Two main sets of culture can be identified in any ERP implementation and use. On the one hand, there is a culture embedded in the ERP software reflecting the views of the ERP developers, vendors and consultants. On the other hand, there is a culture reflecting the views of the implementing organization’s project team, managers and users. We refer to the first as the ERP institution culture and to the second as ERP implementing organization culture. We argue that congruency between the above two cultures can contribute to ERP process and outcome success. However, lack of congruency can lead to cultural mismatch and contributes to ERP process and outcome failure.
An Enterprise Resource Planning (ERP) implementation is a significant intervention in organizational life. Currently, it is one of the most challenging issues for practitioners and researchers in the IS field (Pozzebon, 2000). ERP systems have been found to have conceptual links with almost every area of information system (IS) research (Markus and Tanis, 1999). Thus, the divergent definitions and perspectives associated with the ERP-organization linkage depend on how IS researchers conceptualize and treat the linkage between IT/IS and organizations.
INFORMATION TECHNOLOGY AND ORGANIZATIONS
IS in organizations has been investigated from both the technical (hard) and soft (human) perspective (Chatfield, 2000). From the technical point of view, IS are seen as “engineered artifacts” expected to do exactly what they are designed for (Orlikowski, 1992.). Likewise, organizations are seen as information processing systems, exchanging and handling information based on certain rules (Katzenstein and Lerch, 2000). In contrast, several researchers advocate a softer conceptualization of IS. As Probert (1997) argues, while information systems do have objective and touchable artifacts, like processors and storage, they also have a subjective construct. This perspective of technology is closely related to Orlikowski’s (1992:400) view where she argued, “technology is not an external object but a product of ongoing action, design and appropriation”.
In this paper, we submit to Orlikowski’s (1992) understanding of information technology (IT), which, based on structuration theory, is enclosed in two concepts of “duality” and “interpretive flexibility”. The first addresses the assumption that agents and technology are not independent. In the parlance of Orlikowski (1992:406), “technology is physically constructed by actors working in a given social context but also technology is socially constructed by actors through the different meanings they attach”. Thus, IT as a product of human agents will include, and at the same time reflect, not only the “structures” -- in other words, the rules of behavior of the social system that designs it -- but also their interpretations of the social system it is going to serve (see also Walsham, 2002; Rose and Scheepers, 2001). On the other hand, “interpretive flexibility” refers to “the degree to which users of a technology are engaged in its construction (physically or socially) during development” (Orlikowski, 1992:406). Because of the time and space gap between the construction of the technology and its implementation, the same technology is likely to have different meanings and effects for different users (Pozzebon, 2000; Rose and Scheepers, 2001). Identifying this “time-space discontinuity” among the design and the use of the technology is a very crucial point in the IS research, particularly in the case of software packages that are not built internally (Pozzebon, 2000). From the above discussion, it is possible to identify three key elements in understanding information technology and its deployment in organizations-- human agents, technology, and institutional properties (such as culture) (Orlikowski, 1992).
Because organizational culture is complex, there are multiple -- and perhaps conflicting -- interests involved in IT deployment. For example, systems typically have a two-phase life cycle involving multiple actors. In the first phase, a system exists as the result of negotiation between system clients (representing organizational interests presumably closely tied to strategic goals) and system developers. In this phase a system is most likely to be representational, a set of statements, drawings, or ideas. Developers act as representation agents of the clients (who are the owners of the system). When the system has been manifested in reality (i.e., developed, tested, and released), it exists as the result of (presumably continual) negotiation between the clients and system users who are acting as operational agents of the owners. This second phase is most poignantly portrayed in an example of community e-tourism development (Mason and Milne, 2002). However, in this paper, we focus only on the first phase and the differences in culture apparent there.
ERP AS A SOCIO-TECHNICAL SYSTEM
On the basis of the arguments pursued so far, we conceptualize ERP systems as socio-technical systems. ERP can be seen as “a technological artifact bundling material and symbolic properties in a certain recognizable form” (Kyung and Kim, 2002:27). The structural properties of this technical system are however shaped by the human agents and institutional properties that develop, appropriate and use it. The environment in which an ERP system is developed, selected, implemented and used constitutes a “social activity system” (Skok and Legge; 2001). This ecosystem includes several stakeholders from the developers of the system, the vendors, the consultants, the project team and the ultimate users. Each one of these disposes a certain cultural assumption towards the ERP implementation process, which in turn is embedded in the very roots of the software (the technology) itself.
