will be costlier? That’s why so many implementation’s fail and companies decide to go back to their legacy systems because they are losing so much business. Therefore, change management is not a luxury, it’s an investment.
Sarah: Do you walk away if change management is not sponsored and set up properly?
Alexios: Unfortunately, we cannot walk away, or we would be left with no business. Most of our clients in mid-market do not include change management in their budget initially. In the upper-market, companies are mature enough to understand the concept and need for it. In our sector of the mid-market however, system implementation maturity is very low. Some of our clients do believe in change management but simply don’t have the budget for it. Therefore, we are forced to put change management onto our consultants to solve. In that way, we are asking accountants, warehouse management consultants, and supply chain consultants to also become HR specialists and psychologists and help clients overcome their fear and resistance to change.
Sarah: How do you succeed in this unbalanced scenario?
Alexios: First, try to convince the sponsors with numbers. Make change management an indisputable part of the budget, incorporate it in the design and implementation hours. If it’s ultimately excluded, we must get the client executive leadership to embrace and sponsor change management. It’s little things that they can do that make a huge difference:
- Communication to the employees is very important. The employees need to hear from their leader that they will not be losing their jobs. They need to hear why the company decided to make this change. They need to hear what efficiencies the new system will bring to their lives. They need to hear that this will solve many issues the employees have been complaining about for so long. People are much likely to resist a decision when they know the reasons behind them, and even more so if they have played a role in making the decision
- Encouragement, encouragement, encouragement: For an employee, it’s difficult to keep resisting something when the CEO continues praising the work you’re doing toward the change. Why would you resist something that apparently you are very good at doing?
- Promote the implementation team, celebrate their victories, and give people due credit. For an employee, completing 35 assigned unit tests can be tedious and make them feel drained at the end of the day. But being mentioned by name in a company-wide celebratory and congratulatory announcement will turn everything around. Suddenly, being part of the implementation team sounds like an honor, rather than a burden.
On a personal level, you must make the users embrace the project and not be afraid of it. The new system is not going to make them lose their jobs, it’s going to make the job easier, better and faster. This means less stress and more time at home and more quality time with their families. When you put it like that, you see the lights go on in their heads. Instead of saying, “This is how the system operates”, you ask about their pains and inefficiencies and try to emphasize the ones that the system will solve.
Sarah: What is your favorite part of the job?
Alexios: For me personally, it’s the challenge of solving problems we haven’t seen before. That’s why I prefer difficult and pioneering implementations, rather than easy-going ones. But, as a team leader, nothing beats sending that final email, announcing a successful go-live and thanking everyone for their efforts. I also enjoy being able to create a collaborative relationship with the client. Our job is to help the client achieve their business goals. Their success is our success.