Identifying Success Factors Implementing ERP in Small Organisations - Dissertation Example

?Running Head: ERP IN SMALL ORGANISATIONS Identifying Success Factors of Implementing ERP in Small Organisations Identifying Success Factors of Implementing ERP in Small Organisations Background ERP systems are computer software packages that enable companies to manage all of their operations, such as sales, manufacturing, inventory, accounting, etc. using a single platform. ERP systems officially arrived in the early 1990s, though they evolved over the previous few decades as the separate programs of each functional area began to be integrated into one program (Nah, & Delgado, 2006). The intent of a single integrated software package was to reduce the direct costs associated with multiple packages (re-entering, reformatting, and reconciling redundant data) while aiding the communication between the functional areas of a business, such as sales and production (Davenport, 1998). The market for ERP systems continues to grow faster than any other software market (Al-Mashari et al., 2003) with significant number of companies worldwide have already implemented an ERP system (Mabert et al., 2003a). The vast scope of an ERP system magnifies the typical "risk-reward" relationship of any business initiative. Davenport (1998) described ERP systems as profoundly complex pieces of software that require large investments of money, time and expertise. Correspondingly, he stated that although implementing an ERP system could deliver great rewards for a company, implementation failure could be fatal. In fact, many well- known companies experienced significant challenges implementing their ERP systems. This led researchers to provide insight into what organisations could do to increase their chances of implementation success, resulting in the identification of ERP system implementation Critical Success Factors (CSFs) (Al-Fawaz, Al-Salti, & Eldabi, 2008). Various authors have developed lists of CSF's (Al-Fawaz et al., 2008, AI-Mashari et al., 2003, Stratman and Roth, 2002, Umble et al., 2003). These factors are not specific to any particular ERP software program as they are based on the organisational aspects of the implementation rather than the technical functionality of the program. Examples of such factors include strategic visioning/planning, management support, project management, and training. Proficiently addressing these CSFs should increase the chances of a successful implementation (Ehie, 2005; Thomas & Huq, 2007). However, with so many factors involved in an ERP system implementation project, there can be no guarantee of implementation success. ERP systems, like many other technological advances, were initially implemented only at large organisations. Over the years, software vendors began to provide ERP systems specifically targeted for midsize market price tolerance and functionality requirements, leading more and more small organisations to implement ERP systems. Small organisations have been shown to posses significantly different characteristics when compared to large organisations (McAdam, 2002, Ghobadian and Gallear, 1996, Lee and Oakes, 1995). Their organisational structures and culture are relatively informal, their leadership is intimately involved in daily operations and typically lack long-term strategic planning. Furthermore, they have limited human and financial resources, and often lack a dedicated full-time Information Technology (IT) person. All of these factors combine into a significantly different organisational environment for an ERP system implementation when compared to large organisations. The existing research on ERP CSFs is heavily based on experiences at large organisations. This is understandable, considering that only a few small organisations had previously implemented ERP systems, which limited the ability to conduct research that is small organisation specific. Thus, more research is needed to identify the CSFs of ERP implementations at small organisations and how they compare to the established list of CSFs that is based on large organisations. With the increasing number of small organisations implementing ERP systems, research into the factors that influence the success of an ERP implementation project at small organisations is not only possible, but also necessary. In fact, various researchers have recommended research into how the implementation process and utilisation of ERP systems differs at small organisations (Mabert et al., 2003b, Bernroider and Koch, 2001, Jacobs and Bendoly, 2003). Aim & Objective of this study The overall objective of this study is to identify the factors that are important for the success of an Enterprise Resource Planning (ERP) system implementation at Small organisations. Methodology Research Approach The most common research methods employed for investigating ERP systems and small organisations have been surveys and case studies (Olhager and Selldin, 2003; Umble et aI., 2003). When