We can identify two main sets of culture at work in any ERP situation (development, implementation and use). On the one hand there is the ERP institutional culture reflecting the views of the ERP developers, vendors and consultants. On the other hand, there is the ERP implementing organization culture reflecting the views of the implementing organization’s project team, managers and users. ERP institutional culture represents a certain understanding of problem solving, which is often implicitly promoted in the form of best-of-breed business practices (Davenport, 1998). For instance, ERP vendors and consultants consider that ERP embodies the best universally applicable business processes without taking into considerations potential clients’ culture distinctiveness (Kumar and Hillegersberg, 2000; Krumbholz et al, 2000). Skok and Doringer (2001:5) illustrate that “ERP is designed by having in mind the “universalism culture” with its focus on core competence, low cost strategies and mass production. Similarly, Allen and Kern (2001) criticize this universal business culture of the ERP system and consider it as an “ideology of the private sector.”
The above indicates that during ERP implementation, there can be conflicts between the structural properties of the organization, in particular its organization culture and the structural properties of the ERP institution, i.e., its built-in features and its underpinning cultural assumptions embedded inside the software and the institutions pushing the software . We argue that congruency between the above two cultures contributes to ERP success both in process and outcome terms. However, lack of congruency can lead to cultural gaps and can contribute to ERP failure. Figure 1 captures a visual impression of the framework.
In the social and management science research, culture is divided into two main categories-- organizational and national (Krumbholz and Maiden, 2000). One of the most well-known understandings of organizational culture comes from Schein (1985). Schein, using visibility and accessibility criteria, identified three levels of cultural phenomena as “surface manifestation of culture”, “espoused organizational values and beliefs” and “basic underlying assumptions”. On the other hand, Hofstede (1980) suggested one of the most popular definitions (framework) of national culture, which is captured in five dimensions as individualism, power distance, uncertainty avoidance, masculinity and time orientation. Although Hofstede’s work on culture has been widely accepted in the IS literature (Myers and Tan, 2002), it has also been equally criticized (Avison and Myers, 1995; Walsham, 2002; Walczuch, 1995). Several other authors have conceptualized culture (organizational and national) and suffused it with their own interpretation. For instance, Johnson and Scholes (1993) identified stories, symbols, power structure, organization structure, control systems and rituals and routines as indicators of culture. Trompenaars (1996) identified seven dimensions of cultural diversity: universalism versus particularism, collectivism versus individualism, neutral versus emotional, defuse versus specific cultures, achievement versus ascription, human-time relationship and human-nature relationship (internal versus external control).
Findings from both organizational and national culture theories indicate the importance of norms, beliefs and values as manifestations of culture. Hence, these three common concepts can be used to operationalize the two sets of culture in an ERP situation. In addition, because an ERP system is a global product, which embodies universal business models of industry best practices, we found Trompenaars’s universalism vs. particularism dimension relevant. Further, the literature record shows that national culture establishes certain values, norms and beliefs influencing corporate culture (Ciganek and Jarupathirun, 2004). National differences in problem solving approach might create some difficulties during ERP implementation (Krumbholz et al, 2000). Therefore, we found Hofstede’s “power distance” and “uncertainty avoidance” dimensions relevant to capture such differences.
ERP SUCCESS AND FAILURE
The literature on ERP success and/or failure is inconclusive. While some report positive impacts and outcome of ERP, others have revealed ERP failures. One of the reasons lies in the multidimensionality of the concept of success and the difficulty of developing a single measurement (Delone and McLean, 2003). Based on the review of both ERP and IS success and failure literature (Al-Mashari, et al, 2003; Bingi et al, 1999; Davenport, 2000; Delone and Maclean, 2003; Gable et al, 2003; Lyytinen and Hirschheim, 1987; Seddon, 1997), we identified two dimensions of ERP success/failure-- process and outcome.
The first dimension looks at the success or failure of an ERP implementation process. Implementing an ERP system often constitutes a company’s largest investment of IS in its history and, in many cases, the largest corporate project (Sumner, 2000). There are a variety of “cost” factors that may escalate the initial budget. Furthermore, depending on the implementation strategy adopted, ERP projects are often long and intense (Austin et al, 2003). According to a recent survey, the average time of implementing an ERP system is 23 months (Umble and Umble, 2002). Therefore, process outcome gauges whether an ERP project is terminated within the time and budget schedule.