little is known about a phenomenon due to a conspicuous lack of theory and previous research, a qualitative approach such as a case study is recommended for the early stages of the research (Eisenhardt, 1989; Stuart et al., 2002). Although some may argue that has already been extensive research on ERP system implementations, the majority of those implementations were based on large organisations rather than small organisations. Eisenhardt (1989) and Stuart et al. (2002) state that the case study research approach is preferred when current perspectives seem inadequate, as theory exists but the environmental context is different. With the literature review revealing that small organisation are significantly different than large organisations, and that ERP system critical success factors are based on large organisations, an inadequacy of the current perspective is apparent (Dowlatshahi, 2005) Therefore, this study will employ case study research methodology Yin states that the research method should be chosen based on three criteria: the type of the research question, the ability to control behavioural events, and whether the events are contemporary. Research questions of "how" and "why" are explanatory and lead to the use case studies, histories, and experiments as the preferred research strategy, whereas more specific questions of "who" and "how many" lead to surveys and archival analysis. With the lack of literature specifically addressing critical success factors for implementing ERP systems at small organisations, explanatory research questions of "how" and "why" must first be answered before the more specific questions of "who" and "how many" can even be developed. Following Yin's logic, archival analysis and surveys are not appropriate for this sort of research. Archival analysis can quickly be eliminated as ERP systems have only been around for just over a decade. A survey, according to Yin, could have limited ability to investigate as it can only focus on a limited number of variables to be analysed. In order to limit the variables and ask these types of questions, the researchers must know what they are looking for. This is not the case in researching ERP implementations at small organisations. Following Yin's logic, experiment, history, and case study remain as possible research approaches for this study. As ERP system implementations at small organisations require extensive financial resources over extended time periods of up to 48 months, experimentation, where relevant behaviour can be manipulated, is difficult to apply. Furthermore, ERP system implementations at small organisations are contemporary events, eliminating the "history" research strategy. As a result, Yin would argue that a case study research strategy is recommended for studying ERP system implementations at small organisations. Yin summarises this point by stating that the case study has a distinct advantage when a "how" or "why" question is being asked about a contemporary set of events, over which the investigator has little or no control. Stuart et al., (2002) included ERP implementation as an emerging area in operations that is still in the understanding, discovery and description stage. Furthermore, the authors state that where the subject matter is very complex, case studies provide an excellent vehicle for developing understanding. For these reasons, a case study research approach will be selected. Sampling Multiple Case Studies Rationale In addition to aiding generalisability as discussed below, Miles and Huberman (1994) argue that multiple cases offer the researcher deeper understanding of processes and outcomes of phenomena, the chance to test (other than just develop) hypotheses, and a good picture of locally grounded causality. Stuart et al. (2002) state that multiple case studies are the appropriate research method at the mapping / relationship building stage when relationships are studied more carefully using triangulation. They state that mapping involves identifying and describing critical variables, while relationship building entails identifying linkages between variables, providing causal understanding. In regard to shaping hypotheses, Eisenhardt (1989) recommends multiple case studies, as each case is analogous to an experiment, and multiple cases are analogous to multiple experiments. In summary, employing a multi-case research method will provide a more thorough understanding of ERP system implementations at small organisations. Unit of Analysis In order to enable accurate cross-case analysis, each case must have a common unit of analysis. Miles and Huberman (1994) define a unit of analysis as "a phenomenon of some sort occurring in a bounded context" (p. 25), while Yin (1994) simply asks "what makes up a case?" (a person, a company, a department, etc.) Due to an ERP system's integrated nature, an ERP system implementation impacts multiple departments and staff at various levels. Although it is conceivable that an organisation would implement a module of an ERP system in isolation (manufacturing, human resources department), this research is interested in cases where most of the organisation has implemented the same ERP system. When the area of impact is far reaching, the unit of analysis should also be far reaching, thus for this research, the unit of analysis will be the company as a whole. This correlates with Mabert et al. (2003a) who found that small organisations are twice as likely to have only a single ERP system implemented when compared to large organisations. Sample Size Eisenhardt (1989) states that while there is no ideal number of cases, a number between four and ten case studies usually works well. She contends that with fewer than four cases, it is often difficult to generate theory with much complexity, and its empirical grounding is likely to be unconvincing. Furthermore, with more than ten cases, it becomes increasingly difficult to cope with the complexity and volume of the data. Eisenhardt (1989) recognises that pragmatic considerations such as time and money will influence when case collection ceases. She states further that it is not uncommon for researchers to plan the number of cases in advance. Yin (1994) recommends using replication logic for selecting cases in the multiple case study method. Cases that provide similar results when a particular phenomenon is present enable literal replication. Correspondingly, cases that provide dissimilar results when a particular phenomenon is not present enable theoretical replication. The underlying logic of replication consists in having a sufficient quantity of case studies so that replication can occur. For this research, theoretical replication will be based on successful implementation projects versus unsuccessful implementation projects. To balance various pragmatic considerations with the goal of having sufficient cases so that replication would be possible, this research will include a quantity of four or five case studies. Selection Criteria The following are the specific selection criteria that each participating company will be required to adhere to: A small sized business having fewer than 500 employees. Having implemented an ERP system, and used the new system for 6 months or more. This is so that the organisation has at least six months to be able to identify the impacts of the new system. Data Collection Case studies enable the researcher to deal with a variety of evidence (Yin, 1994, Eisenhardt, 1989). The following types of data will be used in this study: Interviews: with various staff involved with/impacted by the ERP system implementation Documents: project documentation such as project plans and project meeting minutes Company websites: for demographic information Questionnaire Although some may argue that pre-designed and structured instruments limit the flexibility of a case study, research involving multiple case studies requires preparation (Miles and Huberman, 1994). Standardisation of instruments is essential so that cross- case comparisons and analysis can be conducted. Miles and Huberman (1994) contend that within a case study, both "exploratory" aspects and "confirmatory" aspects may be studied. For "confirmatory" aspects of the research, such as demographic information and organisation characteristics, structured questions will be developed. Herzog (1996) recommends that structured questions be employed when studying well defined concepts for which extensive knowledge is available. For "exploratory" aspects, which form the majority of this research, unstructured questions must be employed. Many social scientists have long held doubts about the validity of highly structured methods of social investigation and data collection (Sapsford and Jupp, 1996). Unstructured questions are usually employed to discover the unknown, however they are not totally unstructured, as most topic areas are normally pre-defined (Herzog, 1996). For this reason (Sapsford and Jupp, 1996) prefer the term ‘less­ structured’ questions. Questionnaire will be developed after thorough literature review. Questionaire will be designed to be open ended to ensure the respondent would not simply answer yes or no, but provide a more detailed response and potentially identify factors and relationships not expected by the researcher. For example, after an open ended question regarding the reasons for success or failure of their implementation projects, a Likert scale will be used to prompt further discussion of potential factors that could influence an implementation success. Furthermore, principles related to questionnaire design will be incorporated in the question and interview design, such as question ordering (general to specific), question wording (clarity / simplicity), and avoiding bias (leading questions, negative connotation) (Payne, 1957). All participants will be provided with the interview questions and a letter describing how they could prepare for the interview a few days prior to their scheduled