Outcome success or failure looks at the extent of post-implementation ERP benefits. Organizations implementing ERP expect transactional, informational and strategic benefits (Delone and Maclean,2003; Markus et al2000; Mirani and Lederer, 1998;). Transactional benefits include reduction in IT operations costs, inventory carrying costs, business process cost, operating labor costs (Al-Mashari et al, 2003). Informational benefits include the extent to which ERP increase the quality, accessibility and flexibility of information and improve managerial decisions (Sia et al, 2002). Strategic benefits occur when ERP leads to improvements in competitiveness and customer service.
We used the framework developed above to analyze Krumbholz et al’s (2000) case study. The case involves the implementation of an ERP package in the UK and Swedish subsidiaries of a large European multinational company. Both the UK and the Swedish subsidiary experienced problems and received several complaints from their employees and managers concerning the new integrated system in particular its warehousing module. Some of these complaints include “the warehouse is not working enough, the system over-acknowledges the warehouse operation, and employees cannot match delivery schedules and purchase orders” (Krumbholz et al, 2000:276).
In the Scandinavian subsidiary, there was an established norm underlying employees’ perception of warehouse activities. “The organization believed that the warehousemen should perform physical tasks in preference to other tasks” (p 274). An employee indicates, “The warehouse personnel worked “out there” in the warehouse and performed physical tasks such as moving products” (p. 274). This value emerges from the social interaction of the company’s employees and is the product of shared meanings towards the warehouse personnel activities. ERP systems often reflect a number of assumptions concerning human involvement in organizations; how employees are related to the object of their work. The established norm in the Scandinavian subsidiary that the warehousemen should do physical tasks was not “compatible” with the ERP software’s implicit culture, which requires warehouse personnel to get involved in doing administrative works. As stated in the case study, “…[T]he warehouse staff were spending more time using the system and less time out there…” (p. 274) doing proper warehouse activities. Hence, there was incompatibility between the software’s way of working and dealing in the warehouse and the accepted norm in the organization about what constitutes warehouse activities.
Both the UK and Swedish subsidiaries have in the past developed and used their own customized systems. The implementing consultant perceived these systems as the source of several organizational problems and considered ERP as the solution. However employees in the subsidiaries valued very highly the old system’s functionality and believed that their previous system was exactly what the company needed. For instance a marketing manager in the Swedish subsidiary states “…[T]he old system was just for our needs and was very effective” (p. 274). As a result, the ERP system was perceived as very complicated, with very structured functions and at certain level inflexible. A sales key user said “Order entry in SAP is quite cumbersome because of the way it is set out and because of the information that we have to enter it can make life quite difficult” (p.274)
In the UK subsidiary, there were problems due to the universalistic operating assumptions embedded in ERP. Particularly, “The warehouse module cannot match delivery schedules and purchase orders” (p. 276). Warehouse personnel deal with complex delivery schedules and expect the system to be flexible in order to be able to adapt and process these specific orders. However, “The ERP package failed to adapt to the local circumstance” andwas unable to deal with the complex delivery schedules. As the IT materials management developer stated, “ You can have a complex delivery schedule against the purchase order in theory and then the supplier may acknowledge different quantities and different dates and it is not actually possible to match those perfectly, but the package has made an attempt and it just falls down” (p. 275).
The incompatibilities in the culture between the ERP institution and the subsidiaries have led to a number of process and outcome problems. For instance both of the subsidiaries were forced to reconsider their initial plans (time and budget). In the UK, implementation was extended for almost 5 months and extra financial resources were required for its completion. The low perceived usefulness of the ERP package led to a fall in the performance of the sales and warehouse department. Serious delays in deliveries and in the purchase order process occurred. These inefficiencies in the warehouse had a negative impact on the level of service provided to customers, which in turn had led to a fall in company’s sales figures. As a result, the companies were forced to reconfigure the ERP warehouse module in order to “acknowledge” local requirements in terms of delivery schedule and order purchase process.
SUMMARY AND FUTURE WORK
This paper conceptualizes ERP as a socially constructed technological system that encapsulates the ERP institution and implementing organization’s structures of behavior, values, beliefs and norms of. The paper further argues that the extent of incompatibility between these two can affect the process and outcome of implementing ERP. An example from the analysis of a secondary case study offers some preliminary evidence of the importance of a cultural alignment among the ERP Institution and organizations that implement ERP. Awareness of the cultural assumptions embedded in the ERP and putting in place mechanisms to mitigate any misfits may improve the likelihood of ERP process and outcome success. Future studies are needed to fully explicate the research framework and identify its theoretical and managerial implications.
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