interview. Approximately 31 to 35 interviews will be conducted. Finally, data recording techniques recommended by Creswell (1994), such as transition messages for the interviewer, and space for recording the researcher's reflective notes will be incorporated. Documents Sapsford and Jupp (1996) provide valuable guidance regarding the analysis of collected documents. First, they recommend determining if the document was prepared by a primary source (directly involved at the time) or a secondary source (not directly involved, at a later time), as this may impact validity. Secondly, they encourage the researcher to look at both direct information, such as statistics, and indirect information, such as the tone of the document. Finally, they recommend the researcher connect the purpose of the document to the value of the document (ask why the document exists). Various documents will be collected during the research process, such as project plans, project meeting minutes, and relevant memos. Above suggestions will help to ensure the document is accurately portrayed in the case research. Ethical Issues Prior to contacting anyone regarding participation in this study, an ethics application will be approved by the concerned authorities. The application will include a recruitment letter for potential participants and a consent form for each individual participating in the study. In order to avoid the risk of undue influence, both the recruitment letter and the consent form explicitly stated that organisations and individuals will be free to choose to not participate. Regarding confidentiality, demographic information of the organisation (industry, location, number of employees, etc.) would be disguised, and individuals would be referred to by their role rather than their name. Data collected during the study will be retained for few years in a locked cabinet at the University, with only researcher associated with this specific study having access to this information. After few years, the data will be shredded. Project Timeline Feb. Mar. Apr. May June Jul. Aug-Sep. Proposal Done Literature review Methods Materials Data Collection Data Analysis Write-up Revisions Final Dissertation References Al-Fawaz, K., Al-Salti, Z., & Eldabi, T. (2008). Critical success factors in ERP implementation: A review. European and Mediterranean Conference on Information Systems. Dubai. Al-Mashari, M., Al-Mudimigh, A., & Zairi, M. (2003). Enterprise resource planning: A taxonomy of critical factors. European Journal of Operational Research, 146(2), 352-364. Bernroider, E., & Koch, S. (2001). ERP selection process in midsized and large organisations. Business Process Management Journal, 7(3), 251-257. Creswell, J. W. (1994). Research Design: Qualitative & Quantitative Approaches. Thousand Oaks, CA: SAGE Publications. Davenport, T. H. (1998). Putting the enterprise into the enterprise system. Harvard Business Review, 76(4), 121-131. Dowlatshahi, S. (2005). Strategic success factors in enterprise resource-planning design and implementation: a case-study approach. 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A., Soni, A., & Venkataramanan, M. A. (2003a). The impact of organisation size on enterprise resource planning (ERP) implementations in the US manufacturing sector. Omega, 31(3),235-246. Mabert, V. A., Soni, A., & Venkataramanan, M. A. (2003b). Enterprise resource planning: Managing the implementation process. European Journal of Operational Research, 146(2), 302-314. Miles, M. B., & Huberman, A. M. (1994). Qualitative Data Analysis: an expanded sourcebook (2nd ed.). Thousand Oaks, CA: SAGE Publications. Olhager, J., & Selldin, E. (2003). Enterprise resource planning survey of Swedish manufacturing firms. European Journal of Operational Research, 146(2),365-­373. Payne, S. (1957). Asking Questions. The Art of Asking Questions (pp. 214-237): Princeton University Press. Sapsford, R., & Jupp, V. (1996). Data Collection and Analysis. Thousand Oaks, CA: SAGE Publications. Stratman, J. K., & Roth, A. V. (2002). Enterprise resource planning (ERP) competence constructs: Two-stage multi-item scale development and validation. Decision Sciences, 33(4),601-628. Stuart, I., McCutcheon, D., Handfie1d, R., McLachlin, R., & Samson, D. (2002). Effective case research in operations management: A process perspective. Journal of Operations Management, 20(5),419-433. Thomas N Martin, Ziaul Huq. (2007) Realigning Top Management's Strategic Change Actions for ERP Implementation: How Specializing on Just Cultural and Environmental Contextual Factors Could Improve Success. Journal of Change Management. London: 7(2) 121 Umble, E. J., Haft, R. R., & Umble, M. M. (2003). Enterprise resource planning: Implementation procedures and critical success factors. European Journal of Operational Research, 146(2), 241-257. Yin, R. K. (1994). Case Study Research: Design and Methods. In D. S. Foster (Ed.), Case Study Research (Second Edition ed., Vol. 5). Thousand Oaks, CA: SAGE Publications. Read More